Monday, April 30, 2007


Provoking the 800 pound gorilla

Microsoft (stock ticker symbol MSFT) sued for reselling academic licenses. Other retailers get away with it. Why was singled out?

MSFT doesn't really care if some small fraction of MS-Windoze installations are "stolen." As others have observed, "pirated" Windoze enlarges the footprint, creating more demand for Windoze over time.

What bothers MSFT is loss of channel control. Almost all computer hardware and software is sold through a network of wholesalers, distributors, and resellers known as "the channel." MSFT's monopoly requires that MSFT be able to declare and enforce the rules of how the channel works: who gets how much of the cut, what retail customers are told, etc. It's a lot like the way cocaine and heroin are distributed. Fry's plays by the rules (selling almost all MSFT licenses with new computers or in retail shrink wrap, flooring Vista only...) and MSFT leaves them alone. doesn't (selling MSFT licenses on used computers, selling XP in 2007, selling more "OEM" than retail shrink wrap), and MSFT hits them hard.

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