Microsoft Overcharging? I Am Not So Sure

It looks like Microsoft is managing to settle State lawsuits one at a time. (See and more). Arizona is the 12th state to settle, and Microsoft will provide $104 million in vouchers to customer who were “overcharged” for Windows and Office in between 1996 and 2002. These settlements have already cost Microsoft more than $1.5 billion, and that number is likely to increase.
I am not going to get into a discussion about capitalism, and a debate on who gets to decide what price is right and what is too much. That is neither here nor there at this point.
What really bugs me is the perception of value, or the total lack thereof. Regardless of how anyone feels about Microsoft, this “overcharged” accusation is simply ignoring reality. To put it in perspective, not that long ago we willingly paid $400-$800 for an electric typewriter which did a whole lot less than Microsoft Word which can be bought for $70. Even in the software realm, Excel costs far less than we paid for Lotus 123 when it was the only game in town, PowerPoint costs less than Aldus Persuasion and Harvard Graphics used to, and Access is cheaper than Ashton Tate used to charge for dBase. In fact, the entire Microsoft Office Professional suite costs less than that typewriter did back then.
You may not like Microsoft and you don’t have to, you may not want to pay for their software and you don’t have to, you may not buy the value proposition in which case you’d not have to buy the software either. But don’t call it “overcharging” just to be able to force a lawsuit and a subsequent settlement.
Overcharged? Sorry, I don’t buy that argument, and I wish that Microsoft could have fought these suits. Ultimately, Microsoft lawyers probably figured that settling was cheaper, but that does not make the accusation right in any way, shape, or form.

10 responses to “Microsoft Overcharging? I Am Not So Sure”

  1. David Avatar

    I agree that the entire cost of office, even proffessional, is a great value when compared with historical prices and values.
    But Microsoft had/has a monopoly and was using it illegally to influence price. Forcing competitors out of market places with exclusive (antitrust) contracts with hardware vendors.
    Without those practices Microsoft might not have been able to charge what they charged. That’s where the "overcharging" comes from.

  2. Jaye Morris Avatar
    Jaye Morris

    Ben, I agree with you 100%. I find it odd that people do not take responsibility for their purchase options. What ever happened to <em>fair market value?</em> I paid 400.00 for my Ipod, but I could have bought a similar device for less. That was my choice. Right now Studio MX Pro is slightly less than is was when it first came out. Am I offended or think that Macromedia should give me a little cash back? No. That’s just what it costs to be in the game. No harm, no foul. It’s lame that we live is such a litigious society that it actually enables people not to take responsibility for their purchasing decisions. This is one of those things that make you go… hmmmmmm. Keep up the great work Ben.

  3. Patrick Whittingham Avatar
    Patrick Whittingham

    So, Microsoft ‘pushes’ Netscape out of the market with a ‘free’ browser’ while Netscape charged $$, so who is over-charging??? Free vs $15-30 ??? Microsoft isn’t overcharging if their product is cheaper, it is the other companies overcharging their customers. It is like saying WalMart is over-charging people when it can reduce their costs to ‘remove/eliminate’ small town vendors. It is the small-town vendors who are over-charging. If one can find a cheaper Office product, then buy it, else don’t complain. People who usually complain are the ones who are over-charging, not the consumer how buys the cheaper product.

  4. Jim Avatar

    Your Walmart analogy is completely flawed. The small store HAS to charge slightly more for products because they don’t have the supply chain, bulk discounts, etc which Walmart has. I don’t think Walmart comes to town with the plan of shutting down small businesses – it is just the nature of that beast.
    In regards to Microsoft Office – support 🙂

  5. Greg Ostravich Avatar
    Greg Ostravich

    It’s interesting when a company is found guilty of something and their punishment is to giveaway more of their product. This happened in the airline industry too.
    I just think it’s odd that in this case the reason the company is in trouble because of its’ Monopoly and the punishment gives away more of their product to create a bigger Monopoly.

  6. eokyere Avatar

    i agree with ben that the price is about right… but pricing isn’t the issue here (or at least, pricing on its own)… it is pricing together with all the issues jim points out… btw, ben, your typewriter-costs-more-does-less/office-costs-less-does-more point is irrelevant at best… car prices are not based on prices of horses (even if horsepower is factored in there one way or the other)… their production/reproduction mechanisms vary widely event if their outputs are identical in some way

  7. David Fekke Avatar
    David Fekke

    Actually, Microsoft just released express versions of their Visual Studio 2005 and SQL Server 2005 Express for free. Now if they would just come down on the per processor cost of SQL Server Enterprise ($16,000), that would make me happy.

  8. Ben Forta Avatar
    Ben Forta

    The monopoly discussion is an entirely different one. And no, I do not believe that Microsoft is a monopoly, and do believe that the DOJ’s anti-trust case was fundamentally flawed and an abuse of anti-trust law (even assuming that anti-trust law is a good thing). The EUs case is even worse. But having said that …
    I agree that the typewriter comparison is flawed, but the intent was less comparison and more perceived value. Value for money is not an absolute, and ultimately it is the market which dictates value. The fact of the matter is that not al users upgrade, the prevalent Windows out there is Windows 98 (much to Microsoft’s dismay) which means that users don’t see the value in upgrading (when cost, difficulty, compatibility, hardware requirements, and more, are taken into account). I have no problem with users thinking that software costs too much and thus not upgrading, that is their right. What I have a problem with is legislating value. There is no right or wrong value, and legislation is all about trying to define right and wrong.
    There is something ironic here, charge too much and you have to settle, charge too little and you are being monopolistic and will get punished for undermining competition. It’s a balancing act for Microsoft.

  9. Brian Sadler Avatar
    Brian Sadler

    Ben, I don’t think you can separate the monopoly discussion from the discussion of value for money. Monopolies, or near monopolies, by definition do not offer value for money for the consumer.
    When you say that "ultimately it is the market which dictates value", this is only possible in perfectly competitive markets, and the market for Windows/OS and Office products from 1996-2002 (the period to which the judgement refers) was anything but perfectly competitive.
    You say that Microsoft is not a monopoly but it’s a close run thing. It has huge power in the marketplace to influence prices, and it really should come as no surprise that it is falling foul of anti-trust legislation on both sides of the Atlantic.

  10. j_ivanoff Avatar

    does this mean the people get $1 and the lawyers get $100 million?
    (I know it doesn’t add up)
    Would this work with OPEC?

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