The Technology Liberation Front - Latest Comments in A Market that Probably Shouldn’t Exist

Re: A Market that Probably Shouldn’t Exist

Steve_R — Fri, 02 Jun 2006 15:03:34 -0000

I looked at Microsoft's "Service Overview" and I would conclude that this product would provide no extra value to the consumer. Other than "automating" certain actions, the "features" of Windows Live OneCare are already part of the Windows operating environment. Basically, Microsoft is repackaging what it has already sold to you and selling it to you again. As with enigma_foundry, this no more than attempt to gouge the customer and has little to do with antitrust issues.

Re: A Market that Probably Shouldn’t Exist

Andrew Grossman — Thu, 01 Jun 2006 18:56:03 -0000

Matt, you are right in that the actual cost increase could be less than $50, relative to a bundled scenario, but I would guess that it wouldn't be much less than that. Here's why:

1. MS hasn't had great success pushing customers into annual payments for the OS, especially non-corporate buyers. If a user buys an OS once, say, every 4 years, the cost increase would have to be the present value of 4 annual payments to equal out the cost. I don't think the market for OS's is necessarily that elastic--remember, MS is competing primarily against older versions of Windows.

2. Consumers don't buy Windows, OEMs do and then install it on computers that are then sold to consumers. MS could not possibly squeeze the full $50 (or the present value of n annual payments, as above) out of OEMs, who buy Windows far below its retail price. Bundling lets customers use OEMs to get a lower price.

3. Most customers don't value security all that much. Balanced against the security conscious, who would happily pay $50 / year, the optimal price to sell to this broader market, as part of a bundle, would have to be less than the present value of n years of $50 payments. If customers who value security little far outnumber those who put a great value on it, then the optimal price would be far less. (optimal==profit maximizing)

4. There are collective action issues w/r/t viruses and other malware. Total consumer welfare is likely to be greater if more people use tools that block viruses and the like--networks would be faster, there would be less spam from 'zombie' computers, etc. No individual consumer is willing to pay anything for this potentially great benefit, but it would still lower the net cost to consumers of the new software/service.

Re: A Market that Probably Shouldn’t Exist

Matthew Yglesias — Thu, 01 Jun 2006 18:10:47 -0000

There's no reason to think the $50 fee for the service reflects an actual $50 increase in costs to consumers. If these features were bundled into the operating system and offered consumers $50 in additional value on top of what's already there, then Windows itself would just cost $50 more.

Re: A Market that Probably Shouldn’t Exist

eee_eff — Thu, 01 Jun 2006 17:39:35 -0000

This has nothing to do with anti-trust issues, and everything to do with Microsoft's attempt to move from a shrink wrap business model to a subcription and a service business model.

As I have noted in my comment to "A Different Type of Technological Protection" article, the shrink wrap model is on decline and the ascendency of service oriented model will be on the ascendency as FOSS continues its take off.

The line that this subcription based service is an anti-trust issue is pure MS propaganda.

Incidently, many have criticized FOSS for this move (see IP Central Posts, which do not allow comments) somehow implying that the software must be low quality to move to a service oriented model. Well, that is not the case at all--in the case of SuSE Linux for example.

Now here is an example of a shrink wrap company doing what those at IP Central have accussed FOSS of doing--moving to subcription based sales to cover up their deficient software....