Taking An Early Retirement

2009.08.15   prev     next

Throughout the 1990s, Apple was caught between a rock and a hard place. On the one hand, they needed to have a significantly different (and significantly better) product than Microsoft in order for anyone to have a reason to buy it. But on the other hand, it was because they had a significantly different — and therefore significantly incompatible with what most people were using — product, that most people wouldn’t even consider buying it.

To succeed, Apple needed to find a way be compatible with Windows to the degree necessary to defray concern about incompatibility in the minds of most computer buyers, while at the same time not becoming just another maker of Windows PCs. These contradictory goals, both needed for Apple to have big market success, kept Apple down throughout the 1980s and ’90s.

Then, Apple found a way out: the iPod. The iPod had these critical characteristics:

• It was a product that no companies were making very well, which gave Apple the opportunity to make something dramatically better than anything else on the market.

• It was a product that Microsoft wasn’t making.

• It was a product that Microsoft couldn’t take over with Windows-dominance leverage. In other words, as long as Apple made sure that the iPod worked perfectly well with Windows, then the dominance of Windows would not be a reason for the typical consumer to want to buy a Microsoft-branded or Microsoft-approved player.

Microsoft played their standard cards against the iPod: First, they came out with PlaysForSure, whose name alone was obviously intended to make consumers fear that they would have incompatibility problems if they bought an iPod. And PlaysForSure was licensed to virtually all significant manufacturers of portable digital music players other than Apple, a fact that was heavily played-up to imply that, “Everyone’s going with PlaysForSure — if you’re not, you’re going to be left out.”

But consumers weren’t fooled. The iPod worked great with a Windows PC, and everyone knew it. To succeed with a you’ll-be-sorry-you-didn’t-buy-PlaysForSure strategy, what Microsoft really needed to do was to break compatibility between Windows and the iPod (or iTunes, more specifically). But there wasn’t any way for them to do that without getting immediately slammed by antitrust. Inviting everyone to write apps for Windows, then purposely breaking one of the most popular Windows apps — iTunes — in order to drive its authors out of the music player market, would have earned not just expensive and wearying court battles, but swift and certain remedies from the antitrust division of our government. Microsoft would be lucky to have any music-related products at all after such remedies.

So then they tried again with Zune. That didn’t work either, and for the same reason: no iPod-Windows incompatibilities to exploit. But it did allow Microsoft to gobble up a big chunk of the non-iPod portion of the market from its former PlaysForSure partners. Backstabbing and devouring its partners is something Microsoft can do, and does quite well.

Now we’re seeing the same scenario unfolding with the iPhone, only with a much greater potential than the (wildly successful) iPod had. And now the Mac uses the same processors as Windows PCs, and can run Windows natively — the perfect insurance policy for consumers worried about a few critical Windows apps they think they might not be able to live without.

I think Bill Gates saw the writing on the wall, and decided to take an early retirement: Hand the reigns over to Ballmer and watch him run it into the ground. Ballmer’s doing the only thing he knows how to do — try to copy the iPhone (“Windows phone”), and hope that consumers will flock to the Microsoft copy out of fear that sticking with the iPhone will cause them problems. But that fear just doesn’t exist.

Ballmer, these are your options:

1. Preside over Microsoft’s rapid decline for the next decade or so.

2. Bet the farm that the antitrust people won’t have the nads to do anything really effective to Microsoft — purposely and repeatedly break iTunes, while offering your own iPhone imitation. Maybe call it the “WorksForSure” phone.

3. Take an early retirement.