My main takeaway here was that Gates thought that the cost of distribution on the internet would be so low that there would be no large business that could form. However one of the interviewers pushes back by saying that because the cost of distribution would be so low, aggregators would naturally form a monopoly on this business. Incredibly prescient point in a world of Facebooks and Googles. Anyone know who she is, the Wired interviewer who makes this point?
She has the byline on the cover of the June 1996 Wired story on Gates. I couldn't find the text of the story, but you can see the cover here: https://media.wired.com/photos/5bbbd018b1d78f2d74578369/mast... (shirtless Gates in a pool and called out as a "Gatesfold"...strange)
>Neither FB nor GOOG have become such monopolies in that type of business they were talking about. What Gates said hold true today.
They're very close to that. And the same is true to other content, e.g. Spotify, Amazon Kiddle, Netflix for films, YouTube for video, etc.
People still go to other sources, but increasingly less so, and those sources all increasingly fringe (Daring Fireball? Compared to Facebook and the like?). Nothing like the wild west (and much freer and distributed) market it was 10 and 20 years ago.
Between the 3-4 big social aggregators for example, there goes 80% of the internet advertising pie.
Gates (as quoted below): "There will be no content club in my life time with $4 billion revenue...you are on drugs if you think that".
Meanwhile there are like 5 "content clubs" with much higher revenue...
> People still go to other sources, but increasingly less so,
No, case in point, DDG is generating more traffic than ever.
You can also see Facebook losing ground with teenagers and young adults.
There's assault on all sides to decentralize the web as well. And Facebook is not the only social network, you can use Reddit to interact with your communities of interest and live completely off Facebook so your point does not really stand.
Kindle is not a monopoly either. You have Kobo and several other e-readers with attached stores available on the market, and you can buy e-pubs on numerous sites that are not Amazon.
Netflix also has to compete with Amazon Video and Apple services, they don't operate in a vacuum. And nothing prevents you from renting/buying physical media as well, even though it's not fashionable anymore.
Youtube is the closest thing that looks like a monopoly for video sharing- granted. There are alternatives but they tend to be weak in comparison (at least at this stage).
> Gates (as quoted below): "There will be no content club in my life time with $4 billion revenue...you are on drugs if you think that".
> Meanwhile there are like 5 "content clubs" with much higher revenue...
Good CEOs and Chairpersons don't blather about things that can adversely affect their company. Do you recall what happened after Musk tweeted that funding was secured?
Gates liked to make strong definitive statements and have his employees convince him he was wrong. Arguing back was rewarded with promotions provided you were right. It was a culture that selected heavily for type A personalities.
This ISPs have, or will become the true monopolies that will be the gatekeepers of all access to the internet.
They are entrenched and are not expanding their services, instead, they are digging in and keeping their foothold within their regions, limiting/eliminating competition, both from a rules/laws (like preventing municipal ISPs from forming) and limiting their service footprint to maximize their "profits" within their regions. Next expanding, but always increasing the amount they charge to poor service and access to the "internet."
If anything, it appears that ISP behavior is similar to the original Ma-Bell (USA) telephone Corp. It looks like somebody needs to break them up. But that's wishful thinking this day & age, just like having a nation wide (USA) fiber deploy to all states, cities and towns. Imagine, a Renaissance would develop.
ISP have so far been pretty neutral and have not been acting as gatekeepers. I'm more worried about Google's Youtube, Facebook, Twitter and Apple who've been acting as gatekeepers, banning people they do not like from entering their de facto monopolies. If ISPs start acting this way one day, I will start worrying about them too but so far, it's these social networks that are the real gatekeepers.
That's only because nobody's gone after an ISP for the same kinds of things that they go after Google for, with respect to the stupid Section 230 changes. When the outrage mob discovers it can bully an ISP into shutting off political opponents, then the ISPs will be exactly like Google, Facebook, Twitter, etc. You already see echoes of this for example with Jeff Atwood's misfire on Twitter recently, going after Azure because he thought Gab was still being hosted there (it wasn't)[0]. Incidentally this is one reason why Section 230 was so important. The change is new, so it's probably just a matter of time before the outrage mob starts going after the T-Mobile and Comcast accounts of its enemies.
> ISP have so far been pretty neutral and have not been acting as gatekeepers
Vodafone in Egypt blocks Skype because it has its own voip app. That's what I'm remembering when I hear of ‘net neutrality‘—not even arbitrary blocking of torrent sites in various countries.
> Next expanding, but always increasing the amount they charge to poor service and access to the "internet."
I think your comment is only valid for a particular place in the world. In other countries you have wild competition between land providers and also mobile internet providers that keep offers priced low and more and more competitive as they go. If you want to benefit from competition, you need to ensure the regulators fight against local monopolies, or force them to license their lines.
The US ranks in the top 10 to 15 globally on average consumer Internet speed.
Costa Rica is below #100. About 1/5 to 1/6 the average speeds in the US, with US speeds increasing faster year-over-year despite the difference. Costa Rica is comparable to what you see in Iran or Nigeria, around four to five mbps.
Your premise comes across as dramatically overstated (even if you did encounter a coffee shop in LA with poor Internet).
The marginal cost of distribution is low, but the initial cost of getting all the content and setting up the infrastructure to deliver it is very high.
Wow, is this the original source? Such a low view count for what I feel is a very interesting look into a more casual Bill Gates. This seems much more spontaneous than the usual videos we see of him, and it's pretty cool to see the kind of thoughts he has before being filtered into prepared statements for the public.
I've just watched the first 10 mins, but it's amazing how he's incredibly aware all of the technical details, and combines a strategy perspective ("unified email client") with all the technical details (low level networking details) to make those strat decisions a reality.
Yeah and he demonstrates both a complete and precise knowledge of everything his company is doing in nearly every arm of the business (not to mention his encyclopedic knowledge of business Microsoft is not in). It's easy to forget why Microsoft was so dominant in this era of computing, but listening to him it begins to make more sense.
I always find it fascinating to compare just how large the tech industry has become since this era, when Microsoft was already regarded as something close to a giant in the industry.
Microsoft sales 1995: $6.1 billion ($10b today)
Google is about 12x larger. AWS by itself is about 3x larger. Facebook is 5x larger. Salesforce is similar in size. Oracle is 4x larger. SAP is 2x larger. VMWare is closing in on 1x that size, as is Adobe. And Microsoft today is 12x larger.
If people back then understood how large technology companies would become today, I wonder what would be different (if anything).
It was considered more than something close to a giant. If anything, it was considered scarier than anything we have now.
Back then there was nobody else. We've gone from a monopoly to an oligopoly (ish) which in some ways feels less scary.
It's hard to overestimate Microsoft dominance in the 90s. If there was a wiff of them entering a category, the players in that space would be in trouble (similar to Amazon today, though Microsoft followed through more in decimating their rivals).
> If anything, it was considered scarier than anything we have now.
Yes, I recall those days intimately. It was hysteria and laughable even then. Breathless magazine articles claiming Microsoft was going to dominate everything, set up toll roads on the Internet, dominate e-commerce, publishing, media, and so on. None of it was even remotely feasible or credible.
The fear that briefly surrounded Microsoft's reign was almost entirely baseless hysteria. Its preeminence and monopoly abuse era lasted for six or seven years. Facebook has been abusing US consumers with its social monopoly for longer than that already, as has Google with its search monopoly (they're at least a decade plus in now). Both Facebook and Google are not only drastically more powerful and wealthy (greater financial resources by at least a factor of 10) than Microsoft in 1995-96, their reach is far beyond anything Microsoft had at that time. World-wide PC sales in 1995 were a whopping 70 million.
Google and Facebook touch nearly all corners of the globe, in real-time, at all times. Billions upon billions of people. Microsoft's reach in 1995-96? Extremely slow in nature, and less than ~150 million people globally.
Ability to throw or bias elections and control global commerce? Microsoft had almost none of that type of power with their operating system, or IE. Extraordinary amounts of commercial activity and referral flow directly through Google and Facebook products/platforms each day. Google's algorithm changes have dramatic effects on businesses. Android is a far larger gatekeeper and toll road than Microsoft could have dreamed of in 1995. YouTube by itself is roughly worth as much as all of Microsoft was in March 1995 (and has dramatically greater influence and reach, along with a monopoly position in what it does), Instagram is worth even more.
And Netscape, Microsoft's most famous 'victim'? (although not the thing that really got them in anti-trust trouble) The notion of building a large business around charging for a consumer browser was a dead-end. Nothing that Chrome or any other free browser wouldn't have put an end to later. Netscape was always going to die, short of pulling off a magic in-flight engine change to enterprise software (which they tried and failed at).
There's no chance Microsoft killed off more competitors in those days than Amazon has. How many small and mid size retailers has Amazon put under as it has added $100+ billion to its retail sales? Given the very low consumer & economic growth of the past decade, the tally would have to be thousands of businesses across the US. There are radically more retail stores of all sizes across the US than software companies. It's impossible for Microsoft to ever compete with the business rival destruction that Amazon must inherently cause as it grows ever larger. How many physical stores will Amazon destroy as it adds its next $100 billion in retail sales? It's not detracting from Walmart's sales, that's not shrinking, so it's coming from everybody else.
Something to keep in mind: the DoJ consent decree was 1994, and the lawsuit was filed in 1998.
This was right around the time that Microsoft’s monopoly power was under intense scrutiny.
In that environment, it makes sense for BG to push back against the notion that they could use their desktop OS market share into some kind of content market share.
If you notice he gets particularly vehement whenever someone asks if they can use their control of the OS (or tools or the browser) into control of the content.
He emphasizes that the distribution platform has to be neutral.
I suspect there was a little rope-a-dope going on on his part. Microsoft was less than a year in to turning their ship around (https://www.wired.com/2010/05/0526bill-gates-internet-memo/) to ride the Internet wave. So he wouldn't have wanted to telegraph to other large competitors that this was going to be huge. (hopefully, given their investments) They already had their hands full with all the tiny startups who had been there years earlier.
Yep. Also, he had to be careful not to say anything that would suggest that having a monopoly in the OS market would somehow benefit the dominance of the content busniess, it seems like the interviews were trying him on that. I think the antitrust accusations started to simmer around then?
Interesting to note, Microsoft bought Hotmail for $400 million the following year.
I felt the same. Another piece was avoiding regulatory scrutiny as far as any discussion on monopolies. It's amazing how much business acumen the guy has.
To me if I look at the bigger picture of what he was saying however - he was comparing it to their software division which brought in $4 billion. If you look at where that division is today it is FAR more than $4 billion and dwarfs Netflix's revenue.
It's funny, at around the 32 minute mark Gates even touches on 'free information publishing', which seems to surprise the journalists. This 'free information publishing' would later replace his Encarta, which was costing ~$30m alone to translate.
What a great video! It's fascinating to see the perspectives on the media, content, advertising, etc, in contrast to our current ad-driven world.
At ~25-30 min they talk about "content club" as a business. The Wired guys propose this could be a +4$ billion biz. Gates laughs them off. Now, today we have the numbers:
Apple Music, et al. license content and there are few companies that are able to do this. This creates a barrier to entry that wasn't present for the "content clubs" Gates discusses. In fact, his primary point is that due to the lack of a barrier to entry in the market and no accumulating advantage of any kind, there wouldn't be a single dominant player.
>In fact, his primary point is that due to the lack of a barrier to entry in the market and no accumulating advantage of any kind, there wouldn't be a single dominant player.
Well, we have at best 2-3 "dominant players" in each field, so not much better. And doesn't already Kindle dominate in eBooks? Surely iBooks is not that much of competition.
Gates doubted verbatim that the whole industry would exceed 4$ billion in total, thus no single player could reach that point.
> Apple Music, et al. license content and there are few companies that are able to do this. This creates a barrier to entry that wasn't present for the "content clubs" Gates discusses.
That's not true, because Apple licensing anything is still not a barrier to entry into that market even today. Also, such licensing wasn't available to anybody back then.
> In fact, his primary point is that due to the lack of a barrier to entry in the market and no accumulating advantage of any kind, there wouldn't be a single dominant player.
No, that was another point he made. The fragmentation of the market and he was certainly right on that one.
However, that was still not the point he mad I was talking about, the total size of the market.
No, it didn't have to. The journos ask Gates why he enters into that field (with MSNBC) if he can't see a 4$ billion business in it. He then says: while we won't make those 4 billions (we are making with software), we believe we still can have a profitable business.
I don't know if MSNBC was profitable at that time, but many such businesses were (and still are.)
The question was about the overall size of the industry.
Yes, he assessed the situation back then correctly. That was not hard to do. He said it himself in the interview "do the math" to indicate how this was a no brainer.
What he didn't foresee was that the world would change in a way that makes a +4$ billion "content club" business viable.
The journalists don't put their cards on the table. Were they pressing him so much because they thought a +4$ billion "content club" was possible? This is not clear from the video.
If they thought so, was this out of naiveté or foresight? Of course I can't tell, but back then Wired was much better than today, to say the least.
Considering Gates was referring to "content clubs" as akin to "record clubs" and the Wired interviewers were instead bringing up the cable companies and Disney, I would say the Wired team had a good read on the future. Although other commenters here bring up a good point that Gates may have been downplaying the potential market for content creation/delivery on the internet. Also his dismissal of internet advertising is likely the gap Google needed.
