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Microsoft Software The Almighty Buck

Does Microsoft Cause Lower Software Prices? 726

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?"
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Does Microsoft Cause Lower Software Prices?

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  • by fembots ( 753724 ) on Sunday January 23, 2005 @07:01PM (#11450596) Homepage
    Ever since Microsoft entered the desktop OS market, Linux felt so threatened that it's been giving away free source codes!
    • giving away free source codes

      Yeah. True. I download it from the Internets.
    • Well, it does sort of make sense. With Microsoft having such a hold many different software markets, an easy way to compete with them is on price.

      Linux has just taken it to the extreme. :)
    • Photoshop (Score:5, Funny)

      by mishmash ( 585101 ) on Sunday January 23, 2005 @07:17PM (#11450726) Homepage
      The existance of MSPaint doesn't seam to be making Photoshop more affordable.
      • by nsasch ( 827844 ) on Sunday January 23, 2005 @08:41PM (#11451307)
        Imagine if MSPaint didn't exist. Photoshop would cost even more! But thankfully, I can do everything in paint, from stick figures to solid backgrounds. What can Photoshop possibly do to make it better than MSPaint?!?!?!
        • Imagine if MSPaint didn't exist. Photoshop would cost even more!

          A free graphics editor (think the GIMP rather than MSPaint) allows/causes the professional quality software to have higher prices. When Photoshop is the only software available, Adobe has to choose between high prices or market penetration, and market penetration usually wins. Do you want 10 sales at $10,000, or 1,000,000 sales at $100? With some of the functionality available for free, Adobe has already lost most of the low end of the mar
  • by pnatural ( 59329 ) on Sunday January 23, 2005 @07:01PM (#11450600)
    No, they don't.

    Are they the cause of cheaper software? Yes, they are.
    • Sorry if I don't follow your logic here, but what's the difference?
    • Are they the cause of cheaper software? Yes, they are.

      Indeed, "software sucks because users demand it to."

      In a market that Microsoft doesn't 0wn, it is a fearsome competitor on price by pumping out crappy software.

      However, in a market in which they are the monopoly, they don't stop pumping out the crappy software, but they charge monopoly rents to help fund their entry into the next market. The government is supposed to prevent this, but it seems to be out of antivirus.
    • by BerntB ( 584621 ) on Sunday January 23, 2005 @07:38PM (#11450907)
      I'm not an economist, but I think this is a classic monopolist example.

      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.

      • What you are saying is true, but the overal picture, is the long term growth of the market.

        standard oil is a classic example of reduced volitility of oil prices, standards or production, refinement of product, and quality improvement.

        Now we know what happened to standard oil, Breakup. There is good chance that it will happen again with MS. But like Standard oil, it will take anyware from 15 to 30 years ( history points that the Cry of Monopolist was already shouted to standard oil by 1885 if not prior to
      • I'm not an economist, but I think this is a classic monopolist example.

        Perhaps, but your conclusion is wrong.

        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.

        If they cannot compete long term becayue they believe the larger company can sustain the low prices.

        Good for the consumers? No.

        Sure - they're paying less for bread.

        After the small companies close down, because of the lower prices from the big company,

        • Good for the consumers? No.

          Sure - they're paying less for bread.

          Until the population notices that the bread is of very poor quality like the rest of their mass produced cheap food after which they can only conclude that paying less made them fat.

          cheap food = cheap nutrition = expensive & serious health consequences.

        • "Sure - they're paying less for bread."

          Over the short term, but in the long run it costs them more (as mentioned in the example).

          "But then new competitors move in, because they can make a profit at the higher price, which forces the monolpolist to lower prices again, and keep them there, to keep out competition."

          That may be true for this specific example, but imagine a case where the monopolist bakery sets up a system where you get your bread delivered automatically with the morning paper and the mon

      • by plover ( 150551 ) * on Sunday January 23, 2005 @10:05PM (#11451865) Homepage Journal
        I think the original article is wrong in its assumptions.

        Something people seem to forget is that Microsoft is its own worst enemy. Microsoft isn't enhancing Office 2005 to compete with Open 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.

        • There is a third option: Incompatibility with earlier versions.

          Some boss will buy a new portable that is preloaded with a new version of Windows and Office. Documents won't work that well between the new and earlier versions of Office...

          (And, typically, the new portable can't run earlier versions of Windows... or something.)

      • by jdgeorge ( 18767 ) on Sunday January 23, 2005 @10:34PM (#11452040)
        I'm not an economist, but I think this is a classic monopolist example.

        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.

        If this were true, that would suggest that Walmart is bad for consumers. From many economists' points of view, this is simply not true; Walmart brings and maintains low prices.

        The negative effect of Walmart, Microsoft, and other monopolists is that while the prices of goods often go down, the diversity of local vendors dimishes, and the remaining local businesses are mostly no longer owned by local businessmen. Locally owned businesses are driven out of the economy, so the money the local people bring into their local economy goes right back out of the economy through the almost always non-local monopolist.

        People who view monopolies as positive don't view the annihilation of successful local economies as negative. This is the common approach in US economics, where the significant measures of an economy are considered to be average wealth, and average global quality of life, rather than median wealth and quality of life.
      • 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.
    • Are they the cause of cheaper software? Yes, they are.

      The problem with software is that it can be copied for very little cost, so there is no incentive to pay for a cheaper alternative to the software you want, since you can almost always obtain an unlicensed copy for virtually free.

      Thus there is very little competition in the software market in the conventional sense.

      How many people do you know who run illegitimiate copies of Windows and Office? I've seen it happen countless times, when despite my offer []

  • correlational! (Score:5, Insightful)

    by Frymaster ( 171343 ) on Sunday January 23, 2005 @07:02PM (#11450610) Homepage Journal
    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

    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.

    • Re:correlational! (Score:5, Insightful)

      by __aanebg9627 ( 695892 ) on Sunday January 23, 2005 @08:33PM (#11451262)
      No, the relationship is causal -- predatory pricing.

      Microsoft is a classic monopolist, and shows the symptoms: significantly higher profits than other software industry businesses, over many years. If MSoft's products were in competitive sectors, its profits would be more in line with the rest of the industry, as competition would lower prices (basic Econ 101). Instead, it reaps returns far above average.

      Just read a few of the other articles on that site -- these people are polemicists, not economists. And not very good ones, either; their arguments have many logical holes. Lots of vigorous arm-waving, no rigor. It's probably some Republican-funded policy paper mill, clearly not an academic think tank. /ignore

  • by Xaroth ( 67516 ) on Sunday January 23, 2005 @07:04PM (#11450626) Homepage
    "I'd really like to see some on-line evidence of this. Has Microsoft competition in office suites really cut prices there?"

    Oddly enough... [] the price dropped 100% in the office suites arena. ;)
    • Roger that, how can anyone say prices in the office arena have'nt dropped when one of the biggest MS Office competitors is F.R.E.E!
      OppenOffice is also a very nice to use office tool, even if you are very used to ms office.I was pleasantly surprised at how easy it is to migraate from ms office to OpenOffice.
  • Nope (Score:3, Insightful)

    by doormat ( 63648 ) on Sunday January 23, 2005 @07:04PM (#11450628) Homepage Journal
    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).
  • I am sure that during the initial phase, Microsoft's prices are so low that it drives competitors' prices down too. As with the Xbox, where they use their monopoly rent to pay for losses in the console area. This is called price gouging. Unfortunately. once their competitors are driven out or into niches, do not expect the prices to stay low: there is no longer any market pressure to do so. This is one of the ways monopolies operate.
    • Actually, if I recall right (and I may not, so .. whatever), the notion of selling the 'base' product at a loss is called a loss leader. You find this in many things, such as razors and razorblades, printers and print cartridges, and game consoles and games. Any place where you can sell some consumable that you need to operate a device, you can generally get away with selling something as a loss leader. The only problem is that you are counting on people to buy the secondary items. If someone comes up with
    • by raehl ( 609729 ) <raehl311@yahoo. c o m> on Sunday January 23, 2005 @07:21PM (#11450761) Homepage
      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.
      • 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.

        There are, of course, other factors. If Microsoft sets the "standard", then it doesn't matter if a competitor is better if it does not fully comply with Microsoft's "standard".

        And, of course, Microsoft has lots of strings to pull to reduce the ability to comply with that "standard".

      • Umm, no. (Score:3, Insightful)

        by QuantumG ( 50515 )
        Anyone with a war chest has a simple plan:
        1. Enter market
        2. Set prices lower than competitors can set theirs.
        3. Wait for competitors to leave market because it is not profitable.
        4. Raise prices to gouge customers.

        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.

        • Re:Umm, no. (Score:4, Interesting)

          by Russ Nelson ( 33911 ) <> on Sunday January 23, 2005 @09:13PM (#11451519) Homepage
          This is probably true enough, however, you are leaving out an essential fifth step:

          5. Keep prices high enough for long enough to cover the cost of steps #2 and #3.

          Because, you see, once you've done step #4, you give competitors a reason to enter the market. Then you have to go back to steps #2 and #3 again, further pushing into the future the completion of step #5, which is the only one which can justify all the other steps.

          Show me an example of all five steps happening, and I'll believe your assertion that this is actually a problem.
      • by arkhan_jg ( 618674 ) on Sunday January 23, 2005 @08:42PM (#11451316)
        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.

        You're forgetting lock-in. Once a company has a monopoly, it can set it's own standards and doesn't have to worry about interoperability with other people's software, and can use it's own position to make interoperability with itself as hard as possible.

        Take microsoft office for example; competitors not only have to be free (or at least much cheaper) to even get into the market at all, they have to work with non-standard undocumented office files.

        IE is another; look at how many sites only render properly in IE because people have coded to it's broken implementation of CSS and java, rather than go the extra mile to code to standards AND IE's cackhanded version of them.

        Hell, look how microsoft is using it's desktop monopoly to push windows media player and it's DRM codecs. Only a couple of a days I had a student who lost all his recorded wma files because he didn't realise DRM was on by default, and now his backups are worthless because he didn't backup the licence files too. By making windows media codecs the default for all windows users, they're starting to push out the competition.

        Assuming they succeed, there's nothing to stop them sticking to form and making longhorn only able to work with Windows Media drm formats, thus forcing you to stick to windows (and its media player) if you want to access your own music or home videos, or listen to internet radio, or watch internet films.

        Lock-in lets monopolies keep their position without lowering prices, or innovating, or improving quality.

        And before someone says it, no, IE and WMP are not free. You just pay it as part of the tax when you buy a new PC that's very hard to get without windows (and it's only the courts that have made even that possible, given microsoft used to use OEM agreements to make every computer ship with windows.)

        I also disagree that microsoft has lowered prices. Last I heard, microsoft made 80%+ profit on windows. Windows 95 cost £39. Windows XP Pro costs £151. And the CAL costs... wow, they've gone up a lot. 5 years ago, I paid £5 a seat for NT licences. Now, at a school, we're expected to pay £30 a seat. I don't think inflation is that bad.
      • prices aren't the only barrier to entry in a market.
        The word-processor market should be competition-friendly given the price of word, but it's not, given the lock-in achieved by the .doc format.
        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.
    • Actually, it's called "dumping" and it's what the Japanese did to our domestic electronics industry. You have to be a big player to take heavy losses until your competition is out of business. There aren't many bigger players than Microsoft.
    • The traditional logic is that once Microsoft has attained enough market share prices will go up. Well, nope that is not what I seem to see happen. What I see happening is even more devious.

      Microsoft enters a market and calculates a sweet price, a price where people will buy the product. Then it keeps that price and increases to cover inflation. Is there anything wrong with this? Absolutely! The problem is that Microsoft does not lower their prices after that.

      In a normal market prices drop once new versions enter the market, etc, etc. Take a look at computers, cars, houses (not the properties, but building materials) and prices do drop.

      Where prices do not drop is in controlled markets, like what Microsoft has, and what the music or film industry has. Also want to see another thing about these markets? There are some who make damm big bucks and tons of people who are just eecking out a living.

      How do you change this? Consumers have the power to choose and they should use Open Source, buy "B rated" DVD's, and buy directly from unknown artists.
  • One nit-pick (Score:3, Insightful)

    by mtnharo ( 523610 ) <{greengeek} {at} {}> on Sunday January 23, 2005 @07:05PM (#11450636) Homepage
    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.
    • Lots of others here got it nearly right.

      But I think you got it exactly right.

      We can evangelize all we want, but the average person wants what is "safe". Of course, "safe" is defined as "what everyone else is using", not in terms of security.
    • Re:One nit-pick (Score:3, Insightful)

      by general_re ( 8883 )
      However, once a particular vendor has asserted dominance over a particular product area, they are free to raise their prices again.

      Nevertheless, the price is still lower in real terms than it was before. In 1985, Wordperfect for DOS was selling for $450, which is around $790 when adjusted for inflation to today's dollars. Even if I go out and buy the full retail version of Office Professional 2003, it'll cost me $499 or so, or almost $300 less in real terms than WP cost back in 1985. And in return for

      • Re:One nit-pick (Score:4, Interesting)

        by shystershep ( 643874 ) * <(moc.liamg) (ta) (drehpehsdb)> on Sunday January 23, 2005 @07:53PM (#11450995) Homepage Journal
        The price may be lower in real terms, but the same is true of nearly everything in computers and electronics -- in fact, I can't think of a single example where a product (hardware, software, etc.) is more expensive or even the same price in real dollars as it was 20 years ago. Hell, now you can buy a computer with more processing power than a 1985 mainframe for less than you paid (in 1985 dollars) for a Commodore 64.

        The question is not whether prices have dropped, but whether they are artificially high. In other words, has Microsoft's monopoly position kept prices from dropping compared to what they would be if those prices were determined solely by supply and demand? There is no way of knowing for certain, but I would be willing to bet the answer is yes.

        As an aside, Corel et al. aren't competing with a $499 product; they're competing with a product that is sold at its list price, sold at vast discounts, and widely pirated (e.g., free). It would make an interesting study, but my guess is that the prices of Microsoft's competitors are probably somewhere near the true market price given the wide range of the actual cost for Microsoft products.
  • by Saven Marek ( 739395 ) on Sunday January 23, 2005 @07:06PM (#11450637)
    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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    • by Durandal64 ( 658649 ) on Sunday January 23, 2005 @08:06PM (#11451070)
      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.
      I love the idea of open source, but if you honestly think that it drives the prices of commercial software down, you're kidding yourself, at least on the consumer level. OpenOffice is nice and all, but it's just as bloated as Microsoft Office, and it's got the same nightmarish, crappy user interface. OpenOffice is too busy trying to imitate Microsoft Office. And don't get me started on the Gimp. Again, great idea, but the user interface is a travesty.

      Things like Firefox and Gaim are pretty well-done, but they aren't replacements for commercial software; they are replacements for shitty free software like Internet Explorer and AIM.
      • OpenOffice is nice and all, but it's just as bloated as Microsoft Office, and it's got the same nightmarish, crappy user interface. OpenOffice is too busy trying to imitate Microsoft Office.

        So basically you're saying: OpenOffice doesn't compete with MS Office because it generally is the same (with the same disadvantages) and is cheaper? I don't think your logics teacher will be too impressed.

  • Everybody knows that having MS as a compeditor is terrible news for a company. But if you're producing a product, say quicken, and MS comes along with Money, then you can hardly close up shop without a fight. And that means better prices for everyone buying commercial software.

    That's not to say there is no compertition without MS, but everybody knows they're targeting the lower end of the market and that they'll fight dirty--being happy to lose money on a product for a few years. So it is really no surp
  • by Space Coyote ( 413320 ) on Sunday January 23, 2005 @07:07PM (#11450654) Homepage
    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.
  • monopolistic trends (Score:5, Informative)

    by potpie ( 706881 ) on Sunday January 23, 2005 @07:08PM (#11450662) Journal
    A monopoly produces and prices according to it's production possiblities curve (I think that's what it's called) whereby it produces the most for the least cost and charges to maximize profits. But because there is little competition, they are able to charge less and make more money. Thus, any company trying to compete with the monopoly would have to lower its own prices, reducing its profits, just to keep up. Correct me if I'm wrong; it's been a while since I took economics.
  • by ChiefPilot ( 566606 ) on Sunday January 23, 2005 @07:09PM (#11450667)
    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!
    • Yeppers... (Score:4, Interesting)

      by T-Ranger ( 10520 ) <`jeffw' `at' `'> on Sunday January 23, 2005 @08:21PM (#11451165) Homepage

      Microsoft products are "good enough" and "cheap". When MS enters a given market, their products are never as good as what is out there, but they are cheap. Some example:

      • DOS 1.0 was both significnatly worse and cheaper then CP/M
      • Word v. Wordperfect, AmiPro, Wordstar... just about everything
      • Excell v. 123, Quatro
      • Windows 3.11 (for workgroups), NT 3.5, Windows 95 v. Netware, Banyan
      • IIS v. *NIX w/Apache, BIND, etc
      • Exchange v. Groupwise
      • MS-SQL v DB2, Oracle, (flat text files)
      • IE v Netscape
      • Hyperterminal v everything else
      This is not to say that these MS products have not since passed the quality of their competition, some have. Of course, in many of these cases it is because MS has driven the competition out of business compleatly.

      A recent review of OOo, the author made the comment "OOo will out Microsoft Microsoft". Compared to MS-Office, OOo isnt very good. But its good enough. And its a hell of a lot cheaper. Thus OOo will out Microsoft, Microsoft. The same is true to some degree with other projects like Samba.

      So in response to the articles question: Duh. Thats what Microsoft does. They sell good enough crap for less, forcing companies who produce good stuff to reduce their prices, reduce their marketshare, or die.

    • Your pricing information is incorrect, as is your recollection of "historical" prices. I have never seen the MSRP of Word fall under $100.

      The MSRP of Microsoft Word 2003 is $229. Your number is off by more than 20%. It is trivial to find the standalone application available for a cost drastically lower than MSRP.

      In 1986, Wordperfect 4.2 sold for $500. Microsoft Office (which had 3 applications at the time) came out at cost slightly less than that. Today the MSRP of Microsoft Office Standard Edition (
  • Take a look at software prices from around 1986. Lotus 123 was around $495, Wordstar was around $295, and DBase II was around $495 if I remember correctly. That was in 1986 dollars as well. Even if you look a the cost of OS's Microsoft pushed that down as well. They are not all bad. Just mostly.
    • Re:Yes it has. (Score:3, Interesting)

      by MBCook ( 132727 )
      And "home" computers were $10,000 once. If I pay $10,000 for a computer, $500 seems reasonable for software. If a computer costs $1000, $50 seems reasonable for software. See a trend? They BOTH cost 10% of what they did.

      BTW. Wordstar was $295, Word [] is $217. The 10% rule would put it at $30 (which would be reasonable), tripleing that would put it at $90 (Word is powerfull). Microsoft prices it at $217.

      A computer that is THOUSANDS of times more powerful costs 1/20th what it did then. The leading wordprocess

  • I remember the average game title selling for around $40 in the 1980s, but most releases today are $50-$60. Or is Microsoft claiming their entertainment titles don't qualify because they're not entertaining?

    (I'm just kidding, before any Halo lovers start a flame war).
    • Going from $40 in 1980, to $55 in 2000 is just a result of inflation. Actually you get a lot more for your money, in graphics, game content, not necessarily gameplay though.

      Microsoft doesn't come close to dominating the video game industry. I mean, people want variety, and if there was only one company that made video games, it would be pretty boring. It's not like a video game is something like Excel, where people want standard file formats and don't care if the program changes year to year. With games, y
  • The average price for a full fledged office install is around $300 (i think) unless you have an educational discount. a 60 percent reduction in price would be $180. You wont find an office product other than ms higher than that.
  • by nagora ( 177841 ) on Sunday January 23, 2005 @07:11PM (#11450684)
    Last time I checked MS hadn't made any innovative contributions to the world of computing. So at least part of the argument is just wrong.

    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.


  • It's a classic fallacy of logic. It's been 20 years since I took that stuff in college, but even I remember that.
  • After, therefore because of.

    Maybe Microsoft only markets software products whose prices are bound to drop?

    Maybe it's just coincidence?
    • By the way, I still agree with the conclusions of the article. A 'problem' like Microsoft will never be solved with a 'solution' like more government intervention. Microsoft's tiny, agile competitors, including open source projects, will be their undoing. If the U.S. government ever took an interest in Microsoft, then Microsoft would probably cease to be profitable, but would never ever go away. See Bombardier and the Canadian government for an example of how not to do things.
  • Let's say this is entirely true: that Microsoft enters a space and this forces third-parties to lower the prices of their competing software.

    Does this naturally translate to a consumer benefit?

    I don't think so.

    One major problem, methinks, is that Microsoft has complete Brand Recognition. For some folks, having Microsoft on the box means instant compatibility with everything else that is Windows and, furthermore, instant compatibilty with THEIR computer. Sheesh! For some, Microsoft means "PC."


  • Somebody comes into your little town, kills the only decent auto mechanic and takes over the business, charging insane prices for utterly incompetent work.

    Everybody else in town becomes a "home auto mechanic" to cope. A couple gas station owners start charging to fix cars.

    This is a "benefit" of monopoly?

    Well, yeah, the fact of the matter is that a monopoly can't exist without government coercion. Because a monopoly by definition means excessive profits, which causes competitors (including producers of ot
  • True... BUT (Score:3, Insightful)

    by MBCook ( 132727 ) <> on Sunday January 23, 2005 @07:15PM (#11450713) Homepage
    This is true. Because MS moved in and grabbed market share, other companies that tried to stay in dropped their price. Horrah!

    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?

  • Bad premise (Score:4, Interesting)

    by deblau ( 68023 ) <> on Sunday January 23, 2005 @07:15PM (#11450715) Journal
    Evidence: 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.

    Explanation: Microsoft discovered the popular application markets. So did a lot of other companies, quite independantly. There would have been price competition between everyone else, even had MS not entered those markets. The markets in which MS did not invest money aren't as lucrative (being more niche markets). There are fewer players in side markets, and as a result there hasn't been as much competition in those areas of software development.

    Lesson: correlation != causation. If you're claiming causation, you better have damn good evidence. Would there not have been drastic price reductions in the spreadsheet market without Excel? Put it another way, what would the market look like without MS ever being involved? I have no reason to believe it would look any different than it does now.

    Mark the article (-1, Troll).

  • I would say that yes, it has caused price reduction in office suites. Amazon lists Corel WordPerfect Office Suite 12 at $250, the home edition at $90. I guarantee you they wouldn't be selling for those prices if WordPerfect had retained the dominance it had over the word processor market in the late 80s to early 90s.

    But there's the catch. I don't think the market for office suites is a really good example, because it's one area where Microsoft's products really did get out into the market and kick ass. The
  • So Microsoft just realised that competition gets the prices down? What they don't talk about is how their monopoly in other sectors does just the exact opposite. This is probably the most simple notion in economy, where theres competition, the prices go down and the innovation goes up. Microsoft is good for innovation? Explain to me why IE hasn't changed a bit since a couple of years then? I call bullshit on this one, what drives innovation is competition, not microsoft, but their anti-competitive approach
    • Basically the Microsoft strategy goes like this:

      - Enter Market
      - Make loses on low priced products
      - Kill competition because They cannot afford in long term to keep in business at current price.
      - When Competition is killed stop development while instauring barriers.
      - Stop development
      - Profit repays "investement" of market dumping.
      - Pure Profit.

      Happened to Netscape, Happened to Word Perfect, tried with WMP, tried with XBoX. This is just typical figure manipulation.

  • Microsoft enters a market, so there is more competition so the prices drops.

    The question is do the prices continue to drop once they have monopolised a market?

    If yes then you can say it it MS causing the price drop, if not then it is the principle of competition that does it.
  • Would this same author argue that the dramatic drop in the price of CD players in the 1980's was because Sony or some other particular company entered the marketplace? Microsoft doesn't target in specialty markets like CADD software. If 50 million consumers suddenly decided they needed professional CADD software, the price of AutoCAD and other existing products would probably plummet. If Microsoft suddenly issued WindowCAD, would this author give them the credit for the drop in price?

    The only way Micr
  • Microsoft is just a transitionary force from UNIX back to UNIX. UNIX used to be expensive, with software licenses in the thousands of dollars per seat, etc. Microsoft was a reaction to that, certainly, but Microsoft just doesn't do it well. They replaced an expensive predatory software business with a less expensive predatory software business. It's just a fact that people really don't like Microsoft, even if only indirectly through bad software design leading to worms, viruses, and crashes. Now, enter
  • They cut prices in a market only until they drive the existing players out of business. Are you telling me Office is cheap? List price is $499, street price more like $350-400. They can charge this much because they no longer have any effective competition in this market due to their file format lock in (yes, I know OpenOffice is free and good enough for many geek users, but it's still not really viable competition in most people's minds).
  • I'd really like to see some on-line evidence of this. Has Microsoft competition in office suites really cut prices there?

    Yeah, in everybody else's software! MS Office Pro has become the most expensive component of a new PC, more expensive than the CPU, the display, or the hard drive. Granted, if you amortize that cost over an expected three year lifespan, $599 isn't so bad ($200/year, essentially, which is less than what you'll pay for electricity for the PC during that time period) but it's still damne
  • This is not just exclusive to Microsoft. It happens whenever a new company enters a market and starts getting business from existing companies.

    The same can be said about Linux entering the OS market. Microsoft is not only marketing around Linux [] but they are also putting lower cost [] alternatives [] on the market. No real news here, competition is good for consumers except when it is monopolistic behavior []

  • MS's plan is to make money out of sheer volume, not quality, so yes, competing products will have to drop prices if they want to stay in the game. Unfortunately, it also means that all the products will not be a good a quality as what they might have been

  • by torpor ( 458 )
    .. 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".
  • by ( 311775 ) on Sunday January 23, 2005 @07:29PM (#11450847) Homepage Journal
    I've been using Linux for the last 11 years but I have also kept Microsoft on the family system because it has been more user friendly and familiar than Linux and cheaper than Mac. However.... this weekend after getting so frustrated at XP and the way it thinks it knows better than I do about what I want to do, and the fact it's o bug/virus/scumware/spyware/leachware etc.. I decided I would finally go completely M$ free. Wiped the hard drive on y laptop and installed Mepis Linux. Ordered a Mac Mini for the family. As soon as it gets here I'm going to install MythTV on the old XP box (ATI AIW 9600). It feels almost like I quit smoking.

  • by syousef ( 465911 ) on Sunday January 23, 2005 @07:42PM (#11450934) Journal
    The usual pattern is:

    1) Software companies drop their prices on products competing with MS products.

    2) MS then drops its prices to a point where the company cannot compete. They don't care if they take a loss because other business sustains them while they're strangling the competition. (In the case of Internet Explorer when competing with Netscape they dropped their price to zero)

    3) The competing company typically diversifies as it needs other sources of income. It's often difficult to do this successfully, but if the company does it may even pull out of the competition all together

    4) Microsoft either buys out the competitor, or continues to sell at a low price until the competitor is no longer in the market.

    5) Once Microsoft has dominated the market, prices go up. Have a look at the price of MS Office since it has dominated.

    It's a proven business strategy. Unfortunately it kills competition and therefore innovation. It makes no sense to keep prices low if you've effectively cornered the market either.
  • by Utopia ( 149375 ) on Sunday January 23, 2005 @07:45PM (#11450956)
    A good example of how Microsoft is effecting prices is in the consumer media formats.

    Microsoft undercut MPEG-4 consortium's prices by offering licensing charges of 10 cents per encoder for its codec.
    The MPEG-4 gropup charges 25 cents.

    This led to protests from the MPEG-4 group including attempts to belittle Microsoft's codec in the press.

  • by DrDebug ( 10230 ) on Sunday January 23, 2005 @08:47PM (#11451350) Journal
    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.

  • Shoddy Journalism (Score:5, Insightful)

    by AdrianG ( 57465 ) <> on Sunday January 23, 2005 @08:54PM (#11451385) Homepage

    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

  • by GISGEOLOGYGEEK ( 708023 ) on Sunday January 23, 2005 @09:02PM (#11451432)
    I wish MS would enter the fields of GIS / Mining / and CAD software.

    If the trend is true, then the days of spending anywhere from 4 to 80 THOUSAND dollars for a ONE seat license on these specialty softwares would end.

    You think the MS monopoly is bad? you pay nothing compared to what Autodesk, ESRI, and others charge.

If you want to put yourself on the map, publish your own map.