It does seem that Microsoft could still be massively profitable if they nearly gave away Windows for desktop while still charging for Office and Windows Server.
There'd be little incentive to pirate Windows if it only cost $25. If you want to monetize that further, sell support packages, offer a Backblaze-like backup service for a monthly subscription fee, and so on.
Apple has always sold the hardware and they never gave the OS away, until the new OS came bundled with an App Store which gives apple a 30% cut on each sale.
Actually, they cut the price to 29 prior to creating the mac app store. They sold snow leopard for $29 as well, citing its focus on performance/stability rather than new features, and the faster upgrade cycle. I believe the price change had more to do with switching to annual releases
Few people did, as there were few Mac users when the OS fit on on one or two floppies and enough Mac users to copy from others when it no longer did, but In the 80's, you could walk into a dealer with a bundle of floppies and get a copy of the latest OS release.
