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Microsoft and Innovation -- On iTunes, 2003: "We were smoked"
Saturday, February 06 2010 @ 05:44 PM EST

Recently, an ex-Microsoft executive, Dick Brass, in a New York Times Op Ed piece, Microsoftís Creative Destruction, asked the question, why didn't iPad come from Microsoft? Why doesn't it lead the way in innovation?
But the much more important question is why Microsoft, Americaís most famous and prosperous technology company, no longer brings us the future, whether itís tablet computers like the iPad, e-books like Amazonís Kindle, smartphones like the BlackBerry and iPhone, search engines like Google, digital music systems like iPod and iTunes or popular Web services like Facebook and Twitter.
Aside from the obvious answer that monopolies don't usually bestir themselves unless they have to, I thought I'd highlight one of the exhibits we been transcribing (or describing) from the Comes v. Microsoft antitrust litigation. That case settled, but not before gifting the world with what can only be described as a true history of Microsoft in the 3,000 or so exhibits the judge ordered made available to the public.

It's Exhibit 7219 [PDF], and it's a flurry of emails from 2003, when the Microsoft top tier executives at Microsoft first heard about iTunes. Bill Gates said that Microsoft was caught "a bit flat footed again" by Steve Jobs and urged the troops to come up with something matching or better quick. Did they? Jim Allchin asked how in the world Jobs got the music companies to go along, and his assessment of the situation is short: "We were smoked."

I had no idea when we began working on this project that the Comes exhibits covered such a broad time period, so far from 1988 to 2003. I woke up this morning thinking about the BBC's truly offensive series on innovation and the internet, which you can only view in the UK, in which Bill Gates of all people is one of those highlighted as an internet innovator, if you can believe it. Maybe because ex-Microsoft employees seem to be running things there? Having just transcribed several emails that prove that Microsoft was perhaps the very last to hop on board, I realized that with this collection of exhibits, we are indeed publishing The True History of Microsoft. Please feel free to help out. You can either transcribe any exhibit in full, in part or just describe it enough so it's keyword searchable. Come on and join us if you'd like to help historians in the future know how it really was and what really happened, keeping always in mind that this is still only part of a complex picture, despite their great historical value.

Here's Microsoft Corporate's response to the NY Times Op Ed piece, to be complete in our coverage, and fair, but also so you can compare it and Brass's words with what you find in the exhibits. I think you will agree with my opinion, that Brass's characterization of Microsoft as "a largely accidental monopolist" is hardly accurate.

The exhibit itself is a 5-page email chain, with considerable executive hand-wringing about iTunes and how to set up a Microsoft business to compete with it. Dates are from Wednesday, April 30 to Monday, May 5, 2003. Those in the thread, besides Bill Gates and Jim Allchin, are: Chad Gibson, Troy Batterberry, Hadi Partovi, Mike Beckerman, John Martin, Linda Averett, Oliver Roup, Kenneth Goto, Geoff Harris, Tony Chor, Craig Beilinson, Gary Schare, Christina Calio, Dean Hachamovitch, Jeremy Hinman, David Kaill, Brent Ingraham, Hillel Cooperman, Piero Sierra, Brian Cites, Amir Majidimehr, Dave Fester, Will Poole, Christopher Payne, Yusuf Mehdi, David Cole, Hank Vigil, and Chris Jones.

Two emails stand out, the first from Bill Gates and the second from Jim Allchin. Gates' subject line is "Apple's Jobs again... and time to have a great Windows download service":]

----- Original Message -----
From: Bill Gates
Sent: Wed 4/30/2003 10:46 PM
To: Amir Majidimehr; Dave Fester
Cc: Will Poole; Christopher Payne; Yusuf Mehdi; David Cole; Hank Vigil
Subject: Apple's Jobs again.., and time to have a great Windows download service...

Steve Jobs ability to focus in on a few things that count, get people who get user interface right and market things as revolutionary are amazing things.

This time somehow he has applied his talents in getting a better Licensing deal than anyone else has gotten for music.

This is very strange to me. The music companies own operations offer a service that is truly unfriendly to the user and has been reviewed that way consistently.

Somehow they decide to give Apple the ability to do something pretty good.

I remember discussing EMusic and us saying that model was better than subscription because you would know what you are getting.

With the subscription who can promise you that the cool new stuff you want (or old stuff) will be there?

I am not saying this strangeness means we messed up - at least if we did so did Real and Pressplay and Musicnet and basically everyone else.

Now that Jobs has done it we need to move fast to get something where the UI and Rights are as good.

I am not sure whether we should do this through one of these JVs or not. I am not sure what the problems are.

However I think we need some plan to prove that even though Jobs has us a bit flat footed again we move quick and both match and do stuff better.

I'm sure people have a lot of thoughts on this. If the plan is clear no meeting is needed. I want to make sure we are coordinated between Windows DMD, MSN and other groups.

.... Original Message ....
From: Jim Allchin
Sent: Wednesday, April 30, 2003 4:58 PM
To: Amir Majidimehr; Chris Jones (WINDOWS); Will Poole; David Cole
Subject: Apple's music store

1. How did they get the music companies to go along?

2. We were smoked.



Microsoft and Innovation -- On iTunes, 2003: "We were smoked" | 177 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections Here
Authored by: SilverWave on Saturday, February 06 2010 @ 06:05 PM EST

RMS: The 4 Freedoms
0 run the program for any purpose
1 study the source code and change it
2 make copies and distribute them
3 publish modified versions

[ Reply to This | # ]

Off Topic Here
Authored by: SilverWave on Saturday, February 06 2010 @ 06:06 PM EST

RMS: The 4 Freedoms
0 run the program for any purpose
1 study the source code and change it
2 make copies and distribute them
3 publish modified versions

[ Reply to This | # ]

News Picks here
Authored by: SilverWave on Saturday, February 06 2010 @ 06:07 PM EST

RMS: The 4 Freedoms
0 run the program for any purpose
1 study the source code and change it
2 make copies and distribute them
3 publish modified versions

[ Reply to This | # ]

  • Patent nonsense - Authored by: RichardR on Sunday, February 07 2010 @ 09:21 AM EST
    • Patent nonsense - Authored by: Wol on Sunday, February 07 2010 @ 08:18 PM EST
      • Patent nonsense - Authored by: PJ on Monday, February 08 2010 @ 12:57 AM EST
        • miriam-websters - Authored by: Anonymous on Tuesday, February 09 2010 @ 02:28 AM EST
        • True but - Authored by: Anonymous on Tuesday, February 09 2010 @ 08:22 AM EST
    • That's why... - Authored by: Anonymous on Monday, February 08 2010 @ 01:11 PM EST
Comes vs MIcrosoft notes here
Authored by: SilverWave on Saturday, February 06 2010 @ 06:07 PM EST

RMS: The 4 Freedoms
0 run the program for any purpose
1 study the source code and change it
2 make copies and distribute them
3 publish modified versions

[ Reply to This | # ]

Authored by: ozbird on Saturday, February 06 2010 @ 07:42 PM EST
Pardon my ignorance, but what does "We were smoked" mean in this

Cheers (from Downunder)!

[ Reply to This | # ]

Better question for Mr. Brass: When did Microsoft EVER "bring us the future"?
Authored by: Anonymous on Saturday, February 06 2010 @ 08:31 PM EST

Micrsoft all but stole DOS, ripped off Lotus 1-2-3, copied Apple's GUI (who had
copied it from Unix...).

What has Microsoft EVER don't about innovativing technology of ANY kind?

[ Reply to This | # ]

Response: PreysForSure, and the Zune
Authored by: tz on Saturday, February 06 2010 @ 09:38 PM EST
They can't even respond right.

First is the Plays for Sure DRM that they discontinued stranding all those who
assumed it meant they would actually be able to play their DRMed music for a
reasonable length of time.

Then they came out with the Zune. Yes, the one that 14 months ago went into a
reset loop. Loaded with DRM which actually violates CC licenses.

The only strange thing is there is not yet the Zunes App Store, and more push to
lock in Windows Mobile so IE and Silverlight can become the lock-in standard.
(Even Symbian gave up and is opensource now).

(Not that the iPad is anything really useful - the OLPC or some tablet PC should
clone and work better - like the rest it does HTML5 but NOT the open Theora
codec, only their codec, and not Flash which even the Nokia N900 does)

[ Reply to This | # ]

Microsoft and Innovation -- On iTunes, 2003: "We were smoked"
Authored by: Anonymous on Saturday, February 06 2010 @ 09:48 PM EST

I'm thinking that as per 90s-Microsoft-think the prize was the file format. Server and desktop license sales would follow as a consequence of network effect, much as happened with Office.

Apple, of course, saw the prize as the device and their problem was how to get people to want to buy the device. The experience and the record companies and their unrealistic pay-per-play dreams were a big part of the digital music problem and Jobs basically told them their digital sales were floundering and he had a way to effect a transition. Not all the record companies bought in. Not all the record companies brought in their top artists. The record companies insisted on DRM (one of their bigger mistakes in the Oughts). One more thing Apple did that Microsoft would not do is to disassociate the music player from their computer line. iTunes ran on Windows and not as a second-class port. Notice that pure software products of Apple's, such as GarageBand, are not ported. They are for selling the computers.

Take a look at the tablet. Microsoft did some serious work in getting their os to handle stylus input and then handed it off to the partners to sell. But, Microsoft never really looked at the tablet form as any thing other than a variant on a personal computer, so companies that wanted personal computers with stylus input got tablets. The hardware partners made their profits. Microsoft didn't really care if the os license they sold was Professional or Tablet, so there was seven years of stasis until Apple appears ready to enter the market. But notice what Apple has done, they took an interface that people knew and figured out a use case where a bigger screen is better. They call it a new category and they very explicitly say "this is not a laptop, this is not a netbook." They may lose some sales of the low-end laptops, but it will be because the customer didn't need all the power of a laptop. Right-sizing the product leads to customer satisfaction: it does what I want and nothing more. These are personal devices. One size does not fit all, but the right size fits a lot of folks.

You look at that list, and it's full of device makers who got the software to work right. It was a decade, any way, where if one was in the device business, it was very clear that there were alternatives to Microsoft oses that could be deployed effectively and profitably. Dick Brass basically says that internal politics meant that some of the bright ideas got squelched. But let's think this through. Let's say someone at Microsoft had a great idea for a new category of device. Wouldn't the next step be finding a hardware manufacturer who is willing to take the risk? Does Microsoft write the software before that step? Let's say the device gets a go. After a few iterations, the hardware manufacturer asks for a software change. How readily does Microsoft respond? With diverse partners with differing business models, how insistent can Microsoft be with partners who aren't writing stellar applications?

Isn't it classic? The ones who took the risks got the rewards. Meanwhile, Microsoft put a whole lot of money in the bank, it's just that people think it would have put more, except for it being, at the upper levels, asleep at the switch and for the way the upper levels kept spending and rolling-out me-too items, such as game consoles, search, music players, and retail stores.

[ Reply to This | # ]

Microsoft and Innovation
Authored by: tangomike on Saturday, February 06 2010 @ 09:57 PM EST
in∑no∑va∑tion ( n -v sh n). n. 1. The act of introducing something new.

invention : a new, useful process, machine, improvement, etc., that did not
exist previously (U.S. Patent Office)

Please note that innovation is NOT invention. By that definition, M$ has
succeeded in introducing new things where others failed or under-achieved. M$
Windoze for example beat the pants off Xerox and far outstripped Apple Mac.

Much as I dislike M$ and its lead sociopath, they are right to use the term,
though it's clear they confuse it with 'invent'.

Deja moo - I've heard that bull before.

[ Reply to This | # ]

How did they get the music companies to go along? - DRM
Authored by: SpaceLifeForm on Saturday, February 06 2010 @ 11:19 PM EST

While most downloaded files have previously included restrictions on their use, enforced by FairPlay, Apple's implementation of digital rights management, iTunes initiated a shift into selling DRM-free music in some countries, marketed as iTunes Plus. On January 6, 2009, Apple announced that DRM had been removed from 80% of the entire music catalog in the US. Full iTunes Plus availability was achieved on April 7, 2009 in the US, coinciding with the introduction of a three-tiered pricing model.


Almost immediately after the launch of iTunes Plus, reports surfaced that the DRM-free tracks sold by the iTunes Store contained identifying information about the customer, embedding the purchasing account's full name and e-mail address as metadata in the file. While this information has always been in iTunes downloads both with and without Fairplay DRM, it is thought that it remains in the tracks as a measure to trace the source of tracks shared illegally online, which the absence of DRM now facilitates. Privacy groups expressed concerns that this data could be misused if possessions carrying the files were stolen, and potentially wrongly incriminate a user for copyright infringement.


You are being MICROattacked, from various angles, in a SOFT manner.

[ Reply to This | # ]

What's Wrong with MIcrosoft
Authored by: Anonymous on Saturday, February 06 2010 @ 11:40 PM EST

I think Microsoft's response to this shows what their problem is. When I say "problem", I mean what is wrong with the company as a whole, not just this small issue.

Their problem is they want to do everything. They want to do operating systems, databases, MPR systems, video games, music distributing, mobile phone software, online advertising, Internet publishing - everything that touches a computer in any way.

Twenty years ago, that was probably a reasonable strategy. "Software" was something that stood apart from other businesses. It was an identifiable market on it's own. Now however, software is just another tool that is used by businesses which are centred around other skills. What does Microsoft know about consumer goods? Nothing that I can see. So why do they want to be in the music player or video game business. What do they know about the advertising business? Nothing apparently. So why do they have a fixation on Google? They are the modern day equivalent to the 1960s style conglomerates that also tried to do things they knew nothing about.

At present, Microsoft is trying to do everything and failing at it badly. What they should be doing is concentrating on a few things that they think they can do well. Their core business competence has always been in the corporate office. They should be focusing on competing with SAP and Oracle, not with Apple or Google. My prescription for Microsoft would be:

  1. Dump Balmer. He's had his chance, and he has failed. After ten years of trying, he's not going to suddenly start succeeding now.
  2. Sell the XBox and Zune to someone like Samsung, LG, or a Taiwanese company that wants to try their luck in that market.
  3. Sell the Windows Mobile / WinCE business (one of companies listed above might want it). Short of that, pull the plug on it. Concentrate on making sure that everyone else's phone syncs well with Windows.
  4. Pull the plug on MSN/Bing or whatever they are calling it this week. Sell it to someone else (Yahoo?), or just close it down.
  5. Close down about 90% of Microsoft Research. They produce nothing of value that is even remotely proportional to the resources poured into them. Move the remaining 10% directly into the business units that might make use of what they can do. There is a much better chance that way of any new ideas that they do come up with will eventually see the light of day instead of being buried and forgotten.
  6. Dump the Azure/Cloud business. It is a capital intensive commodity business that is going to have thin margins and will be a money losing proposition for everyone except the most efficient operators. Efficiency and good customer service are not Microsoft's strong points. It is going to be yet another failure for them unless they pull out of it.
  7. Focus on Windows, Office, MSSQL, and the MRP/ERP/CRM market. That is something they might be able to do.

I don't think any of this will happen unless Balmer is forced out by the shareholders. He has no ideas of his own. His idea of leadership and "innovation" is to ape whatever successful companies he sees around him without also adopting the reasons for their success.

[ Reply to This | # ]

under the magnifying glass
Authored by: grouch on Sunday, February 07 2010 @ 03:44 AM EST
It is a great relief to see these documents coming under Groklaw scrutiny! Thank you PJ and everyone who takes the time and effort to do this.

There has been a wide-spread resurgence of astroturfing since MS Windows 7 came out. I've also been running into newly recycled FUD such as "open sores", "no GUI" and "written by basement dwellers". There are an alarming number of college students who appear to take Microsoft's version of computing history for granted. That makes it easier to sell a closed, dark future.

The Comes v. Microsoft documents provide significant ammunition against so-called "stealth marketing". The convenience and credibility of a Groklaw link helps in responding to that fake groundswell.

-- grouch

GNU/Linux obeys you.

[ Reply to This | # ]

Re: BillG as an internet innovator
Authored by: Anonymous on Sunday, February 07 2010 @ 05:29 AM EST
Actually in part 1, I thought Sir Tim Bernes-Lee was shown
(in a nice way) as anti-establishment and keen to make the
protocols free. By contrast BillG came across as someone in
it for the money.
Incidentally although the words "Open Source" were mentioned
briefly just once in P1 and not at all in P2, I'm hoping
that OS is given significant recognition in P3 or P4.

[ Reply to This | # ]

Microsoft and Innovation -- Their development environments were far from innovative
Authored by: Anonymous on Monday, February 08 2010 @ 01:57 AM EST
Basic is really a very poor programming language. It was too much like its
predecessor Fortran. It used GOTOs for flow control and so produced programs
that were difficult to maintain. I think Edsger Djikstra of structured
programming fame said someting like "teach a programmer BASIC and ruin
him/her for life".

DEC had an OS in the 70s on PDP11s (RSTE/E) with an interpretive version of
Basic with commercial extensions called BASIC+, and later a compiled version
called BASIC+2. This was nice. You could debug interpretively then compile for
performance. There was a migration path for BASIC+2 to VAX/VMS.

Commodore 64 Basic had extensions for graphics, since that was its market,
mostly computer games. It had a games socket. You could also buy a version of
Pascal too.

Visual Basic and C++ are ugly OO versions of the original BASIC and C languages.
Java and Smalltalk were innovative languages which support OO much better and
more intuitively.

Windows 3.0,3.1 and Windows95 added a GUI interface but underneath was an ugly
DOS kernel, which needed to be maintained to keep the drivers in hi-memory and
lo-memory and other ugly abominations. It crashed often due to all sorts of
weird exceptions. Writing drivers was a nightmare.

I learnt Unix from John Lyons in 1974. C was elegant and efficient and performed
well on the PDP11s. But pointers often made it difficult to debug and caused
obscure runtime errors. Smalltalk ran too slow. Java is a major improvement.

Unix and Linux and most other Enterprise level OSs have security built into the
kernel. The was an add-on to Windows and we have been paying the price for it
ever since, with virus, etc. It ran fast but it wasnt really an OS. It was more
like CP/M. A monitor. Many enterprises are reluctant to use windows for high
reliability applications.

Neil W. (downunder)

[ Reply to This | # ]

Measuring Our Work by Its Broad Impact
Authored by: DannyB on Monday, February 08 2010 @ 09:21 AM EST
. . . upon Competition and Innovation.

And the impact it has on Competitors and Partners!

And on customers' wallets!

The price of freedom is eternal litigation.

[ Reply to This | # ]

Microsoft and Innovation -- The Internet
Authored by: hamstring on Monday, February 08 2010 @ 01:08 PM EST
Funny how companies like Microsoft will change history to be important. Lets
ignore the fact that the Internet was developed on Unix by various educational
and government programs (Arpanet).

Until Microsoft Windows 98, Microsoft did not include the protocol required for
using the Internet (TCP/IP). From Windows 3.x through Windows 95, TCP/IP had to
ba acquired from a third party vendor.

Microsoft up until Windows 98 was pushing for their proprietary networking
prototol (NetBUI) which would not work beyond a local office since it's a
non-routable protocal.

# echo "Mjdsptpgu Svdlt" | tr [b-z] [a-y]
# IANAL and do not like Monopoly

[ Reply to This | # ]

How did Jobs? - Microsoft and Innovation -- On iTunes, 2003: "We were smoked"
Authored by: Anonymous on Monday, February 08 2010 @ 03:47 PM EST
"This is very strange to me. The music companies own operations offer a
service that is truly unfriendly to the user and has been reviewed that way

Somehow they decide to give Apple the ability to do something pretty

The answer is Steve Jobs has connections Bill Gates doesn't. And that is
because of the market the Mac was good at selling to, the entertainment

[ Reply to This | # ]

Microsoft and Innovation ????
Authored by: Anonymous on Thursday, February 11 2010 @ 01:34 AM EST
MSFT innovate??? What has MSFT ever innovated?
Windows GUI? No. Copied from
Office? No. Copied from Lotus 1-2-3, WordPerfect, etc.
Internet Explorer?
No. Copied from Netscape.
Zune? No. Copied from Apple.
XBox? No. Copied from
Nintendo, etc.

[ Reply to This | # ]

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