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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?"
Ever since Microsoft entered the desktop OS market, Linux felt so threatened that it's been giving away free source codes!
Rock that crushes, Paper & Scissors that don't matter.
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.
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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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The classic behavior is that a company drives down prices to get rid of the competition (if its internal costs allow that), then raise prices after the competition is gone.
While MS has competition within a market (Word Processing comes to mind) their prices are very low. I recall Word selling for $99 back when it was competing with WordPerfect. Today, with essentially zero competition, it's $299.
Of course the counter-argument is Excel vs Borland's Quattro Pro: Excel was at $495 and QPro at $295, but despite great QPro reviews vs Excel purchasers thought QPro was not in Excel's league because it was too cheap!
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"
The existance of MSPaint doesn't seam to be making Photoshop more affordable.
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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
Something people seem to forget is that Microsoft is its own worst enemy. Microsoft isn't enhancing Office 2005 to compete with Open Office.org 2.0. Microsoft is enhancing Office 2005 to compete with Office 2003!
Consider: Microsoft has giant piles of cash, Bill Gates is closer to Scrooge McDuck than any person in history. But what he doesn't have is a steady revenue stream, constantly topping off his vault. He has to constantly create new reasons for people to send him money. Sure, Microsoft has OS sales for new PCs, but Office upgrades? Why would the users upgrade? Office 2003 still works fine. Office XP still works fine. Office 97 still works OK. Office 95 still works, sort of. The "features" that Office 2005 bring to the table are the only reasons people would have to upgrade, and Office 2003 is already a really complete product that most businesses love. Therefore Office 2005 would just be a waste, right?
In order to get you buying Office 2005, they have to make it attractive enough that you'll consider it worth $239 more than Office 2003. And most people won't. Therefore, Microsoft doesn't make as much money.
Microsoft has two choices here to get cash churning again: One, speed up the End-of-Life process -- ditch support for Office 95, 97, and XP soon, and ditch Office 2003 two years after Office 2005 comes out.
The scarier option (that they are busy pursuing) is to turn software into a "rental" or "lease" business. And the only way they can accomplish that is by locking down their users' computers so they can't keep using the same old software: Trusted Computing, here we come! With Trusted Computing, if you don't pay your $9.95 per month for Office, you won't get Office. Sure, that $9.95 per month keeps you in the "newest" Office, whenever they get around to releasing one, but basically it turns Office into a revenue stream. Is $120 per year cheaper than $259 every two years? Depends on if you would ordinarily upgrade the day Office 2007 comes out.
John