Looking Back At The Microsoft Antitrust Suit: Did It Matter?

from the probably-not... dept

Thu, Jul 30th 2009 2:52am — Mike Masnick

We've argued before that the antitrust lawsuit against Microsoft was misguided (though, I'll admit that I was in the camp that thought it made sense at the time, before realizing that was a mistake). The fact that the EU continues to go after Microsoft on antitrust issues seems even more silly. Farhad Manjoo has an article in Slate, officially about why it doesn't make sense to go after Google on antitrust charges, but with most of it detailing why Microsoft wasn't really an antitrust problem:

Many of Microsoft's assets turned out not to matter, because upstarts like Google and old foes like Apple found ways to innovate around them.

Indeed, in many ways Microsoft's size was a liability, not an asset. This is the classic innovator's dilemma; the company was so intent on protecting its cash cows--it derives most of its revenue from two products, Windows and Office--that it was blind to opportunities in new markets. Microsoft couldn't make a Web e-mail system like Gmail, because that would have threatened Outlook. And why should Microsoft bother with free online word processing apps when Office was doing so well? When journalist Steven Levy showed Bill Gates the first iPod, Gates' first reaction was, "It's only for Macintosh?" Gates saw the iPod through the lens of desktop computers; if the iPod connected only to Macs, it didn't pose a threat to Microsoft. What he didn't figure out was that the iPod would herald the iTunes Store, allowing Apple to become not only the most influential entertainment company in the world, but also the dominant software maker for mobile devices. Yes, the first iPod didn't work on Windows. In time, it would help render Windows irrelevant.

Indeed. This is a point that we've raised often before. Underdogs beat out big companies all the time, by changing the rules completely. When we talk patents, we hear people insisting that small inventors can't succeed because big companies will just "steal" their idea, but the simple fact is: if that big company recognizes the value in your idea, then you probably weren't going to succeed in the first place. The real innovators get responses like Gates' above to the iPhone. They come from so far out of left-field that the "big companies" don't see them coming (at all), even when they're right beneath their noses.

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Filed Under: antitrust
Companies: google, microsoft

31 Comments

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Lawrence D'Oliveiro, 30 Jul 2009 @ 4:15am

iTunes Red Herring
The iTunes Store hasn’t been much of a success. It only accounts for a small percentage of the music on people’s iPods (most of which Steve Ballmer (semi-)accurately characterized as “stolen”). And it doesnt’t bring in much profit for Apple, either.
If you want to talk legitimate music downloads, the iTunes store is dwarfed by the ringtone market.
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Shawn (profile), 30 Jul 2009 @ 4:20am

one mans not much success is another mans 2 billion dollar a year in revenue.
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Jan, 30 Jul 2009 @ 4:22am

and what about your fight?
Using the same logic I could say that your fight against patents, extended copyright etc... is misguided and does not matter - because new upstarts will find ways to innovate around them. No doubt about it - there is always some way - even if that way is far from optimum. Even with that idiotic 'beans patent' you wrote about today - it did not destroy all beans in America, right? So why did you write about it?

Instead I want to say: this logic is misguided. The fact that there is a way around does not mean that it did not damage the market and consumers. And I think almost every web-developer will agree with this - bundling MSIE with MS Windows destroyed the other browsers for a long time. Yes, we have Firefox and Chrome and Opera now... but how many years did it take to figure out alternative ways how to compete with giant misusing its dominance on OS market? Where could we be now without years of stagnation with MSIE 6 without any incentive to come up with any innovation? MSIE 6 and the way it twisted web standards is pain in the ass until today! Ask any web-developer what he thinks about hacks he has to do because of MSIE 6.

EU has the same incentive to fight against MS abusing its dominance as you fighting against patents, ridiculous trademark lawsuits and RIAA abusing it's power - because they harm innovative startups and make innovation and competition more difficult and expensive, thus harming consumers despite the fact that there is always some way around.

I am sorry for being a bit provocative - I like your articles and I just wanted to make my point.
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Anonymous Coward, 30 Jul 2009 @ 4:53am

"Yes, the first iPod didn't work on Windows. In time, it would help render Windows irrelevant. "

Since windows isn't irrelevant yet, I am wondering what future time frame the author is from.
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Anonymous Coward, 30 Jul 2009 @ 4:55am

Re: and what about your fight?
I think innovation around government enforced monopolies is often called piracy.

So yes, people will get around it, but it will come with a great legal cost. The argument he's making is that without this interference in innovation, there would be even more.

However, I do agree with you. The government should be involved in breaking up monopolies. Microsoft is a great example. IE is still extremely popular, and the lack of standards compliance is holding web development as a whole back. I'd be fine with a bit more intervention there.
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Yosi, 30 Jul 2009 @ 5:07am

Little arrogant are we
>> allowing Apple to become not only the most influential entertainment company in the world

In the world, no less, ah? This is so typical-american bullshit.

In many countries iTunes have no local artists AT ALL. So match for "influence".
Educate yourself before talking such crap.
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JackSombra (profile), 30 Jul 2009 @ 5:36am

Did the suits matter? No but not because they reasons behind them were wrong, rather because they not only took way way to long to reach a conclusion (some are still going as you pointed out) but also because in some cases MS were pretty much allowed to bribe themselves out of them (USA ones)

If they had been short and stuck to their stated chosen aims (stop MS using their OS dominance to try to take over the web interface) we would probably be at least 5 years ahead of where we stand in regards to online tech

Only reason we now have the likes of Firefox now is because MS won the browser wars and then did absolutely nothing for years in that area except sit on their collective ass's congratulating themselves.

If they had not done this Mozilla/Firefox would probably never been even started never mind successful, only thing that got them moving again was once Firefox started to take off and started threatening the control of their market
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Richard, 30 Jul 2009 @ 6:03am

Re: iTunes Red Herring
"most of which Steve Ballmer (semi-)accurately characterized as “stolen”"

No - not even semi-accurately - most of it is ripped from CD's that were themselves legitimately bought - often using the "rip this CD" option that appears without prompting on Mr Ballmer's own MS media player.

If that music is stolen then Ballmer is an accomplice!
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Anonymous Coward, 30 Jul 2009 @ 6:10am

"Did it matter?"

Yes

It produced such a basic underlying hate for IBM by Microsoft supporters that the "SCO Affair" was initiated as punishment.
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hegemon13, 30 Jul 2009 @ 6:47am

What?!
"Yes, the first iPod didn't work on Windows. In time, it would help render Windows irrelevant."

ROFL! Sorry, but Windows is still a very, very far cry from irrelevant. Might it become that way someday? Perhaps, but certainly not because of the iPod. It is much more likely to be made irrelevant by the advent of cloud/connected computing and the web OS (no Palm's "WebOS", but the generic term). Still, there will always be a market for local operating systems on servers, workstations, and other high-powered systems, and I don't see anyone with the opportunity to ease Microsoft's hold on those markets.

To suggest that a single entertainment device that is PROPRIETARY and CLOSED, only works on the big 2 OSs, and only works with iTunes helped to render Windows irrelevant is laughable. Give it a few years, and the iPod will be truly irrelevant. The general public is seeing more and more value in openness, and I can't see the next generation accepting the kind of limitations that Apple puts on their users.
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Anonymous Coward, 30 Jul 2009 @ 6:49am

Did Antitrust matter?
We've argued before that the antitrust lawsuit against Microsoft was misguided (though, I'll admit that I was in the camp that thought it made sense at the time, before realizing that was a mistake).

Do you have links to support these positions or are you just making stuff up again?
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yozoo, 30 Jul 2009 @ 7:08am

Your thinking is all wrong
"The fact that the EU continues to go after Microsoft on antitrust issues "

This has nothing to do with anti-trust or competative marketplaces, its a simple cash grab. If your making a cash grab, it makes perfect sense to go after those with the most cash to grab . . . look at it from the EUs point of view and its perfectly logical.
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Ben Dwaneesteonov, D.M., 30 Jul 2009 @ 7:18am

Re: Did Antitrust matter?
It seems that the application of "We" and "I" is pretty much interchangeable with Mike. Perhaps "We" got several Microsoft people to buy into The TechDirt $10m level. I wonder how much money "We'll" get.

But that notwithstanding, anyone who thinks that Microsoft wouldn't be a better and more focused company if it wasn't actually broken up (either by force or voluntarily) has completely missed the boat. Good companies are good because they focus, focus, focus.

For example, a small company would FOCUS on getting the best bang out of a $1M ad budget. At some companies,it appears one big $100M ad budget is created. This sometimes can cause expanded scope creep and adding features that indicate the moon is made of cheese-like syndrome as the groups vyye for a singular $100M ad budget.

If an organization becomes too big, a problem of groupthink occurs, and issues that can't adequately address customer needs becomes apparent. Think Vista, or some more Vista or the Zune.

Sometimes, breaking up is the best thing to do, not only for the shareholders, but also, just do it for the children.
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lavi d (profile), 30 Jul 2009 @ 7:59am

One Benefit
The continued pressure on MS from the EU has succeeded in forcing them to open up their file formats.

Open Office, GCalc, AbiWord and others can all now seamlessly open, modify and save in Microsoft's Office formats with a minimum of loss or inconsistency.
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The Cenobyte, 30 Jul 2009 @ 9:46am

Re: and what about your fight?
Bundling IE with windows did not destroy the browser market at all. MS was "bungling" IE with windows starting early in OSR process for win95 but anything before IE 4.x no one wanted use it. Instead everyone downloaded Netscape and used it, hell we even used it at MS cause it was just so much better. Then Netscape came out with version 4 and it was bloated and slow and tried to do everything but did nothing well. At the same time MS came out with version 4 of IE that was fast and small. Everyone switched (Even though you had to go and download it) because it was that much better. (This is all pre windows98 mind you). Then Netscape just gave up the ghost and no one could seem to come up with anything good enough to make you want to go out and download it. Even today with Chome, Firefox and Opera, there is not enough better about them to make them compelling enough for most users to download, all those browsers have mannage to do is get a few strides ahead in the same cross country horse race as IE. If they want to take over they are going to need to really add something compelling and new. Until then it's not worth the trouble.

Sure MS used IE to kill Netscape, but they did it in a time when you had to download either of them. People picked IE cause it was a better browser (At the time) and no one seemed to want to build something that could compete.

The industry failing to make a better browser that people wanted isn't something that you should blame on MS. They tried to make the best browser and for a time they did, while everyone else just gave up. Sure they could have not put IE into win98 and later, but why not? What other browser where you going to use?
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Ryan, 30 Jul 2009 @ 9:47am

Re: Re: Did Antitrust matter?
Are you a writer for Techdirt? No? Then it is blatantly obvious that he is not referencing you with "we". Does he need a fricking Wikipedia article to reference for everytime he states his own opinions about something? That's what this site is for...

I agree with the next statement, though...good companies focus. Which companies focus is not determined by the government though. Walmart, for instance, can provide lower prices to consumers than anybody else precisely because it is huge, thus enabling it to buy in larger bulk then anybody else and to leverage its suppliers more than anybody else.

Besides...what do you care how Microsoft does as a company? If you're a shareholder, then you have a vote that counts in direct proportion to your number of shares. Otherwise, nobody cares what you think of them. They became large because they provided a better product than anybody else. Often it becomes difficult for those companies to remain on the front line of innovation, which is provided by newer, smaller companies. If not enough of these are popping up to provide alternatives, then the market conditions set by government are probably not conducive enough to small businesses. Why exactly should government be getting involved in a private company that made its market share legally?
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The Cenobyte, 30 Jul 2009 @ 9:54am

Why does anyone own an Ipod exactly?
I personally don't get it. With the limited space, cost and the closed format it just doesn't follow for me. When companies like SANdisk make players with just as many features at 1/4th the cost, just makes me wonder what people are thinking. The idea that a device that is to expensive, closed format and is duplicated by dozens of other companies will end Windows and MS really laughable. I do believe that wearable computers will take over the world one of these days, the ipod/iphone is really no closer to that than dozens of other companies software/hardware including MS.
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some old guy, 30 Jul 2009 @ 10:21am

Re: Why does anyone own an Ipod exactly?
..."closed format"...

Really? are you THAT clueless? No wonder you don't know why everyone loves their iPod. You're completely ignorant.

There is *NOTHING* closed format about the ipod.
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Anonymous Coward, 30 Jul 2009 @ 12:28pm

Now Think About That
Many of Microsoft's assets turned out not to matter, because upstarts like Google and old foes like Apple found ways to innovate around them.

Question: So why didn't Microsoft just block upstarts like Google and other browsers? Technically, they could have since they controlled the operating system.

Answer: Fear of more antitrust problems.

Question: So how popular would Google have become if they were blocked from Windows?

Answer: Not very, I'd guess.

So to say that antitrust enforcement has no positive value, especially by using Google as an example, is to completely ignore that without it Google would probably not exist today.
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Anonymous Coward, 30 Jul 2009 @ 6:38pm

This is the sort of story that surprises me to even find on Techdirt - the effects and repercussions of the Microsoft anti-trust actions, both in the US and even more in the EI have had a significant effect on the computer business, the internet, and everything that it touches.

Without it, Apple would have likely been squashed, the Ipod driving piracy "revolution" might never have happened, and so on. Firefox, Google, Youtube, torrents... all potentially (and likely) different or not happening if Microsoft is left to do it's business in it's own manner.

This is a subject talked about and killed over and over, nothing new here. Certainly not tech news or tech info, that is for sure. If you can't see the influences, then you need to go back and study.
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Alan Gerow (profile), 30 Jul 2009 @ 6:50pm

Re: iTunes Red Herring
So, becoming the #1 music store in the world isn't much of a success? iTunes sells more music than Walmart, that little store that sells a couple things.

And I'm willing to wager that a majority of music on people's iPods are ripped from CDs, which most people would argue is not "stolen".
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Alan Gerow (profile), 30 Jul 2009 @ 6:55pm

Re: Little arrogant are we
"most influential entertainment company in the world" is not the same thing as saying "most influential entertainment company in every market in the world"

Just that Apple, as a single entity, has more global influence than any other single entity. How much influence do those local artists have globally? Less than Apple's.

So, the original statement still holds true.
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Alan Gerow (profile), 30 Jul 2009 @ 6:58pm

Re: Did Antitrust matter?
It's an opinion. Not fact.

One is allowed to state an opinion without footnotes.

*rolls eyes at some people*
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Alan Gerow (profile), 30 Jul 2009 @ 7:05pm

Re: Now Think About That
I would say people dropping Windows because it's blocking websites is more of a deterrent than anti-trust issues. How long would businesses (Microsoft's bread & butter industry) continue to use Windows, if the operating system started blocking websites?

Question: How popular would Apple/Linux have gotten had Microsoft started blocking Google?

Answer: Significantly.
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Lawrence D'Oliveiro, 31 Jul 2009 @ 5:29am

Re: iTunes Red Herring
Alan Gerow wrote:

So, becoming the #1 music store in the world isn't much of a success?

Given the current state of sales of music recordings, no it’s not.

iTunes sells more music than Walmart, that little store that sells a couple things.

Wal who? US-only company, aren’t they? Big deal. Even the ringtone market is bigger.
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Gene Cavanaugh, 31 Jul 2009 @ 3:45pm

Patents can't help small inventors?
You say about patents: "small inventors can't succeed because big companies will just "steal" their idea, but the simple fact is: if that big company recognizes the value in your idea, then you probably weren't going to succeed in the first place."
So when Westinghouse realized the value of the telephone, they made Alexander Graham Bell irrelevant, in spite of his patent?
Stop thinking with your bias, Michael, and use your head!
I love your blog, but in this case, give me a BREAK!
I agree about the abuse of the present system, though.
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Anonymous Coward, 31 Jul 2009 @ 4:18pm

Re: Re: Why does anyone own an Ipod exactly?
..."closed format"...
Really? are you THAT clueless? No wonder you don't know why everyone loves their iPod. You're completely ignorant.
There is *NOTHING* closed format about the ipod.

Maybe he was thinking about Apple's FairPlay DRM system on the iPod. So FairPlay's an open format, eh?
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Anonymous Coward, 31 Jul 2009 @ 4:28pm

Re: Re: Now Think About That
I would say people dropping Windows because it's blocking websites is more of a deterrent than anti-trust issues.

Except I don't think they would have.

How long would businesses (Microsoft's bread & butter industry) continue to use Windows, if the operating system started blocking websites?

Businesses already do a lot of blocking on their own. As long as there were other search engines, for example (and there were), very few businesses would have given up Windows and Microsoft Office in order to use Google over other other search engines. Having worked in corporate IT at that time, I can guarantee you that.
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Anonymous Coward, 31 Jul 2009 @ 4:32pm

Re: Re: iTunes Red Herring
Wal who? US-only company, aren’t they? Big deal.

Largest retailer in the world's most dominant country.
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Anonymous Coward, 31 Jul 2009 @ 4:37pm

Re: Little arrogant are we
In the world, no less, ah? This is so typical-american bullshit.

I wouldn't even say they were the influential in the US, but don't try telling an Apple fan-boy that. To them, Apple IS the world. Hence, Apple IS the most influential in THEIR little world.
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anynomous, 10 Feb 2011 @ 8:45am

shut yo face!!!!! this msg goes to shaquille hurd
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