The Xbox is Microsoft's "Joe Camel"

Microsoft as a company is a criminal monopolist. That has been decided in court. The evidence has been presented, the opposing viewpoints have been argued, the judge has deliberated, and the verdict has been handed down. Whether or not the company ever ends up receiving any punishment as a result of this verdict, the truth remains: they're guilty.

However, if Microsoft's current plan bears fruit, they will never have to answer for it.

Death of the PC

The desktop PC market has reached a plateau, where just about everyone who wants a computer has one, and so sales of new PCs have dropped off considerably over the past year, contributing in large part to the dot-com failure and tech bust of the year 2000. Popular software doesn't push the limits of hardware anymore like it did back in the old days; Moore's Law (where the number of transistors in a CPU doubles every 18 months) is becoming less and less true. Microsoft can try to push for new levels of hardware hunger in software like Windows XP, but with bandwidth, hard drives, and RAM continuing to drop in price, it's not going to drive sales of complete machines anymore. There's really only one area in which new software continually pushes the demands on PC hardware: games.

This is why Microsoft feels it needs to diversify into non-desktop-PC hardware offerings like the Xbox and UltimateTV. The market for PCs is saturated; they need to put their efforts where they can still win over new customers.

And that's where the beauty of the plan comes in.

Get 'Em While They're Young

I have had a number of conversations lately with teenaged PC gamers who see the coming of the Xbox as the great new revolution that will free them from the doldrums of stodgy console platforms like the Sony Playstation 2 and the Nintendo GameCube, new as those consoles are. To these people, whatever else a company does is irrelevant, as long as it produces the biggest, baddest game platform on the block.

These conversations go something like this:

KID: "Hey! I just found your web page, and it says you don't like Microsoft. What's your problem, man?"
ME: "Microsoft is a convicted criminal monopolist. I'm protesting their unfair business practices and trying to present valid alternatives."
KID: "But Microsoft is a great company! They make the Xbox! How can you say anything bad about them? Their games rule!"
ME: "What? I'm not talking about games. I'm talking about the server operating system market and their monopolistic practices with desktop software, which results in the death of small companies like--"
KID: "Huh? I don't even know what you're talking about. All I know is Microsoft makes great g4m3z! Leave them alone!"


Ingenious, huh? Microsoft knows that by breaking into the console game market, where they control the interface standards for gaming on PC hardware, they can quickly rise to be a leader in the field-- where all the gamers care about is who's on top-- and appear as a benevolent, heavenly father figure, leading its followers to the new promised land. When these kids reach the age when they will vote with their dollars on what desktop and server software to use, they'll choose Microsoft, because their past experience with the company was with kickass console games. And when consumer-rights groups try to decry Microsoft's business practices, these kids will rise in a wave to shout them down. "Leave Microsoft alone!"

Breaking Down Barriers

The desktop OS war has stagnated. The market shares of Windows, Mac OS, and UNIX alternatives like Linux have not materially changed in years. Those people who prefer to stick with Windows are sticking with it; the number of people growing bored or dissatisfied with Windows and trying alternative platforms are matching, or even outstripping, the number of people moving from the alternative platforms back onto Windows. Microsoft isn't winning any ideological converts on the desktop. Even among dyed-in-the-wool Windows users, the ever-present refrain is of how much everyone hates Windows, how their Outlook configuration is screwed up, how Word scrolls too fast so you can't select a block of text, how generally crappy everything is. On the desktop, for productivity, Microsoft is a necessary evil-- a given part of the equation, something to put up with, like the phone company.

But Microsoft knows that to keep from ever paying the piper for their corporate transgressions for which they have already been convicted, they must win in the court of public opinion-- and to do that, they must win over new voices to their camp. They must convince new people that they are a Force of Good (tm), and that won't happen through yet another version of Office or a year-too-late DVD player application, or Lord knows through a central database-driven pay-per-use software model.

Where it will happen is among the kids.

Not just among the kids, either-- among the adults who would otherwise not have ever entered the world of computers. UltimateTV is the "console game system" for little old ladies watching soap operas and for George Liquor watching football. TiVo notwithstanding, these people will fall into line with UltimateTV (especially if they're already DirecTV users) and sing Microsoft's praises for bringing them salvation.

We have seen that when Microsoft decides they want to own a market segment, they can do so-- by throwing all their bulk behind a product, as with Internet Explorer, they can elbow the already established leaders aside until the l33t d00dz of the community consider them to be "old school" and "dinosaurs". Maybe they are. Maybe the Microsoft products are indeed better, and so why should we complain?

That's the insidiousness of this master plan. Microsoft is not incapable of making good products. The problem is that they choose to make good products only when it suits them-- specifically, when they want to dominate a market and grind the status quo into the dust. Microsoft isn't some scrappy little upstart, remember-- the Xbox is no David slaying the giants of Sony and Nintendo. Microsoft can play the exclusionary licensing game every bit as well as the status quo can, and so their meteoric rise to the top of a given market owes everything to Microsoft's ability to put all their monstrous resources behind the development effort, rather than to pure innovation or a desire to change the world. And meanwhile, once Microsoft owns a market, it squats on it like a sumo wrestler and won't ever budge. Not to innovate, not to take things to the next level, no-- only to keep the "real" Davids out of the space that is so rightfully Microsoft's now.

And the Problem Is...?

Okay, so we have superior products from Microsoft in market segments where Microsoft has never played before. We have new audiences oohing and aahing over what they see as genuine innovation from a company innocently pursuing the American Dream (tm). Where's the problem?

The problem is that Microsoft isn't about making great games, nor about making life-enhancing set-top boxes. When they bring out new games, Microsoft buys them from companies that have already done the work for them to flesh out the title list. Sure, these games are great. But if Microsoft truly meant to be in the business of giving customers what they wanted, they would be developing games themselves, using fantastic innovative ideas from within, not just buying themselves a list of developers and slapping their name on everything. No, Microsoft's foray into the console game market is all about winning over a new population full of Microsoft lovers. So is their foray into the "programmable live TV" market. Once they've proven to the audience just how wonderful a company they are, no grand jury in the country in the world will ever convict them.

See those Philip Morris ads showing how they benefit the world by giving oranges to poor old ladies in nursing homes, and how they fund programs to aid battered women and feed the orphans and all that sickly-sweet nonsense? That's the kind of PR Microsoft needs. But Microsoft at least knows that they have more people on their side already than the cigarette manufacturers do. There aren't "Truth" ads on TV showing activists stacking up the corpses of Netscape and Apple employees. Microsoft enjoys a significant advantage already by dint of most of the world thinking that Bill Gates invented the Internet and that "Think Different" is the Microsoft slogan. So for them, the "feed the starving children" PR stunts will work, whereas for Big Tobacco they're universally scorned as cheap, contemptible appeals to the public's "aaawww" instinct-- the last refuge of the damned.

All Microsoft has to do to win over that all-important generation of young, up-and-coming computer users who haven't yet formed their opinions on operating systems and business practices is to hit them where they live: in console games. Because once the gamers are brought into the Microsoft fold, they'll grow up to apply whatever they think of Microsoft's games in a knee-jerk fashion to everything else they make. "Hey, they rule the game market, so obviously they make the best computer systems too!" Just as kids in the 60's muscle-car market ignored the business practices of Ford and Chevy and Plymouth and concentrated purely on the little number on the front fender, Microsoft can pander to what kids like-- dominating the market that matters to them-- and build brand identification that will last forever.

Get 'em while they're young, and they'll be hooked for life.


Brian Tiemann
June 5, 2001