Stop the Noiz

Apple Isn't an 'Evil Empire' Like Microsoft

Frank Fox - 2008.09.16 - Tip Jar

Some on the Web like to claim that Apple is becoming an evil empire like Microsoft. They like to say it has become a "bad apple". (This cliché has been way overused - please think up a new metaphor.) These people weren't born yesterday, so we can only assume that they are knowingly making false comparisons - or are simply idiots.

That is not to say that Apple hasn't gained some prominence in the last several years, especially in the music business, but it didn't achieve this position the same way Microsoft did.

People falsely assume that because Microsoft is a monopoly and it abused its monopoly position, all monopolies are evil. This is false.

We allow all sorts of monopolies in the United States. Your local utility company is probably a monopoly. Patents are a monopoly right granted to a business or individual for disclosing how an invention works. We accept many types of monopolies because sometimes it just makes things easier to deal with.

Being Popular Is Not a Crime

A very popular brand may control most of the market. This may give them effective monopoly on setting pricing and deciding what new features to add. This may be annoying for the competition and lead to investigation on consumer impact, but just being popular isn't a crime.

The success of MS-DOS and later Windows was about the popularity of the product. People liked the price/performance benefits.

Being popular or inexpensive isn't evil, and that's not what got Microsoft in trouble. Being a monopoly wasn't the crime.

Microsoft did many things in its pursuit of market dominance that turned it into the evil company we know today.

It used FUD (fear, uncertainty, and doubt) as a tactic to prevent other operating system from gaining a toehold in the PC market. I'm not just talking about just about Linux; before Linux there was OS/2, and before OS/2 there was DR-DOS. Microsoft tried to kill these alternate operating systems.

It also used its monopoly power in one area to dominate another market. The Windows operating system became a tool to promote sales of Microsoft Office. This bundling successfully knocked out the leading word processor (WordPerfect) and leading spreadsheet (Lotus 1-2-3) from the market. And in a move calculated to ruin Netscape, Microsoft bundled Internet Explorer with Windows - and tied it unnecessarily to the operating system.

Its market position in one area made it very easy to dominate any new area Microsoft decided to enter.

Apple Is Not Like Microsoft

On the surface, the truth can be stretched to make it look like Apple is doing the same thing with the music industry, but if you think about it, you can see that it isn't true.

When Apple started with the iPod, it had around 4% of the PC market. This was not the position for forcing anyone to use its device. There were no tricks by Apple that prevented anyone from using another MP3 player. Maybe the vendor didn't support the Mac, but that wasn't Apple's doing.

It is Microsoft that bundles Windows Media Player and Play for Sure (now rebranded as Certified for Windows Vista) with every new PC.

Apple has to promote its product against Microsoft's bundled solutions. iTunes doesn't come bundled with Windows Vista. You have to download it or your computer vendor has to install it for you.

No forced bundling here.

When Apple opened the iTunes Store, it had just a small fraction of the download market. Napster was doing great business with file sharing, but the recording industry didn't like that. It was the recording industry, not Apple, that took Napster to court.

To my knowledge, Apple has not taken another music distribution site to courts for selling music. Apple didn't like it when people tried to crack the DRM of the iTunes Store to gain customers for their service, but Apple didn't try to stop them from selling it with a different DRM.

Even today, Apple does nothing to interfere with other online music retailers. Many went out of business because their margins were too low. Apple has so far kept the price of a download very low, but we can't claim that Apple ran the competition off with low prices and later jacked the price up when they had monopoly control.

Apple has not interfered with the open market for other devices or services as long as they don't try to free ride on Apple's products or services.

Same Rules for All

If it wasn't evil for Sony to launch its own music service that was only compatible with Sony players or Microsoft its own, then it wasn't evil when Apple did the same thing. There was no coercion that forced the record companies to license songs to Apple. Instead, Apple agreed to the record industry's demand for DRM - and Apple retains sole license to its DRM.

Another popular monopolistic tactic is to buy up the competition so that only your product remains. Apple did not buy any other brands to bring the market under its control. Instead, it gained market share because Apple sold a better solution for both Macs and PCs. They gained not on being the only choice or the cheapest, but on popularity for the total package.

Remember that the original iPod sold for $399. Apple wasn't driving competitors out by underselling them.

What about the use of coercion to limit business partners from making deals that could adversely affect you? Never has Apple used its position in selling music or computers as a weapon to prevent the record industry from selling music through another service. If the record industry wants to cut a deal with Microsoft or Amazon, you don't hear reports of Steve Jobs throwing a fit.

I will bet that the next time Apple's lawyers show up to discuss licensing terms, these other deals are brought up. That's just good businesses - no point in letting your business partners give someone else a better deal!

In summary:

  1. Apple never had the market share clout to force people to choose the iPod or iTunes.
  2. Apple has never forced anyone out of the market.
  3. Apple didn't buy out its competition.
  4. iTunes and the iPod are marketed as a set, but that is how it has always been. It wasn't a forced change after Apple had majority market share in one area.
  5. Any business partner can sell to someone else. There may be exclusive content or special promotions, but Amazon and Zune Marketplace can bargain for similar deals unrestricted by Apple.
  6. Apple haven't raised prices since gaining a dominant market share.

Apple has missed numerous opportunities to behave like Microsoft. Since it hasn't acted like an abusive monopoly, it isn't fair to falsely accuse them of things they haven't done.

At the end of the day, Apple has positioned itself very well in the market. It is offering better integrated services than anyone else, but that doesn't make it evil. Apple has a long way to go before we can begin to call it as bad as Microsoft. (You just have to read a few of the documents that came out in the many Microsoft court cases to know that it played by its own rules and wasn't afraid to twist arms to get what it wanted.)

Apple's rule is simple: It's our product; we control it.

It doesn't matter if Apple has 4% or 94% of the market. Apple builds the whole solution, so it can remain in charge of the end product. This isn't a new development. Apple didn't change into an evil twin of Microsoft when it became the dominant force in the MP3 player and online music markets.

People should stop acting surprised when Apple continues to do what it has been doing for 32 years.

Microsoft prefers a different rule: If we want to take control of your product, we will.

Sure, Microsoft works with a lot of partners, but when they want to enter a new market - watch out. Google was just another web search site using Internet Explorer to make a few bucks. Then when they got too successful, Microsoft tried to crush Google and take away its business. That's not the behavior of good partner.

Microsoft may not control the whole product like Apple does, but it acts like it does when it wants to take over some new aspect that is showing a lot of success.

Given a choice between these rules, I pick Apple. They won't put me out of business unless I try to break their rule. With Apple it's mostly live and let live. If they release a similar product to mine, mine had better be darn good.

Consumers are going to make the choice with their wallet - not based on FUD or Steve Jobs' Reality Distortion Field, but on whose product is better. for me, that has meant choosing Apple products over a lot of nice - but not good enough - brands. LEM

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