Pity the big, bad wolf

A post written for Comment is Free on the Microsoft fine; crossposted here. Interesting comments already underway over there.)

I have a theory about the regulation of companies that get too big and too powerful: by the time government notices they really are so powerful, they are usually already in decline, having grown too big.

The EU today levied a record €899m (£680m) fine – adding up to a total of €1.7bn in the past four years – against Microsoft for charging “unreasonable” prices for access to its code.

The EU competition commissioner, Neelie Kroes, wanted to pile on even more: another €600m for good measure. Take that, big, bad Microsoft!

Except, in my mind, Microsoft is turning into a bit of a laughing stock these days for trying to buy Yahoo, which itself is a company in rapid decline.

The reason Microsoft is desperate to do this is that, even after all these years, it still does not have a successful internet strategy. So it is trying to buy one.

But I say it is buying the wrong one, a strategy based on an old-media worldview in which we are all masses that can be bought and sold. Microsoft – like too many advertisers and media companies – thinks we think of the internet as just another TV. It believes it can own content and technology when, in truth, we own it now.

Microsoft just yesterday released some of its code under a new “open source interoperability initiative” that offers open interfaces, support for standards, data portability and cooperation with third parties.

Of course, a cynic might say that doing this only a day before its record fine was Microsoft’s way to suck up to the teacher and avoid punishment; the cynic would have a fair point.

But it’s also true that Microsoft needs to open up to play in the internet or it will continue to be left behind by the open and free movements that are taking over operating systems, browsers and – with Google’s goosing – office software.

One could also see the move as a mark of desperation. Poor Microsoft.

In the US, regulators and activists continue to rail at media companies that they say have grown too big. But these media conglomerates, too, are pathetic shells of their former powerful selves, shrinking in audience and advertising at ever faster rates. The internet is killing their mass models, and they don’t know what to do about it.

Their response, like Microsoft’s, has been to buy up competitors, to grow bigger. But that strategy is not working: witness the collapse of the radio giant Clear Channel into a private company and the tragic gobbling up of the newspaper chain Knight Ridder and the cross-media synergy giant Tribune Company.

It might make more sense for the conglomerates to invest, like Microsoft, in new companies, or even in their own innovation. But they have lost the touch. Poor conglomerates.

Looking back, I could even argue that the breaking up of telecoms companies that grew too big only presaged the inevitable opening up of communications that led to the decline of the split-up telcos and their desire now to reconsolidate.

This should be a children’s story, in which, at the end, we discover that the big, bad, scary monster is actually a pussycat inside, and a sad and lonely one at that. Paint these giants as dinosaurs with tears in their eyes.

And their regulatory conquerors? Are they knights in shining armour or are they the real bullies?

Either way, I’m not scared of Microsoft any more.

  • Unless Microsoft change stratagy very soon, they are in for a massive fall. Linux is pushing into the mainstream – through the web and incresed communications are showing how crappy Vista really is. Open source programes are taking hold.

    The giant is falling.

    When it does, who will take up the mantle of big bad wolf of the digital age?

    (My money is on Apple. Their fanboy legions already scare me.)

    – also – see you on friday Jeff!

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  • this is not a bad thing. it is just evolution. the innovative characteristics that made Microsoft great and powerful have been long lost. Get that big and you will spend too much time organising and defending yourself. You will also become more focused on what works for your organisation than for your customers. It will be impossible for Microsoft to retain their position because, while they have enjoyed their big and entrenched margins, the position of players all around them has shifted – in fact it’s a whole new game.

  • Fred Mertz

    [The basic value proposition and underlying business models for entire industries are undergoing massive disruption because of the internet.]

    Sure they are. The Internet in the U.S. is controlled by a few major telco and cable utilities that stifle innovation in the same way that Microsoft has crushed innovation on the desktop.

    Massive disruption, my ass.

    Bravo, EU. Show those MS assholes how a real government deals with monopolies.