Original URL: http://www.theregister.co.uk/2004/10/07/ballmer_doesnt_get_it/

Love DRM or my family starves: why Steve Ballmer doesn't Get It

Ballmer digs pit, inserts whole MS strategy, keeps digging

By John Lettice

Posted in Software, 7th October 2004 13:02 GMT

Last Sunday Microsoft CEO Steve Ballmer kicked off this week's European tour by sitting down with a small group* of British journalists and dispensing pearls of wisdom, notably on the future of Apple in home networking (it has none, natch, says Steve). He also did at least one interview, with the Financial Times (published in Tuesday's paper), remarkable largely because it inadvertently revealed the Microsoft High Command's paucity of ideas - if this is all Steve's currently betting the company on, then Microsoft is in big trouble.

But the Apple stuff, particularly the ill-informed 'iPod users are thieves' slur, is worth examining in some detail, because it shows that Steve doesn't Get It, that Microsoft doesn't Get It, and points us to the reasons why they don't Get It. Microsoft, essentially, is pre-programmed to fail in the battle for the home, for consumer electronics, and for consumer digital services.

First at Silicon.com, CNET's representatives on Earth for the day, Ballmer was reported as saying of the digital home: "There is no way that you can get there with Apple. The critical mass has to come from the PC, or a next-generation video device," and: "We’ve had DRM in Windows for years. The most common format of music on an iPod is 'stolen'." At which point we deduce, British journalists being British journalists, the headline "iPod users are thieves, says Ballmer" formed in thought bubbles above the heads of every hack present.

Skip dealing with the slander though, and cut straight to what passes for damage-control in the wonderful world of Ballmer. This was delivered at a TechNet briefing in the Hague on Tuesday, and commences: "I don't know what I said exactly, but it was bad." The report elaborates this as follows: "When asked which MP3 player his son used, he answered jokingly, 'My son doesn't have an MP3 player. He has a Windows Media player.' Everyone in his household knows that the protection of intellectual copyrights is important, he said. 'It's what puts food on the table.'"

This is enough for us to be going on with. We have first, the old Microsoft PC religion being applied to the home, with Apple (and indeed everybody else) consigned to the dustbin because "the critical mass has to come from the PC", and second a statement that amounts to iPod users having to be defined as thieves, otherwise Steve's family starves (or more believably, Microsoft dies and Steve's family just stops getting richer). Both of these are statements of belief, religious in the sense that they are non-negotiable and not necessarily true. Both, as it happens, are false.

As regards the food on the table, what Steve anticipates as providing this in the future is the success of Digital Rights Management, with Microsoft as gatekeeper. As he told the FT in yesterday's interview: "There are enough people watching television [to create] a big opportunity. We just charge [cable and phone operators] a tiny little bit of money, not even 'annoy them' money." Success of DRM on cable TV systems is inherently more plausible than on the internet, because of the level of control already exerted by the providers, but there is no obvious reason why cable operators should elect to use Microsoft DRM, unless it is propelled by momentum gained elsewhere. It would therefore seem likely/obvious that the overall success of Microsoft DRM will be related to its success in the nascent online music sales business.

Which is where Apple comes in, and where iPod users might be thieves, and where the nature of the DRM becomes relevant. One of The Register's wiser acquaintances in the handset business told us the other day he'd been lobbying not for 'foolproof' DRM as being pushed by the techies, but 'good enough' DRM, i.e. 'good enough for us not to get sued'. This is very wise and sensible, because handset companies want to sell handsets, want to help their networks to sell handsets, and aren't in the business of helping the entertainment business tithe digital sales. It's naturally not good business for them to get sued by the music industry for aiding and abetting crimes, but it's very bad business for them to try to sell handsets that interfere with consumers playing their own stuff. So they need good enough DRM, good enough to cover their arses, but DRM beyond that level is counter-productive.

Apple's iPods have DRM, but you don't really have to notice it, because it's 'good enough DRM', enough to keep the music business in check (Apple now being a major force in online sales helps here as well) but not unspeakable enough to conform to that industry's crazed desires, and not strong enough to be a significant negative for iPod and Apple Music Store purchasers. It's like handsets, except with Apple it's headsets - the company's objective is to sell its own stuff, not to police the music industry's stuff, and it keeps that objective in mind.

Microsoft, on the other hand, publicly and privately shares the music industry's views, and markets its DRM to digital content owners on the basis that it is strong protection. We anticipate that quite a bit more blood will be spilled before the music business is finally convinced that its current course is futile (but check here for an attempt to get them to see sense early), and Microsoft is going to be along for that ride.

Talk to practically any Microsoft executive and you'll find that they really do believe that all content that doesn't go onto a player or a computer via an 'approved' sales channel with 'real' DRM is stolen. It's a totem, a religion that permeates the company, and it really, really does run to the extent that most of them (the marketing ones, anyway) profess never to have dipped their toes into the waters of file sharing, 'because that would be stealing'. And indeed we know, from Steve down, what puts the food on the table. Presumably the techies know better, but are smart enough to keep their mouths shut.

It's kind of difficult for a company to combat something if it don't have some understanding of it, but that's pretty much what Microsoft is trying to do. Microsoft execs and music industry execs will probably be the last people in the world to Get It as far as digital content is concerned, and they are going to be singularly ill-equipped to even notice as everybody else proceeds on the basis of a more rational and workable belief system. They will still be trying to explain why DRM is yummy and good for us, we will be rolling our eyes and carrying on pretty much as before, revolting every now and again by boycotting selected devices that are factory-fitted with Denver Boots. They will look at their sad sales figures then redouble their efforts to get across the message that DRM is good for us.

The point about Apple's DRM strategy, on the other hand, is that it's a tactic, not a strategy at all. Apple knows damn well that attempting to deliver the music industry's desires is an exercise is suicidal futility, but recognises that it can gain an advantageous position and put food on its own table by taking the good enough DRM route. That way it gains strength in the run-up to the music business seeing sense, and it's even helped by potential competition eliminating itself when that competition is perceived to be agreeing with the music industry too hard. Ballmer's thieves jibe no doubt played well to Microsoft's friends in the music business, but it possibly plays even better as far as Apple's image with consumers is concerned. 'Apple, the company that doesn't stop you playing what you want, where you want?' Not entirely true, but if we were running iPod marketing we'd be pretty pleased with Steve for suggesting that.

Microsoft's belief that the PC is and must remain the centre of all things, everywhere, predates DRM as a corporate religion, but for consumer digital services it relates for reasons additional to food and tables. All of the entertainment gear you have littering your home can now come as part of a PC box, and therefore from Microsoft's perspective there is a compelling logic to you eventually throwing all of that stuff away and putting the PC box in the living room instead. The inherent faultiness of this reasoning is however apparent even to Microsoft, and results in the invention of more plausible alternatives, but these are maimed by the need to retain the primacy of the PC, and indeed to convince the world that strong DRM is good for you. Microsoft's connected appliance strategy does sound potentially viable of itself, but the company's need to insert a PC into the equation is likely to cripple the plan, and quite possibly to tar the PC as the box you buy in order to stop yourself using all your connected appliances to steal stuff. Which does not sound like a winning sales pitch.

The connected home will happen, but the consumer electronics industry has functioned and prospered for years on the basis of unconnected and irritatingly incompatible and limited-purpose devices that we carry on buying anyway. Yes, we probably all agree that it'd be nice and helpful if they were connected and compatible, and we would like to be able to do whatever it is we want to do easily, at the touch of a button, but that is not necessarily the same thing as us wanting all of the things we want to do being built into the one box. We wouldn't object to that if it all worked, wasn't too expensive, never broke and never went out of date, but don't hold your breath waiting for the product that qualifies.

And before we go agreeing with Microsoft, we should maybe consider the possibility that the people in the consumer electronics industry know precisely what they're doing here. They sell cheap, limited function devices and add functionality as the years go by. Digital music has been a disruptive force over the past couple of years, and they'll have to react to that, but the reaction ain't necessarily a PC and the Internet. Simple home audio connectivity for MP3 players does look like a sensible reaction, and given that Apple has sneakily grabbed much of the mindshare for these, the smattering of iPod housings we're starting to see looks a viable route to take. Mass storage is a logical next reaction, and this is starting to show up in higher end DVD recorders. The PC is currently a far more flexible and cost-effective jukebox or home digital stuff repository, but if Microsoft cripples that flexibility by appointing the PC as home jukebox policeman it'll tend to eliminate itself from the competition and blow its opportunity here.

And stimulate the sales of Linux-based sever appliances in the home? One of this writer's favourite toys is the defunct Rio Car, which in addition to its primary purpose of in-car digital audio player can also function as a networked home jukebox. You can pick up music anywhere on the network via its web or FTP server (software upgrade for these required), and you can edit the content or control it from Jemplode, a Java implementation of the Emplode PC software it shipped with. It seems to me to be doing pretty much what I'd like to do with my digital music collection, and a perfectly viable basis for a next generation consumer electronics category.

Which Apple could conceivably make a move into. These days when Apple introduces a new product it tends to be praised for how sleek it looks, but marked down for missing opportunities. Add a couple more features, the critics say, and Apple would have a real killer on its hands. But I have a theory that this approach is very smart. We don't actually know who or what is going to win the battle for the connected home, but we can be pretty sure that people are going to carry on buying simple products they more or less understand, and that deliver something that they want at a price they're prepared to pay. The trick, which the consumer electronics industry is generally pretty good at, is moving the functionality on at just the right pace, the one mass market buyers can keep up with. So some of us already want BluePods, but there's not a lot of point in shipping them until you're sure there's a mass market, and indeed that the music industry isn't going to bust the hell out of you for shipping them. And when you read that the IMac G5's lack of a TV tuner is a missed opportunity, note that it is the "early-adopter" that Apple is missing. Presumably early adopters have been buying Media Center PCs, but as their overall sales performance has been less than stellar we could maybe draw a few conclusions about the relative sense of the rival approaches here.

We don't actually know for certain what people are going to want from the personal computer business as far as consumer electronics are concerned, but we can be pretty sure it'll be pieces of functionality, rather than a multi-purpose box that does most things rather badly and expensively. Will they want some Internet browsing? Email? Maybe, but maybe not that much, considering they've got these already anyway, and if you want your email in the living room, maybe that sleek new iMac G5 looks a more appropriate delivery mechanism than your TV screen. Or maybe your mobile phone is good enough. And if it's DRMed service delivery you want, you can get that from your cable company, your phone company, your mobile phone company... It's really not that clear why you'd need a multi-purpose PC device in there, far less one whose objective was to make everything work together seamlessly provided it could be sure you'd paid for it all.

Microsoft's PC religion however requires this. It does not have a single, killer product area for the PC in home digital networks, so it has (characteristically) attempted to aggregrate multiple areas of functionality into the PC box and is crossing its fingers that the sum total amounts to the killer product, i.e. the PC. If the world then stampedes towards PCs to control their digital entertainment (which it won't), then Microsoft will indeed be able to control the seamless distribution of that entertainment (but it won't).

Microsoft is making the mistake of wanting consumers to want what it needs them to want, rather than thinking about what they actually want. Apple may or may not succeed in the digital home, but we don't even know what Apple would class as success there. Maybe it'll be happy making a few bucks and letting somebody else drive, maybe not. And maybe at some point it'll miss an opportunity and blow its chances, which is no more and no less than any other company in the area could do. But the company that's preprogrammed to fail is the one that, as an article of faith and based on little or no evidence, thinks it all has to come from the PC. Microsoft doesn't Get It. ®

* The Register wishes to state, with some pride, that we were not among this august band, which we presume consisted of those Microsoft Europe deems more likely to "take an impartial stance". Ballmer also spoke at a "no press" event in Wembley the following day, which we learn was also attended by selected journalists. Our informant, a selected journalist for the latter event, is now considering changing his deodorant, on the perfectly reasonable grounds that he fears his perceived impartiality could seriously damage his reputation.

We did however misspeak when we said the 'thieves' thought bubble formed above the heads of "every hack present." It didn't above at least one, that of long-serving Brit impartial journalist Jack Schofield, of the Guardian. With the aid of an interview tape Jack demonstrates in this thread that Steve was in fact only joking. Or something. But if we were Silicon.com we'd be perfectly easy about defending the original headline on the basis that it was fair comment. We certainly wouldn't see it as our business to try to dig Ballmer out of a pit of his own making but hey, we're notoriously partial.