MS will do fine for a while by lowering the price dramatically, clearly not everyone is going to pay $200 for each copy for 15 devices. If MS reduces that to $15 for each device, they still get the same money (or more) per person and it doesn't seem so expensive.
This only goes so far however. Soon even $15 or even $5 will be too much, when a music player costs $15 and has the power a pentium 4. Those that run free software will be the only ones that can even compete.
Another issue has nothing to do with money but rather with hassle. I personally got really turned off with proprietary software largely because of the hassle: having enter 24 digit product activation keys; realizing I can't run a lot of software on more than one computer without a new license; having to enter in the key AND phone the company anyway to get it activated; getting bugged every year or two for every app that needs upgrading and a new tax to pay; changing my hard drive and adding RAM and a new NIC to a box only to find that Windows deactivated; upgrading to Vista only to find that my Photoshop CS2 doesn't and won't run on it, I'll have to upgrade to CS3 for $$$; etc, etc, etc ad nauseum. Imagine going through this on 15 different little devices for every little app. you like. And with cheaper hardware, people will just buy a new XYZ device every year or two. Imagine transferring apps and licenses to your new XYZ every year and having 15 devices of various kinds.
In the coming world of pervasive computing, proprietary software in general is a bankrupt model, and FOSS, especially in the last year or two, is making giant strides and has all the momentum. It's starting to snowball. I have yet to hear of anything FOSS can't conceivably do because of any inate failing in the concept. I mean games don't run on Linux because people don't write Linux games, not because Linux is incapable of running games fantastically. Therefore, it's only a matter of time and will. I've only been watching FOSS for about 3 years, but in that time, nearly every shortcoming I've seen in the various apps has been recognized and 90% of it has already been solved. Even if Linux and FOSS all kind of sucked it would still be compelling, but I think increasing it's actually superior. I don't think it's a matter of if proprietary software can stay dominant, I think it's a matter of how and why it could conceivably survive more than another 10 years.
Testing can show the presense of bugs, but not their absence. -- Dijkstra