Has Apple Finally Become a Monopoly Like Microsoft?
Recently Mac users everywhere have been faced with a very disturbing thought. Most try not to say it out loud for fear it might be true. Others attempt to rationalize their point of view regardless of the facts. What could be causing such trouble? What is giving so many loyal Mac users a sinking feeling in the pit of their stomachs? Why, the simple notion that Apple might have finally become a monopoly just like Microsoft. That is a statement loaded with implications and to better understand all of the ramifications first we need to start with a definition:
mo·nop·o·ly ~
A situation in which a single company owns all or nearly all of the market for a given type of product or service. This would happen in the case that there is a barrier to entry into the industry that allows the single company to operate without competition (for example, vast economies of scale, barriers to entry, or governmental regulation). In such an industry structure, the producer will often produce a volume that is less than the amount which would maximize social welfare.
To begin to understand this issue first we must decide, is Microsoft a monopoly? Yes, I believe they are. Though they weren’t convicted by the time the entire trial had run its course, Microsoft had, and continues to maintain, a monopoly in the operating system market. So, according to the definition previously stated, Microsoft is indeed a monopoly. However, this doesn’t automatically mean that they are doing anything illegal (and before you say they are doing something wrong remember, wrong and illegal are two different things)
So, if simply having a monopoly is well within the law, what was the trial all about? Well, as it turns out, they were breaking the law. You see, while it is legal to be a monopoly it is illegal to use that monopoly to ensure your position in the market, force smaller companies out of business or otherwise stifle competition. If you are to retain a monopoly it must either be government sanctioned or maintained in such a way that no laws are broken. That last point is where Microsoft ran into trouble.
Many people have argued (though I don’t share this point of view) that even if Microsoft had a monopoly and even if they were engaging in illegal business practices, all of that should be over looked because in the end Microsoft did more good than harm. This is the rationalization argument that basically boils down to the ends justify the means. However, history has proven that monopolies consistently do two things: They always stifle innovation and (with the possible exception of heavily regulated monopolies) they always produce an inferior product compared to what a “normal” market would produce.
Before we move on to Apple let us recap what we have decided so far: Microsoft is a monopoly, they engage in illegal business activities (to maintain their position) and they create a product that does not maximize the social welfare. For anyone in search of proof for that last point need only to look at Internet Explorer. When Netscape was a true competitor the IE team had over 100 people on it. After Netscape’s demise the team was reduced to 2 people and the product was left to stagnate for 5 years. It wasn’t until Firefox came along that any real innovation was started up again.
Now let’s look at Apple. Are they a monopoly? In the area of digital music players and digital content delivery, I must conclude that they are. Their 80+% market-share gives them a de facto monopoly in this sector. That Apple has reached this position through innovation (quite unlike Microsoft) doesn’t change the fact that both companies are monopolies.
We, as consumers, must be ever vigilant for illegal activity. So, has Apple done anything illegal to maintain their dominance? The answer is no, not yet at least. So far Apple has played by the rules. They have been accused of infringing on several patents, but those cases don’t directly bear on their status as a monopoly. So far, other than producing superior products, they have yet to do anything that would harm their competition. Now, they haven’t made any mistakes, nor have they done anything to help their competition, but that just means they are clever, not crooks. In this aspect they differ greatly from Microsoft. Throughout its history Microsoft has been many things but seldom were they an innovator.
Now comes the hardest question, does Apple’s dominance in this market maximize the social welfare? This is a difficult question to answer for the simple reason that so far, Apple has gone above and beyond the expectations of the market. They have consistently improved their products and driven down their cost. They dominate for the simple reason that they produce the highest quality experience for the lowest total cost. And yet, history tells us that, in the long run, this cannot last. If Apple becomes secure enough in their position then innovation will slow and consumers will pay the price. And despite their current progress, true competition is the only way to ensure superior products in the years to come.
Where does this leave us? We have concluded that Microsoft and Apple are both monopolies. And while Apple’s reign is benevolent, this trend cannot continue forever. Both Microsoft and Apple need competition to keep them “honest.” This of course raises the question of should Apple be broken up? Should they undergo the same type of trail that Microsoft endured during the 90’s?
To that I must answer no. In the same sense that you can’t damn Microsoft for being a monopoly while arguing that Apple isn’t one, you can’t lobby for separating the iPod/iTMS until you are ready to break up Microsoft too. It is either all or nothing. Either they are both monopolies that harm the market and the government should intervene or you believe the market will correct itself and the government should do nothing. Personally I believe that the government should have taken action against Microsoft when it had the chance. And while I would like to see them broken apart now, I feel that the market is in the process of correcting itself and will soon solve this problem for us. By either forcing Microsoft to compete on the merits of its products, or shifting market-share to other operating systems.
In conclusion, there are really only two main differences between the MS and Apple monopolies. Business practices and quality of product. Microsoft has repeatedly engaged in unlawful business practices over the years as it fights to maintain its dominance. So far, Apple has not broken the law. Likewise the quality of Microsoft’s products has fallen as time goes on while Apple has continued to innovate rigorously. This means that in the OS monopoly consumers are getting a very poor product while in the MP3 player monopoly consumers are getting a very high quality product. This situation could change for the worse, however, if Apple continues to dominate this market. It is very hard to drive for perfection when there isn’t a strong competitor in the market to motivate you. Thus, I can only conclude that, in the long run, the best deal for consumers is to hope that Apple loses market-share. How this could come about barring government interference I do not know. But the time could come soon enough when consumers might wish for a few more options in this ever more profitable market.
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Global music sales taken up by iTunes are 4.8%. Is that really doing quite well in the actual relativity of the situation?? -Luke
You’re blaming the small overall marketshare to iTunes’ locked-in nature? I’d like more than a coorelation before I believe it.
I think many strong mac fans idolize Apple… and try to ignore their mistakes.
That is what is commonly known as the goddamned understatement of the century.
And they don’t simply “try.” They intentionally and with great enthusiasm swallow gallons of Apple-laced Koolaid that labotomizes their brain and replaces it with Apple press-releases.
What you end up with is preposterous analogies, like comparing Apple to KFC and Coca Cola, in order to defend Apple’s otherwise indefensible monopoly. But with Mac-bots and Apple, there’s really no such thing as “indefensible.”
Saying that Apple’s refusal to license Fairplay is unfair is like saying Coca Cola and Kentucky Fried Chicken are monopolies because they refuse to license their “secret recipes”.
Seriously. Where do you guys come up with this moronic bullshit?
First of all, Coke’s marketshare is somewhere around 50%. An industry leader to be sure, but not a monopoly by a long shot.
Second, the analogy to Coke’s secret recipe would be more like the programming code to iTMS or the innards of the iPod, all trade secrets that NO ONE has even suggested Apple share with anyone.
Instead, what Apple has is a lock on its product specifically designed to keep competitors out. Fairplay’s ONLY purpose at this point is to stifle competiton. Period.
And if you truly have a problem with anti-competitive practices (yeah, right), and if you truly believe that Apple can compete on an even playing field, then you’d do Apple a FAVOR and urge them to license their DRM.
Actually Apple has already been taken to court on whether they were a monopoly, in Europe, by France. Apple won. The courts ruled that their were plenty of alternatives in the market and as such Apple was not doing anything wrong. Yes they have tied their iTunes music store offerings to the iPod via Fairplay. Not entirely because they are evil, but they negotiated with the content providers who required some form of DRM. Fairplay apparantly satisfied the content providers requirements. Just because Apple’s competitors cannot get their heads together to develop a product that can compete isn’t Apple’s fault. Where do I come up with this moronic bullshit? I’ve worked with Microsoft, Yahoo, Napster to discuss their plans while working at a competitor of Apple’s. Never did anyone whine about Apple being unfair because they wouldn’t license Fairplay. They and the company I worked for couldn’t get on the same page on how to compete and none of them were willing to invest the time to work on the whole package, SW, HW, storefront to make it a good experience for the end user. Apple didn’t make us bumbling idiots….we did that ourselves.
Actually Apple has already been taken to court on whether they were a monopoly, in Europe, by France. Apple won.
First of all, this case was brought in 2004, when Apple’s marketshare even in the US was less than 30%. In France it was even less.
Second, the case was not brought by France, it was brought by Virgin. The French Competition Commission dismissed the case at the time, saying that while Apple’s DRM lock out was a “disadvantage” to consumers, Virgin had not provided sufficient evidence of a monopoly.
That was then.
Today, Apple’s marketshare in the US is 80%. In France, it’s 40%. And the French govt feels the situation has changed (an understatement) and is in the process of passing legislation that would force music stores and music players to open up their DRM.
As recently as March 22, the European Commission is investigating Apple’s dominance of the portable music player market as well.
Btw, courts in the US found that Microsoft had not violated any of Apple’s copyrights regarding its GUI. Do you believe then, that Microsoft really didn’t steal anything from Apple, if indeed court decisions are your moral barometer? Apple fans seem to think so, regardless of the courts, so clearly a court decision, if one exists, isn’t the end of the debate.
Not entirely because they are evil, but they negotiated with the content providers who required some form of DRM.
This is why they have DRM in the first place, yes. It is not, however, why they refuse to license Fairplay. That’s entirely Apple’s decision and it’s based entirely on stifling competition.
Apple didn’t make us bumbling idiots….we did that ourselves.
If this is true (and I’m not saying it isn’t) then why is Apple so afraid of opening up their DRM, to the point of threatening to pull out of the French market altogether? Why abuse their monopoly power if, as Apple (and their Macbot minions) argues, they would dominate the market anyway?
Cheating even when you don’t need to is still cheating.
You’re blaming the small overall marketshare to iTunes’ locked-in nature?
No! I am saying that iTunes won’t grow to take a large piece of the market for as long as it’s locked in. It’s a bit detriment to the music industry. And I am saying this as a person who owns an independent label with music on said store.
I am a content provider for iTMS, yet I don’t want DRM on my content. What other point could DRM serve apart from purposely locking users into iPods?
I want my customers to be able to put their music on their mobile phones… their Rio’s…. wherever they want. Because otherwise, right now, these people are just getting it from P2P.
Apple is not becoming a monopoly.
Apple has very much been a monopoly for a decade.
A definition of why Microsoft is a monopoly was spelled out in the early pages of the 214 page ‘Finding of Fact’ in the DOJ/Microsoft suit. As I read it I realized that the definition applied just as well to Apple. This definition spelled out why market share need not be 100%. It involved the difficulties and costs that kept users from switching platforms.
But most people think that monopoly is measured in terms of market share. This is also misunderstood, not in the case of Microsoft but in the case of Apple. People would say that a company with 5% market share for personal computers cannot be a monopoly. But in this case, Apple has 100% market share of the Microsoft platform, and for those of us using it, switching can be just as hard as for PC owners.
When one walks into a store, they know that they are going to buy a PC or that they are going to buy a Macintosh. There’s really no trading off features each time, as there is between different PC’s. You are buying the OS. You don’t want to learn a new one. You don’t even want apps that are different.
The illegal use of a monopoly is not how you use it to keep your customers. It’s in how you use that monopoly strength to take over other related markets from innovative 3rd parties. Microsoft left no stone unturned in taking the browser market. Netscape had no chance in that one. There’s nothing more any large company could have done than Microsoft did to turn the tables on Netscape, not by having a better browser but by forcing you to Ineternet Explorer if you had or purchased Windows. That’s the nature of antitrust law.
If you controlled 100% of the gas stations and announced that you were coming out with cars and also that you were modifying all gas stations to only work with your own cars, it would be an example of this as well. Fair competition is what fair business practice demands.
In Apple’s case, could they take over things related to the Macintosh OS? Things like music software for the Macintosh? Like photo software? We know that Apple has done a better job than any 3rd party ever did, and that we benefit greatly by having many integrated applications (not to menion the dot-mac service). So it’s really touchy as to whether this sort of antitrust activity is good or bad. It’s better to turn our heads the other way I think. At least as long as the Apple leadership is more interested in good products than the quick buck.
This antitrust reasoning doesn’t apply to the iPod/iTunes market, in my opinion, because Apple created and made a new working system and changed the world. Before Apple there was no legitimate market at all for online music, at least not one done in a way that we users would want. Apple hit on the formula of making the music player a satellite to your PC. They did it first and deserve to keep doing it.
But in this case, Apple has 100% market share of the [Macintosh] platform, and for those of us using it, switching can be just as hard as for PC owners.
What you’re referring to is a vertical monopoly in which one company controls everything from nuts and bolts to the final distribution of a product. And while it’s true that Apple has a vertical monopoly on the Mac, I don’t think it should be subject to antitrust simply because they don’t have the marketshare to abuse that power.
But the issue of the iPod/iTMS monopoly is a wholly seperate issue from the Mac.
This antitrust reasoning doesn’t apply to the iPod/iTunes market, in my opinion, because Apple created and made a new working system and changed the world.
The same could be said of the Microsoft GUI. It made a new working system and changed the world. Before Microsoft, GUI’s existed but they were too expensive and weren’t all that popular.
To now suggest that Microsoft is therefore not guilty of antitrust because they “changed the world” seems to me to be a tad on the asinine side. Can you imagine Bill Gates using that at trial? “But your honor, we changed the world. Antitrust reasoning does not apply to us.” The judge would smash the gavel over Gates’s head.
Beeble, your basic argument is: Because Apple controls 80% of the music player market then not licensing Fairplay is an illegal monopolistic action. If Apple were only 40% then it’s okay.
You can keep arguing that until you’re blue in the face but no US court will convict them of anticompetitive behaviour based on that. Maybe 40 years ago, but not today.
This is what you need to show: Actions such as coercing iPod distributors/retailers into not selling other brands of MP3 players. Or preventing competing music download services from properly functioning on a Mac. Or slipping a routine into iTunes that hampers or disables competing music download services in any computer that has iTunes on it. Or charging iPod owners 99 cents for each song they put into their iPod regardless of where they bought it. (This last one is the iPod version of MS charging computer mfrs for Windows OEM based on the number of PCs shipped regardless of whether it had Windows installed or not.)
That’s the question you’ve been avoiding. Let me ask you again directly. Did Apple do anything like the above-mentioned? Microsoft certainly did. If you can show me one instance where Apple did take such actions w.r.t the iPod, then I will agree with you that Apple is an abusive monopolist.
I’ll tell you one action where Apple *might* have crossed the boundary—the deal with the flash memory manufacturers. But it all depends on how the contracts were negotiated and worded. Here again, being the largest customer alone is not a crime. But if Apple says to the mfrer, we’ll buy from you but only if you promise to sell no more then X units of flash memory to our competitors. See the distinction?
Because Apple controls 80% of the music player market then not licensing Fairplay is an illegal monopolistic action[...]You can keep arguing that until you’re blue in the face but no US court will convict them of anticompetitive behaviour based on that.
I’ve been arguing that it’s ANTI-COMPETITIVE. Which it certainly is. Whether or not it’s actually illegal is for the courts to decide.
But whatever the courts decide is largely irrelevant, particularly to apologist Mac-bots like you. As I asked earlier, does Microsoft’s exhoneration in its copyright infringement case with Apple ultimately answer the question of whether or not MS stole elements of Windows from the Mac? Not according to the Mac-bot shills it doesn’t. So why should any legal decision make any difference at all?
That’s the question you’ve been avoiding. Let me ask you again directly. Did Apple do anything like the above-mentioned?
I haven’t avoided it since no one has really asked it—probably because it’s pointless and stupid. You’re defining monopoly abuse as “exactly what Microsoft did” as if every company that abuses its monopoly position has to follow that specific set of standards in order to be anti-competitive. Obviously that’s ridiculous. There’s more than one way to be anti-competitive, just as there’s more than one way to kill someone or get a ticket for a moving violation.
If you can show me one instance where Apple did take such actions w.r.t the iPod, then I will agree with you that Apple is an abusive monopolist.
Not a chance in hell of you ever admitting anything of the sort. You’re an Apple shill. You find excuses, as you have done above, on why nothing that Apple has done can be construed as anti-competitive, even when shutting out the competition is the one and only reason for them not licensing Fairplay.
That’s your example. But it’s not good enough for you. And I doubt anything ever would be.
This is what you need to show: Actions such as coercing iPod distributors/retailers into not selling other brands of MP3 players. Or preventing competing music download services from properly functioning on a Mac. Or slipping a routine into iTunes that hampers or disables competing music download services in any computer that has iTunes on it. Or charging iPod owners 99 cents for each song they put into their iPod regardless of where they bought it.
What the heck?! That’s totally irrelevant to what we’re talking about here. You’re saying we would need to find monopolistic practices within: the iPod, Mac, Mac, iPod. We’re talking about iTUNES MUSIC STORE AND HOW IT DOESN’T WORK WITH OTHER MP3 PLAYERS. Don’t say we need to show anything else to do with Apple stopping stores selling other brand MP3 players, or anything like that - that’s all totally irrelevant.
Luke, you make an excellent, excellent point. What <strike>Macbot</strike> tundraboy is asking is to show one example of Apple doing what is listed in his quote you cite. What strikes me in particular (and which I dismissed for the reasons you cite and for my own reasons above) is this:
“Or preventing competing music download services from properly functioning on a Mac.”
Since, as you so wisely point out, the issue isn’t about interoperability with the Mac computer, but rather the interoperability between iTMS and iPod, this example should more accurately read:
“Or preventing competing music download services from properly functioning on an iPod.”
Of course, this is the case with Apple and is what we’ve been complaining about the ENTIRE discussion. It more than amptly describes what even <strike>Macbot</strike> tundraboy himself describes as a monopolistic practice.
Will this example satisfy tundraboy or will there be yet again some reason why this fails the test and why Apple isn’t being anti-competitive in any way?
Beeblebrox, I mean, I do respect you lots, but you need to be more… selective with your words. You can’t call everybody a Macbot, or they just won’t listen. I mean, if you went on the street and asked some random person, “do you think Apple have a monopoly on digital music?” and the person says, “hmm… nah, I mean if people wanted to go and buy something else, that’s up to them” you wouldn’t shout “MACBOT!!” and wave your arms in the air now, would you?
Sorry, just had to say
“We’re talking about iTUNES MUSIC STORE AND HOW IT DOESN’T WORK WITH OTHER MP3 PLAYERS.”
I am so upset at HP. See I have a Lexmark laser printer but I prefer HP’s toner. I think I’ll sue HP and ask the government to force HP to make their toner cartridges fit my Lexmark printer. Better yet, I think I should get Lexmark to sue HP. Yeah that’s the ticket.
I am also so mad at Sony. See I have an Xbox but I just love the PS2 games so I’m going to sue Sony and ask the government to force Sony to make the PS2 discs run on my Xbox. No, I’ll get Microsoft to sue Sony. Yeah!
I am going to sue Costco too. Just because I’m a Sam’s Club member and not a Costco member, does that mean I can’t buy stuff from Costco? Well that’s just unreasonable! Wait, I’ll get Sam’s Club to sue Costco. Yeah!
Luke, they won’t listen anyway. Note how we provided exactly the kind of example tundraboy was asking for. Did he listen? Did he do what he said he’d do and admit that Apple engages in anti-competitive practices? Nope. He did exactly as I said he’d do. Ignore, conflate (by comaring NON-monopolies and their products to Apple’s monopoly), and find ridiculous excuses.
That’s the thing about Apple apologist drones. You can’t reason with them. And while I’ll admit that yelling “Macbot” isn’t productive, it is amusing to me, much more so than beating my head against the hard white plastic and brushed metal of these brainless robot minions.