Ms. Spaulding, I'm not getting through to you here. The price on your invoice has NOTHING to do with what Gateway paid MSFT for it. You bought a SYSTEM that came with COMPONENTS from MANY DIFFERENT MFRS, and that SYSTEM was put together by GATEWAY, and sold to you for ONE PRICE.
When I ordered my Gateway, I asked the salesperson if I was paying for MS Office, because I used WordPerfect, and didn't want to pay for Office. They said it was free, and that is reflected in the invoice. Also, none of the other components to the computer were itemized, because they're usually not sold separately, and therefore, there is little chance that any monopoly would be established in those products, especially, since, most of the time, you don't even know what components were used. The monitor was the other itemized item, and unlike MS Office, it did have a nonzero price! Now, if Gateway was simply selling everything as a unit, why itemize the monitor? Because some people may not want the monitor. They might already have one, so it would save them money if they didn't have to buy another. Ditto for MS Office. If Gateway actually paid for MS Office, why list it as $0.00, when, to be more competitive, they could have listed the true price of MS Office, and gave people the choice to whether they wanted to pay the extra money for it? It just wouldn't make sense for Gateway to buy MS Office from Microsoft, and then list it as an itemized, nonoptional component for $0.00. Why itemize it at all, if it were just part of the system?
If the OEMs considered their customers most important, and no pressure was exerted by Microsoft, then the OEMs should have offered any suite the customer wanted, or no suite, to save more money if they were actually paying for it. I would have much preferred this. However, Microsoft did exert pressure to have their office suite distributed, as illustrated by the meeting between Microsoft and IBM. After all, how could Microsoft seriously tell IBM not to sell its own product over Microsoft's? Note Kempin's concern about profit margins if IBM distributed SmartSuite. And if Microsoft was just competing on quality, then why put pressure on anybody? Microsoft would just compete on quality. Why be arrogant enough to tell a company, the same company that gave Microsoft its operating system monopoly to begin with, that they should distribute MS Office rather than their own product?
There's no question Microsoft knew what it was doing! Even if the OEMs did pay for MS Office and distributed it to every computer buyer, the effect is the same as predatory pricing. Their competition is just about dead.
Finally, think about this. Because the marginal cost of software is virtually zero, Microsoft could drop its prices dramatically as sales expanded, and still increase profits. But they don't, because they don't have to. They don't have to worry about any competition, because the competition has been mortally wounded. And that's why Microsoft is one of the most, if not the most, profitable company in the world. Microsoft now has pricing power, the true hallmark of a monopoly! |
