Strategies for a discontinuous future.

Friday, May 28, 2004

The Three Laws of Microsoft

I haven't see MS's Janus DRM discussed much, so:

".."The missing piece, the piece that we're delivering with Janus, is the ability to extend that subscription service content onto devices, and for it to still be protected," Jason Reindorp, a manager in Microsoft's Windows consumer group, told The Seattle Post-Intelligencer. Janus will enable users to transfer songs and other digital content from subscription music sites to handhelds, cell phones and portable music players. More important for the music moguls, the software stamps the content with a use-by date, requiring users to pay-up every so often to maintain their rights to tunes and movie."

Italics are mine. Here's the link.

OK. I've argued often that micromarkets for digital goods are bound to fail, and that micromarkets for digital services are far more likely to succeed. That's because they reduce asymmetrical information between buyers and sellers, and because bundling things which are hyperbolically discounted - like 5 cent digital microgoods - is a hugely efficient mechanism to reduce risk and compensate for consumers' heterogeneous (and increasingly more heterogeneous) preferences.

It's easy to say things like this, but in the real-world, execution can reaaaalllly botch them.

Can you imagine the difference between a user-centric value proposition incorporating the above economics, and the obviously supplier-centric, value-extraction focused proposition MS has come up with? They'd be galaxies apart.

I can't think of much more MS could do to make this thing more heavy-handed. Here's the point: consumers are especially risk-averse when it comes to media, because they've gotten screwed time and time again by shady record companies, etc, etc. I hardly think a value proposition that SCARES RISK-AVERSE CONSUMERS is gonna work.

The point is that micromarkets for services offer huge room for strategic innovation which is not economically possible with microgoods business models. The future is not about 'renting songs' - it's about renting intimacy with the creators of goods, and influencing the outcomes of the goods themselves. (Read Prahalad's latest stuff for more). This works partly because it's a massive source of new value creation, and partly because it's a really, really, really cool risk-mitigation mechanism for risk-averse consumers buying experience goods - but it's the second bit that tells us this is the model that's gonna work in microservice markets.

Also note that interconnectivity is now table stakes - not added value. I can already transfer my MP3s etc between almost any device I own. MS is, contrary to it's own belief, not creating value for consumers by 'allowing' them interconnectivity.

I've read so much scaremongering about MS in the last few days, I'd like to formulate 3 principles of thinking about MS:

1) MS is strategically (much) less intelligent than you think.
2) MS is strategically (much) less capable than you think.
3) Revise expectations 1 and 2 downwards again.

And, of course, the zeroth law is:

0) MS will tactically stoop (much) lower than you think (because of 1,2, and 3).

-- umair // 6:37 PM //

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