Microsoft is currently locked in a battle with European antitrust regulators over bundling Windows Media Player with the Windows XP operating system. Last year, EU courts ordered Microsoft to provide European consumers with a version of Windows sans WMP. Microsoft, showing its usual defiance of meddlesome bureaucrats, cheekily proposed naming the product “Windows XP Reduced Media Edition.” Europe’s bureaucrats have nixed that title.
Today’s legal skirmishes recall the browser battles of the 1990s, when the United States Department of Justice and state attorneys general spent the better part of a decade pursuing Microsoft for allegedly using its dominance in the operating systems market to eliminate its rivals in the market for web browsers. Advocates of aggressive antitrust enforcement tell a plausible-sounding story about how markets are won and lost in the high tech world. In their vision, large, wealthy companies like Microsoft are able to use the built-in advantages of a ubiquitous product and deep pockets to strong-arm their customers into adopting new products they wouldn’t otherwise choose, thus expanding the company’s hegemony and ensuring that the company controls more and more of the software industry.
That story — plausible though it might sound — turns out to be wrong. It’s certainly true that Microsoft often attempts to gain an advantage from its Windows franchise when entering new markets. The problem with the “just so” story of antitrust proponents is that those efforts often fail. I’d like to tell the story of a product, Microsoft Passport — and the broader Hailstorm initiative of which it was to be a part — that offers an object lesson in how all the strong-arming in the world won’t save a bad product.
If your computer runs Windows XP, chances are you’ve seen the annoying pop-up messages Windows XP displays to entice you to sign up with the Passport service. Passport is a unified sign-on service that would allow the sharing of login data between multiple web sites. No longer would users need to keep track of numerous separate usernames and passwords for each of the web sites they visited. During 2001 and 2002, Microsoft promoted Passport aggressively — including those annoying messages in Windows, adding Passport support to popular Microsoft properties like Hotmail, and promoting the product to other major websites in an effort to encourage widespread adoption. Many web sites, including auction giant eBay, added Passport support in response.
Although Microsoft doesn’t talk about it much these days, Passport was to be the entering wedge for a suite of products code-named Hailstorm — software services to be delivered via the Internet using Microsoft’s .net technology. Microsoft hoped that the convenience of software subscriptions would wean consumers off of their reliance on software CDs, which had high distribution costs and — more importantly from Microsoft’s perspective — could only be sold once. When announcing the concept, Microsoft positioned it as the future of the company.
Microsoft scaled back Hailstorm in 2002 because of a tepid response by potential business partners. Since then, the company has been largely silent about the concept of software services and online subscriptions. More recently, Microsoft has shown definite signs of putting Passport itself out to pasture. In December, they stopped evangelizing the service to other web sites, reserving the system for those sites that had already signed up and Microsoft-owned properties.
What happened? Microsoft’s considerable technical and marketing muscle were insufficient to coax the business partners and consumers whose support it needed from jumping onboard. The failure of Passport and Hailstorm — not to mention the less-than-spectacular record of other Microsoft products like the XBox — should give advocates of aggressive antitrust enforcement in the high tech arena pause. Sure, Microsoft is a fearsome competitor, and it often succeeds in new markets. Certainly having the world’s most popular OS and billions of dollars in the bank gives it a leg up on its competitors. But evidently, Microsoft’s customers remain in the driver’s seat. They adopt Microsoft’s products only if those products give customers what they want. If Microsoft offers a product that customers don’t want or need — like Passport or online software subscriptions — all the “bundling” in the world won’t budge them.
What does all this mean for Microsoft’s battle with the EU? After several years in the marketplace, Windows Media Player continues to face stiff competition from Real and Apple’s Quicktime. Each of those companies is more than capable of meeting Microsoft’s challenge head on — Real has a large installed base of streaming media servers, and Apple has an installed base of Mac users as well as tremendous marketing muscle from the iPod and the iTunes Music Store. Apple and Real are not helpless startups about the be crushed by Microsoft’s billion-dollar boot. European consumers, like their American counterparts, have every opportunity to choose the media platform that best serves their needs. EU bureaucrats should get out of the way and let them do so.
Tim Lee is science and technology editor of Brainwash and a staff writer at the Cato Institute. His website is binarybits.org.
Source: AFF Doublethink Online | Kathlyn Ehl
Source: AFF Doublethink Online | Jacob Hayutin