Microsoft Turns Enemy Into Ally in Antitrust Settlement
One time enemies amid a fierce antitrust lawsuit, Microsoft and RealNetworks have decided to become partners in the battle with Apple over the music downloading industry. In the time since their antitrust lawsuit began, RealNetworks has evolved to become a predominantly subscription service company, providing music, games and video. That realization is at the heart over this new agreement between the two companies.
This is a great example of "co-opetition", as we've discussed in class. The two companies are still technically competing over their respective digital music software programs, but they have decided to cooperate in order to accomplish a very strategic goal. That goal is to cut into the substantial market share that Apple has acquired. By promoting RealNetworks subscription service, Microsoft is assured of providing the "back end" to the music downloading experience. This allows Microsoft to further protect itself against piracy and also allows the company to have more control over the individual's desktop computing environment. On the other hand, RealNetworks gains access to Microsoft's customers through msn.com and other means in hopes of bolstering its subscription service.
The plan to dig into Apple's market share is evident by RealNetworks' CEO Rob Glaser's comment, "We're not one closed monolithic system where you have to use their device, their software and their service." In other words, Microsoft and RealNetworks are hoping to attract more customers by allowing users the freedom to choose any software/device in consuming their music. This freedom of choice would theoretically lead to an overall decrease in the amount customers need to spend to consume music by partially eliminating switching costs and decreasing the effect of lock-in. Customers would not be restricted as those who have purchased iPod's and download their music through the iTunes music store, which requires the exclusive use of Apple products throughout the entire process.
Ultimately, this is a great example of two companies choosing to think of their products as complements instead of as competing with each other. There is a good chance that both companies will stand to gain from this agreement.