That cost reduction doesn't just come out of thin air. If you want to build software that is competitive with Windows in other aspects, then you will have to charge similar amounts. Otherwise you're just leaving money on the table, because we know by now that customers are extremely willing to pay for it. And as long as Microsoft is shipping new APIs on Windows, Linux will never be able to run every game on Steam or every Windows program. It will always be perpetually behind playing catch-up, just like it has been for the last 25 years. The problem with your plan (and with all of these type of plans that I've seen people post) is that it requires Microsoft to give up and cede the market, which is not going to happen.
> That cost reduction doesn't just come out of thin air. If you want to build software that is competitive with Windows in other aspects, then you will have to charge similar amounts.
The assumption here is that development costs are linear.
If you spend a thousand dollars developing an operating system and your competition spends a million dollars, theirs won't be a thousand times better than yours, it will be infinitely better because theirs might actually boot and yours won't.
But if you spend a billion dollars and they spend a trillion dollars, theirs won't be a thousand times better than yours, it will be 2% better. Maybe. Because your billion dollars already caused to exist an operating system that does everything people need from an operating system and there is a point of diminishing returns. Which is where all the major operating systems already are.
What you would expect in a market like this is price competition. 80% as good for 20% of the price wins. 98% as good for 0% of the price wins even more. We're already there -- Microsoft has been giving away the Windows 10 and Windows 11 upgrades for free. They now need that to be competitive.
They can add new APIs all they want, but if Valve is providing ones that are just as good and will allow your games to run on their consoles which have any non-zero market share in addition to Windows, developers will prefer those.
I don't think they are at a point of diminishing returns. There are still advancements in hardware and drivers, and that's where the investment really pays off. Microsoft has historically been really good at designing APIs for this stuff that developers actually want to use. The vertical integration with shipping the whole OS really pays off for them. In Linux, it's extremely difficult to make any changes because you have to plumb everything through several layers of the stack which are all in separate disconnected projects. Only a few wealthy companies can really do it well and those tend to have a narrow focus on a specific vertical (Google, Red Hat, etc).
Price competition on the OS doesn't actually matter, as you have noted the market has moved towards additional services. When you say "98% as good for 0% of the price" you're not factoring in all the additional paid services that the company wants (and needs) to sell. I can tell you that Canonical certainly does not charge 0% of the price for everything, if they are taking a customer from Microsoft then they would probably like to gain 100% or more of that price from any given customer.
I have seen nothing to show that developers will prefer any Valve APIs, a lot of the games still seem to be running in Proton which actually shows that most developers still prefer to use the Microsoft stack and tooling. I should have mentioned this earlier but Visual Studio (the original, not VS Code) is also extremely important and entrenched, game developers are not just going to all switch to Vim and Emacs because Valve sold a product with Linux on it.
