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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.


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