gambling on web tv 14 of april, 1997 by johnmichael patrick monty monteith

Bill Gates is nothing if not a gambling man. Sure, most of the time he puts his money down on a sure thing, like Word, Excel, Explorer, or Windows. Yet, every so often he’ll take a big gamble. The WebTV purchase is probably his biggest gamble yet. Knowing Gates, he will make it pay off, regardless of the way the market moves. Never the less, Microsoft’s purchase makes Apple’s recent gamble on NeXT look like a five buck minimum bet.

The first major gamble by Bill Gates was the purchase of a little known disk operating system. Gates bought it for a steal, gambling that he could convince IBM to adopt this new Microsoft operating system instead of CP/M. IBM could have just as easily gone with CP/M, then the industry standard, in the IBM PC. Instead they decided to use Microsoft DOS. Partly luck, sure, but the gamble paid off. From there, the Microsoft Monopoly grew at a cancerous pace.

Even with all of the growth, Microsoft stayed pretty safe, deciding to only gamble on sure things, or make the bet so small that there was no way to lose. Microsoft would let the industry choose what it would make next. It let companies like Apple Computer take the risks, and just steal what worked. It was not until Microsoft decided that it wanted to get into the banking industry that he decided to make the mother of all gambles.

When Microsoft put up a bid for Intuit, he was not merely attempting to pick up a new personal finance software package. After all, they already had MS Money. Sure, Intuit had a larger user base, but the two programs were not all that different. They would essentially be ‘giving’ Money to Novell just to appease the justice department and the software industry. And, for the most part, the agreement to give up Money did just that. Until someone figured out what Microsoft was really up to. It was not the software companies that kept Microsoft from purchasing Intuit. It was the banking industry.

Gates was gambling that eventually all personal finance would take place via electronic medium. Eventually technology will replace the need to physically go to ‘the bank’. You will deposit, transfer, pay bills, and get a loan all from the comfort of your PC in just a few years. Most of this can already be done today, but very few people are using it. Microsoft merely was gambling that eventually nearly everyone would be going to the bank from a personal computer. And if everyone is doing this, why would you physically need a bank? After all, the software company providing the interface could be your bank instead. Eventually, all you need is your favorite piece of software, and Microsoft would take care of the rest. Meet Microsoft Bank.

It was a gamble, not because there was a possibility that people would not be using this software for banking. Everyone will, eventually. Sure, there will still be a need for banks, but electronic commerce will all but replace them. The gamble was whether anyone would figure this out before Microsoft made their purchase. After all, on the surface, Microsoft was merely switching software. But, in truth, they were looking to do to the banking industry what they have already done to the software industry.

Fortunately the folks at IBM figured out what good old Bill was up to and notified all of the major banking officials. Something not far from: "Hey, do you guys have any idea what will happen to your industry if Microsoft controls how every person in the world interacts with you? Remember what happened to IBM? Child’s play compared to what you are about to experience."

It was only a matter of days after the banking industry put 2 and 2 together that Microsoft withdrew their bid for Intuit. The banking industry would not allow the merger to happen, and, voila, it never happened. But, since the banks were not threatened by a purchase of WebTV, there was no one to stop Microsoft’s most recent acquisition.

If Microsoft had gotten their hands on Intuit, that would have been a sure thing. WebTV, on the other hand, is a much higher risk factor. The gamble this time is that your TV and your computer will eventually become one. Although on the surface this may seem an unlikely scenario, I think as consolidation starts to occur between cable, phone lines, and the Internet, this possibility becomes highly likely. After all, if you are going to buy a new 25 inch high definition digital television, it sure would be nice to use it as your computer monitor, too, wouldn’t it? Studies have shown web browsing cuts into TV time, so what would keep the industry from moving into web surfing for your TV shows? The telecommunications de-regulation act was about making this convergence happen, and if it does, who do you think is going to make the software to operate it?

When and if this happens, at the very least it is still years away. After all, the ‘Information Superhighway’ is still crawling at a snails pace. Never the less, like in the software industry, whomever controls the interface will likely control the media. That is why Microsoft is putting such a gamble into making certain that they are the ones in control of the interface. (Why does this sound like an Outer Limits episode? "We control the horizontal.") And now the Microsoft has a vested interest in this convergence, it is a safe bet that the chances of it happening are now even higher.