Do You Use Vista Or Does Vista Use You, Continued

In the last episode of the ongoing soap opera, "As The EULA Turns," Microsoft was trying to explain what the End User License Agreement for Windows Vista really meant when it said you couldn't run Vista in a virtual machine. Today we hear Microsoft say, "No, when the EULA says you can only move Vista from one machine to another once, it actually means 10 times."I couldn't make this stuff up, could I? The "10 times" figure comes from Bit-tech.net, loosely attributed to "a Microsoft spokesman from the Licensing Dept," whatever that is. The EULA does say "one time": "The first user of the software may reassign the license to another device one time." I went back and checked.

Officially, Microsoft has said through its PR agency, "The hardware tolerance of product activation for Windows Vista has been improved and is more flexible than that for Windows XP."

That didn't address the issues, but it does contain a hint to the real problem. The issue goes much deeper than the bickering over the Vista EULA. It's about a major shift in Microsoft's business model, not just from the way it has handled license transfers for XP, but from how it has done business since the Pleistocene Era, when MS-DOS on 5 1/4-inch floppy disks roamed the earth.

Back then, you got the disks with your PC, and Microsoft didn't much care what you did with them. In fact, it didn't want to know. User support? Not Microsoft's problem. Call the guy who sold you the PC. And when your OS got screwed up, you reinstalled--sometimes as often as once a week.

Back then--and in fact, right up through Windows 3--Microsoft accepted a certain amount of...we won't call it piracy, we'll call it "product leakage"...as a cost of ignoring its users. Then it discovered with Windows 95/98/2000 that it could actually make money by charging for customer support and, as the market for PC hardware matured, selling upgrades over the counter.

With Windows XP, Microsoft began to build this own-the-customer business model into its products, and the Internet has given it the perfect tool--product activation.

Microsoft has become a mature company--meaning (a) the growth in its customer base has slowed dramatically, and (b) it's much harder to innovate its products (just look at Vista, which left most of its much-touted technological innovation on the cutting-room floor). In order to maintain its standard of living, Microsoft must get ever-increasing revenue from a finite customer base.

Product activation--knowing precisely who its customers are and micromanaging what they do with its products--is obviously the centerpiece of Microsoft's profit plan for the foreseeable future. It's Windows Genuine Advantage, all right, and the advantage is Microsoft's. (The surprise in last week's announcement of Office Genuine Advantage was that it came before the official release of Microsoft Office 2007. If I were Steve Ballmer, I would have delayed the inevitable crackdown until after the new version was out the door, for the same sorts of reasons that oil companies keep gasoline prices low until after elections.)

Product activation and authentication in real time across the Web give Microsoft a powerful revenue-generation tool. It's unreasonable to expect the company not to use it. In fact, Microsoft's OEM operating system business--bulk sales to PC makers--is obviously being reshaped into a marketing upsell opportunity with Vista, as all the versions of the OS come on the disk you get with your new PC that comes with Vista Home Basic installed.

Which raises an interesting EULA question: There's a big difference between the licensing rights you get with an OEM version of Windows XP and a full retail version. If I buy a PC loaded with Home Basic and use the OEM disk to upgrade to Vista Ultimate, do I get rights to transfer the license more like the full retail rights, or am I limited to OEM-like "only on this PC" rights? I don't actually expect an answer to this one anytime soon, because it's obviously to Microsoft's advantage not to be absolutely clear about what the EULA means.

Tune in to "As The EULA Turns" again, when we'll hear Microsoft say, "No, when the EULA says you may run Vista on up to two processors in a device, that doesn't mean they can be two quad-core processors. For that, you'd need four licenses...unless it's Tuesday."