Back a few years ago, more than one person remarked how odd it was that Stardock hosted (for free) its primary competitor in the Windows desktop theming world (Samurize). It competed (and still does but the market has changed quite a bit since Windows Vista came out) with DesktopX. Why would we do that?
My answer was: I don’t like monopolies, especially ourselves.
When we were designing up the specifications for Impulse::Reactor, there was much debate over whether it should require the inclusion of the Impulse store or require the creation of Impulse store accounts. I was adamant that it shouldn’t because the job of Impulse::Reactor isn’t to replace Steamworks with something that’s just as exclusive. On the contrary, I don’t want Impulse to dominate. I don’t want Steam to dominate or any of the others either. In the past couple of years, I’ve seen enough of the sausage factory that is the game industry to know that you definitely do not want anyone having leverage over publishers or consumers.
If your motivation is to create excellent things, you want competition. If you’re a consumer, you want competition for your dollars.
No matter how wonderful a thing is when it starts out, the end behavior is inevitably the same once they have leverage. The solution is to prevent anyone from ever having a monopoly in the first place.
I for one am glad there is competition, with out it there is nothing but complacency.
Can't wait to see the Reactor and GOO in action , with the release of Elemental
Plus, when a competitor does come out, monopolies tend to get squashed if they don't buy their way out of the problem (which further reduces profits...).
Saying they have no incentive to improve and then saying how that will cause them to fail is contradictory. If it will cause them to fail, then that's clearly incentive for continuous improvements so it continues growing and competitors simply can't compete.
World of Warcraft has done this in the MMORPG category. They came in, developed a huge player base, and basically got a monopoly on the genre. Yet, they constantly fix bugs, provide excellent customer service, and add new content. That way, when new competition comes out.. they simply can't compete; all the while WoW continues to grow as the game gets better and better to keep people sticking around and new people to join.
Also cash cows are good, I don't see where you're going with that. The idea behind a cash cow is that the growth rate has slowed so much that it can just be milked until people are done with it, generating high income with low expense. For example.. the iPod is a cash cow for Apple. They've milked it to fund other projects like the iPhone and iPad. Continuing to improve the iPod is pointless at this point as it's market is saturated and Apple can still branch out to acquire growth in other markets. If there is still growth to obtain, it stays a star and the company keeps pumping money into it.
Not saying the BCG Matrix is the best thing ever btw. But you brought it up
What I mean is that because they have consistent profits, and no competition, there is little incentive to improve to generate greater profits. Thus, if I'm making a 20% margin and $100B/year (or whatever), and my shareholders are happy (if I'm a monopoly, I'm likely "outperforming" the sector), then there's little incentive to change. This unwillingness to change can, in the long-term, result in failure. People think--and, especially, are incented by--the short-term, however. I don't think I've contradicted myself, if you take the aspect of time into consideration.
Cash cows aren't necessarily bad at all, but they rarely grow. Novell's networking software is a great example. It's a slowly diminishing user base, but it's users continue to pay maintenance year after year. Has it really improved over the years? Perhaps, but not enough to gain market share. Novell isn't even a monopoly, so the cash cow syndrome isn't unique to them.
I agree with your implicity analysis that high-performing companies continue to push the envelope, even with their cash cows. WoW is a good example of this. Windows is as well, oddly enough. MS has poured billions into future development of new versions of Windows, even with the massive amounts of maintenance revenue it generates. Whether that investment will be successful in the long-term is TBD.
Thoughts?
WoW is not a cash cow yet. They still spend $50 million a year on it and are continuously improving it as there is still the threat of a new game coming out to be the next "wow-killer". Interesting side note: http://www.onlineschools.org/blog/unbelievable-wow/wow.jpg
In your hypothetical, if there is no more market share to acquire, then of course there will be no more growth. If they think they can streamline the process a little bit, of course they will continue to do that. Kind of the definition for the BCG model. In the longrun, they all become either a cash cow or a dog. Talking about "greater" profits beyond improving the production side of it doesn't work. There are no more significant sales or market to gain, so it becomes a cash cow. Or they failed to acquire market share and it becomes a dog, ready to be put down. Kind of like Stardock / GPG abandoning Demigod.. it's receiving no major support anymore and has a small % of the market share. They got what they could out of it, but now it's a dog.
For Novell, they merely moved on to their next project. If they felt there was more money, greater opportunity, as well as diversify their products by working on something new instead of spending resources improving an existing product to marginally increase then it's no surprise.
Good points.
$800 million in revenue from North America alone for $50 million a year is definitely a cash cow, if your cost is correct. I'd love to have a 1550% gross margin.
brad for president!
The user friendly approach Stardock is taking is a lot more likely to get Stardock noticed right now than anything else they can do against Steamworks. In an industry that's constantly being criticized for user unfriendliness, it's a stark contrast and people will notice.
Sure, they could do the lock in thing that Steam is doing, but then publishers, developers, and users would've said 'meh' and thought of Impulse as just another Steam wannabe.
It may not only help Stardock, but the general opinion of them and their products will improve greatly just because they aren't showing only self-serving motivations. Where the general opinion of Steam is good because, lets face it, 99% of the time its a great service. They just decided to go in a direction that many people don't particularly care for.
Here ya go, Brad!
Steamworks = No Purchase. Not that it matters, they don't carry the games I like anyway.
lol sorry. Not to prolong this discussion, but I forgot to put in that the $50 mil is just the cost to keep the servers running Still a large amount of other costs, but I don't doubt they generate a pretty penny off it.
Why the hell haven't the guys at Blizzard purchased their own banana republic for them to rule as supreme overlords?
Probably because Bobby Kotick already bought it and turned it into his personal home from where he dictates new methods for making game developing suck. Seriously, google "bobby kotick quotes." Just don't eat before you do, or you may have to clean the vomit off your keyboard.
That is completely irrational. If you are a monopoly, you want to ramp up the margins. Besides, you need to outperform yourself in addition to outperforming the competition to keep shareholders happy. There is always incentive to change if the change increases profits. If you aim to maximize profits and have a monopoly and don't work hard to both maintain the monopoly and increase your margins, it's just a poorly run business, nothing else.
As for Impulse::Reactor and Stardock's approach to competition, I'm at awe. I do think that the approach of helping competitors isn't that bad of a business move either. Working the Stardock does increases their appeal from the customer point of view considerably. I for example don't want to use Steam that much because of their more restricted policies. I still do occasionally, but if I have a choice I always use Impulse. I'm sure other potential customers think the same way I do, so making room for competition might actually help fight the competition, which is at least a pretty interesting thought, if nothing else.
Sir_Linque : It's only irrational if we assume the corporation has an intelligence of its own. It doesn't, however, being made up of people like you and me. Shareholders can demand more all they want, but they generally won't shout too loudly if something is consistently generating good profits and faces no dangers. Profits are a pull; competitors are a push.
Perhaps the best lesson is just history itself: Ma' Bell, before it was broken up, was a static, unchanging, inefficient organization. Can you image Ma' Bell of yesteryear saying "we need to become a pathway to content, or perhaps even own some content"; they were still renting telephone sets until the very end.
Perhaps a broader question is in order: does anyone know of a monopoly--anywhere in the world in the past 200 years--that has maintained a high level of innovation and change?
Microsoft
Is microsoft really a monopoly?
And where is the innovation? Windows XP and Windows Vista seem virtually identical to me, except some small layout differences. I've no expierience with windows7 as of yet but I'm told it looks similar to vista.
TBH, they really only bring OS's to the greater portion of the world, what else do they have to offer? (Seriously, if there is something else I don't know about it.) That's not innovation, that's complacency. Sticking to what they are comfortable with. Innovation requires some form of risk, at least, in modern industry. Innovation is making something entirely different, not making the old stuff look pretty or anything like that. I will give you change, though. They do a good job of releasing new OS's just around the time everyone is using the last one...
-Twilight Storm
According to the Supreme Court of the United States, yes.
The difference isn't that noticeable to every user because there were a ton of small changes to small features. Seven is quite different though, especially the boot up time. They've also come out with other neat gadgets. They're pretty darn diverse if you ask me. Name another company that manufactures an Operating System, a browser, a gaming console, and lots of niche software. (all the stuff Microsoft makes)
Monopolies are economic dictatorships. They can be fine if the dictator is a cool guy, but usually absolute power corrupts absolutely and all that.
(Been a while since I've even acknowledged this name as I hate Macs as a rule, but) Macintosh/Apple? (TBH, IDK if they're different, or one is a co. and one is a bran or whatnot. But those are the closest thing to a rival microsoft has.
Microsoft has *limited* competition from Linux and Apple, but not enough to make a difference.
NFL, MLB, AT&T, De Beers, Microsoft, Standard Oil (Now Exxon and Chevron). All very successful monopolies that were hated on and antitrust lawsuits filed against them or other court issues. The thing is, it's hard to create a successful monopoly due to government regulation / restrictions. It's such an awesome thing for the producer / seller and not for the consumer / buyer that the govt. steps in to help consumers / buyers.
Actually, the government steps in to help the government. Either they need the product, or the owner refuses to bribe them. Seriously, if there's nothing in it for them, they don't care. (Now, that something may just be votes for the next term, but...)
Yes, by all but the strictest definitions.
They spend a fortune on innovation/R&D every year. Their products have improved significantly over the years, as mentioned by others. Innovation can be improving an existing product, it doesn't have to mean creating a completely new one.
Is that why they're offering tax credits for the health bill? Looks like that only hurts them but helps the people lol. Helping consumers does help them, especially if you keep in the "just for votes" option.
I agree. MS has a monopoly.
But, that is only because they deliver good products that the majority want.
Both Mac and Linux/Unix are too limited in scope. And I'm sure we all remember the likes of BeOS and other OS's that bit the dust in the last 20 years. Microsoft's OS's have always been more compatible with more hardware and software than any other. I still can't use any Linux product with my Falcon II TV card, but I still can with Windows 7.
They have made mistakes, like ME and Vista. But they have also recovered from those mistakes with products like XP and W7. But, in an overall perspective, MS has delivered the OS of choice for the overwhelming population of this planet.
The same goes with much of the hardware MS produces. It is both of good quality, and it is easy to use.
Has their capture of a market stifled their innovation? I don't think so, because they continue to be on top of so many.
Some monopolies are a good thing, IMO.
This might have been true in the beginning, but after they got their foot in the door they pretty much beat down any competition to a bloody pulp anytime anyone even attempted to compete with them. They've had enough legal issues that say exactly that, with enough blood on their hands not to be able tojust claim they deliver what consumers want. They're right up there with Intel in shady business practices. I am not exactly anti-Microsoft and certainly not pro Apple or anything like that, but I won't just sit back and applaud Microsoft for their business practicies.
Well, Microsoft has improved their behavior a lot in the last years, those legal issues are pretty old in general. In the meanwhile, Apple is starting to behave just like Microsoft used to...
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