Passing judgement on Microsoft's media juggernaut

Passing judgement on Microsoft's media juggernaut

Summary: In response to my last post on Microsoft's rapidly growing global footprint in the digital media universe, one ZDNet reader complained that, while I was reporting on that colonization, I wasn't taking a stand or expressing a viewpoint.  Another ZDNet reader, Godot,  took such sides, accusing Microsoft of unfairly wielding its operating system monopoly in an effort to dominate yet another market.

TOPICS: Microsoft

In response to my last post on Microsoft's rapidly growing global footprint in the digital media universe, one ZDNet reader complained that, while I was reporting on that colonization, I wasn't taking a stand or expressing a viewpoint.  Another ZDNet reader, Godot,  took such sides, accusing Microsoft of unfairly wielding its operating system monopoly in an effort to dominate yet another market.

If you're looking for me to condone or condemn the juggernaut, the first of the aforementioned readers is correct.  I've done neither.  And in this world, if you don't condemn, then you must be condoning. (Not that I am, but I understand how the perception could apply in this case.)   To Godot's point that Microsoft is using their operating system monopoly to move into this space, there's no doubt that Microsoft's global presence as a result of that monopoly greatly influences every market it attempts to penetrate. That said, I'm not willing to take the same position that Godot has taken and here's why.

First, when it comes to the operating system situation, what's done is done.  It's water under the bridge.  Microsoft has the footprint it has and while precedent antitrust judgment requires an antitrust remedy to keep a convicted monopolist from illegally building a new monopoly, we at the same time can't expect Microsoft or any other business to roll over and decide not to pursue its goals as vigorously as possible within the confines of the laws or the remedies that have been ordered.

So far, until someone proves to me otherwise, Microsoft appears to be going about this build-out in all the right ways, and has been very smart about it.  One of Microsoft's first stakes in the ground for mobile media, for example, was its PocketPC PDA operating system.  Unlike with Palm's initial strategy and, for the most part, Apple's current strategy, Microsoft's only model for operating systems is to license them to hardware manufacturers and then to let those vendors duke it out in the market.  When PocketPC first arrived on the market, a lot of people laughed it off.  I didn't. 

"Trying  to be all things to all people," they said.  "Violates the KISS principle that  has made Palm such a success, " they said.  "The  product isn't that great," they said. (This, back in PocketPC's early days, was true.)  But I and a handful of other people saw a different future, one where then market leader Palm was going to have some serious problems.   Since then, Microsoft's PocketPC has clawed its way to PDA supremacy,  to the chagrin of the old Palm (now split into PalmSource and PalmOne).  Palm stuck by the notion of simplicity and even worse, as I've written many times before, stuck to an isolated base of development for the PalmOS rather than joining up with one of the two environments that now command the lion's share of the world's developers (.NET and Java).  

Had it not been for Handspring's Treos (eventually acquired by PalmOne)  -- about the only bright spot in the Palm universe -- the undertaker would probably be getting dressed right about now.   Not that he isn't already.   When Handspring first got going and managed some traction with the cellcos, I remember one of the founders Ed Colligan describing what a monumental challenge it is to get the cellcos to resell a new telephone and how, by having overcome that barrier, Handspring had some natural protection from Microsoft, which at the time had no cellco relationships.  Indeed, Microsoft had no such relationships -- or maybe it had one in Asia -- and everyone was laughing at them, saying "See? No one wants to do business with Microsoft."  And what cellco doesn't have Microsoft gear on its network today?  How quickly time wounds all heels.

Here again, Microsoft had some vision. Today, cellco operators are being squeezed every which but loose and are desperate for ways to increase their average revenue per unit (ARPU).  They've got the VoIP on WiFi/WiMax folks to the left, themselves as competitors straight ahead, and 3G build-outs eating away at their bottom lines on the right.   Along comes Microsoft and says, "Look.  Let us on your network and we'll put a device so powerful in the hands of your customers that they'll want to subscribe to other services from you which will make you more profitable."  Doh.

The point, in the case of Palm, is that Microsoft stayed the course that it knows so well.  It licensed the OS (as both Apple and Palm should have always been doing) and knew that by version 3.0 (as with Windows), they'd get it so right that the naysayers would be eating crow.  And so they are.  There's no doubt that Microsoft's desktop monopoly played a role in PocketPC's rise from obscurity.   But it was really just a classic business model combined with the mistakes of Microsoft's competitors that got PocketPC to where it is  today.

Another bet that paid off for Microsoft was Moore's Law.  The early PocketPCs were slow and clunky.  Memory technologies like Compact Flash and SD were just getting their footing at the time, so they couldn't do much to improve the situation.  Palm executives poo-pooed the idea that one day, a handheld device might be less of a PDA and more of computer and let Microsoft make a fool of itself in the market with a non-starter.   

Today, PockePCs are just that: handheld computers that perform just as well as 2002-class Intel computers and that can have gads of memory added to them.  Recognizing that PDAs and phones based on its mobile platforms were actually computers, the Redmond company was also smart in unifying all of its platforms, including PocketPC, under the .Net development environment.  If Microsoft leveraged its monopoly, perhaps this is really the closest one can come to pinning the tail on the donkey.   It created a world where all of the people developing for Windows desktops and servers -- at least the ones developing on .Net -- could also develop for the PocketPC.  But even here, to say the monopoly played a role, is a stretch.  A lot of Windows developers -- particularly the VB crowd -- are getting dragged into .Net kicking and screaming.  It's not exactly like Bill Gates threw some switch and said "Muh-haw-haw-ha-ha-ha-ha...  and now with the flip of this switch, we will use our army of developers to dominate PDAs as well."

So, whether it's a phone or a PDA, people are now running around with some pretty powerful gear on their belts and Microsoft has a choice now that mobile media has taken off thanks to the iPod.  Leave the power dormant on those mobile devices (let them be fancy contact managers, email devices, and phones) or go for broke and enable them for all forms of content: text, audio, and video.   And, surely, there are some of you out there saying "Shame on Microsoft" because when it enabled all those mobile devices for multimedia, it did so in a way that made it compatible with Microsoft's desktops and notebooks (thereby once again leveraging the monopoly).  So, let me get this straight: Microsoft should have invented some new format that was incompatible with everything else it makes just to avoid any perception of monopolistic impropriety?  Puh-leeeze.

Now that Microsoft has the deals in place to make sure the market is sufficiently seeded with the technology to play Windows Media-based content, all it has to do is get the content flowing.  That way, the cellcos get their ARPU up.  Oh, and the content providers know that when they create some content, that they only have to create it once and it will work on someone's media center at home just as well as it works on the phone in their hand.  Enter deals like the TiVo one I wrote about yesterday.  The content is flowing.   Enter the competition that Microsoft has created between online music stores like Napster-to-Go and Yahoo's Music Store, both of which require Microsoft Digital Rights Management technology in order for the music that's downloaded from them to work.   If music from Apples iTune's Music Store comes down in price from 99 cents, you'll have Microsoft and the battle for your business that it created between various online music stores to thank.

Did Microsoft do a bad thing?  Sure.  Not only that, I'm still not sure that the trust-busters came up with an effective remedy.  I've often said that Judge Penfield-Jackson had it right.  Not only should the company have been split up, it should have been split three ways (the third one being MSN).  But now that the punishment has been meted out,  to expect the company to roll over and play dead instead of doing whatever it can -- within the limits of the law -- to protect its future and its stockholders is absurd.  To credit Microsoft's monopoly for the way the company is so well-positioned to succeed in digital media is equally ridiculous.  If you really want to point a finger at someone, point it at Microsoft's competitors. 

Topic: Microsoft

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  • Glad you revisited this.

    Also glad to see a non-biased review of where things stand and how they got there. I said the samething you have said in your closing remarks. If there is a "blame" to place then it must be placed upon the competition, both proprietary and open source.
    • I have made this point over and over

      Stupid people are responsible for the popularity of Microsoft.

      Stupidity or laziness. The products that Microsoft are usually never better until others begin to accept the product.

      Sony is atleast giving Microsoft a run for their money in the Console Market. By making software alliances with game makers, they are using Microsoft's strategy against him.
      • And your "point" is plain silly.

        If I understand your position, 95% of the world is "stuid" and you are the genius. Uh huh, right....
      • Don't own your own business do you

        "Stupid people are responsible for the popularity of Microsoft."

        So my parents are part of the crowd you consider stupid huh?

        Makes me wonder how stupid you might be. It is called product branding. It is called keeping your product name in the forefront. It is called target marketing. It is called price marketing. It is called controlling what you want the consumer to see and know. Microsoft markets better than any of the other products save maybe Sony or even Dell. People respond to the marketing they see.

        So let's see how stupid you are? What beer or soda do you drink? What deoderant do you use? What make of vehicle do you drive? I'd bet that your intial decisons to buy whatever brands you do come from ADVERTISEMENT or what your folks used to buy and used. You are branded. Now does that make you stupid. Of course not. It means you responded to their advertisements. You payed for what you are used to seeing or hearing about.
        • It's a fact: a lot of Windows users are illiterate

          To be fair and more precise I mean computer illiterate. It's like buying a car and don't know how to drive.
          To use a computer you don't have to be a computer expert or wiz but you need to know the basics to make use of your computer (and investment in the hardware/software you purchased).
          To drive a car you don't have to be an expert stunt driver or race car driver but you need to know the laws of traffic and can operate basic driving maneuvers (parking, changing lanes, changing gears etc.)
          Are they stupid? I think a more fair term would be: they are not smart.
    • BBC going Open Source

      Here's a fly in Microsoft's ointment streaming from the tube.

      "The Dirac video Codec created by BBC R&D and co-developed since early 2004 with open-source programmers is set to remove one massive barrier to making available on the internet all BBC TV output ? by saving the corporation very many millions of pounds in streaming license fees in coming years."

      Why pay for it?
  • Judge Jackson had it wrong.

    He decided that Microsoft was Evil, and had to be attacked so that it could never be Evil again. Being in a court of law, though, he was required to observe the limits of the law. The most important restriction was, the punishment had to fit the crime.

    You wrote:

    Did Microsoft do a bad thing? Sure. Not only that, I'm still not sure that the trust-busters came up with an effective remedy. I've often said that Judge Penfield-Jackson had it right. Not only should the company have been split up, it should have been split three ways (the third one being MSN).

    But, as Judge Kotelly summarized the Appeals Court's instructions to her:

    The appellate court offered specific guidance to this Court regarding the inquiry to be undertaken following remand.

    In this regard, the appellate court focused most of its attention on the merits of a structural remedy, noting in particular that if, in fact, Microsoft is a ?unitary company,? rather than the product of mergers and acquisitions, it is not scissile. Id.

    [Under law, Microsoft could not be broken up because it was not a conglomerate of acquisitions.]

    In addition, the appellate court reiterated its concern over the quantum of proof provided to support a causal connection between the exclusionary conduct and Microsoft?s persistence in the dominant market position. Id. at 107.

    Notably, however, the appellate court did not remark that this Court should consider whether or not to impose any remedy. Instead, the appellate court advised this Court to ?consider which of the [original] decree?s conduct restrictions remain viable in light of [its] modification of the original liability decision,? id. at 105, and admonished that the remedy imposed should be carefully ?tailored to fit the wrong creating the occasion for the remedy,? 107 (?[W]e have drastically altered the scope of Microsoft?s liability, and it is for the District Court in the first instance to determine the propriety of a specific remedy for the limited ground of liability we have upheld.?)

    Note the reference to "conduct restrictions" in deciding on the appropriate penalty. Anything structural would be returned, probably to still another Judge.
    Anton Philidor
    • revisionist rubbish

      Microsoft bought leniency in the election campaign
      They seriously put back the software market with their
      anticompetitive behaviour, and still are doing this, as they are
      yet to be punished.
      Quit trying to dress up a dirty pile of washing.

      I've proved this to you over and over in these talkbacks, and you
      still peddle this rubbish. You said over and over Linux was
      preventing the emergence of a competitor to windows, and I
      proved to you that in fact it was Microsoft that was doing this on
      an ongoing basis.
  • There's a confusion between standards and technology

    PocketPCs are a good example of Microsoft taking market share by perfecting a product and giving better value to customers. Many laughed and continue to laugh but PDAs are getting faster and each new release of the software gets richer and more stable. This is much like what they have done with the tablet PC. Thankfully they have the resources to continue development until they create an interesting and valuable product. However this scenario does not necessarily apply to how Microsoft are exploiting other markets.
    There is a difference between offering better software/technology and seizing control of a market by gaining control over it's standard. It happens to be that microsoft have control of a large percentage of the devices that play the media (PCs) and more importantly, they have control over the majority of the devices that will create (ripping CDs) and purchase the media. This means they can, and they are, blocking other standards to seize the market for themselves. Obviously in this case having Windows as an OS monopoly is far from being water under the bridge. They offer Windows Media Player for free which customers use to rip CDs into WMV format and encourage manufacturers to create players that support their format. A huge amount of non-technical users must take some time before they realize they aren't just using the famouse "MP3". Then a few years later appears their music shop ( Somehow by chance this music shop happens to be designed so that Firefox can't use it. Go ahead browse to it and try to purchase a tune in Firefox.
    Again... offering better technology is not the issue, that would not be abuse of a monopoly. The issue is repeatedly locking others out, once control of a standard is completed. They still wield great power thanks to Windows and more importantly they have great resources so they can play the waiting game.
    Another prime example is MSN messenger. Do you remember the time when there were many competing instant messengers ? Microsoft packaged MSN messenger for free into Windows and now everyone uses it. It is only after they gained control of this market by becoming the standard, that they started suggesting that they could enforce their rights to make other compatible IM software pay rights to use their network. It is also only after they are the standard for general IM that they introduce their revenue streams from messenger. Now with messenger 7 you either buy new "winks" to send to your friends or you use the ones that are paid for by advertising.
    I can already hear people saying "yes.. but better software... free... better value for customer". No! that is not the point. We know Microsoft can afford to develop products and we know that Microsoft can afford to offer them for free until they can create a revenue stream. The point is, using a monopoly to gain control other the standard for a new market, is effectively using a monopoly in one market to gain monopoly of a new market, and that is the problem. standards.
    I can agree that the competition is far from being perfect... but tell me: How is microsoft so much superior to the competition in the Media arena ? How is their format so much superior ? Why do they really need this particular format and not another one they would be compatible with ? How are their services, and not free software, so much cheaper ? is still selling music at the universal 0.99$.
    Windows is the gateway so the standard is theirs to define. I understand their position, but I don't understand the position of those who are not alarmed by this and see it as a legitimate example of better technology.
    • Was there a point?

      You say MS is locking out others, and yet they freely license theri tech to anyone and everyone. Does Apple do this with the IPod? NO! They absolutely do EVERYTHING they can to keep it from happening.

      You ask how Microsoft is better? The answer is that they have built software to meet the needs of the content providers and the hardware manufactures. Tell you what, write to Apple and ask them for a license to build an IPod knock off and see what happens...

      You speak as if the PC is the center of the media world and it is far from it. In fact it's only a tiny fraction of the media market. No, having control of the PC desktop does not equal a show in to media. Building great software and granting a license to all comers is what has made the difference...
    • Um, no

      "PocketPCs are a good example of Microsoft taking market share by perfecting a product and giving better value to customers."

      PocketPC is a good example of anti-competitive M$ paying Apple $150 million to sit on (and kill) the Newton. Palm emerged as a force, because it was ALREADY WRITING the software for Newtons, and it was either make their own handheld - or die.

      Interesting to note that PocketPC's use the SAME processor that the Newton did.
      Roger Ramjet
      • Are you dreaming?

        The Newton was the most underpowered thing ever built. Even Apple admited it didn't have the power to do what it needed to in order to win market share. And yes, I owned one...
        • No dreams, just reality

          Early Newtons were battery eaters. This was because there were NO low power chips out there (No Pentium M's in 1990's). The final incarnation of the Newtons use the StrongARM processor that was SPECIFICALLY made for low power. DEC made the chip, InHell bought the fab, and they STILL make the chip - calling it Xscale. If it was good enough for InHell to adopt it, then the Newton MUST have been pretty good - and NOT underpowered.
          Roger Ramjet
          • Well gee, I used to use a 286 too.

            Saying it was an ARM CPU is meaningless.

            Look, I have had a Newton, I've had a Plam, and they are now both in the "collection of old" hardware that I look at occasionally for yucks. Neither of them (and not even Palms newest offerings) come anywhere close to the features and functions of my PocketPC. It's just that simple...
    • pouring money in to win a market

      makes sense until the market disappears as is happening with
      PDAs. Personally I think Microsoft have lost a vast bundle on the
      overall project, and will never recover this money.

      in another post, I've compared this to "winning a game of
      shuffleboard on the deck of the titanic" which I think pretty aptly
      describes pocketpc.
  • And now for some realistic news..

    Playstation 3 will have external Linux option.
    • Simply doesn't matter...

      But then, even you knew that.
      • Well, when PS3 spanks the Xbox 359, it will..

        It will make users more aware of FREEdom.. not restrictions and greedy corporations.
        • Sony isn't "greedy" Buwahahahaha

          What are you smokin???
          • OK, I'll give you that.. lesser of two evils, then..

            OK.. OK...