Microsoft to Music Moguls: Play Fair!

Microsoft Corp. has broken off licensing negotiations with the four global music companies, raising questions about the Redmond, Wash., software maker’s plans to start a subscription-based music service, according to people familiar with the talks… According to the people briefed on the discussions, the negotiations broke down Friday over what Microsoft considered unduly high royalty rates [emphasis added] sought by the labels…. —Wall Street Journal

Yes, that’s right. Microsoft is complaining about “unduly high royalty rates.”

This from a company that has been earning “unduly high” margins on hacker-prone operating software that nobody actually likes to use from Day One—and getting away with it.

Now, I know a lot of people disagree with my view that Microsoft has a monopoly, and that Microsoft abuses that monopoly whenever a competitor introduces a better product—which is almost always—by either incorporating the offending function into its operating system or by coming out with a half-baked clone and giving it away at cut-rate prices.

(Just today I was writing a document in Microsoft Word and made the mistake of trying to switch the page numbering from the upper right header to the lower right header. I ended up with page numbers at both the upper right and lower right of each page. I could see no way to change this—the “help” function in Word is like a computerized version of the so-called “instructions” found on the back of an IRS tax form, but even more useless. I had to find an earlier version of the draft lacking the duplicate page numbers and rewrite the stupid thing. So much for Alan Greenspan’s famous computers-as-magical-productivity-tools theory.)

Still, I don’t begrudge Microsoft its monopoly. It was easy, and quite profitable, to short stocks of companies Microsoft was targeting back in the 1980’s and early 1990’s.

But those days are gone. Microsoft began losing its mojo along about the time the internet began changing the way people used their computers. Search, mapping, instant message—all these features have been pioneered by non-Microsoft companies. And the amazing thing is they remain the domain of non-Microsoft companies, because Microsoft can’t underprice free.

The lousy search function built into Microsoft Network, and the even worse instant-message function Microsoft keeps trying to foist on its users, are fooling nobody.

And now that Microsoft has clearly become an also-run in the department of downloadable music, the company is left to complain about the “unduly high” royalties being demanded by the music owners.

It’s like Darth Vader complaining about Luke Skywalker’s sword.

Jeff Matthews I Am Not Making This Up © 2005 Jeff Matthews The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.