Why Can’t Microsoft Develop Software for Zune HD?
August 15th, 2009
Daniel Eran Dilger
An iPhone developer has reported that Microsoft promised it “a bucket of money” if it could port its Twitter app to the new Zune HD. The obvious question is, if there’s so much money in writing Zune software, why can’t Microsoft write its own simple apps and pocket all that potential for wealth itself?
The bottom line: Microsoft knows there’s no real money in Zune software and doesn’t want to invest its resources (the company has plenty of cash) in developing low value software. The problem: mobile developers have no incentive to leave the iPhone App Store in order to support the Zune HD, and consumers have little reason to buy the Zune HD without any software.
Yet, oddly enough, Microsoft’s fortunes have come solely from software licensing, not from developing a platform and selling hardware. So why is the company now abandoning its apparently proven Windows Everywhere business model to chase the Apple’s hardware-oriented business, the complete opposite, with the Zune?
Microsoft is admitting that its Windows Everywhere fantasy/strategy, as advocated and championed by Bill Gates, is over. Rather than being a superior life form that won out over Apple, Microsoft is admitting that all along it was really only a parasite that could only thrive while blindly leaching off the colon of a sentient host like Apple.
After briefly leaving its host to set out on its own, Microsoft has discovered that to survive it must scamper back into Apple’s shadow and leach upon its host for direction. The questions now are: can Microsoft pull this leeching business off again, and will Apple allow it?
How Microsoft Climbed On Top: Software.
Microsoft knows quite a lot about how to extract money from the tech industry. Since the late 80s, the company has been inhaling the lion’s share of profits in the desktop PC world. It has done this by focusing on software, leaving PC hardware makers to battle over increasingly smaller hardware margins as PC prices fell and competition ramped up.
Similar competition in software has not occurred however; prices have largely remained stagnant or even risen. The price of Office has only recently dropped in the face of competitive pressure from Google Apps and OpenOffice, and the cost of Windows, where there is little effective competition, is now two to the three times as much as it was a decade ago.
Microsoft’s domination of the PC software market started with its 1981 deal with IBM to license PC-DOS. IBM lacked the foresight to recognize that the value of its original PC was largely delivered by DOS, particularly after Compaq and other companies began copying IBM’s hardware, turning the PC design into a basic commodity used to run DOS and its DOS-demanding apps.
IBM tried to release a greatly improved PC design under the name PS/2, but Compaq and other cloners had already depressed the prices of “IBM PC-compatibles” to the point where there was little room for real innovation in the hardware space. Through 1995, competition kept hammering PC prices down while Microsoft’s lucrative DOS business began to attract attention from its own audience of cloners.
Microsoft’s Monopoly Maintenance.
With Windows 95, Microsoft destroyed the market for DOS by tying and embedding its own version of DOS to the Windows environment, a clear violation of anti-trust laws. Microsoft also used the launch to blindside DOS developers such as Lotus and WordPerfect, neatly leveraging its DOS monopoly to migrate users from their existing DOS software to Microsoft’s new Office 95, thereby creating a secondary monopoly in desktop PC software.
Throughout the 90s, Microsoft continued to destroy one market after the next, taking over Netscape’s web browser business by simply bundling its own Internet Explorer browser in Windows and working to similarly destroy other businesses, including Apple’s QuickTime. Microsoft used its monopoly position to block competitive bundling deals, break competitor’s compatibility with Windows, stop rivals from introducing compatible alternative offerings, disrupt efforts to build alternative platforms, and prevent other products from reaching the market, both directly through exclusive business deals and indirectly through misinformation campaigns spreading fear, uncertainly and doubt.
Apart from a vocal minority of critics, Microsoft was largely congratulated by the tech media and its punditry for continuing its successful streak of anti-competitive behavior. Had Microsoft been competing against an array of larger rivals, its ability to profit and remain popular would have been worthy of accolades. But Microsoft wasn’t playing fair and was actually breaking the law. Additionally, Microsoft owed its success to the companies it later turned on, starting with IBM and then Apple.
Back then, Gates complained about patent protection law preventing competition. Once Microsoft was in the position of owning patents and using them to stifle new competition, it changed its tune. Microsoft became a great parasite that had developed an intolerance to parasites of its own. The problem: the company had no capacity to do anything original apart from extracting the value created by others.
The Floundering Parasite.
Even worse, it started to become obvious that Microsoft wasn’t even able to do that anymore. When Apple, nearly sapped of its revenues by the Windows parasite, coughed up the Newton Message Pad as its last great hurrah of the early 90s, Microsoft set out to deliver its own tablet computing ideas. Palm stepped in and delivered a more cost effective and popular platform with the Palm, causing Microsoft to shift its parasitic attentions to a new host. But all of Microsoft’s efforts to suck the life out of the mobile PDA market floundered throughout the 90s.
Realizing that the future of the PDA was to be fused with mobile phones, Palm began pioneering its Treo smartphone. Microsoft again shifted its mobile efforts from clamshell Handheld PCs and Pocket PCs to Windows Mobile, yet after years of trying, the company simply could not deliver an attractive product.
Meanwhile, the invigorated Apple began selling the iPod, catching Microsoft’s attention yet again and resulting in a series of missed hits that continued through PlaysForSure and into the Zune. Microsoft was also busy trying to copy the success of the Sony PlayStation 2 in fears that console gaming would kill a major artery feeding Microsoft’s PC monopoly.
Despite growing all these tentacles in efforts to leech away revenues from anything successful around it, Microsoft’s new businesses related to the Zune, Xbox and Windows Mobile have all consumed more resources than they’ve earned. So why is Microsoft pursuing these hardware businesses rather than sticking with its software success?
Because it knows the PC business is maturing, and once the potential for growth ends, Microsoft will end up stuck on a dying island. PC sales will of course grow into emerging markets, but these offer little opportunity for Microsoft’s historically fat software profits. India and China are rife with piracy and are willing and eager to substitute their own operating systems and desktop software based on free and open source technology for Microsoft’s expensive alternatives.
Microsoft’s third leg of profitability, server software, was a similar parasitic attack on Unix and Lotus Domino/Notes, an effort which handsomely repaid Microsoft’s efforts in developing Windows NT/2000/XP and Exchange Server. However, the enterprise market is also maturing, and as companies see opportunities to shift to free and open software, the allure of paying through the nose for Microsoft’s proprietary solutions is also leading up to stagnant growth potential there, too.
Eating Up Time.
Over the past decade, the company has simply grown desperate for ideas. Windows XP attempted to head off any interest in Apple’s Mac OS X, and the company promised repeatedly to fully deliver its own version of Apple’s technologies in the development of Longhorn. That culminated in the greatly disappointing Vista after too many years on the drawing board. Now Microsoft is getting ready to relaunch the software as Windows 7, hoping that the release will make up for the lost decade.
The problem there is that time ravages all organisms. The last decade has stripped Microsoft of its perceived immunity, omnipotence and omniscience, giving it a tarnished brand while its once weak competitors and former hosts have regained their strength. Commercial Unix has been reborn as Linux, and has gained a new respect in the enterprise that no amount of Microsoft-fueled misinformation campaigns can now slow.
Apple has adapted faster legs in retail, enabling it to keep well ahead of Microsoft’s tentacles as computer sales in general grow stagnant outside of Apple’s retail outlets. Apple’s retail efforts are now approaching ten years old and are growing as fast as the company can manage to expand.
Microsoft has announced plans to open two stores, making it years away from profitability in retail on top of having no track record in direct sales, no competency in building out retail stores, and no product lineup that has any potential ability to do anything but embitter its existing retail channel. Even if everything works out swimmingly for Microsoft (and of course, things won’t work out well for Microsoft’s retail stores), it will remain a decade behind Apple in retail.
Moving At The Speed of Zune.
Clearly, Microsoft has to move fast. It’s now the third year of the Zune, which failed miserably despite the company’s best efforts to apply its monopoly power and disgorge rivers of false information from every pundit pore. The failure of the second year’s Zune models only proved the fact that Microsoft’s hubris was the act of a naked emperor. Apple kept one step ahead throughout, delivering the cheap video Nano to embarrass the original Zune and the iPod touch to humiliate the second generation.
Now, Microsoft is launching an iPod touch clone (again substituting various useful iPod features with a radio, something that didn’t work over the last two years, either), but it is missing a critical element: third party software. For the last year, Apple has been building up its iPhone/iPod touch mobile software platform and now has 65,000 apps available. Microsoft has two options to compete against this juggernaut: develop a series of useful applications itself, or copy Apple’s attempt to harness the power of third party developers to do this for it. Microsoft is choosing the latter.
This is a grave mistake. There are no historical examples of companies who arrived late to the party with a copy-cat minority platform (even ignoring platform maturity and quality), and subsequently took over. IBM crushed the fledgling pre-PC market (mostly CP/M), but only using its monopoly power in business machines. Apple’s Mac launched rather weakly, and ten years later was overwhelmed, not by the cheaper Amiga or Atari ST, but by the much larger Windows/DOS PC monopoly wielded by Microsoft. With Microsoft’s attempts to leverage its monopoly power now failing more often that succeeding (PDAs, web search, gaming, mobile phones, MP3 players, etc) it’s completely non-sensical to think that Microsoft’s minority Zune will somehow be able to sap any strength from Apple’s iPod/iPhone/iTunes business.
Additionally, this time Microsoft doesn’t have the support of its army of hardware partners. The Zune killed off Microsoft’s MP3 partnerships, leaving it pitted against a variety of rivals in addition to Apple, from other smartphone and MP3 player devices to competing devices like Nokia’s Internet Tablets and the indirect competition for attention posed by netbooks and handheld gaming devices. Expecting developers to flock to the Zune HD in ways they haven’t flocked to the already existing Zune APIs is rather naive.
Doesn’t Microsoft Write Software?
Most puzzling is the fact that Microsoft already has a proven business model to copy, and given that copying others’ ideas is what the company does best, it’s hard to understand why it hasn’t taken a better look at how Apple delivered the iPhone.
The success of the iPhone is best understood by comparing it against the Newton Message Pad. With the iPhone, Apple released a device with lots of included basic functionality, not just lots of potential features that third parties could someday deliver, if the device were to gain a sufficient enough installed base to warrant such investment. Apple wrote a series of apps for the original iPhone, enough that the first 5 million buyers were sold on it even before Apple announced any plans to deliver third party APIs.
In contrast, Microsoft has still not sold four million Zunes in nearly three years of trying. The Zune HD is starting the installed base over at zero because it uses its own development platform. That’s what Apple did in the shift from iPod to iPhone, but the critical difference is the fact that Apple managed to sell more than five million iPhones in the first year before making development APIs available. Therefore, there was immediate interest and a significant installed base to incentivize application development from the start.
The Problem with Third Party Developers.
Android, the Palm Pre, and the Zune HD are currently all inviting developers to write software for a negligible installed base, an uphill battle Apple already experienced back in its Newton days (and something Steve Jobs experienced in launching both the Mac and NeXT platforms). That’s a really tough sell. It’s especially tough once you realize that third party developers are not necessarily aligned with you. They’re independent third parties, meaning they’d happily stab you in the back or desert your platform if a better deal presents itself.
That’s something else Jobs and Apple know about first hand. Back in 1981, Jobs invited Gates to develop for the Mac platform as an opportunity to enter the application development business where Microsoft had little previous success. Once Microsoft realized it had tremendous leverage against Apple as the key developer of several important Mac apps, it used this to extort rights to Apple’s Mac technologies and then used these against Apple, both in developing the copycat Windows and in successfully thwarting Apple’s efforts to defend its software copyright in the Look and Feel lawsuits.
Microsoft then abandoned Apple anyway, leaving Word and Excel on the Mac to stagnate as Microsoft put all its development efforts into Windows versions. Gates also refused to write software for NeXT, knowing that Windows wouldn’t stand much of a chance if Office apps were available on superior platforms. Microsoft still only makes the most feeble attempts to deliver the appearance of supporting Mac Office apps, and Apple tries diligently to maintain that Office for Mac is anything other than half-assed trash while it shores up its own iWork suite.
Android, Palm’s WebOS, and the Zune HD will similarly only retain third party developers as long as their respective platform developers can both deliver compelling enough hardware to attract buyers and good enough tools for developers to use. The first problem is by far the most serious. And beware Google and Palm: your top developers are ready and willing to abandon you to start their own basic platforms on a Linux kernel; easy come, easy go. Watch for China, it is especially good at taking your technology and nationalizing it. Good luck and all.
Again, Doesn’t Microsoft Write Software?
This all means that Microsoft should be delivering the Zune HD with an impressive assortment of clever mobile apps to rival the iPhone and iPod touch. It isn’t. While CNET regulars are gushing over the very basic version of Internet Explorer 6 (!) included on it, once the device hits the street it will be compared against a real mobile browser and users will wonder why Windows Enthusiast rags were blowing so much smoke up their… Zune.
In reality, the Zune’s web browser looks terrible. Its virtual keyboard (previously reviled as a concept by Windows Enthusiasts when it appeared on the iPhone) covers more of the display and looks clunker, while its zooming, panning, and general navigation are so bad Microsoft refuses to demonstrate it in public. In contrast, Apple showed off the iPhone’s new browser in depth six months before it hit the market, and even Android and Palm demonstrated theirs well in advance. Both were based on WebKit, and therefore already proven. The Zune HD goes on sale in a month using a browser formerly known only to drive Windows Mobile users nuts and send them off to download Opera.
If Microsoft’s web browser is this bad, you can imagine what else is wrong. The general navigation is that same awful list of text that trails off the edge of the screen, something that did not seem to create excitement in the first two generations of Zune devices. The Zune HD is Windows Mobile without a phone. Think about how bad that is. No really, pause and reflect for a moment. Wow.
What does the Zune HD offer? HD Radio and HD video output, both features that, while unique, have no known demand. In contrast, the original iPhone delivered, well, a phone, but also contact, calendar and mail features and access to weather, stocks and other widgets. Subsequent versions have added push messaging and photo and video recording. All of this is well within Microsoft’s capacity to deliver. The company just doesn’t think it needs to do anything. This again is a huge mistake.
Why Isn’t Microsoft Developing for the iPhone?
It is also telling that Microsoft has not delivered any software apps for the iPhone, the most successful mobile software platform over the last year and a half. Microsoft is so blinded by trying to maintain its dying monopoly that it is failing to identify real opportunities to innovate its way out of oblivion and irrelevance.
The only reason Microsoft delivers Mac Office is to fulfill contractual obligations with Apple and to prevent the appearance of a rival Mac office suite that could work its way to Windows. Attempting to attain or maintain monopoly control was also the reason Microsoft delivered a version of Internet Explorer and Windows Media for Mac. Once that motivation passed, so did those products.
Recall that even at its most beleaguered, Apple cranked out ClarisWorks on the Mac and then Windows and quickly claimed the top spot in integrated productivity software against Microsoft Works. Apple then let its Claris subsidiary fall apart, but that demonstrates the potential for incubating threats against Microsoft on the Mac platform. QuickTime survived because of being on the Mac platform. The reinvigorated Apple later revived QuickTime cross platform and used it to deliver iTunes for Windows, followed by Safari for Windows and then MobileMe for Windows.
Apple isn’t afraid to develop key apps for rival platforms that offer opportunities. So why is Microsoft, desperately in need of new opportunities as its core monopolies stagnate, not jumping on the opportunity to define excellence in mobile apps on the iPhone? Certainly, if Microsoft could deliver a variety of “must have” iPhone apps, it could use those to lead users toward its own Zune and Windows Mobile offerings. Is the company stupid and just unable to deliver?
Failure to Launch.
I think the company is unable to deliver. Back at the launch of the Mac, Microsoft was late in delivering MultiPlan (later named Excel), and ever since, even up into recent versions of Office for Mac, its offerings have always seemed both late and rushed. A look at the Windows Vista debacle indicates this isn’t something limited to its Mac offerings.
In fact, Microsoft only looks competent in areas where there is nothing to compare it to. The Zune looks fair in a vacuum, but next to the iPod it’s at least a year behind in hardware and further back in software. Back in 2000, I similarly observed that Windows CE devices looked fair only without making any comparison to Palm. Being forced to use Office on a recent project left me frustrated and angry, largely because I had grown accustomed to iWork, software designed to work for you rather than to maintain Microsoft’s monopoly.
If you look at Microsoft’s customers, they’re only satisfied when they don’t look at alternatives. And most of its core customers are Windows Enthusiasts and Microsoft shop IT departments that are careful not to examine alternatives out of fear their faith might be shaken if exposed to some reality.
I think if Microsoft attempted to develop iPhone software, it would only expose how comically incompetent the company is. The majority of the problem is management. When I talk to Microsoft employees, they express frustration and irritation with how badly and incompetently products are managed. This reflects a top-down desire to maintain the status quo rather than rebuilding to try new things. That’s also what killed Apple in the mid 90s.
Death is Always the Answer.
Life knows better than to embrace the status quo. We, and everything around us, are programmed to die. This forces us to make tough decisions and do more than just lounge around passively. More importantly, it erases away our ability to hold back the forward momentum of the gene pool and of civilization.
The older we get, the more resistant we are to change and the more conservative our outlook becomes. If we lived to 200, our entire global society would be as backward and delusional and hesitant about making any progress as the middle of the United States is specifically. We’d have whole generations of naysaying, Civil War-era veterans adamantly insisting on turning back the clock on Civil Rights and Suffrage, rather than just a minority of superstitious people who have invented a fondness for living in the imagined glory of the past.
The only way to break from the past is to kill it off along with all those who prefer to live there. Nature has devised a grandly elegant way to do this by giving us clocks that coldly kill us so that are children are limited in what they can learn from us while making their own way forward, rather than forever living under our perceived notions of what is true and right. Without death, there would be no revolutions, no exploring beyond the flat edges of the known earth, and no attempts made to leave a lasting legacy behind. There would also be no hope of escaping from under the current dominations of the less qualified.
Death kills everything that does not regerminate with a fresh mix of DNA and rise from its former ashes to try new things. In the mid 90s, Apple had to die to live again. And today, Microsoft is a large cancerous parasite being leached to death by a series of attacks launched by quicker and more innovative rivals.
Today’s Microsoft will die, just like the old IBM monopoly and the British Empire and the Caesars and the dinosaurs. The only question is, will Microsoft reinvent itself and live on in a new form, or sink into history as one of the most troublesome diseases to ever hold back the progress of our society’s technological advancement?