Microsoft isn’t cheating as good as its competition


With the unsurprising announcement that Groove Music Pass is being discontinued it makes me wonder if Microsoft is too strict or fearful to cheat like everyone else.

If you look at how Amazon runs Amazon Prime it is clearly anti-competitive behavior. They are using their dominance in online commerce to fund their side services like Prime Streaming.

Microsoft seems to be the only one of the big 4 tech giants to be concerned with every single service being separate and individually profitable.

What do you think? Should Microsoft use more loss-leaders like Amazon, Apple, and Google do? Will Microsoft’s current strategy continue to be successful long into the future?

Comments (12)

12 responses to “Microsoft isn’t cheating as good as its competition”

  1. rameshthanikodi

    Eh, Amazon's behaviour isn't cheating or anti-competitive. Besides, Prime Streaming isn't wildly successful either. They're barely any better than Groove was.

    But yes, Microsoft seems to be the only one that cares about if or not a business activity makes money. Crazy but it's true. The only long-term exception they made for themselves was Bing, and even Bing is profitable now. Which makes it odd that they tried it with Music for so long. Microsoft just doesn't do long-term loss leading stuff like the other Big 4's. For better or for worse, it's just never been Microsoft's thing. You see Google doing robotics, Facebook doing balloons, Amazon subsidizing their own hardware, all for increased marketshare and ecosystem lock-in. For Microsoft, the ecosystem lock-in they really have are Office, Azure, and perhaps Windows. Three very different markets with very little opportunities to cross-sell in between.

    Music streaming services are generally in a rough spot. Apple Music and Google Play Music don't stay afloat on their own. If you do the math, there is only one conclusion: The only streaming service that has any hope of turning a profit is Spotify. But alas, even for Spotify, while they're well on their way, it is yet to be seen.

  2. PincasX

    What are you talking about? None of the companies you named are cheating and with the exception of Amazon I don't think they have loss leaders. Even then, Amazon has made a strategic decision to reinvent rather than hoard cash. Further, the largest streaming services is Spotify not the companies you named. Groove failed because MS ran it as a "me too" product rather than putting the effort into making a viable service.

    • TheJoeFin

      In reply to PincasX:

      Google uses their revenue from their search monopoly to prop up their other services which don't make money like: YouTube, Hangouts, Gmail, Google Drive, Google Docs, etc. Some of these services are related to each other, but Google could use their search revenue to keep Google docs alive and free forever a move Microsoft would not make. Google is well known for buying a consumer service like YouTube and Android and when it becomes a monopoly they use that to hurt their competition, like they did recently with removing YouTube from the Echo Show.

      Apple uses the success of iOS to give an advantage to their own services like: Apple Maps, iMessage, Safari, FaceTime, iBooks, etc. In the case of Apple all these services are related to using iOS so a decent case could be made that they are needed, but the inability to change defaults is anti-competitive behavior.

      Amazon uses the success of and AWS to advantage their own services like: Audible, Prime Streaming, Prime Video, Amazon Drive, Kindle, Echo, etc. Bundling services with Amazon Prime is a classic case of anti-competitive behavior. It is extremely similar to the landmark anti-trust case against Standard Oil who made their own barrels which they sold at a loss putting oil barrel makers out of business.

      Microsoft probably still has fears from the anti-trust in the 90s and are just now getting bold enough to keep Edge the default browser on Windows 10 S, but other than that Microsoft only uses Windows to push O365. All defaults can be changed and buttons removed/remapped. One of the few places where Microsoft bundles a possibly unrelated service would be the 60 mins of Skype calling per month in O365.

      • PincasX

        In reply to TheJoeFin:

        You keep saying anti-completitive but I don't think you know what that means from a legal standpoint. None of what you are listing is anti-competitive.

        • TheJoeFin

          In reply to PincasX:

          I'm not a lawyer. The legal definition of anti-competitive is not black and white. Also it is a combination of behavior, marketshare, consumer impact, and competitor impact.

          Microsoft bundling IE and Windows Media Player with Windows and setting them as the default was legally anti-competitive. Apple doing the same thing with Safari and iTunes was not because they didn't have the same marketshare as Microsoft.

          The definition I am using for anti-competitive behavior is "tending to stifle or suppress competition." Like when MS included IE and WMP, or when Google favored Google Shopping over competitors on

          Anti-competitive behavior + Marketshare + hurt consumers and/or hurt businesses = legal grounds for an anti-competitive lawsuit.

          All big companies engage in some anti-competitive behavior but rarely does it do significant harm or get taken to court.

  3. Chris_Kez

    I won't comment on the anti-competitive claims at the moment, but I will comment on the financial part. Microsoft likely has its own money pits, they just may not be as obvious. If you follow Microsoft's earnings reports you'll see that they combine different products and business units in a way that makes it extremely difficult to actually understand how profitable the various components are.

    Google has taken some steps towards fiscal responsibility since hiring their new CFO Ruth Porat. There was a long article about her in Fortune about a year ago. But yes, they still get 90%+ of their revenue from search advertising and that funds everything else. To be fair, they'd be crazy not to spend that money developing new products and services.

    Amazon is an odd case because they purposely minimize profits, and investors don't seem to care at all. Amazon gets away with it, in part, because many of those ancillary services feed back into driving Prime memberships, which is the core product (I'm putting aside AWS, though I think there may be similar principles at work there as well). If Microsoft could get some more traction around the idea of Microsoft 365, then maybe they could take steps in that direction. The thing is, you need to start with a core service or offering that can attract significant interest on its own.

    Apple starts with iPhone, the single most successful and profitable tech product in the world. Everything external to that (Apple Music, iCloud, Apple Watch) is just another way to extend the benefits of iPhone ownership. And I would argue that Apple does care about profitability. They could easily afford to subsidize those things. but they charge market rates for Apple Music and iCloud, and premium prices for Apple Watch. Stuff like Maps and iMessage are harder to evaluate because their costs and benefits are intrinsic to iOS development and the whole integrated experience.

    Actually I will offer a brief (and admittedly incomplete) comment on the anti-competitive stuff. You noted the dimensions of consumer harm and market share. Amazon and Google actually help consumers insofar as they offer more and better services for less money (or no money). Yes, this can potentially stifle competition and have unforeseen opportunity costs in terms of new companies and services that will never be created-- but in the US the focus is traditionally on lowering prices (whereas in Europe the focus is on enhancing competition). From a market share standpoint, even though Google and Amazon have dominant positions in search and retailing (and cloud computing), respectively, they do not have absolute monopolistic control. Their core business still have notable competitors and many of the ancillary services they offer are each competing in otherwise healthy spheres (music streaming, video rental/sales, online storage, photo management, mapping and navigation, etc.). Apple of course has huge competition from Android.

    While I do honestly think there are real dangers from these companies sucking up all the money, I don't think the current laws in the US are suited to the task of effecting positive change.

    • TheJoeFin

      In reply to Chris_Kez:

      A lot of good thoughts in there. Good catch about how Google is refocusing their business model around making their services profitable. And you are totally correct; these big tech companies should be investing in new products/services to diversify.

      It continues to amaze me how Amazon can keep profits so low with and the majority of investors happy about that. But it is clear how Amazon is slowly building out their enterprise productivity offerings most recently with Chime. It will be interesting to see how fully featured their offerings become.

      Apple has tried to build every service an iPhone user would need. Even if they are charging market rate that doesn't mean the service is profitable. Groove music pass was the market rate but MS killed that, I'm assuming they wouldn't kill the service if it was a net profit, but maybe.

      All things considered there is a lot of good healthy competition which is delivering good products and services for consumers. I just hope it stays that way. The only areas I see as overly dominant are Android, Google search, and Facebook.

  4. dave0

    My random thoughts:

    What is Apple's loss leader? They make money on everything from what I can tell.

    Amazon will hit a brick wall one day and wish they had more cash on hand. Explosive growth only lasts so long.

    Google makes most of its money from porn searches, it too will slam into a wall at some point. Although, I would argue they have hit that wall many times already with their cacophony of product failures. There is nothing for Microsoft to emulate from Google.

    Microsoft did the right thing by stopping the music service. They need to clear out other under-performers from their portfolio.

    • TheJoeFin

      In reply to dave0:

      Apple is probably the closest to MS with very few loss leaders, however MacOS and iOS are 'free' because you can only get them on Apple hardware so that gets confusing. Also it is hard to tell if iCloud is profitable or not since Apple probably is using someone else's cloud (maybe Azure). Is Apple Music a profitable service for Apple?

      As far as anti-competitive behavior Apple is one of the worst offenders. Can't change defaults on iOS for web browser, texting apps, maps, etc.

      I keep thinking Amazon eventually has to start acting like a real mature company, but IDK when that happens.

      I doubt if Google's crazy amount of money every drops off because of the monopoly they have in search, which will probably be here for a long time.

      I agree Groove needed to get dropped. I just wonder what else makes sense to drop...

  5. Winner

    They cheated to get to where they are today. Without all of that cheating they might not be so big.

    Do you think Bing is profitable?

    Was XBox profitable for at least the first decade?

    Was Windows Phone profitable?

    They gave Windows 10 away for free, what was subsidizing that?

    • TheJoeFin

      In reply to Winner:

      Yes they did cheat to get where they are. And all the examples you listed are either where using a loss leader eventually worked out, or they essentially stopped doing it. Giving Windows 10 for free is a great example of something they should keep doing, or maybe give 10 S for free.

      Today MS tries to get its users to pay for every single product, with almost no loss leaders.

      I don't know if Bing is profitable, I thought they said it was.

  6. anchovylover

    MS are willing to get into the gutter with the rest of them when it suits their objectives. The OneDrive bait and switch, abandoning mobile users, the shameless way they behaved during the free W10 upgrade period which includes the red X embarrassment just to name a few.