What is Microsoft?

Looking at how they have acted over their long history you have to say that Microsoft are a monopolistic intellectual property broker. Their products have never been particularly good, just good enough for the job, and usually then only with V3.0 or later. They have achieved their position by skilfully wielding monopolistic power.

Firstly a quick history. Bill Gates dropped out of education to found Microsoft to provide computer languages for early microcomputers. Their big break came when IBM asked them to make an operating system for their forthcoming PC and they craftily built the right to sell it to other people into the contract. Compaq and the other IBM clone makers came along and they bought their operating systems from Microsoft who eventually found themselves with a near monopoly. This they used to lever themselves into the application market, pretty much destroying the incumbents. Bill Gates, famously, didn’t get the whole internet thing and it took all their monopolistic power to get Explorer to destroy Netscape. But they missed the boat completely on search and for once Microsoft were the ones who were walked all over, by Google.

The whole console thing is a power play by Microsoft to do in the home what they have done in the office. It is a razors and razorblades attitude, just like at Sony. But whilst Sony are a manufacturer of boxes and see the media standard as king, Microsoft are an intellectual property broker and see the software platform as king. When it came to the console Microsoft could have just created a hardware standard for others to manufacture. I am sure that they have considered this many times. However they once tried this and had their fingers burnt, with MSX in the 1980s, so they were forced to make their own hardware this time. A situation which gives them more control and power, which they like.

When they designed the Xbox all Microsoft did was to take a PC and remove the keyboard and the un-needed bits of the operating system. This made it very simple to design and cheap to make, using standard parts. More importantly it was a platform already well understood by the world’s programmers with plenty of tools already available. Microsoft built on this, using their vast software knowledge, to make the Xbox as easy as possible to develop for. This contrasts very strongly with Sony who present developers with challenges with every new platform because they insist on doing the hardware their way.

To give you an example of how unimportant the hardware platform is to Microsoft and how important the software platform is (the reverse of Sony) take a look at Xbox Live. This online software platform cost more to develop than the Xbox did. In fact it could be argued that Xbox live is the real product and that the Xbox console is just an enabling mechanism to create members. Certainly Microsoft have identified this as the critical area in their battle against other gaming platforms and they have invested very heavily to pull out a substantial lead here. And they could be right. Xbox Live could well be what gives Microsoft the near monopoly in the home that they already enjoy in the office.

What Microsoft and Sony do have in common is the ability to throw money made in other areas of their business at the establishment of new game console standards. Both heavily subsidise the retail price of new consoles in the hope of recouping their money later with game sales and online subscriptions. Microsoft are lucky in that their near monopoly on the PC is one of the biggest cash cows ever invented so the $4billion they lost on the Xbox in it’s first four years is insignificant. In fact Microsoft will not see this as a loss, they will see it as the price for buying position and power.

It could also be argued that, in their corpulent middle age, Microsoft have lost the plot and are banging their heads against a brick wall with a flawed strategy. That more nimble and quicker thinking competitors (Nintendo) are just making Microsoft look like a steamroller that is running off in the wrong direction. Certainly, one would think that Microsoft could build more USPs into their product. Further criticism of Microsoft can be made in the way that they have totally missed the Web 2.0 boat.

Personally, I think that Microsoft could end up owning the dominant home gaming platform. But it will take them a lot longer and cost them a lot more money than they ever expected. They have not made life easy for themselves with the way they have done quite a few things. However, Xbox Live could gradually emerge as the gaming standard. I have written in an earlier article how we are still just at the beginning of the gaming industry. This being so Xbox live could grow to be an even bigger cash cow than the PC has been for Microsoft. If I was in charge I would be investing very heavily into making Xbox live the best social networking platform possible, they could build on what they already have to create something very special indeed. Then a 360 would be a must have purchase. And the games would roll out on the back of it. Also I would introduce an Xbox Live phone, this would integrate with the home console games and with the social networking and so would also be an essential purchase. There are infinite possibilities here.

As ever please Comment away. I could be misguided, misinformed, jumping to false conslusions or just plain stupid. Have your say by clicking on the link below.

2 comments ↓

#1 Evan on 08.20.07 at 7:04 pm

Thank you for the interesting take on Microsoft. I think the the approach of focusing on software and services, rather than hardware, is probably smart, given that hardware tends to become commoditized over time for most applications. And Microsoft did a good job of capturing an early lead in the online arena with Xbox Live. However, it remains to be seen if Microsoft can maintain that lead — Sony’s online content and services have been impressive, in some ways more innovative, recently than those of Microsoft. If nothing else, Sony has shown that it is not going to cede the online space to Microsoft without a bitter fight.

I also wonder how much online services enter into most gamers’ decisions about console purchases. I recently read an analyst report that indicated that the overwhelming bulk of gamers valued the single player experience over the online experience. Conventional judgement seems to hold that as gamers gain experience, they will increasingly move to online play. However, I am an example of a gamer that jumped into online play early, but find it increasingly less attractive as single player AI improves. As the power of the consoles improves, it seems to be less necessary to put up with the hassles of online play because AI is approaching the point at which it is as good (and one day might be better) than the experience of playing against other people. Of course, AI cannot replace the social experience of interacting with other people online, but I am unwilling to pay money for that interaction when I can find other online ways to get that for free.

#2 Bruce on 08.21.07 at 11:45 am

Great comment!!
I think that Microsoft would do well to go after the 192 million members of MySpace by enhancing the social networking elements of Xbox Live. They are in a position to create a vastly superior offering and this would offer a richer experience than AI.

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