If You Define the Market Narrowly Enough, Monopolies Are Everywhere

from the fun-with-definitions dept

It's almost become a cliche to note the decline of Microsoft as a competitive force in the software industry. True, it's still a large and profitable company, but it's been consistently unsuccessful in its attempts to dominate new markets the way it did in the 1990s. The XBox and Zune are fine products, but they're not market leaders. Neither are its software offerings. Microsoft's mobile OS is getting clobbered by Symbian and faces more stiff competition from Blackberries, iPhones, and soon Google phones. Its online offerings often run in third place behind Google and Yahoo. Internet Explorer is still the leading browser, but competition from Firefox and Safari have brought its market share down from 95 percent in 2004 to 82 percent today. This sure looks to me like a vigorously competitive market.

However, in recent filings, ten states and the District of Columbia argued that Microsoft is still a monopoly facing no serious competition from Google, Mozilla, or other firms. They're seeking to have federal monitoring of Microsoft's business practices under antitrust law extended until 2012. To make their case, they've stuck to the narrow definition of the relevant market they adopted in the 1990s, arguing that Microsoft has a monopoly for "Intel-compatible PC operating systems." I'm not sure that definition made sense in the 1990s, but it certainly doesn't make sense now. Microsoft's smartest competitors haven't attempted to launch a frontal assault on the company's operating system business. Instead, they've focused on beating Microsoft in related markets, including search engines, mobile phones, music players, and consoles. Companies like Apple and Google now enjoy commanding market shares in those markets, and their dominant position in those markets gives them considerable leverage and customer loyalty. If Microsoft forced its customers to choose between Windows or iTunes, or between Windows or Google, a lot of them would choose the latter. There's no longer any serious reason to worry that Microsoft's large Windows market share will allow it to squelch innovation in the technology industry, because Microsoft now faces a lot more competition on a lot more fronts than it did in 1998. The rise of web-based applications has made it far easier for companies to get their products into consumers hands, and the rapidly-growing mobile market gives companies some new platforms to target that aren't controlled by Microsoft. Most of this competition is outside of the "Intel-compatible PC operating system" market, but that definition of the market was always somewhat arbitrary, and it looks ludicrously narrow now.


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  1.  
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    GeneralEmergency (profile), Nov 29th, 2007 @ 4:17pm

    I agree with Tim.

    But for different reasons.

    Vista is punishment enough for Microsoft.


    Ouch.

     

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  2.  
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    Idleline, Nov 29th, 2007 @ 4:27pm

    The Xbox 360 leads the U.S. Market by far and globally not far off of the Wii. They are also the latest to the game in this industry. Sony, Nintendo, and Sega were all market leaders and Microsoft took a HUGE chunk out of that. So it's not as if they've fallen off here.

    Not having research statistics handy I'm sure AD & Exchange are still market leaders, and whether or not IE is gaining or losing ground, it's still the leader. Odly enough Netcraft is reporting that Apache is steadily losing ground and IIS is gaining. It's not THAT hard to see them as a monopoly in a lot of areas.

     

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  3.  
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    Shun, Nov 29th, 2007 @ 4:30pm

    Is everyone gunning for Microsoft?

    I think it's good that we have a company we all hate. It's too bad it's been so dominant for so long, but oh well. In terms of most hated company, M$ is pretty high up on the list. Only one company has "successfully" competed against Microsoft and survived (Apple). By success, I mean "They make operating systems, and they have not been completely blown out of the water, yet." Even they wouldn't be where they are today without the iPod.

    The reason I'm such a positive hater is that M$ presents us with a model: how to be successful, and how to be hated for it. Obviously, the leaders of M$ are fabulously wealthy. They are almost universally reviled, however, except in Redmond and in Business Schools.

    Also, the tactics companies take to get around M$ are instructive, in and of themselves. Most people have attempted to ride the emerging technologies bandwagon. The internet blind-sided M$, and to a large extent, M$ still does not "get" the web, or at least some of the faster-moving portions of it.

    For all of its faults, Google, at least, is a net-centric company. It also helps that its CEO is not a chair-throwing maniac with anger issues. For the most part, the M$ era resembles a very large boulder thrown into a river. For a while, the river backed up, but little streams have been seen coursing around the boulder, and soon, the floodgates will open (like my mixed metaphor?) M$ is not dominant in any gadgets which are expected to dominate our technology landscape in the near future (PDA, MP3-player, smart phone, and console, storage).

    If convergence is not your thing, then chances are M$ is facing a death by a thousand cuts. If you think there is an emergent dominant player, then another 800-pound gorilla will take the place of M$. Either way, M$ control of the desktop is over.

    Will the PC go away anytime soon? Please?

     

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  4.  
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    Urza9814, Nov 29th, 2007 @ 5:00pm

    Disagree

    Other than apple, Microsoft has no serious competition in the OS market, which still seems to be their primary market. How can you not say it's at least a near monopoly when there is only one company of any significance selling PCs that are windows-free? And that company being apple. Yes, Dell and others offer Linux computers, but have you ever tried to find a Linux computer on Dell's website? I had to actually type 'Linux' into the search bar to find them, and then they were still a few hundred bucks more expensive than identically configured windows machines. If Microsoft decided tomorrow to block Google on all Windows PCs...people would stop using Google, for the simple reason that they wouldn't know they have a choice. In my experience, there are very few people that aren't aware that a computer doesn't have to be running Windows. Hell, people still say PC or Mac. 'Personal Computer' is still synonymous with Windows. How is that not a monopoly?

     

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    Greg K Nicholson, Nov 29th, 2007 @ 5:07pm

    For once, I disagree with you

    Microsoft doing business (rubbishly) in many areas does not prevent them from being a monopoly in one of those areas.

    ...and for the rest, just read Urza9814's comment above instead.

     

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  6.  
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    Le Blue Rude, Nov 29th, 2007 @ 5:20pm

    Re: Disagree

    Redhat Ubantu Susie.

     

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    Anonymous Coward, Nov 29th, 2007 @ 5:36pm

    How can the same people that say that Linux is slowly gaining market share also say that Microsoft is a monopoly. IF LINUX IS GAINING MARKET SHARE, THAN OBVIOUSLY NOT.

     

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  8.  
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    Nick (profile), Nov 29th, 2007 @ 5:41pm

    I like to poke fun at Microsoft as much as the next guy but I think these guys should give them a break. Yes, there are the many flavors of Linux and then there is Mac OS. These all run on Intel chips. I can't see how Microsoft's lawyers cannot easily point this out.

     

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  9.  
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    Michael Kohne, Nov 29th, 2007 @ 6:04pm

    Are they a monopoly?

    Until I can reasonably expect to be able to use my Bank's web site from a browser/os combo other than IE/Windows, yes, Microsoft is a monopoly. I can't do a large number of things online without them.

    Yes, things are moving in a good direction (more web accessability, and more support of non-IE browsers), but until major banks, etc take alternate browsers seriously, MS is still a monopoly.

     

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  10.  
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    Susheel Daswani, Nov 29th, 2007 @ 6:38pm

    Re: Disagree

    +1

    Tim, imagine if other companies could create Windows API compliant OSes. Then we'd have true competition in the PC Operating System market.

     

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  11.  
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    Tim Lee, Nov 29th, 2007 @ 6:58pm

    Re: Are they a monopoly?

    Funny, I've never owned a Windows machine and I've rarely had difficulty. And in any event, I don't see how continuing the antitrust oversight will change the situation. Last time I checked, Judge K-K isn't supervising the design of bank websites or ordering the IE team to comply with the latest W3C specs.

     

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  12.  
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    Anonymous Coward, Nov 29th, 2007 @ 7:23pm

    Re:

    Sega was on the decline on its hardware front ever since the saturn. Microsoft didn't send sega hardware to an early grave, sega's own mismanagement did

    With the wii, Nintendo has gained marketshare that it hadn't seen even in the 80s, and the PS2 was a far more successful system than the gamecube and the xbox. Microsoft hasn't hurt any of the vg system manufacturers you mentioned

     

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  13.  
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    stueycaster, Nov 29th, 2007 @ 7:38pm

    Re: Are they a monopoly?

    I use Firefox for every website I ever go to. I can even do Microsoft Update on it. I use IETab. Plus I use NoScript and no Java script baddies can get in. I get no popups or banner ads. I never use Internet Explorer.

     

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  14.  
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    moe, Nov 29th, 2007 @ 11:39pm

    Re: Disagree

    Unfortunately for your argument, your examples are out of date or tenuous. Last time I checked, it wasn't a legal issue if you were almost a monopoly. Secondly, you can't fault Dell for not putting the Linux machines on the front page because most people visiting the site don't want Linux PCs. And the claim that you, "had to use the search function" (paraphrase) to find what you were looking for -- isn't that the point of the search function?

    The Dell Linux PCs were only more expensive than the identical Windows PCs at launch time. When everyone griped, Dell fixed it and claimed it was a mistake. So, that point is moot. And if MS did block Google at the OS-level, people would be up in arms and you're not giving much credit to the average user. On top of that, a move like that would put MS back under the microscope.

    All that being said, I think the reason for the changes over the past years are due to the oversight. I'm just undecided as to whether they're still needed. If a formal process isn't continued, there would still be informal oversight happening by the market and it wouldn't take long before the appropriate authorities scrutinized MS again, should they run afoul of the law.

     

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  15.  
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    SRNissen, Nov 30th, 2007 @ 1:39am

    Re: Are they a monopoly?

    My bank works with Firefox. If yours does not, I suggest that this problem is with the bank, not with Microsoft.

    While I do not contest that Microsoft may well be a monopoly (because they have the power to, say, bar Firefox from the market by simply making it so that regular MS software updates are designed to delete important FF files) they are not actually doing the stuff that makes monopolies problematical.

    Traditionally, monopolies are considered problematical because they can use their powers to shut down competing companies and remain the sole purveyor of [product]. Since Microsoft is, in fact, not doing this, they have none of the problems you usually get with monopolies.

     

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  16.  
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    stueycaster, Nov 30th, 2007 @ 5:48am

    Re: Re: Are they a monopoly?

    My bank does too. At first they warned me that it might not but it does. I'm dual booting with Ubuntu Linux and it works there too. Plus there are a ton of extensions that you can use with Firefox. Use Firefox people. It's awesome.

     

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  17.  
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    Harlique, Nov 30th, 2007 @ 5:55am

    Re: Are they a monopoly?

    Pointing out that your Bank's website is not useable on anything but IE/Windows is not an arguement supporting Microsoft's Windows OS being a monopoly.

    It's a argeument that your bank has a poorly designed website.

     

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  18.  
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    Killer_Tofu (profile), Nov 30th, 2007 @ 7:55am

    M$

    I do tend to bash M$ as some of you may have noticed.
    I do not agree with some things they do.
    However I do not view them as a monopoly.
    I think they should be free of this.
    Then if they do monopolistic things, they will go down fast or be put under the microscope again. For now they have been playing nicer than they used to.
    I'm with Tim on this one.

    Oh, and the Wii has outsold the 360 by more than a million units already. And the 360 only has a whole year's worth head start too.
    http://www.vgchartz.com/
    The site goes by actual units sold, not units shipped.
    I view that as more reliable.
    The PS2 owned the Xbox, and the Wii is owning the 360.
    And a great point about the video game market, the market has grown so much over the past five years that talking about market share is kind of misleading.
    They may have went from 0 to 20% (random numbers for example, not factual) of the market share, but the whole market doesn't even need to grow by 20% for them to have 20% and take away 0 customers from the other companies.

     

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  19.  
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    Anonymous Coward, Nov 30th, 2007 @ 9:41am

    If You Define the Market Broadly Enough, There Are

    If you define the market broadly enough, there are no monopolies. After all, everyone is competing for the same dollar.

    So defining the market is crucial for defining a monopoly. By manipulating the market definition you can make the definition of "monopolist" whatever you want it to be. In fact, some people use this trick to try to claim that monopolies don't exist, at all, and all antitrust laws should be repealed. I'm sorry to see Tim Lee resorting to this kind of trickery to try to absolve Microsoft.

     

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  20.  
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    buckykat, Dec 1st, 2007 @ 8:54pm

    Re: Re: Disagree

    spelling is awesome: Redhat, Ubuntu, Suse. not to mention others like Mandriva, Fedora, Debian, and all the other *nixes.

     

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