Here's how much those 'free' Windows licenses actually cost

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It's no secret that Microsoft is practically giving Windows 8.1 licenses away to tablet vendors in order to drive adoption, but now we know exactly how much the company makes.

According to a document on Microsoft's OEM Partner Center site, discovered by ZDNet's Mary Jo Foley, the price of Windows 8.1 with Bing on 9-inch or smaller tablets is $0. (Microsoft avoids using the term “free,” and the site lists the actual price as $10, minus a $10 “configuration discount.”)

For tablets with screens up to 10.1 inches, the price jumps to $15 after the configuration discount. The document also shows that Microsoft is throwing in a year's subscription to Office 365 personal at no additional cost for OEMs.

So how does Microsoft make money on these deals? The potential to convert users into paying Office 365 subscribers is one way, as Personal accounts normally cost $70 per year. But as Foley notes, OEMs who use Windows 8.1 with Bing must also include Bing as the default search engine and MSN as the default home page on any browser. The hope is that these services might bring in some more ad revenue, though users can always change the defaults on their own.

The low-cost licensing, combined with reduced hardware requirements for Windows, have allowed Windows tablets to become considerably cheaper over the last year, with device costs ranging from $100 to $200. Microsoft is likely offering licensing discounts on low-end laptops as well.

Why this matters: The discovery of Windows 8.1 with Bing OEM pricing comes just a couple days before Microsoft's Windows 10 event, where the company will talk about its phone and tablet plans. Foley doesn't expect OEM costs to be topic of discussion, though it's likely that free and cheap licensing will continue to be the norm for low-end devices as Microsoft tries to take a stand against cheap Android tablets and Chromebooks.

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