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Does Microsoft Cause Lower Software Prices?
AngusSF writes "OK, slashdotters, , so is this FEE article Antitrust Benefits Consumers? It Just Ain't So! true?" AngusSF quotes from the article: "... as Stan Leibowitz and Steve Margolis have shown in their book, Winners, Losers and Microsoft, in virtually any market that Microsoft has entered (financial software, spreadsheets, etc.), the effect has been a dramatic reduction in prices and an expansion of output and innovation. Software products that do not compete with Microsoft's products fell in price by 12 percent from 1988 to 1995, but by 60 percent where there was competition from Microsoft.", and writes "I'd really like to see some on-line evidence of this. Has Microsoft competition in office suites really cut prices there?"
No, they don't.
Are they the cause of cheaper software? Yes, they are.
this relationship looks correlational rather than causal. as the market for a certain type of home software expands, the price goes down. the same market force also attracts microsoft. both are the result of a common cause: the market.
2 1337 4 u!
Because after MS runs the competition out of business (or out of that market), the only software in that segment is MS's overpriced Office suite (though the student edition of office isnt too bad).
The Doormat
If you're not outraged, then you're not paying attention.
From one perspective, yes, Microsoft does indeed cause lower software prices. Competition in a given market area (Office Suites etc) will reduce prices among different vendors. However, once a particular vendor has asserted dominance over a particular product area, they are free to raise their prices again. Thus, competitors in the Office Suite area (Staroffice, Wordperfect Office) are much less expensive, while Microsoft's product (especially full "Professional" versions) is much more expensive. Net effect: More expensive software for the consumer, because everyone "needs" the de facto standard.
Well this is ignoring other factors.
When you look at it you will see MS enters markets that already exist. They pick and choose and go in when things are getting popular
The thing this article misses is that also when things get popular open source people come in too and write their own versions for free. And they do it better than propriterary software usually.
Which is the real thing that drives prices down.
High margins and high profits only exist in really tiny niche markets that dont have many competitors.
Microsoft is just entering markets that also other competitors such as open source teams are entering and thus it is not just microsoft who is making prices lower. Somebody has not thought this through properly.
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That's not the point. The point is whether Microsoft has used its monopoly position in the market to stifle competition. The same argument is always used by companies accused of dumping in a market, and it doesn't hold up in court.
___
Cogito cogito, ergo cogito sum.
Microsoft lowers prices in a software sector the same way Wal-mart lowers local prices: by leveraging the large amount of cash they have on hand.
Dumping product in an attempt to rule the market is nothing new.
Rather than look at the short-term (Word is cheaper than WordPerfect), look at the long-term (Nobody think it's worthwile to engineer a $200 competitor to Office.)
As to the pricing thing, well. Where I lived in England (really England, not meaning "any part of Britain"), Stagecoach (a bus company) rolled into town and set their prices at zero until all the other bus companies went out of business. Then they stuck their prices up to something slightly less than the old prices.
Sure, prices were lower but in getting there all competition had been destroyed and Stagecoach is no longer (especially since they got control of the trains too) under any pressure to ensure quality. So they don't.
It's the same with Microsoft: after they crap all over a market to kill all the competition they simply sit around and look for new ways to screw the trapped clients. Sure, the prices are lower, but quality is non-existant and customer service is some sort of joke.
IE is a good example: until Firefox came along it had basically been left to rot. It still doesn't actually manage CSS level 1 or 2 to anything like a decent level, or display PNGs correctly. Sure, browers are bloody cheap (free) but if you'd been waiting for MS to innovate you'd have been dead and buried before it happened.
TWW
"Encyclopedia" is to "Wikipedia" what "Library" is to "Some people at a bus stop"
BUT... price isn't everything. Instead of having 3, 4, 5, or more products all competing against themselves and one-upping eachother for $60 each, you now have 2 products, at $50 each. Which is better?
Now certanly $50 is easier on your wallet. But what about the OTHER effects? MS products tend to rapidly get better untill they are better than everyone else and therefor "good enough". Then then stagnate. They stagnate like time stopped. So you have one product that's good enough, and another that will try to get better. But once that other product gets better, it will reach a point where it's better than MS's. Then what? Well since by now they probably have a much smaller market share, MS can sit by comfortably. Thus the second company doesn't have to work too hard because their product is already the superior. They can keep trying to make it MORE superior, but it probably won't change things. Firefox changed IE (a little), but that took HOW LONG? Things stagnated since IE 4 or 5 (and IE still has serious problems). And other than adding a popup blocker (which does work) and more warning dialogs (which never work), IE is the same. Consumers lost. Hopefully Firefox will get accepted enough for the cycle to repeat.
What about other products. How 'bout financial software. You have Quicken and Money for the home. That's it. Money works but I find a large number of annoyances in it (it's what I use). Quicken works, but I don't like it's interface at all (Money's is nicer IMHO). So I'm stuck choosing between the two. There is no third party to force them to improve against eachother, they are are usually considdered about the same quality (from ratings I remember seeing). No one will enter this market because it already has 2 juggernauts and they'll never get in (open source excepted). This isn't very good for the consumer.
Unless you use a Mac. If you use a Mac, MS doesn't MAKE Money for Mac. So you can choose between Quicken and... Quicken. What a buffet of options. Fantastic. The situation on the Mac is even worse (from what I know, there may be some other piece of software out there, but from my perspective (a rather highly educated consumer when it comes to computers) there are two options). And the Mac is considdered a small market with a monopoly product (Quicken) so no one will enter that market and provide competition. You just have to hope improves from Windows move over. And even if someone DOES enter the market, MS can always walk in and sell Money if they see you doing good, and you're gone. Quicken can survive, you little product probably won't.
I'll take $10 to $20 more and a better selection and more improvements from healthy competition over the cheaper stagnate price.
If that's all it takes to make things "better" for the consumer, lets have the Government make everything and sell one brand and price it 5% less than the old commercial products were. There will never be improvements, and quality will probably suffer without competition, but IT COSTS LESS!
Prices are better, quality isn't. And I contend that prices are better only through last ditch efforts to stay alive. If they little guys go out of business after MS enters a market and MS is left the only game in town with over 5% market share, they are free to never cut prices again or even raise them. Do you think Windows would cost $200-$300 per PC if MS had competition?
Comment forecast: Bits of genius surrounded by a sea of mediocrity.
You cant sell software at a loss...
And why expect the prices to go up?
If the prices go up, then it becomes reasonable for another competitor to enter the market again, restoring competition. Microsoft isn't the only company with a war chest.
Driving your competition out of the marketplace isn't a PERMANENT condition - if it took below-cost prices to take over the market, it'll take below-market prices to keep control of the market.
Prices will go up not because competition got eliminated, but because you can't maintain those prices forever. The consumer benefits as long as manufacturers try though.
paintball
MS is a monopoly. When they enter a new market, they sell their products at a loss, with the express purpose of driving their competition out of business.
But what large organization doesn't? You just explained Walmart's strategy too.
.. its computers. anywhere you start to computerize, things get cheaper and more efficient.
to say its 'microsofts fault, specifically', is to say that "computers are as good as they are because IBM made computers".
; -- the corruption of government starts with its secrets. a truly free people keep no secrets. --
Consider an area with many small bakeries. A big company goes in and opens bread shops with lower prices so the small shops have to close.
Good for the consumers? No.
After the small companies close down, because of the lower prices from the big company, the prices are increased to higher than the small companies had before the big company went into the area!!
The profit from the high prices is used to undercut small businesses in the next area the big company takes over...
Now, replace a geographic area with a type of application (spreadsheet, writing, etc).
When Microsoft goes into a new area, they move their investments there. The speed of development in the old area goes down. (But while Msoft takes over an application area -- the speed and development is faster!)
The development speed for new revolutionary features of Internet Explorer or Office isn't high...
When there is competition in an area taken over earlier, lots of developers (paid by the monopoly profits from some other controlled area) are moved back into that place -- until the threat is gone.
So now, with Firefox, there will be development on Internet Explorer.
At any given time, it's better to use the monopolist product -- but in total it's never good for anyone, except for the monopolist.
Karma: Excellent (My Karma? I wish...:-( )
For corp volume licences, MS Office doesn't cost anywhere near $300. However, that's because large firms with centralized IT and big budgets actually have greater freedom to select their products (or at least pretend to).
If anything Micrsoft is even more entrenched in the small business market, which is why you can't go to a store and buy a cheap copy of Word anymore. Irontically, as cost-sensitive as these folks are, they don't have good IT support, their own customers are using Office and therefore they are beholden to Microsoft.
No-one can or will re-enter the market because at that point you can just lower your prices again. As it actually takes investment to enter a market, the immediate undercutting by you will blow them out of the water.
How we know is more important than what we know.
Duh, of course prices are lowered *while* Microsoft tries to monopolise that industry. The only study worth anything, would be one 20 years after Microsoft eliminated its last competitor.
Show me an American consumer with a sense of discipline and self-reliance, and I'll show you a much freer market.
1) A company comes up with a novel computer idea.
2) Microsoft ignores it while it is a 'fad', so the original company can more or less charge what they want.
3) The 'fad' becomes a trend, and Microsoft gets interested.
4) Using their overwhelming resources, Microsoft develops a competing product, at a much lower price. (This is in lieu of getting the technology by 'other' methods).
5) The original company laughs it off, since any Microsoft product version 1.x or 2.x is not really competitive, and sometimes horrible.
6) Over time, the Microsoft product gains technological and marketing credibility.
7) The original company tries to hold on, but the lower prices of the Microsoft product (plus the creeping featuritis of the Microsoft product) eventually lead to the companies demise.
8) The original company gives up, and releases all of their people. Naturally, Microsoft swoops in to skim off the cream of that crop.
9) Microsoft now owns 100% of the market.
10) Microsoft freezes development on the product and starts looking for another victim company to screw.
11) Rinse, lather, repeat.
This article seems like one of the worse excuses for journalism I've seen in some time. The author writes:
Competitors will always whine and cry about how the price-cutting, product-improving, and customer-satisfying practices of their more successful rivals are "unfair." This in fact is the modus operandi of antitrust: The antitrust laws provide a means by which sour-grapes competitors can achieve through politics what they fail to achieve in the marketplace.
This is a dreadfully dishonest characterization of anti-trust laws. Microsoft wasn't accused of success through fair competition. They were accused of a series of dirty tricks that have nothing to do with competing on a level playing field. These tricks include giving their customers discounts if those customers would design their own web sites so that non-MS browsers wouldn't work with them, and pushing PC makers into deals where they had to pay for MS licences, even for machines that were to be loaded with non-MS operating systems.
Neither economists nor politicians nor policy wonks are capable of deciding the most "efficient" size or configuration of any business enterprise. As Ludwig von Mises once explained, "The question to be decided is: Who should determine the size of the enterprises, the consumers by their striving to buy what suits them best or the politicians who know only how to tax away and to spend?"
This is a strawman argument. Anti-trust laws aren't designed to limit the size or market share of companies; The are designed to limit companies from using monopolies or near-monopolies unfairly to exclude competition. As such, they are only targetted at companies that actually have monopolies or near monopolies. But I supposed it's easier for the unscrupulous to simply make up non-sense positions for their adversaries and to claim that their adversaries hold those non-sense positions than it is to argue against the positions their adversaries actually take.
By adhering to this false "maxim" antitrust regulators are attempting to supersede the informed judgment of millions of consumers
Even if we assume, for the sake of argument, that most consumers are informed enough to exercise informed judgement, those consumers can only use there judgement to decide among the choices they actually have. If I offer an OS at the same price as MS's and if customers can choose which one to purchase, customers can make a simple judgement about the qualities of the OSs. But if MS has strong-armed vendors into making my customers pay for MS-Windows in addition to my OS for any machine they buy, even if my OS is the only one loaded, then the consumer's choice isn't just about OS qualities, anymore.
Third, the government is clearly unconcerned about consumer welfare in its prosecution of Microsoft: In Judge Thomas Penfield Jackson's November 1999 "Statement of Fact" he devoted a mere five out of 412 paragraphs to the issue of consumer welfare.
This is just plain stupid. The point of Judge Jackson's "Findings of Fact" document was to describe the facts of the case, and not to concentrate on the social consequences of the facts. And in any case, the proper focus of a Judge is on the law and on the facts of a case. The author of this article is either showing his ignorance or his dishonesty.
He rests his case on the lame notion that, in his opinion, the company's management had "anticompetitive motives." Economic analysis may not be Mr. Litan's strong point, but mind-reading apparently is. He claims that such a malevolent "intent" has harmed Microsoft's competitor Netscape by keeping it from competing in the Web browser market. In fact, Netscape has distributed more than 150 million copies of its browser since 1995.
The author completely misses the point, and we are left to wonder if he did more than skim the "Findings of Fact" document. MS used the browse
Hardly, they'll use the networking effect. What company risks using the small startup's office suite, when none of their customers or suppliers do?
Then, they use all sorts of aggressive tactics.
Besides, what venture capitalist will fund a startup going up against Microsoft?
I'm not saying it's forever, but in Microsoft's case, the monopoly will erode far slower than a monopoly carmaker's would.
Not true at all. Microsoft uses (used?) its dominance in one market to force or bias usage of its products in other markets. This is more or less what the antitrust suits are all about. When an 800 lb gorilla like Microsoft tells vendors to only sell their products or they'll stop selling through them the vendor must comply.
An earned monopoly comes from making the best product at a good cost value. Even MS dominance in Windows wasn't driven by it necessarily being the best product, it was because MS made exclusive deals to have their operating systems installed on PCs at the point of sale. Why would a consumer go through the hassle of finding another (better) OS, paying extra for it, removing the MS OS, and installing the new one. MS might have earned it in the "shrewd businessman" kind of "earned", but not in the "best product and value" kind of "earned".
prices aren't the only barrier to entry in a market. .doc format.
The word-processor market should be competition-friendly given the price of word, but it's not, given the lock-in achieved by the
Once you have a monopoly you can keep competition out using 'dirty tricks'. That's why monopolies are bad for consumers (after all, competition is suppsoed to be the cure-all for consumer satisfaction in capitalism), and that's why there are laws to curb monopolies.
The only way an *unearned* monopoly can exist is through government force.
Depends what you mean by "earned". If you mean is it impossible for a rich, but otherwise clueless company to buy up all the competitors in any sector and achieve monopoly status- then no, of course not. And there are other ways this can come about, for example if a major competitor folds.
-WolfWithoutAClause
"Gravity is only a theory, not a fact!"The monopoly also undermines the quality and the variety of the baking ecosystem, and killing off the local bakeries also kills of the local suppliers to those bakeries, diverting the demand to only distant bulk suppliers so it hits the whole economic ecosystem from keel to crowsnest.
Got time? Spend some of it coding or testing
Sure, Microsoft's entry into those markets caused prices to tumble: Microsoft knows how to undercut competitors. But those markets were ripe for the picking: some company would have entered them quickly.
The problem is that with Microsoft's entry, prices have stopped falling. Microsofts undercuts competitors to drive them out of business, but once they have a monopoly, they hold prices constant or even raise them. It's standard monopoly behavior: first, you give up profit for acquiring the monopoly, then you reap your rewards many times over. Internationally, it's known as "dumping". While in the short term, it may cause prices to fall, it is not something that's good for customers.