Zune, Microsoft and Corporate Culture

What do you think of the new Zune?

That question led to fascinating discussion about Microsoft on Thursday. What they do, how they work, brainstorm, etc. It also covered how Microsoft develops new products (notice I didn’t say innovate).

A few quick thoughts on the Zune: The coolest thing is its owners ability to zap songs back and forth via a Wi-Fi
connection — but those songs expire after "three plays or three days, whichever
comes first," which is kinda poor. The 3 inch screen versus the 2.5 inch on the iPod also looks pretty nice. Other than that, its not a particularly compelling piece of hardware.

Brown? How long til that gets cancelled? 

We don’t know the price yet, but I expect it to be in the $249 – 349 range, and a function of how much MSFT is willing to lose/subsidize each unit.

What I found most fascinating about "This Week in Microsoft" were the 3 separate products that leaked out over the past few days:

• The Zune iPod challenger (in classic "steal the other guys thunder" following Apple’s event)

Soapbox: The Microsoft YouTube Clone;

Live: The Microsoft Google challenger;

Let’s get a few things straight about Mister Softee. First, forget all the chatter coming from Redmond about innovation. They are now and have always been uttery shameless copycats. They do not innovate; They do not create cool products; They are boring code writing cubicle dwelling drones — and that’s what they should be.

The second thing you need to know about Microsoft: They print money like they were a branch of the U.S. Treasury Department.

That is the bottom line for investors, and the cash ain’t coming from all these other products attempting to recapture lighting in a bottle. Its Windows 1st, Office 2nd, and then a big 4 way tie for SQL, Hardware (mouses etc.) Server SW, and then everything else. All these other products — including Xbox, hotmail, MSN, etc. — are what happens when you have more money than God and still want to be one of the cool kids.

And, they’d probably get just as much criticism if they didn’t make all these attempts at imitating other successful innovators. Otherwise, they would just be a mature company milking their monopoly products until the next paradigm shift came along.

Understand my complaint about Redmond: I don’t begudge them these many attempts to stay relevant and hip, to keep pressing buttons until they find the next thing that works. Hey, after you become one of the most successful firms in the history of Capitalism, it becomes hard to repeat that performance every quarter.

I’m just tired of the bullshit about all their terrific innovations (Spare me the techno-babble about multithreading processors or dynamic ram usage).

To understand how Microsoft got to be the "innovator" it is today, you need to have some background into the psychology of its leadership. My favorite example comes via Robert Cringely

If there is a reason, it has to come from the competitive nature of Bill
Gates as Microsoft’s spiritual and ethical leader. Everything is a competition
to Bill, and every competition has a winner and a loser. Microsoft people have
always been encouraged to see the game, not the consequences, and to win the
game even if winning this way makes no sense.

Let me give an example of this behavior. In the early days of Microsoft, one
of the popular games was to see how late the boys could leave work for the
airport and still make their flights. These weren’t people who were habitually
late, they were playing a game. The eventual winner was Bill Gates, of course,
but to win he had to abandon his car [a new Porsche 911] at the departures curb.

Tht pretty much says it all. They are competitive to a fault — its in their DNA. Its also why they have been such a vast money machine. But please: Spare us the sanctimonious garbage about Microsoft the innovator, and keep the focus on Microsoft the moneymaker.

Here’s some more recent ideas out of the innovation factory:

Soapbox: The next YouTube?


MSN Live: Where ever did they get the idea for that interface?


Microsoft Unveils Zune Player to Compete With iPod
Dina Bass
Bloomberg, September 14, 2006 12:31 EDT

Microsoft YouTube Clone Coming
Michael Arrington
techcrunch, September 9 2006

Microsoft’s Google-killer arrives with a ‘whuh?’
Andrew Orlowski
The Register Friday 12th November 2004 12:01 GMT

Why Microsoft Keeps Getting Sued
Robert X. Cringely JUNE 20, 2002

Interview: J Allard, Microsoft Corporate Vice President
Ryan Block
Engadget, Sep 14th 2006 1:58PM

Microsoft Zune Gets Officially Announced
Jason Chen
Gizmodo, September 14, 2006

Zune in uphill fight against Apple’s iPod
Rex Crum
MarketWatch, 2:46 PM ET Sep 14, 2006

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What's been said:

Discussions found on the web:
  1. Charles commented on Sep 15

    What I am eager to know is whether or not the song sharing feature will have the 3-day 3-listen limitations on songs that were NOT purchased from the Zune marketplace. While making these restrictions part of the DRM structure for songs that Microsoft itself is selling seems to be a necessity to get the RIAA on board, (there are also sharing restrictions on songs purchased from iTunes), I don’t think consumers will respond well to not being able to send friends mp3s they ripped themselves.

    I’m not trying to go wading in the weeds of copyright law, I’m just saying that when people can quite easily email each other unencumbered mp3s from CDs that they have purchased, many will view it as a hassle that they cannot just do the same with their Zunes.

  2. mlhm5 commented on Sep 15

    This is MS once again copying the ideas of Apple. Who can forget windows.

    I don’t see the advantage since we all know how well MS software works.

    Kudos to Apple making MS an imitator once again.

  3. BDG123 commented on Sep 15

    Brown? Uhhh, do they sell that in the Soviet department store? Do I get a mud pie with that color? If I drop it, will I be able to distinguish a Zune from my dog’s large load he just dropped? What happens if it falls in a mud puddle? Do I get rubber gloves to pick it up if I drop it? When I order it, does it come in a UPS truck? Can I put it between two pieces of bread and eat it? Does it come with a brown paper back as a carry case? I mean WTF is that about? I think MS needs to head over to Pratt and pick up some designers. That alone tells me they simply don’t understand the consumer market. YUCK!

    The product does have some cool features. And, I have a big rap against Apple making you buy tunes for a buck each. So, if I want a library of 2000 tunes I have to pay……….what? Hopefully, enough competition with a subscription format will force Apple’s hand at some point. Right now, all high priced tunes do is perpetuate the rip off process that most all iPod users participate in.

  4. KP commented on Sep 15

    “Peak Microsoft” was about 3 years ago. 5-10 years from now Redmond will be a ghost town. Vista will be the beginning of the end for the company. Ubuntu amongst others are young, hungry, and innovative….these are the qualities that Bill himself once had and it these qualillities that he used to drive Microsoft to success. But as of late they have been too busy trying to patch the swiss cheese that is XP, fighting countless anti-trust lawsuits across the globe and have lost traction to copy as well as they once did. When they can’t even copycat as well as they once did(this Zune is a prime example, how long as the Ipod been out now?)….what do they have left except that mountain of cash…which even that is not going to last forever.

  5. GMF commented on Sep 15

    I thought the same thing about the 3-day/3-play limit on shared songs – lame.

    However…name a MS product that hasn’t been hacked to pieces after its release.

    I don’t expect their “protection” to be very robust or long-lasting.

  6. andiron commented on Sep 15

    all i want to know if barry is now throwing in his towel!..or volume is still a problem..
    barry’s year end target will be missed big time, no doubt.
    I am still unsure and in cash

  7. DarrenJ commented on Sep 15

    Barry seems really negative and angry today? What is wrong? It must be hard to make much money being permanently bearish.


    I have been mostly cash — After we went straight up for 45 minutes, I shorted — just covered. There’s many ways to skin a cat .

    I also bought some VIX options

    As to anger, I have no pateince for chest pounding buffoons . . .

  8. Brian commented on Sep 15

    That short hedge fund guy you know might have to downsize to a Sears Holdings underwear model.

    I keed. I’m a bear too but jeez. It keeps going.

    Anyway the bullish frenzy on CNBC is making my shorty sense tingle. Goldilocks last made an appearance around the middle of May.

  9. BDG123 commented on Sep 15

    Brian, May I ask why you are thinking of that hedge fund guy and his underwear?

  10. Luka Valas commented on Sep 15

    You guys are underestimating brown, I kind of like it! :)

  11. Brian commented on Sep 15

    BDG123 – I’m not thinking of his underwear, I’m thinking of his underwear models.

    Next week: Nasdaq up another 5%, time to trade down to a Sam’s Club underwear model.

  12. M.Z. Forrest commented on Sep 15

    No underwear models for me, but my shorts in tech are doing fine. Closed out a RedHat short a few days ago. CA is having a great day so far. Comcast is falling again.

  13. Barry Ritholtz commented on Sep 15

    Darren J, Mike, Jeff — Pick one real name and stick with it.

    IP address

    False identies are a good way to ge tbanned around here.

  14. miami commented on Sep 15

    Everyone copies everyone, to the seemingly teenage posters who don’t know Apple copied their entire graphical interface [and several other ‘inventions’] hook, line, and sinker from Xerox Parc, try reading a little more.

    The 1 salient good thing about MSFT [other than *printing* cash] is that they do innovate after they copy. My old I-bank used Lotus 1-2-3 for years, I was weaned on that stuff, and eventually we converted to MSFT — because they had come out with a superior product! Not due to IT, not ‘cos of some purchasing nimwit mgr, because Lotus got fat and happy and lost their technological lead. We switched over every last spreadsheet and model at the best global bank, on our own accord, to take advantage of Excel’s superior technology in the mid-90s.

    Apple didn’t create the mp3 player, they copied the MPMan/Diamond Rio players. Funny how none of the Apple-is-gawd-tards will mention that.

  15. miami commented on Sep 15

    Compaq also created the first hard-drive mp3 player, licensed to Hango, only *3 years* before Apple did so. Better to be a fast follower than innovator — apple and msft both follow that credo.

    ‘Occupying a ramshackle building adjacent to Stanford University, PARC’s occupants would prove to be the greatest gathering of computer talent ever assembled: it conceptualized the very notion of the desktop computer, long before IBM launched its PC, and it laid the foundation for Microsoft Windows with a prototype graphical user interface of icons and layered screens. Even the technology that makes it possible for these words to appear on the screen can trace its roots to Xerox’s eccentric band of innovators.’

  16. Bob A commented on Sep 15

    ” “Peak Microsoft” was about 3 years ago. 5-10 years from now Redmond will be a ghost town. Vista will be the beginning of the end for the company. ”
    You’re crackin me up… or maybe you’re smokin too much crack. No one’s a bigger critic of Microsoft than me, but sorry, Apple’s just Microsoft only smaller and it’s chief BS’r wears jeans instead of suits. Contrary to popular opinion, Apple is not some humantarian organization out to protect the little guy. And lest we forget, Apple started by copying the original windowing OS developed at Xerox PARC.

  17. LP commented on Sep 15

    as homer says “funny cause it’s true”

  18. babycondor commented on Sep 15

    Brown is the new blue.

    Verizon has a chocolate phone.

    I like chocolate things.

  19. babycondor commented on Sep 15

    Oh yeah,
    positions: long MSFT, VZ, HSY

  20. KP commented on Sep 15

    “You’re crackin me up… or maybe you’re smokin too much crack. No one’s a bigger critic of Microsoft than me, but sorry, Apple’s just Microsoft only smaller and it’s chief BS’r wears jeans instead of suits. Contrary to popular opinion, Apple is not some humantarian organization out to protect the little guy. And lest we forget, Apple started by copying the original windowing OS developed at Xerox PARC.”

    I’m not an apple fanboy by any means. I haven’t used an apple computer since the apple II e’s in grade school….the implication was much more that Microsoft’s dominance is and will continue to fade away, while others, the real innovators, rise to power. They have over played there hand in my areas….especially in their most profitable one…Windows….I see it as the natural cycle of birth…growth…maturity…and finally death. Nothing more, nothing less.

  21. Duckie commented on Sep 15

    I heart my Diamond Rio. Still have it. And it still works. Everyone else including Apple just copied what they did.

  22. Jim Bergsten commented on Sep 15

    A quick (and hopefully unnecessary) lesson for you “business types” on technology and the “unimportance” of who invented what first:

    Seldom (if ever) is the inventor or primary marketer of a new technology successful. Much more typically, it is the second guy, who lets the first guy step on all of the land mines. The land mines include proving the innovation, removing the bugs, educating the market, finding the early adopters, establishing cost and pricing viability, and so forth.

    The second guy leverages the first guy’s experience — improvements are made, the “pitch” is tuned. Money is spent on marketing (the first, probably undercapitalized guy has probably run out of money by now). ATTENTION is spent on marketing (the first guy, by definition, actually believes the “build a better mousetrap” clap trap). PRIORITY is placed on marketing — the second guy’s product is really cool looking, or at least attracts appropriate buyers. If things run true to form, the second guy gets all the awards, including credit for invention.

    Guy two gets 80-90 percent of the market. Guy three gets 8%, everybody else gets the rest.

    If guy one is lucky, he got bought out, or works for guy two.

    So, what Xerox invented, or Burroughs, Honeywell, etc. before them matters to the engineers but not at all to the money folk.

    Like you.

    p.s. Guess which “guy” (meaning company) number I always seem to start?

  23. DavidB commented on Sep 15

    Finally a subject I can chip in on since I was in Inet marketing for a few years(that’s not really the case though, my big mouth chips in on a lot of subjects).

    Brown is quite a good color from a psychology of marketing perspective. According to the following site it conveys these impressions:

    This color is most associated with reliability, stability, and friendship. More are more likely to select this as their favorite color. It’s the color of the earth itself “terra firma” and what could represent stability better. It too is associated with things being natural or organic. Caution however, for in India it is the color of mourning.

    Color Psychology and Marketing

    The top mover from a color perspective if you want to attract people are (believe it or not) orange, red and blue.

    Now you understand why you see brown and orange companies out there. Their corporate appearance was designed by a color psychologist

  24. j d ess commented on Sep 15

    hey barry, did you put that bitter sweet album cover in the display of the one on the far right, or is that a coincidence? also, i kinda like the brown.

  25. finance girl commented on Sep 15

    I worked at MSFT for over 6 years and yes, it’s hyper competitive.

    Ya’ll don’t know from competitive.

    I am horrified about Zune and I am also horrified by Windows Live.

    Desperate measures by desperate men.

  26. Andy commented on Sep 15


    Windows was a terrible UI to DOS once, and SQL Server was awful until version 6 or 7, at least.

    One thing that Microsoft understands and isn’t given credit for is that they understand _engineering_. A brilliant idea conceived in a moment of inspiration is great, but the ability to build something and iteratively improve it over and over is what software engineering is really about.

    You’re largely right about their lack of originality, though.

  27. Ballmer commented on Sep 15

    Here we go again. Is it that time of the month already? I thought we had a few more days before you spew your MS venom.

    I gotta say I hope MS keeps doing more copying. Just to see the Mac zealots get their panties in a tizzy. Go Bill!

  28. LP commented on Sep 19

    Don’t knock the XBOX. I had the PS2 and the XBOX & now the XBOX 360. I felt that the XBOX was better than the PS2. MS did a much better job with the online game play ability. It’s just unfortunate that they were so late as usual to the market. Consider this, there were a slew of PS2 competitors including Nintendo, yet only MS was able to somewhat compete with Sony. Also the XBOX 360 is an awesome machine and considering I bought it for $300 while the PS3 will be at the very least $399, I think that’s a good deal. Also, the fact that they were able to sell the machine prior to the World Cup and the 06-07 NFL Season, has put it on par with the PS3. Madden and the World Cup 06 were big winners for EA. I’m sure it’s means something for MS as well. Other than the XBOX, I still hate all the other MS products. But it’s a necessary evil. One last thing, I’ve never owned a MAC but I enjoy their commercials.

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