Should We Welcome Microsoft's 'Predatory' Pricing?
from the monopoly-time dept
For some time there's been concern about how Microsoft's push into security software might square with its reputation (and conviction) as a monopolist. Depending on your point of view, the company could be seen as trying to profit from its own software vulnerabilities by selling security or abusing its monopoly by bundling anti-virus software along with its products. This dilemma appears to be coming to a head with the release of its OneCare security suite, which is priced significantly below that of equivalent competitor packages. On the blog of one security company, the case is made that the company is guilty of predatory pricing, in a deliberate attempt to damage the competition. There's no doubt that Microsoft does want to take shots at its competitors -- that's what all businesses do. What's funny though is that the argument boils down to the fact that OneCare is too good of a deal, that its licensing terms are too flexible, and that a software package of its caliber just shouldn't be so affordable. All this sounds pretty good for consumers, whom the law should ultimately be designed to protect. If security software is such a commodity that price is the only concern for customers, then the price should be dropping. In addition to the direct concerns about pricing, the company argues that Microsoft will establish a monopoly in the space, and that investment in new research and startups will dry up. One reason this isn't likely is that security software doesn't lend itself to a natural monopoly the way an OS does (not to mention the fact that the vaunted Windows monopoly itself is seen as weakening). On the issue of future investment in the area, this too seems like a red herring. Microsoft's monopoly hasn't killed innovation; in fact it prompted entrepreneurs and investors to pursue a radical new envisioning of how software could be developed and distributed using the web. Getting the government to preserve the status quo in the security space would be the last way to ensure a dynamic, innovative market.
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Gates is a God!
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Misses the point of predatory pricing
The problem with monopolists is that they can use their monopoly power in one category to create an unfair competitive advantage in an adjacent market.
In this case, Microsoft may be pricing security software at a lower price than is rational as a stand-alone business because they are subsidizing this business via their core monopoly. By doing this Microsoft can eliminate competition in this segment by making it unprofitable for others to compete. Later, once the competitors have been eliminated, Microsoft is then free to price their product at whatever they wish (no competitive pressure).
Thus there is an illusion that consumers benefit from predatory pricing practices -- it is an illusion because it is short-lived and in the long run the consumer suffers from the reduction of competition and the emergence of a monopolist who can dictate price to the market.
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Monopoly: I'm only going to say this once
"Monopolies only exist by government permission."
People really need to grow a clue about the whole monopoly thing. Is MS saying that you can ONLY use their OS and office suite? On the other hand, I would certainly love to see telcos and utilities use some truth in advertising.
AT&T, Qwest, Verizon: "Bet you'd like to be able to call your friends..."
Electric companies: "What are you going to do? Buy a generator?"
Gas companies: "Boy! It sure gets cold without a working furnace!"
And my favorite, Department of Highways: "Yup, the roads suck. Too bad!"
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MS is just trying to gain marketshare...
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Re: MS is just trying to gain marketshare...
MS is making Swiss cheese software, and then gets rewarded for that by selling you more crap to make the crap OS better. What a deal!!
If you recall the IE / Netscape scenario, IE was supposed to be "free"?? in Windows 98, but when XP came out the price of the OS had about doubled. Was IE still "free", or was it ever "free"?
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Security Software as a Comodity
There are stark differences in quality among vendors offering security software. I'd imagine most end-users only at the price, assuming that every virus scanner catches every virus, every malware removal tool removes every piece of malware, and every firewall provides the same level of protection from threats on the Internet.
I have not used Microsoft's OneCare, but considering that it is a product that's designed to make another Microsoft product more secure...I am skeptical. And I think many other's would be as well. So is it predatory pricing, or just Microsoft realizing that OneCare would flop if it was the same price as their competitors.
It's up to the security companies that offer competing products to identify what differentiates them from their peers -- a task, thus far, they have not been very successful at.
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I compete with free and inexpensive products all the time, and in fact, I have a free firewall myself that I give away. The point is not price -- the point is predatory pricing -- where a large manufacturer like Microsoft comes into a market and undercuts the incumbents. Perhaps some may think it's nothing to be concerned about, and perhaps they are right. One might, however, propose that the security industry should be a vibrant, diverse one; and that the business should not be dominated by one vendor who can be taken down by attack; and to whom the majority of the community relies upon. If Microsoft wants to compete fairly, I have absolutely _no_ problem with that. But if they want to undercut the market, it makes things a bit different.
Remember 15 years ago, we had a variety of databases to choose from. Today we have primarily SQL and Access. The same goes for languages -- we had Borland and other really innovative companies. Now we have only Microsoft. The majority of the market moved to IE. And after that, we had the massive wave of adware and spyware, directly targeted at IE. And on and on and on. Is this healthy in the security market? Will new companies be able to get funding for their products? Will businesses continue to invest in this space, given that Microsoft may dominate? Do you really want security to be a monoculture?
I've posted several follow-up posts on my blog on the subject.
Alex Eckelberry
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Re:
I'm afraid I don't understand a bunch of your statements. First you say that you give away products (price it at zero), undercutting the market of other competitors, and then complain that Microsoft does the same thing to you.
How is that predatory pricing? As far as I can tell it's just pricing you don't like.
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Re: Re:
However, in the US, the definition of predatory pricing was created by anti-trust legislators to deal the idea of a dominant player comes into a market, underprices the competition and then raises prices after the competition is wiped out. Now, whether or not Microsoft will raise prices subsequent to destroying the competition is unknown. And, in reality, predatory pricing is largely an arcane legal concept, rarely practiced in jurisprudence because it’s so hard to prove.
The bigger point is: Will Microsoft dramatically undercutting the security market be a good thing for the state of security in the long run?
This situation is unique as Microsoft is the provider of the platform and much of the software that runs on top of it. Software itself is a zero cost-of-goods product, the only costs being related its development, marketing and so on. So you can, literally, sell software for a penny and if you sell it in enough volume, recoup your expenses. In normal industries, predatory pricing is difficult, because there’s only so much a company can realistically lose before it throws in the towel.
However, in the software business, it’s different because of the cost margin, and with Microsoft able to make its real money from OS sales, it is in the enviable position of being able to lose literally hundreds of millions of dollars without major effect.
It is because of their unique position that they have been able to dominate most of the markets they have gone into.
To put it in a more personal sense, would you like to start a security software (or hardware) company in this environment?
Again, the real question I have been trying to pose is: Will a Microsoft hegemony in security be a good thing for the health of the security industry? If people think that’s a good thing, I will rest my case and move on.
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Re: Re: Re:
Can you give one example in the software industry where this has happened? It seems like prices continue to drop, and if they're raised, it opens up opportunities for new entrants.
The bigger point is: Will Microsoft dramatically undercutting the security market be a good thing for the state of security in the long run?
Oh come on. I could just as easily phrase the question as follows:
If Microsoft fixed their own software so that it didn't need so many security solutions, is that a good thing for the state of security?
You chose to be in a business where you were dependent on Microsoft keeping its product crappy. That's a business risk.
Secondly, you chose to be in a space where, if you were 100% successful, you would put yourself out of business anyway.
Again, these are business decisions.
To complain about the market changing seems silly.
Again, the real question I have been trying to pose is: Will a Microsoft hegemony in security be a good thing for the health of the security industry? If people think that’s a good thing, I will rest my case and move on.
Read Joe's post again. He explains why, yes, it likely will be a good thing.
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Is that really all we have now?
Excuse me? What about Oracle and MySQL? dBase, Sybase, PostGRE... How's that FOSS for predatory pricing? And maybe some of those that have passed are not really missed because they had pathetic performance. Or the companies were poorly managed. We should not sustain failed business models for some nice feeling of competition in the marketplace; performance and management are part of a business model.
As far as languages, we are hardly limited to MS' offerings, even if we only want to develop for Windows. As a software engineer, I get to pick the best tool for the job. Sometimes it is a V*++ or V*# language. But there are plenty of languages to choose from. The right tool for the job.
And when it comes to any product in the marketplace, may the best player win. If MS makes the best product (somehow I doubt it), then I hope they bury everyone else. But I think it will be a safe assumption that someone will offer a FOSS or inexpensive AV app that will spank OneCare up, down, left, right, and sideways.
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Re:
What?
Take a look outside your immediate industry/employment niche and things will look different. SQL and Access? SQL as a language, I hope you meant. Oracle, SQLBase (annoyingly), open source solutions.. There's lots out there, and from the last company I was at (manufacturing sector software), MS databases didn't hold a majority stake at those companies.
Same for languages.. Microsoft can lay claim to VB and C# (and not for long, really, with Mono shaping up nicely), but the "real" software is still C and C++. Java is also a bloody MONSTER in international markets and in non-desktop PC deployments. Delphi still has a strong following.
MS are probably the biggest fish in the sea, but they're certainly no bigger than the rest of the fish put together. Not by a long shot, I'd say. Apologies if I misunderstood your words, but you seem to be more intimidated by MS than they really deserve.
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Re: Re:
Oracle's primary business is in large enterprise. For the average small to medium businesses, it's most common to see Access and MS SQL.
As regards C++ and C, what compiler is the most used?
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It's extortion
However when the insurance agent is also your docter, you've got a major conflict of interest going on.
Microsoft now has an incentive to leave security holes in their products. Now they've gone from incompetent fools to organized criminals (some argue they already were...).
This is bad.
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Re: It's extortion
For years, everyone complained that windows is extremely insecure and that it's all microsoft's fault. Microsoft attempts to fix this bad security image with a security product, and now they're extortionists?
I bet you Microsoft wanted to simply build an antivirus program into Windows to do away with a need to spend 50 bucks a year at McAfee or Norton...but they couldn't out of fear that they would be sued for making their product too beneficial for their customers by "bundling."
I'm so tired of you anti-market people out there that think Microsoft is some kind of monster. They sell software. Period. If you don't like their software, don't use it. You sure as hell shouldn't condone the idea that other COMPETITORS get to sue or lobby governments to punish successful companies from trying to improve their products, or god forbid, their shareholder's bottom lines. I'm tired of people that actually think profiting is evil! You profit every time you take home a paycheck. Don't like profits? Send ME your paycheck. OR...stop being such hypocrites.
How is it any other company's right to dictate what another company's software or software lineup should or shouldn't contain?
I obviously lve in irrational times where this can even be a point of debate. Freedom is dead.
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Checking in with the real world
Similarly, nobody can make a "bulletproof" operating system...with the combined effort of a few thousand hackers, any system will eventually fall. That's why Operating Systems need evolving armor. Few people think ill of the military for investing in new and better ways to protect the troops that they train.
Microsoft is relatively "insecure" compared to other operating systems for the same reason celebrities are relatively insecure compared to us normal people: THEY HAVE A PUBLIC FACE UNDER CONSTANT SCRUITANY, AND FEW PEOPLE GIVE A RAT'S ASS ABOUT EACH OF US. There's no profit in attacking Linux or Mac because so few people actually use them.
But if, say, Linux was magically the dominant OS and was subject to tens of thousands of attacks from digilent "security researchers" every day, then you same pundits would be sitting here complaining about how "insecure" Linux is every time someone finds an attack that works.
Most of the people who post here seem to think like each other...but just because you represent the majority here don't think you represent the majority of real people. Check out a monitoring site like:
http://marketshare.hitslink.com/report.aspx?qprid=5
...and see what the real world looks like. Check out the O/S share trends. XP up, Mac has some nice gains, and "other" dwindling away. There's still more Win98 users than Linux users. Don't believe your own hype guys...
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Re: Checking in with the real world
a) the military charged the soldiers for new armor
and/or
b) Linux were actually as insecure as Windows.
Sorry, but Windows is far more insecure simply based on the administrator model, let alone all of the other problems. Plus, there's tons to be made in attacking Linux...just imagine how many large comapnies' servers run it. The market share figures simply show the market and advertising power of Microsoft, nothing else. Most people who use a computer don't have any idea what's going on. OSX is making nice gains for those that are starting to realize Windows is no good, so are moving to a better OS, or those who are moving from Linux to a "simpler" but similar OS. Linux is almost in a different market. It does not really appeal to those who like Windows or OSX.
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Re: Re: Checking in with the real world
a) The taxpayers pay for the new armor, just like they payed for the initial training. Security is a continuing investment...you don't expect your home to be burglerproof just because it's new. And even if it WAS, you wouldn't expect it to be ready for the smarter, stronger criminal of tomorrow.
b) "Secure" is a very subjective term open to debate. Again, if Linux were under constant attack by thousands of determined hackers, you'd see plenty of problems. And still, I've seen plenty of linux-hosted sites "powned" by hacker groups just long enough to get their grafiti up there.
As a CS major at MIT, I use a variety of systems all the time. Linux is great for power users and experimenters. The issue is this: Linux is NOT suitable for use by the masses, so it's "security" is a moot point to the vast majority of people. It wouldn't do most people any good to have their Windows installation replaced by something they can't use for every little thing...and by the time their systems were modified to the point where it behaved like they wanted, I guarantee it would be a lot more vulnerable than you'd like it.
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Microsoft isn't the low cost alternative
Spybot S&D http://www.safer-networking.org (Free)
Ad aware www.lavasoft.com (Free)
and how is Microsoft's low cost bundle going to be a problem?
I know that AVG and Ad-aware offer a low cost bussiness package too.
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Re: Alex
It would be nice to see a new entrant into this market for once who brings some price competitiveness. Frankly, I can think of only a few companies on the planet that can actual overcome the existing barriers to entry at all. An oligopoly, for it to function, requires significant barriers to entry and by God, you sure have it in this market.
If you want, bring it to court. You won't win.
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Oh I forgot
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I'm not a fan of Microsoft
Go ahead and complain about Microsoft's abuses of its monopoly, but find a more relevant example to make the point.
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Dominant firm
When you use an economic term, just as with any medical term, you have to use the whole of a definition. You wouldn't want your doctor confusing influenza with appendicitis because he only used part of the definition of the symptoms, would you?
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Here
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Time for MS to get predatory with Windows
That said Ive always been pro MS. Yes they may have faults but in the long run the the good things theyve done for this industry far outweigh the things theyve done bad.
Lower the PRICE of Windows already. Im hearing over $400 for Vista Ultimate and Im having a hard time with that.
Mitch
"Don't pee on my leg then tell me it's raining".
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Re: Time for MS to get predatory with Windows
I can't think of anything that MS has done to better computing. The only decent technology that they created was dhcp, and that wasnt entirely them. They are not innovative. Their tactic is beat down the competition and buy them when they're cheap. Then sell their software under the MS brand. They did it dos, windows, ie, access, sql, excel, and pretty much every other product they offer.
The statement you made about their good outweighing the bad couldnt be further from the truth. They crippled the linux market, and any other innovate technology by making their ways "the standard". They are following in the foot steps of IBM, and look at them now, they have to sell of parts of the company because no one will follow their trends anymore. I honestly believe MS will, and is already beginning to follow that trend.
I can honestly say that the day they love the majority share of OS's I won't be the least bit dissapointed.
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Here MS goes again
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security software
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Maybe we should feer OS preditory pricing
Geez.. Price for feature a capability Microsofts products are still less than they were when they didn't own the market.
When people are done worrying about poorly run companies that blame Microsoft for thier woes..
Maybe they can worry about the consumer that probably pays more for Windows because of government meddling and sometimes has the Government tell them to give the customer less.
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M$ doesn't have a monopoly, rather they control pu
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How about one gigantic real estate company that builds houses that the overwhelming majority of the population lives in? Except they also provide a security alarm system for every house they build.
Which situation is better for the consumer? Which provides for the most competition, a better product, and a more CAPITALIST market?
The answer is obvious. No one else would make any money building a better car alarm or home security system, would they?
So explain exactly how LACK of competition can possibly be benefitial to anyone but the stockholders of a monopoly
--Prof HiB.
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Idiots
When you buy a car, does the salesman try to upsale you. When you buy a house, does the realator try to get you in the most expensive. When you buy anything, isn't the salesperson job to upsale you?
This is an ignorant group yelling b/c you don't like MS, nothing else.
For those of you that don't think MS changed the computing world, please, how many offices in the world rely on MS to run business verse others?
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Re: Idiots
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Every single time Microsoft sets it's foot in a market, everyone with a foot in that market crys out in shreaking agony. Why? Because it is cliche. Microsoft may be a threat but they are a threat because they are competition. If you don't like competition, get the hell out of your business and apply at McDonalds cause I am sick of your needless bitching. Either that, or create quality software (yea right - if you had the ability to create quality software you wouldn't be threatened by anyone much less Microsoft).
Microsoft has never stopped anyone from being able to install any type of software on their OS. Nope, don't even go there with your technical babble, I don't really care to know how low your IQ is.
Fact: YOU HAVE FREEDOM OF CHOICE OF WHAT SOFTWARE TO USE WITH MICROSOFT WINDOWS. IF YOU CREATED QUALITY SOFTWARE, CONSUMERS WOULD PURCHASE IT INSTEAD OF MICROSOFT SOFTWARE, THEREFORE THERE WOULD BE NO THREAT AND NO NEED FOR YOU TO CRY BECAUSE YOU HAVE A COMPETITOR.
The only reason people jump all over Microsoft when they become a competitor is because it has become very acceptable to do so. Stop jumping on the bandwagon and be an innovator. You claim that MS is not an innovator, well, neither are you. If you were, your product would be #1.
No one has ever had a good excuse for disagreeing with Microsoft that I have ever heard. Every person I've ever heard argue something against Microsoft showed me just how low their IQ really is.
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You argue that Windows is not secure, so you say move to Linux.
Once we move to Linux, in time it will be as insecure as Windows once was.
So shall we completely switch operating systems every 10 years (or so)?
You go right ahead. I promise you many won't follow.
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Security Suites
I would really like to see some improvement in the maintenance sector with programs like iolo's System Mechanic. Every other one I've seen has an even worse interface and causes unpredictable results. This category of product needs some competition also to spruce up the ease of use and remove the unintended consequences.
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Re: Security Suites
My gripe is that if this software makes windows better then why doesn't MS incorporate it into its OS? Is the assumption that some users don't want increased security and maintenance? I contend that NS wants to "Hook" you with their OS, for which they have a near monopoly, then to extort additional "protection" money. I doub this will be the only MS product to dupe users into additional contributions
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