Daniel Eran Dilger in San Francisco
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From Vista to Zune: Why Microsoft Can’t Sell to Consumers

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Daniel Eran Dilger
Microsoft’s marketing of Windows Vista and the Zune have failed in large part due to the fact that Microsoft has not learned how to effectively sell consumer products. Consumers buy Windows and Office, but that’s because they have no choice, not because of the company’s marketing savvy. Microsoft only effectively markets its products to businesses, which represents a very different type of sales relationship.

Businesses are so used to disgorging overloaded language about facilitating and empowering that they don’t find Microsoft’s marketing of the same caliber all that difficult to swallow. Consumers are a whole ‘nother ball game, and Microsoft is striking out in efforts to reach them. This has big impacts on the company’s future prospects.


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Vista’s Consumer Failure.
Microsoft’s TV advertising and and other marketing materials for Vista show just how out of touch the company is when marketing a technology product to consumers. The “Wow” Vista campaign blew millions on billboards that said nothing and TV spots that portrayed a breathless reaction from actors excited by the aroma of a new version of Windows. Consumers don’t buy software like coffee however.

This wasn’t a two dollar cup of emotional excitement being pitched, it was a several hundred dollar software license that would slow down your PC, change how everything worked, pop up lots of error messages to read, possibly force you to buy a new printer, and step you through a phone-home software activation process that appeared to be designed by the TSA. “Wow” doesn’t cut it.

After failing to deliver the product originally described as Longhorn, Microsoft thought consumers would fall for buying Windows XP again with a heavy slathering of lipstick and in a fancy new plastic box, just because it was now priced higher. Raising the price of a bad product does not induce sales unless you have stratospheric cachet attached to your brand name, and Windows does not.

Windows 95 and Vista: Why 2007 Won't Be Like 1995

Windows 95 and Vista: Why 2007 Won’t Be Like 1995
Windows Vista, 7, and Singularity: The New Copland, Gershwin and Taligent

Zune ad

birds on fire zune

Same Slip, Different Zune.
Similarly, the Zune was marketed as a fun brand for college age kids at a party who like to doodle and watch bizarre art advertisements done in Flash. The problem is that Microsoft wasn’t selling them on a free MySpace page, it was trying to get them to buy a $250 music player with beta quality software, a store with little content and that doesn’t really work, and hardware that looks like it was designed by Communists in the 1970s.

If Microsoft had owned a lock on the music player market, such advertising might have been useful for brand recognition. However, Microsoft is instead in the position of trying to muscle into an existing market and commoditize what has become a key element of the popular culture and a household brand: the iPod. It has failed miserably.

Microsoft’s ads looked amateurish and weak next to the high energy iPod marketing featuring silhouetted dancers with white headphones driven by popular music tracks. Apple’s iconic campaign was so simple and effective it could easily translate to billboards and magazine pages, and it evolved with every new iPod release to remain fresh and relevant to music. Microsoft’s ads were just weird.

Zune Sales Still In the Toilet

Zune Sales Still In the Toilet
Why Microsoft’s Zune is Still Failing
Winter 2007 Buyer’s Guide: Microsoft Zune 8 vs iPod Nano
Zune vs. iPhone: Five Phases of Media Coverage

Yes But We Have Tighter DRM!

After establishing its brand name among consumers as a synonym for failure and the butt of many jokes, Microsoft retreated to more familiar territory in attempting to establish the product through business deals rather than effectively selling it to individuals.

Just as with its previous PlaysForSure failure, that meant lining up egregious DRM deals that promised music labels the opportunity to round up consumers and lock them up in a policed corral to be milked of their money.

Microsoft’s main differentiation over iTunes and the iPod has been more restrictions on content use and a greater willingness to follow the RIAA rather than to challenge it as Apple has.

Rise of the iTunes Killers Myth
The Two Faced Monster Inside Zune

The Consumer Impact of DRM.
While portrayed by the media as a difficult partner for the RIAA, Apple’s iPod actually rescued the record labels by driving a new interest in music in an age where consumers have lots of new things to spend their money on, from movies to video games, and as public perception had started to view music as something obtained for free from Internet file traders.

Apple started the only effective online music store and has been virtually unchallenged in online sales since, despite the arrival and departure of plenty of competitors. From the start, Apple made it easy for users to listen to their own music from CDs and pioneered FairPlay as a simple restriction for purchased music. Apple made it easy to work around the DRM in order to make mix CDs and use their purchased songs on other MP3 devices.

In contrast, Microsoft developed Windows Media DRM as a complex system for securely preventing users from doing anything content owners didn’t want them to do. Again, this is because Microsoft sells to businesses rather than consumers. The problem is that businesses don’t buy music and players from online stores. Windows Media didn’t sell to the critical consumer market, leaving it to languish behind iTunes.

Steve Jobs and the iTunes DRM Threat to Microsoft
Will Steve Jobs License Apple’s FairPlay DRM?

Mix and Match Vendor Choice vs Seamless Integration.
After Apple’s iTunes music store shot past Microsoft’s planned efforts to rope online music sales into a taxed monopoly arrangement patterned after the Windows PC model, Microsoft spent another two years marketing PlaysForSure as a “superior business model” for selling players and online music because of the choice of hardware and software vendors involved. Apple positioned the iPod as a better alternative for precisely the opposite reason, just as it had with the Mac: that integrated products from one company work together better.

An artificial choice of players all based upon the same reference design, and usable only with a choice selection of stores that all served up Microsoft’s complex DRM only resulted in an ecosystem where consumers were left wondering what exactly they were choosing between, and wondering why none of that fake choice had resulted in any real competition that delivered good products, good prices, or good service.

Microsoft conceded the failure of PlaysForSure when it introduced the Zune as a clone of Apple’s iPod business, but it was too late. Apple had already positioned itself as the new standard in music players and the best online store for both commercial and free content. By 2006, Apple also enjoyed vast economies of scale that prevented Microsoft from offering a significantly cheaper player. If consumer hardware giants such as Sony and Philips and Panasonic and Creative couldn’t duplicate the iPod’s success, how could a software company with no real experience in making money on consumer hardware?

10 Ways Microsoft Can Salvage their iPod Killer

10 Ways Microsoft Can Salvage their iPod Killer
Ten More Myths of Zune

Microsoft Serves Business Executives Instead of Consumers.
Microsoft appealed to its business instincts by making a deal with Universal to include a voluntary piracy indulgence tax on every Zune sold. This did nothing to benefit consumers, as it only covered their assumed guilt for previous sins.

It did not grant them any additional rights to use commercial content in flexible new ways. Instead, Microsoft’s highly touted sharing features limited rights on all content used on the device, whether subject to copyright or not.

More recently, Microsoft offered to absorb price hikes from NBC designed to get more money from popular TV shows, as well as agreeing to investigate how to install spyware on users’ machines designed to delete any media that appeared to be pirated. NBC executives pulled out of iTunes after Apple refused to allow NBC to control prices or to develop similar “content cop” filters in iTunes on NBC’s behalf.

Universal vs Apple in the iTunes Store Contracts
Microsoft May Build a Copyright Cop Into Every Zune – New York Times

Market Pricing and Retail Ignorance.
Market pricing might sound like a good idea when studio executives present it, but the idea is fundamentally flawed. Imagine Pepsi trying to strong arm retailers into selling its popular drinks for substantially more than its slower selling ones, or studios forcing movie theaters to set higher ticket prices for each film upon the whim of the studio executives.

Manufacturers don’t set retail prices; retailers do. The reason retailers favor standard pricing within categories is because they have a better insight into how consumers react to prices and complex decisions, due to being closer to the consumer. When there are too many variables to compare, consumers leave irritated without buying anything. Retailers know this better than wholesale producers, who are twice removed from individual buyers.

Apple is a massive retailer. It is now the largest retailer of music and media, and has a long history of selling its hardware products directly to consumers. It knows exactly what appeals to individuals and has mountains of sales data that support the pricing models it uses. It studies how people walk around in its stores, how they shop online, and what factors increase their likelihood to buy more stuff. It also knows what causes customers to leave the store.

Microsoft is a business to business licensor of software, and exists in a monopoly bubble isolated from any real market competition. It should be no surprise why Microsoft can’t effectively market to consumers and is so quick to congratulate the theories of equally ignorant studio executives who live in a similarly rarified atmosphere of belief that their content should be sold at fantastically high prices that constantly push the envelope of what consumers will pay.

It’s also no wonder why studios and labels would prefer to work with Microsoft: the company is offering to sell them magical beans almost guaranteed to make them rich without any effort. Apple is demanding that they face market realities and build a real business instead.

Apple’s Retail Challenge
Apple’s Adventures in Retail

Piracy vs DRM
If punishing consumers for leaving your store were a workable strategy for expanding one’s business, Microsoft and the music labels and movie studios wouldn’t be stupid for introducing new efforts to push draconian DRM policing. But it isn’t. Piracy is a real problem for software and media content producers, but the solution is not to rough up the minority of consumers who are still paying.

Apple had that figured out right away. Its music store appeals to legitimate buyers and simply ignores those who prefer to steal content. Apple isn’t trying to police the world for content violators, a task that is nearly impossible and certainly not profitable. Instead, it positions high quality, well organized commercial content that competes against the freely available, but often low quality pirated material.

In order to compete against free, prices have to be attractive and simple. Once you get customers used to buying content at reasonably low prices, they will continue to return and build your business. This obvious idea is lost upon NBC’s studio executives, who see iTunes as a golden goose that can be butchered to obtain an extra egg.

By raising prices in iTunes, NBC’s “market pricing” would trigger a mob of greed from every other studio, pushing content prices up into ridiculous heights and sending customers back to file trading sites. High volume retailers don’t experiment to see the highest price they can charge before customers leave in disgust; they set low prices that encourage regular purchases.

Microsoft recently revised its prices to ape Apple’s. It lowered its TV and movie prices in Xbox Live to that of iTunes, and largely gave up on subscription music plans that the labels like but which are not popular among consumers. Even so, those imitative steps would be reversed the moment Apple stopped exerting competitive pressure. Microsoft’s pricing schemes for Vista show how the company sets prices when it doesn’t think it faces competition: higher. And more complicated.

Is Piracy Really Killing the Music Industry?
Did iTunes Kill the Record Store?

Microsoft Faces the Competition.
It should come as no surprise why Microsoft’s business marketing has kept lots of pundits and plenty of institutional buyers hoodwinked while doing such a poor job of reaching consumers. The former are easy to fool, and the result of doing so is lots of free publicity and high profit, high volume purchases that are nearly immune to competitive threat.

In the consumer market however, Microsoft faces something it has seldom had to take on: real competition. Back when Apple was struggling to sell its computers at Sears and mom and pop computer shops, Microsoft had little to worry about. Now, however, Microsoft is facing a retail giant that is creating its own weather, not only in PCs but also in music players, smartphones, and mobile Internet devices.

Given how poorly Microsoft did in copying the relatively simple iPod, the idea that the company could put together a successful retail front to counteract Apple’s rapidly growing chain of stores is just statistically improbable. Microsoft’s inability to understand consumers is torturing Vista, UMPC, Pocket PC, Windows Mobile, Zune and the rest of the company’s hardware offerings.

The Xbox has carved out a position from Sony’s PlayStation market, but only by cloning Sony’s business model and marketing. Now, a year into PS3 sales, Microsoft is falling behind Sony and Nintendo in monthly sales to third place. That indicates that when faced with any real competition, Microsoft’s brand savvy and marketing can’t even effectively sell a product that really should sell itself.

Soviet Microsoft: How Resistance to Free Markets and Open Ideas Will the Unravel the Software Superpower

Soviet Microsoft: How Resistance to Free Markets and Open Ideas Will the Unravel the Software Superpower
The Microsoft Invincibility Myth
Video Game Consoles 2007: Wii, PS3 and the Death of Microsoft’s Xbox 360

Copy the Game, Not the Player.
For Microsoft to change and adapt, it would need to develop a genuine interest in why Apple’s products appeal to consumers, and copy that enthusiasm for developing great products rather than simply trying to push out devices that should make money because they superficially resemble other successful ones. It’s not clear that any desire to develop good products is in Microsoft’s DNA.

That’s a serious problem given that its PC monopoly is being eroded away on multiple fronts and that every other consumer business the company has entered has largely failed to materialize as planned. It is particularly bad for Microsoft that its every failure is being expertly nailed by Apple, which has long been portrayed as a dragon Microsoft slew.

Microsoft was able to outpace Apple in the early 90s because Apple had turned into a company run by salesmen rather than technology visionaries with a passion to create valuable products. Microsoft subsequently simply bought up much of Apple’s engineering talent. Now, just over a decade later, it is Microsoft that is the boring corporation being run by a visionless salesman.

WYE, WYG: Apple and Microsoft in Consumer Electronics
How Microsoft has become the Beleaguered Apple ’96

Jobs vs Ballmer.
That problem is not easy to fix. The old Apple and today’s Microsoft both put conservative salesmen in charge for good reason. The companies were large and established, and their directors didn’t want to gamble known returns on fresh but risky new ideas. That was core to why Steve Jobs was pushed out of control at Apple in the mid 80s.

Apple’s turnaround a decade later required a very real brush with death. Any less dire circumstances would have made Jobs’ bold risk taking seem imprudent. It was certainly possible that Jobs’ strategies could have failed. Even after they started working, few in the industry had any faith that Apple would return as a relevant, leading tech company. Many of the slower pundits still refuse to acknowledge that Apple has even today.

The extreme difficulty of big corporations to take bold risks underscores both the unique success Apple is currently enjoying and the morose series of failures Microsoft is suffering. Steve Ballmer has tried to demonstrate that he can take risks and execute; he presided over Vista, the Zune, and the dropped acquisition of Yahoo. Ballmer’s failures have demonstrated that risk taking is not synonymous with success.

That is of course why bean counters avoid risk in the first place. However, this all leaves Microsoft stuck in an unpleasant limbo between not excelling enough to be successful in its expansion efforts, and not failing enough to be able to take the kinds of ballsy risks needed to pull off spectacular results.

Meanwhile, Apple has found out how to maintain prudent growth and incrementally build into new businesses, from retail to smartphones, while also keeping an entrepreneurial spirit that takes on big risks and successfully makes them work. Key among Apple’s successes has been its ability to reach consumers as individuals. That’s something that Microsoft just can’t manage.

Why Does Microsoft Really Want Yahoo?

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40 comments

1 russ { 05.12.08 at 3:37 am }

The article said roughly what I thought it would.

“Microsoft’s inability to understand consumers is torturing Vista, UMPC, Pocket PC, Windows Mobile, Zune and the rest of the company’s hardware offerings.”

And this is becoming more and more obvious. As another reader pointed out recently, John C. Dvorak has recently had a column slating Vista. I think it’s badness can’t really be hidden from consumers any more.

Bearing that in mind I was interested to see a column from notorious Microsoft shill Ed Bott today:

Why do Macs need so much fixing?

http://blogs.zdnet.com/Bott/?p=446

I can only assume that is meant to discourage ZDNet readers from jumping ship. Look, he’s telling them, you’ll have as many problems on the Mac.

But, of course, they wouldn’t. I don’t think Bott’s deception is going to work. There’ll be a few readers who’ve previously decided that they “hate Apple” and who will, therefore, convince themselves that his deceptive shoddy journalism is insightful. But those people wouldn’t buy Macs anyway. And most readers, I suspect, will take that column with a pinch of salt.

2 StrictNon-Conformist { 05.12.08 at 3:40 am }

Let’s presume Microsoft is capable of producing quality hardware/software and the integration when provided (ok, it seems the Zune doesn’t measure up: but the keyboards and mice do pretty well on that front, though they’re admittedly far less complex). Where does this lead? A major problem for Microsoft (and a large advantage for Apple) is the reality that Microsoft is mostly a creator of software for jack-of-all-trades hardware, also burdened with their success of backwards compatibility encasing their feet like cement shoes in a deep ocean AKA the market. The problem they have with the Zune as a hardware/software product is it’s a “Me too!” product all the way, only not as well executed. One of the major problems with Windows Mobile is the crappy variety of hardware it has to run on, which the iPhone/iPod Touch doesn’t have as a problem: there’s a lot of Windows Mobile devices out there that are crap in comparison, and (worse yet) they’re all just different enough that they need to have small adaptations for each one.

So, if Microsoft wants to have their cake (institutional sales) and eat it too (direct to consumer sales) they’d be best off doing something similar (but not identical) to Apple: addressing the market at large with a hardware/software combination where they have sufficiently good control over the TUE at commodity prices, to present a market option that wouldn’t try (probably with great failure) to go after the same market Apple covers: the higher-end, higher profit segment. If Microsoft did the due diligence, and provided a hardware/software combination that they explicitly set base details for that they guaranteed (by writing the drivers themselves, so they couldn’t blame others) with the expansion options most generic PC’s have, they could very well do much better, and they’d need to be more in touch with the generic consumer. Alas, they’ve not done that with Windows Mobile, and thus have come up with something that’s not really effective on most of the hardware (if any) that it runs on, because things are just too fragmented to concentrate. And that, really, is probably Microsoft’s biggest failure, and something Apple generally does well at: concentrate on a few things, and do them well. While a certain number of geeks get up in arms about the lack of flexibility in the lineup of Apple’s computers that have been available for several years, the reality is that the most vocal complainers make up a very small subset of the general consumer public, and (especially with fast external buses such as FireWire and USB 2.0 and standard Gigabit ethernet) there’s surprisingly little reason most people have to expand their limited-choice machines in practice. Gone are the days Apple released a new Mac every few months (or even more than one: I remember a period where I once was able to name all Mac models ever produced, until they got to that insane stage) which probably cost them a fair amount in overhead, and confused customers as to what they should get. That, and their model naming schemes back then were of a similar complexity to a lot of computer model naming schemes today: what’s a 7200 versus a 6600? Is there a model number somewhere between? What does “Centris” really say about the level? What about the model name “Quadra” ? Microsoft is making the same mistake in their Vista options: too many options, too complex to determine which one to get: likely will result in two extremes for options, that of the cheapest and the most expensive being bought, for the majority of those that buy them.

Then again, the complexity may drive enough customers batty enough to try a simpler choice: OS X or OS X (unless they’re looking to run a server, but that’s not the most common case for Apple’s customers)? Then the choice comes down to the relatively few options (but workable ones 99% of the time) for hardware, and since it can run older Windows just fine, what is there to lose that they aren’t likely to lose already?

3 jfatz { 05.12.08 at 3:47 am }

There seems to be some question on the whole “content cop” matter. An NBC exec seems to say that Microsoft is willing to help them in the matter, but others at Microsoft are saying “we are not pursuing any such thing,” so… either there’s some queer communication going on, or NBC hopped on board with Microsoft for “showing a willingness” but not actually agreeing to DO anything about it, which simply makes them excessively large hypocrites.

4 whmlco { 05.12.08 at 3:56 am }

The entertainment industry already uses “market pricing” on iTunes for movies, with new releases priced higher than “library” titles.

Further, the movie studios know that there’s a limit as to how high it can price DVDs before customers simply stop buying them. And even in stores, there’s new ($18), recent ($12), old ($9), and bargain ($5) pricing for DVDs. Same applies to CD sales.

Of course, another argument is that variable pricing will completely confuse the poor consumer. But I don’t get confused, and I doubt others will either. After all, I manage my Amazon shopping cart just fine.

Bottom line is simple: “It costs $X. Is it worth $X to me? Yes or no?”

As such, I’m not convinced that market pricing would cause the devastation that you seem to think it would. Yes, obviously, the net gain to the studios would be higher.

But it could also benefit some of us as well if it leads to lower prices for library titles, especially if you’re not on the pop music bandwagon. $1.99 new, $0.99 recent, $0.49 “classic”.

Would that be so bad?

5 russ { 05.12.08 at 5:26 am }

@jfatz

“There seems to be some question on the whole ‘content cop’ matter.”

I agree. The interesting write-up in this regard is this one:

http://www.technewsworld.com/story/Will-Zunes-Zap-Unauthorized-Content-62928.html

It looks as though Microsoft told NBC it intended to work on a “content cop” (whether it did or not) and then was stuck with having to tell end-users a different story (after an NBC executive told the Times what he’d understood Microsoft had told him).

Who knows what Microsoft intends here? Maybe this time they intended to double-cross NBC not Zune owners. But I don’t think that invalidates Dan’s basic point, which was that Microsoft is not good with consumers. The end result of Microsoft’s maneuverings here is that Zune users (let alone the rest of us) don’t trust them.

Apple, by contrast, has clear and consistent attitudes.

6 Berend Schotanus { 05.12.08 at 5:36 am }

Microsoft will have to reinvent itself, eventually…

OK, I have thought (and hoped), reading RoughlyDrafted, that Microsoft is close to death. Reality is they still have huge income from existing products. Even when future prospects of Microsoft are dim, a view that I support, their real problem right now is that it is going way too good with them. Microsoft is so rich it can afford to avoid painful management decisions and keep on dreaming it is the greatest company in the world who can make anything better.

In the end Microsoft will have to make the turn. That is not exclusive to Microsoft, it happens all the time. All companies want to live the dream that they are the greatest and can do anything and tend to overplay their hand when the dream is realized. (Steve Jobs learned it the hard way at a very young age and might be slightly more aware of the risk now)

The “problem” with those American tech businesses is they are so damn versatile when the need is really there. They don’t nationalize themselves to death like the old railway industry. They don’t strike themselves to death like the old car industry. Once the dream is over they just start all over again. Once IBM gave up the dream of dominating computer hardware and discovered they are quite good at making dedicated business software. One day Microsoft might give up their domination dreams and amaze us by showing what their real qualities are. If only…

…if only we consumers want to help them a little bit by showing there is a real need and by not buying crappy products from them.

7 Berend Schotanus { 05.12.08 at 7:46 am }

By the way:
It is funny to see how Google pops up all those “Fix All Vista Errors” kind of ads, in the ads field right beneath the opening picture of this very post, which is full of irony about Vista.

8 quadj { 05.12.08 at 9:00 am }

I have always believed that Apple’s greatest advantage is the fact that it builds the “complete widget”. This concept has been marginalized by so many, yet Apple has proven that it works time and time again.

I have always thought that the entire computer industry needs to reduce itself to maybe 4 or 5 strong companies that focus on “building the complete widget”. Of those companies, Apple is obviously one of them. I also think Sony would be a good possibility. I would also put Microsoft and Dell in this category only for the fact that they have enough cash to actually enter this kind of market. (Whether they would be successful or not remains to be seen.)

Now I know that many of you would look at this scenario and immediately think that this wouldn’t be good because everything would be proprietary. But I don’t think so. The only thing the computer industry needs is a consistent set of standards. Whether those standards are protocol/communication standards or file format standards, it really doesn’t matter. But it is those standards that make everything work together. Therefore, if there were 4 or 5 companies all building “complete widgets” and those widgets all followed the same standards, then I would think competition would rampant. Think about it. Each company would have the freedom to build whatever they wanted. They would be able to differentiate themselves in a lot of ways. Yet since they would all conform to the same standards, consumers would have the assurance that they would all work together even if one looked and acted entirely different than another. It’s the standards and protocols that have to be the same; not the hardware/software combination. That is currently what Apple is showing the entire industry, and for some it is a painful history lesson.

9 John Muir { 05.12.08 at 10:40 am }

One of those moments when RDM and FSJ both hit the nail on the head, re: software over here and re: Dell’s difficulties with commodity hardware over there…

http://fakesteve.blogspot.com/2008/05/why-dell-will-not-bounce-back.html

Very different idioms of course, but the message of both commentaries is strikingly similar. Innovate or die.

10 limey { 05.12.08 at 10:43 am }

@qhadj – I agree that building the whole widget is Apple’s advantage, but I must differ on your other propositions.
Consolidating or limiting the electronics industry, or any industry for that matter, stifles innovation and encourages complacency. Examples are the American and British Auto industry and the American broadcasting networks. Sure there would still be competition but it would not be customer oriented.
Little Johnny Startups are necessary to keep the big boys on their toes and keep them grounded in the real world of customer satisfaction.
As Dan’s article suggests, Microsoft has lost focus on the end-user and is pandering to the corporate structure, because that’s where it sees it’s bread buttered, but it fails to see that ultimately every penny it earns comes from our pockets, be it directly or via products that it’s software helped produce.
Microsoft fails miserably in the consumer marketplace. It really needs to shit or get off the pot. Once again I’m surprised that there has not been a shareholders revolt.

john

11 dscottbuch { 05.12.08 at 10:54 am }

Actually, Apple doesn’t ‘build the whole widget’ (they don’t build the chips, etc.) but what they do, that is critical, is control all of the items that define the ‘Total User Experience’. This is what MS is not capable of, at the moment, and certainly not Balmer. TUE is why they bought PA Semi – they have some specific area of UE in mind they need the expertise for. If they just needed chips OTS they would just buy them.

12 Silver_Surfer1931 { 05.12.08 at 10:59 am }

@quadj:
Standards are fine. However, you have to look at the whole thing. For example, LINUX. It is built on open standards. Yet, it can’t make a decent dent in the consumer market. Another thing to look at is the bottom line: how will it increase there business? I think the biggest reason why Apple is the way it is now is because of their user experience. The software is great. So is the hardware. But what matters most are the ones that use them and continually to do so because it provides a seamless integration…so easy that a child could do it…so to speak.

Take a look at AppleTV. In five clicks or less, I was able to watch movie after making the selection. It’s this kind of simplicity without dumming you down that keeps people coming.

My $1.34…

13 tundraboy { 05.12.08 at 11:19 am }

Agree with quadj completely.

Let’s get one thing straight. Microsoft dominates the OS market not because it’s ‘open’ system is superior to a ‘proprietary’ system. It dominates because 1. IBM picked DOS for the PC and 2. Gates outmaneuvered IBM into signing a non-exclusive contract on DOS (and its successors).

If IBM didn’t pick DOS, Microsoft would be just another also-ran that might not be around today.

If IBM signed an iron-clad contract, the PC clone business would not exist and IBM would probably still be the dominant PC manufacturer today. I’m not in any way saying whether that’s good or bad.

As much as people extol Microsoft’s non-proprietary ecosystem, think about it, pretty much all other mass-produced complex products use the proprietary whole-widget model. So Microsoft’s model is just a detour that was a natural outcome of its unique circumstances vis-a-vis IBM.

So the model is now unravelling and the reasons can be summed up in one word: Complexity. The folks at Apple probably know this and they decided to just bide their time, keep refining the Mac/OS-X platform and as software inevitably gets more complex, Windows will soon collapse on its own weight.

For complex products, non-proprietary models just don’t work out. There are too many moving parts there to efficiently manage. And quadj is right, the best system is to have proprietary whole-widget manufacturers working under a tight, comprehensive, continuously updated set of standards and protocols THAT IS NOT CONTROLLED BY ANY ONE COMPANY.

14 gus2000 { 05.12.08 at 12:49 pm }

IBM was never going to dominate the PC industry. The “B” stands for “Business”, and IBM had never sold to consumers before (or since). It was only massive cuts, layoffs, and a return to their core businesses that kept IBM afloat after the 90′s decade of decline.

Microsoft is the new IBM.

15 John E { 05.12.08 at 1:35 pm }

concur fully with the article’s perspective. but it’s time to take off the rose-colored glasses about iTunes. in order to get all the studios on board, Apple has agreed to their ridiculously high prices. how many are going to pay $15 to buy a movie via download? only the rich or hopelessly impatient. everyone else will rent for $2, steal for $-0-, record from CATV for $-0-, or at least buy a DVD at the same cost that they can share with others, play anywhere, and copy for themselves on their computer if desired.

the fundamental fact that is screwing up digital media today, iTunes included, is the content owners’ refusal to recognize their content – music, movies, TV shows, whatever – is worth only a fraction now of what it used to be in the last century. their control of content distribution is irretrievably broken. the high prices they still demand now will only prevent consumer acceptance of legal on-line media as their primary source until they slash prices by 75%.

their only smart move so far is (surprisingly) Universal’s Hulu site. it’s ad-supported free content is decent quality and wide-ranging. many other sites also offer free TV shows now (e.g. Comedy Central). this is the future. it’s really the old broadcast TV model, just using wires instead of the airwaves for distribution. it’s a fair deal for the consumer.

Jobs must know this. clearly he has prioritized for the near term getting all the studios on board at iTunes at whatever price they insist on, so that iTunes can be the “one stop shop” for buying any media.

but until those prices come way down, most of us are going to get our stuff some other way.

16 danieleran { 05.12.08 at 1:51 pm }

Lots of great comments! I have to note a few things tho:

@ StrictNon-Conformist: Microsoft gets credit for selling keyboards and mice, but those are actually built by Logitech and rebranded. Logitech is a consumer-oriented company.

@ jfatz: Microsoft rushed to deny having actually implemented a “content cop,” but only as damage control once the NYT broke the story based on NBC’s comments. The Windows Enthusiast media largely ignored MS’ agreement with NBC and instead assured the public that no, MS didn’t have anything ready yet so there was no cause for alarm. So there is no real controversy, just an attempt to downplay the truth (as noted by the original report I linked to).

Microsoft said “We have no plans or commitments to implement any new type of content filtering in the Zune devices as part of our content distribution deal with NBC” and “We have agreed to work with NBC across a range of topics, and protection of copyrighted is one of them” out of different corners of the same mouth. The first line is a bit weaselly (“no plans” currently for “any new type” of filtering does not mean there won’t be plans or that there aren’t plans to use an existing type of filtering) but the second is pretty clear: MS make the agreement Apple refused to, with obvious results.

@ whmlco: yes iTunes does have new/catalog movie prices. However, it does not have promotional music pricing, which the labels want.

If you think that “market pricing” is an effort to REDUCE the price of old content, you’ve taken the bait. Do you really think content producers are telling you the truth when they wave their arms about LOWERING the price of their long tail of back catalog content? Do you think the dispute hinges upon the fact that Apple doesn’t want LOWER prices that will induce higher traffic through its store? If so, there are five bridges in the Bay Area that I’ll make a great deal with you on right now. Use the PayPal link to send whatever you got and they’re yours.

Also, if you look at CD prices, outside of loss leader WalMart they’ve been raised up into the stratosphere. Record stores have music titles pushing toward $25. That’s a major factor in why kids have stopped buying CDs all together. Of course, even $18 for a CD is egregious.

17 kibbled_bits { 05.12.08 at 1:52 pm }

I don’t believe anyone has pointed out that Microsoft owns shares in NBC/Universal and they have huge leverage in this company. The two companies got together for two failed adventures: MSNBC & HD DVD.

18 shoopylove { 05.12.08 at 1:56 pm }

But back to their marketing problems:

Can all the money in the world not buy MS at least one person who will point out that phrases like “The ‘Wow’ starts now” and “a jolt to your operating system.” are completely devoid of meaning? I pointed one of those billboards to my wife last year and she had no idea what the product was let alone what benefit the “Wow” was supposed to represent for her.

And those “alternative” and “edgy” zune ads do not even attempt to prove to me why the zune is somehow more capable of catering to my independent tastes than the iPod. That was what you were attempting to communicate, right Microsoft? That if I buy your media player, I’ll be signing up with the hip underdog?

Let’s see… Microsoft = indie hipster. No. I don’t think you even believe that, MS. But don’t give up. Keep throwing your billions of dollars into half-assed me-too products so consumers can plainly see how relevant you are.

19 nat { 05.12.08 at 5:27 pm }

shoopylove,

I felt the same way about Zune advertising. The name alone is lame and then you see the Microsoft name on the back. They just used any indie artists they could get on board. As a musician myself, I’d never put my content on the Marketplace. iTunes, eMusic, and a band website – that’s where all self-respecting indie artists should make their music available.

Microsoft’s attempts to play the underdog make just as little sense as Hillary Clinton trying the same thing. I wouldn’t be surprised if she were a Zune owner. :D

20 The Mad Hatter { 05.12.08 at 10:01 pm }

Microsoft is horrible at marketing, and always has been. I assume it will take an upper management overhaul before they change.

After all, they never needed marketing before, and they are pulling in immense profits, so they don’t need to change anything, right? It’s an attitude I’ve seen at a lot of businesses. They are making money, and they forget the basics, and then wonder why sales aren’t what they think they should be.

21 Forrest, Forrest Gump { 05.12.08 at 11:01 pm }

Two comments on copy protection

* Some time ago (20 or more years) somebody tried to hire me in order to start-up and develop for a Phillips propietary hardware computer. However, Phillips had also propietary OS and languages that only authorized personnel at Phillips can program for. Have you ever heard about that computer? No. Why? Because only they (Phillips) could program, so nobody can even touch the thing. Bad strategy, I think.

* Also time ago, on the extinct MacUser Magazzine I read an article about the benefits of software piracy: promotion. Ok, people copy programs to use at home (and some people at work) but, sooner or later, there will be a purchase if the product worth it. So, piracy is not that bad.

* Remember that think in customer not always should be “give the customers what they want”. I think that customer wants what he knows. The real grown happens with visionary people that foresee what people will want. And think in make this world better.

22 Tod { 05.13.08 at 2:09 am }

@ Forrest…
Can you perhaps rephrase your last bulleted item. I can’t make heads or tails of what you’re trying to say. “the real grown happens…”???

23 John Muir { 05.13.08 at 9:32 am }

@ Forrest

I’ve heard the piracy today = sales tomorrow argument a bunch of times, and even occasionally made it myself, but alas the evidence is almost all against it:

http://arstechnica.com/journals/thumbs.ars/2008/04/30/crytek-swears-off-pc-exclusive-games-in-piracy-wake

A PC gamer friend I linked that to said “Crysis was just a tech demo anyway, it should have been free”. Just a couple of months before however he was triumphant that Crysis was the proof he’d been eagerly looking for that “PC gaming is alive and well”.

PC piracy is alive and well. Crytek like so many before them have now worked that out. PS3′s and all the rest of it may have less brute power than a top spec gaming rig right now, but they have plenty enough for the next several years for the mass market. And one killer feature too: piracy is now almost impossible.

The iPhone of course has this too. Part of the huge draw we’re going to see the first fruits of next month.

24 tundraboy { 05.13.08 at 10:58 am }

If I were Microsoft I would track down that Fat Zune Tattoo Slob and quietly pay him to never ever associate his face or likeness with Zune or Microsoft on any public forum ever again.

I bet though that the Microsoft marketing honchos think this guy is so cool and is a great enhancement to the Zune image. Which gives you an idea of just how clueless they are.

25 tundraboy { 05.13.08 at 11:07 am }

@#14 gus2000

If IBM had the DOS/Windows monopoly of course they would have sold PCs successfully to the consumer market. And the ‘decade of decline’ you mentioned would never have happened. In fact that decade of decline was precisely because mainframes gave way to PCs and IBM had no stranglehold on that segment.

Microsoft is your living proof that a company with no expertise in selling to the consumer market can still dominate it if it has the thick sturdy walls of monopoly to keep competitors out.

26 John Muir { 05.13.08 at 11:23 am }

@ tundraboy

Well … it wasn’t MS who had to market all those PC’s. It was the OEMs, Dell, HP, Compaq, Toshiba, Acer, Sony, etc. etc. etc.

If IBM had controlled the PC as closely as Apple held the Macintosh in the 1980′s (and today), it’s very possible something else would have taken its place in the home.

The best candidate being the Mac! But then there was the capable and well priced Amiga, the Atari, the Acorn, etc. etc. etc.

27 John Muir { 05.13.08 at 11:33 am }

Indeed, it would have been a much better 1980′s computing landscape without the DOS PC behemoth.

The Amiga was a much better fit for many home users, and a much better price:
http://arstechnica.com/articles/culture/amiga-history-part-7.ars

Note: I am not one of those old cranky Amiga die-hards! Never owned one. It was GEM (yuck), Win 3, 9x, 2k, OS X for me … though I did have regrets.

28 David Dennis { 05.13.08 at 3:04 pm }

I have to agree with Shoopy’s wife about those Vista ads. If I saw them on the freeway I would have had no idea what product they were trying to sell. The name “Windows Vista” on the ads is almost unreadable, and if you had not seen Vista at that point, you would not have recognized the screens or logos shown.

It seems crazy to have a Vista ad comprehensible only by people who already have Vista! What a waste.

I still remember Steve Jobs on the introduction of Leopard:

“This year, we’re going to introduce Leopard in several different editions.”

(The room went silent. You could have heard a pin drop.)

“The Basic edition will cost $129.”
(Big picture of box, $129)

“The Premium edition will cost $129.”
(slightly nervous chuckles started)

“The business edition, $129.”
(more people started to get it)

“And the Ultimate edition, $129.”
(roars of incredibly relieved laughter)

“We think most people will choose the Ultimate edition,” Jobs said dryly.
(laughter, cheers, applause)

THERE is someone who knows how to market to the consumer! Well, to software developers anyway, for whom lampooning Microsoft was exactly the right approach. To regular people, he simply knows that a product you can understand invariably beats a product you can’t.

I mentioned the five different Vista editions in nine different packaging options to a few non-computer friends, and they all said you’d have to be insane to try and sell a product this confusing to someone not obsessed with it.

D

29 JohnWatkins { 05.13.08 at 5:18 pm }

@ danieleran & @ StrictNon-Conformist:
Dan is correct when he says, “Microsoft gets credit for selling keyboards and mice, but those are actually built by Logitech and rebranded. Logitech is a consumer-oriented company.”
But to give Microsoft some of their due, they have had a hardware design group for at least 9 years or so. They are very hands on in terms of form, haptic design, and development of new features (they have researchers,designers engineers, etc.) but indeed, I think they let Logitec to the heavy lifting.

30 JohnWatkins { 05.13.08 at 5:19 pm }

When I said, “They are very hands on in terms of form, haptic design, and development of new features” I ment to add:
You can tell they are involved by some of the poor esthetic decisions that are made.

31 khichdo { 05.17.08 at 2:18 pm }

@david dennis: This is called segmentation. It is the art of trying to upsell to consumers. Even apple does this – with the various price points of macbook/macbook-pro, ipod nano, ipod classic, touch etc.

Sure, they dont charge different price for OS, but their hardware is what differentiates the different price points.

32 drx1 { 05.17.08 at 2:24 pm }

The interesting thing here – where the ‘whole widget’ bears out is the iPod. Microsoft, to a large degree has catered to the geeks, who like complicated things that take a lot of time and intelligence to figure out, fix, etc…. and so everyone knows someone who knows Windows – so that’s what they have purchased (in the past) …. because even if they dont like the complicated, geeky parts of Windows – they atleast know someone who can help them out.

There there are electronics … like Sony’s or JVC or whatever -this stuff (usually) just works – and if it doesnt, you take it back (or get a new one). This is where the iPod shines – it just works – its an appliance. It is power and it is easy to use, with little fuss and this is where Microsoft gets trapped in their culture of making things overly complicated and/or just do not work well enough for the average user.

Also, I would consider Apple making the whole widget, even with the Intel systems. If you have a hardware problem – you go to Apple… if you have a software problem – you go to Apple…. if you have something inbetween – you go to Apple. Also, from what I understand, Apple does have some input on the chip/mobo features – not as much with say PPC/AIM, but its still there.

MS does have a lot going for it still … even though Vista sucks, Microsoft will still make a ton of money off of it. Even though the Zune sucks, it doesnt really matter (in the near term) if it fails. MS Office will still be king for at least 7 to 10 years and well business also are using .NET heavily …. I guess the XBOX360 is doing OK. … hopefully people and companies wont continue to blindly buy Microsoft.

33 Llydis { 05.17.08 at 5:42 pm }

I, personally, still wonder what context a “social,” has on the modern music scene. Especially with the age group they’re marketing to with Zune.

Most people my age are familiar more with clubs and bars. The idea of going to a social for music is kind of alien at this point.

Then again, there’s a lot of things wrong with the Zune’s advertising from the box, to the web sites, color choices for the product’s identity… I’m beginning to wonder if their advertising staff has to undergo a lobotomy before they’re hired.

I’ve only seen one person use a Zune in the wild, and he was in my math class last semester.

34 Partners in Grime { 05.18.08 at 10:33 pm }

I’ve never seen a Zune in the wild….

35 harrywolf { 05.19.08 at 1:53 am }

Its interesting reading through the comments and noticing how most people are unwilling to believe that a giant corporation like Microsoft can be so stupid and useless in so many areas.

A large corporation is usually run by a very small group of people, and if those people arent too bright, or have dangerously large egos, anything can happen.

The boss of Vivendi wanted to control the world; he wasted billions and was sacked, but until that point, everyone believed his BS.

When software was simple and obvious, and merely printing a document successfully was thrilling (back in the late 80′s), Microsoft had it easy.

But now, Microsoft are exposed as what they have always been, a second-rate company that got lucky, with zero design skills, no taste (Steve Jobs said it first)
and a completely false belief that they are number One.

They remind me of the lottery winner who is still unhappy and unwise even after winning a billion bucks.

36 L { 05.19.08 at 1:03 pm }

I remember reading Gates book. Their methodology is code and sync. That’s just ripe for failures. MS has introduced so many APIs where as Apple has one (two with Carbon, but’s been dropped).

37 MikieV { 05.28.08 at 1:47 pm }

Piling-on…

I like InformationWeek’s last paragraph, in their story about zune being dropped by GameStop:

http://www.informationweek.com/news/personal_tech/ipod/showArticle.jhtml?articleID=208200325

“Despite a big investment in developing and marketing the Zune, which Microsoft launched in 2006, the device in the first quarter of this year accounted for only 4% of the U.S. portable music player market. The iPod, on the other hand, accounted for 71%.”

38 Boycott Novell » Another Tough Weekend for Microsoft { 07.28.08 at 9:13 am }

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