Friday, June 27, 2008

Knowing The Path Isn't Walking The Path

In The Matrix, Morpheus tells Neo that there is a difference between knowing the path, and walking it. This is true. There are examples all the time of folks who have some realization about the real path to what they want or need, but still don't manage to pursue it.

This post is about Bill Gates' recognition that Microsoft isn't on The Path and the dates in question make clear that Gates' recognition and Microsoft's warning from its founder weren't enough to get Microsoft on The Path.

For those of you too tired to read, or who simply prefer radio, I offer KIRO-AM/710's Dave Ross conducting a dramatic performance of excerpts of Bill Gates' 2003 email about trying to purchase downloadable software created by Microsoft. In it, he details the challenges faced by a user trying to buy and download Microsoft MovieMaker and the Digital Plus pack. He resorts to frustrated allcaps in places as he tries to express his exasperation about what he experienced trying to use a web site ( whose creators never imagined folks would try to buy downloads from Microsoft's "Downloads" page, and the like.

By 2003 I wasn't much of a user of Microsoft's products, but I'll take Bill's word on this one. I gather that XBox has made it easier for folks to buy at least some downloads, but then, XBox has cost Microsoft so much more money than it's brought in, that last year MSFT had to engineer its finances to make the last quarter of calendar 2007 seem to produce an XBox profit. (MSFT accelerated into mid-2007 -- the prior fiscal year -- billions in above-expected warranty-related expenses rather than continue to recognize them as they were incurred, so that the last quarter of 2007 -- while still servicing warranty issues -- didn't have any of those charges booked on the current quarter.) Meanwhile, fierce competition has forced Microsoft to price XBox competitively, in the expectation that its per-unit loss can be overcome with eventual software and services sales. The improved interface and shopping experience MSFT crafts in its entertainment division will hopefully bear fruit elsewhere at the company as it fights heinous user experiences.

The other Bill Gates email from 2003 that attracts attention relates more directly to Microsoft's entertainment division.

When Apple first launched the iPod in 2001, it was a Firewire device without any support for Microsoft's customers. Third parties such as MediaFour offered solutions like XPlay to enable users owning Firewire-equipped hardware running Microsoft operating systems to encode and synch music to Apple's ultra-portable (by then-existing standards) music player. Apple didn't lift a finger to support non-Mac buyers for about half a year, until it was dragged into it kicking and screaming by folks who were insisting they wanted to be customers and would pay a third party for the privilege if they had to. Say what you will about Apple's salesmanship, those folks can take a while to pick up a hint.

What's Microsoft care? It doesn't. Microsoft licenses digital rights management (DRM) technology to several firms offering download services, and everybody understands that once critical mass lines up behind Microsoft's format -- and with Microsoft's development and marketing resources to keep its format's performance and availability ahead of competitors, why shouldn't it? -- Apple's customers will either be locked out of the music market (DRM is coming to a new music disc near you! Old music will die!) or Apple will have to license Microsoft's DRM to enable its customers to continue playing it. Sell all the tape players you want, Stevie-baby -- it's the tapes that make the thing sing.

Then, in 2003, Apple launched the Apple Music Store. Well, they pretty quickly renamed it the iTunes Music Store when they were reminded about their agreement with the Beatles' music label Apple Corps that Apple Computer had to keep the Apple name good and clear of the music business ... but it was the Apple Music Store at first. The Apple Music Store was accessible through iTunes (which before being renamed had previously been known as SoundJam from Cassady & Greene), formerly a computer jukebox like anyone else's: you encoded your music and you organized playlists and you listened and maybe you synched music to a portable player.

you also could buy music.

Not just rent it, which was the going game on Microsoft's DRM platform. Apple had struck a deal -- probably because the licensors saw immediately that Apple's program only ran on Apple's computers and everyone knew how few of those were ever sold -- that allowed folks to buy by the song in addition to buying albums. Apple launched sales-capable iTunes for Macs on April 28, 2003. And Apple customers bought millions of tracks.

But before Apple customers had made it clear they liked the music store, Bill Gates wrote April 30 -- within two days of the launch -- that Jobs had caught Microsoft flat-footed, and needed to be replied with a good Microsoft music solution. In particular, he cited: (1) Jobs' ability to focus on a few things that counted, have folks do the interface right, and market the whole as if it were revolutionary; (2) "a better licensing deal than anyone else has gotten for music" (which he said "is very strange to me. The music companies [already compete with their own stores and yet] Somehow they decide to give Apple the ability to do something pretty good"; therefore (3) "Now that Jobs has done it we need to move fast to get something where the UI and Rights are as good."

Fast forward five years. Microsoft's given up, in essence, on its partners ever getting music sales straight -- and has launched both its own player and its own store. The store won't sell you one track. The store will sell you a bundle of points, usable also for XBox 360 services, which you may not yet know you need, and the points are sold in bundles that aren't divisible by 79, the number of points needed to buy a song (79 points turns out to be 98.75¢). One-click? Change from that point bundle?

Sure, big point bundles protect Microsoft from per-transaction charges that can eat all the profit on a one-song transaction. It doesn't do much to make buying songs a simple joy or an impulse buy, though. It seems to make of song buying the kind of user-hostile maze Gates railed against when he tried to install MovieMaker.

Now that Microsoft's had five years to benefit from Gates' instruction from the helm, one might think Microsoft should have overrun the field. The Microsoft we feared in the mid-'90s would have done it for sure, right? What's changed? And why can't a company with so many really smart engineers (and they are smart, I've met some both before and after they were recruited to Redmond) organize solutions to problems like this?

I have a sneaking suspicion that the increasing size of both Microsoft and Apple is going to make nimble reaction to competitors a bit more challenging. In a few fields, I expect Apple to keep the focus needed to produce high-quality products (developing the operating system and development environment for quality performance on iPhones and near-term-visible hardware, for example), though I believe I already see Apple at the limits of its expertise in other areas (Apple received criticism for its dealings with indie music labels and small bands, and I expect it will have the same problems an order of magnitude worse when it starts selling iPod software through its AppStore.

With iTunes and the AppStore, Apple has a possibility of offering content owners worldwide access to customers, and with that power Apple stands in a position to materially change the relationship between bands and the public (and their crooked managers and labels), between developers and the public (like, the public might find them), and so on. Recognizing Cocoa's strength in localization, a single global software marketplace is an extremely valuable prospective asset -- and a likely asset, if Apple doesn't screw the pooch.

Let's hope Apple doesn't learn the wrong lesson from its old operating systems competitor.

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