Why Apple Isn’t Microsoft
September 26th, 2007As Apple continues to grow a lot faster than most people ever expected, it’s inevitable that there are going to be comparisons with Microsoft. This is particularly true when it comes to the iPod and iTunes, both of which hold serious majorities in market share.
So if you complain that Microsoft is a monopoly, shouldn’t you also make the same complaint about Apple and its standing in the digital music market?
Unfortunately, many of the people who make this claim have failed to learn from the lessons of history, particularly how Microsoft came to occupy a dominant position in PC operating systems and office suites. And, no, it wasn’t because they built the best product and beat their competitors fair and square.
From the very beginning, when Bill Gates played a shell game with IBM to sell them the original MS-DOS operating system before he acquired it from another company, it is clear that Microsoft knew how to play the game of business hardball, ethical or otherwise.
Through the years, Microsoft has grown, in part, by double-crossing its partners. Remember when they were working with IBM to develop OS/2, the next great industrial-grade operating system? Well, that partnership evaporated, and Microsoft created Windows NT instead. That way, they could keep all the profits to themselves and not have to share the glory with anyone.
This is not to say that NT was necessarily a bad operating system. Certainly it was a tremendous leap beyond the DOS-based Windows, and thus something that benefited all Microsoft customers in the end. But you don’t have to question why IBM these days is pushing open source.
More recently, when its PlaysForSure partners couldn’t gain a foothold in the digital media player market against the iPod, Microsoft released a modified version of a Toshiba Gigabeat player, called it Zune, and went off in their own direction. Still no success, but it does show the folly of partnering with Microsoft.
I do not need to recount the issues that led to antitrust actions against Microsoft in America and Europe. Even though some of the fine elements of those complaints may be debated, the overwhelming evidence shows that Microsoft employed all sorts of questionable tactics to achieve and retain market dominance.
It was never about having the best product.
Now compare that to Apple Inc.
Over the years, Apple has done some pretty foolish things that squandered their prospects for early control of the personal computing market after the huge success of the Apple II. You can certainly argue about a lot of things that could have been done better — or at least differently — but can you honestly say Apple has used illegal marketing tactics to achieve its present-day status as a industry-leading consumer electronics manufacturer?
Certainly, although it hasn’t always met shipping dates, Apple hasn’t played dirty tricks to enhance the Mac’s market share. They’ve simply built the product, shipped it, and let the customers decide whether or not to buy. There was no tie-in with other companies, forcing you to pay for their products even if you didn’t want them, as you have to do with the typical PC and Windows.
But what about the iPod? Doesn’t Apple have a huge advantage in that market segment? Sure they do, but they also started the iPod from absolutely nothing and, I gather, without any expectation that it would become a culstural icon. Apple had never built a digital music player before, and there were indeed a number of competitive products out there.
Apple didn’t succeed by riding roughshod on Creative and other companies building music players. When the iTunes store first appeared on the Mac expanded to the Windows environment, Apple didn’t demand exclusive agreements with the music companies. They all had product at other music stores too.
But a combination of ease of use, sex appeal and smart advertising drove Apple to the top of the heap. They didn’t prevent competitors from building their own music players. While the iPod and iTunes were closed platforms, that didn’t prevent other companies from building similar environments for their own gadgets, or offering superior hardware and music store integration.
Should there be one unified format that would allow you to take your iPod and have it work with any music store? Should iTunes integrate as seamlessly with the Zune and other products? Maybe, maybe not. But that doesn’t mean music lovers don’t have a choice.
However, don’t forget that many Apple products these days are fully compatible with Windows. On the other hand, Microsoft and its PlaysForSure partners treat the Mac as if it didn’t exist.
No, Apple isn’t a monopoly and it doesn’t behave like one. Let this argument die a quick death once and for all.
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Even though it’s only been in existence for two days, the Amazon MP3 store (aTunes?) seems poised to offer a serious challenge to iTunes. In the past 20 years, nothing of any sort has even come close to offering the same threat to Microsoft.
Didn’t they say the same thing about Amazon Unboxed?
Well, on this occasion, of course, we’re talking about songs that aren’t tied to a particular DRM, so they should function on the iPod.
Besides, Apple doesn’t make all that much from iTunes anyway.
Peace,
Gene
It would have got them nowhere, as they haven’t got sufficient clout to demand that. But, nevertheless, such agreements do not exist, which, as you say, makes any comparison with Microsoft absurd.
The Amazon Store, incidentally, looks, in part at least, like an attempt by Universal to undermine what clout Apple does have. Apple won’t agree to “variable pricing” — a euphemism for soaking the public on whatever the record label’s marketing is indicating to the public they should buy at any one time. Universal’s stuff is, apparently, slightly cheaper on average at Amazon’s new download store, but the prices do vary and it’s not difficult to see that if it is a success, and with Apple out of the way, prices will be hiked.
Universal is going cautiously: not all of its catalogue is available DRM-free. It’ll be interesting to see how well it does. Not too well, I hope, because I think that wouldn’t bode well for the end user.
What much of the tech press, which has been pushing an “Apple’s monopoly” line — presumably on behalf of Microsoft — has missed (or perhaps more accurately does not want us to notice) is that it is the record labels that have exclusive agreements in the music download market. Universal is not making its catalogue available to Apple. Universal is not making its catalogue freely available to any retailer that’s willing to sell it. In this market it’s the labels that need watching, not Apple.
MSFT is poised, it seems, to launch a knock-off of the AppleTV– a wireless media hub. But tied to Vista……
I guess they need SOME method to try to drive Vista sales, but , again, Apple delivers a more “realized” product. AppleTV isn’t tied to Leopard. Or even OS X.
Microsoft’s Media Center stuff really hasn’t gained traction, and they’ve had it going for several years. Try and try again, but at some point they have to face the music 😀
Peace,
Gene
“Microsoft’s Media Center stuff really hasn’t gained traction, and they’ve had it going for several years. Try and try again, but at some point they have to face the music”
I don’t think the concept is flawed, but 1) the execution may be 2) the market isn’t ready yet. People didn’t understand the Mac when it came out, either. Unless they did. Having said, that, it’s anybody’s game at this time. I’m glad Apple is dipping its toes in these waters.
I’ve been seeing this claim for several days now, yet it’s never been backed up.
What leads you to believe that the Amazon store is an attempt to drive the ITMS out of business and cause prices to be raised?
The Amazon store appears to be the first real attempt to break into the ITMS-iPod system that has learned from past mistakes:
1) It is compatible with both PCs and Macs.
2) You aren’t limited to any one music player.
3) The music is DRM-Free
4) The files are ready to import into iTunes, with the tags filled out and artwork included.
6) The files are all at a higher standard bitrate than iTunes DRM files.
5) Prices are low enough to encourage you to purchase the music rather than getting it for free.
If anything, this will encourage Apple and their partners to remove DRM from their music, drop prices to compete with Amazon, and allow the files to be used on any player or system.
There is nothing wrong with being a monopoly so long as you are not a bully about it That is, you don’t charge excessive prices for poor goods and services. You can earn a high market share from simply being better than your competitors. It doesn’t take much to be better than Microsoft.
Microsoft tried desperately to get a foothold in the MP3 player market without success. it took Apple a year and a half before the iPod took off. Microsoft has failed everywhere it has tried to honestly compete. Where’s Microsoft’s mobile phone software? Dragging tail in the Smart Phone market. The iPhone will sell better this year than Microsoft’s mobile software entries. Why? Because over 80% of iPhone buyers say that they are either satisfied or very satisfied with their purchase.
The iPhone can only improve. It is a version 1.0 product. The hardware will improve. The phone companies will upgrade to wider distribution of G3, so Apple can afford to go to Version 2.0–G3.
All products are imperfect. Many people are dissatisfied with their current phones. As their service contracts lapse over the next year, we will see steady growth in iPhone sales. How long will it be before the Microsoft shills start to decry an iPhone monopoly? I’d guess by the end of 2008. Why? Because Apple will sell more than 10 % of the Smart Phone market– far more than 10 million iPhones.
What’s interesting to me is the lack of diversity among the Microsoft shills. One of them makes an absurd statement and all the others pile on as if there were more than a few people spouting this nonsense.
I have no idea if Amazon’s music service will succeed. What has Amazon changed from their previous failure to make them more competitive? Not much; they use watermarks instead of DRM. But, the market will decide, not the Microsoft shills. If the market trusts an Apple “monopoly” than its current phone suppliers, that’s just the way it is.
No media center is going to gain traction until the DMCA and MPAA loosen their grip on the industry. As long as it is a crime to copy movies, and copy TV shows, those who do it will be far and few between and certainly won’t be making themselves a vocal lot. The incrimination of such activities goes against the very heart of “fair use” in the copyright clause, and since it is being incriminated, all attempts at DRM are going to be faced with criticism and uphill struggles. Apple is simply the dominant player now because of elegance in the interface of the iPod their flooding the market with the product. AppleTV and Mediacenter aren’t going to go anywhere as the real truth is no one wants to have to pay for the TV shows on their TV that they can record to VHS or to their TiVo and similar such devices. With DVD places such as Netflix offering old TV shows on a nice simple subscription basis that is fair, why should I pay $4 or $2 to own the TV shows when I can just rent the one I want by returning my currently rented DVD and getting the TV show I want put on top of my queue? Same with movies. Neither Apple nor Microsoft is gaining a lot of traction in the video end because Netflix and Blockbuster already own it. If someone made a system simpler than the iPod for deploying both video and audio, they will outdo both Apple and Microsoft, if neither takes the lead in video. Apple may not be Microsoft, but like Microsoft they have stifled competition by buying software vendors and staying a closed software vendor. Vista and Mac OS X have become so much alike, the only serious difference left is that security is better implemented on Mac OS X. Microsoft monopolizes on software, and Apple monopolizes on hardware and software (iPod and Mac OS X), leaving you inside their own closed system. When the systems become more open, the comparison of Microsoft to Apple will cease.
If we’re going to take a positive spin of this development, yes, this is an alternative to iTunes that, in fact, doesn’t necessarily have to impact sales of the iPod, since it will work with it. Maybe the process requires an extra step, which is to import the file first into iTunes. But after that, it’s just another track.
Peace,
Gene
Gene,
Another excellent, calm, rational, intelligent post. Thanks for explaining all of the reasons Apple is not a monopoly in the digital music realm. Like you say, Apple built a player, the software and a store, and the people voted with their wallets.
Regards,
Chuck
Oh, OK. There’s no particular reason why Universal will not let Apple have its catalogue; Universal does not intend to raise prices at any point; and even if retailers other than Apple are successful with its catalogue Universal most certainly will not demand higher prices.
Happy now?
is apple ever going to beat microsoft?
They already have when it comes to the iPod, and compare the iPhone to any Windows Mobile phone.
As to operating systems, that’s a touchier issue. I don’t see that happening, although I see Apple making bigger and bigger inroads into the PC marketplace.
In the end, when there is no longer a need for PC operating systems, Microsoft may still be a relic of the past, while Apple will have long since moved on to the next great thing.
i’m writing a research paper on that topic “if apple is ever going to beat microsoft”. your response was great. but got any documental supports/ theories? thanks a lot! 🙂