According to "Commodore: A company on the edge" by Brian Bagnall, Jack Tramiel (then CEO of Commodore) stated that Gates originally offered royalties of $3 per copy, but Tramiel claims he answered "I'm already married" and offered to purchase it outright for $25,000 (some sources give lower numbers).
The license allowed Commodore to make improvements, but did not give Commodore any improvements Microsoft made - people like Bob Yannes at Commodore at the time thinks Microsoft basically assumed Commodore would come back asking for upgrades, and pay them more money, but Tramiel was famously tight with money.
In the end, had Gates managed to get $3 per copy, the C64 alone would have resulted in somewhere between $45m and $60m of income for Microsoft at a time when that actually was a lot of money for them.
I believe it was first when they did the Commodore 128 that Commodore negotiated a new deal with them.
The Tramiels were notorious for not caring about software infrastructure, compatibility, and maintenance, to their customer's detriment.
I'm not sure of the details of the deal that Tramiel's Atari Corp signed with Digital Research when they licensed and ported GEM (a Mac/Lisa-like GUI framework) and GEMDOS (a spawn of CP/M 68k) for the Atari ST -- but after the initial port it never received any improvements from DR, though Atari themselves made some relatively minor changes and bug fixes later. But it was a potentially very good operating system that failed to improve significantly until it was too late (Atari hired the author of and acquired a set of open source Unix-like extensions in the early 90s, but by then the writing was on the wall for the platform.)
The license allowed Commodore to make improvements, but did not give Commodore any improvements Microsoft made - people like Bob Yannes at Commodore at the time thinks Microsoft basically assumed Commodore would come back asking for upgrades, and pay them more money, but Tramiel was famously tight with money.
In the end, had Gates managed to get $3 per copy, the C64 alone would have resulted in somewhere between $45m and $60m of income for Microsoft at a time when that actually was a lot of money for them.
I believe it was first when they did the Commodore 128 that Commodore negotiated a new deal with them.