EU Sanctions: A Question of Real Estate

Students of irony should appreciate the fact that in the same day that the EU apparently refused a remedy proposed by MS to overcome antitrust concerns, RealNetworks, the company with the most to gain from harsher EU sanctions against the Redmond behemoth, was trumpeting its own market successes.

RealNetworks, the media streaming company is apparently building some momentum in Europe in selling back end content services to telecoms operators. It has sold Helix, its multimedia back end server to mobile operators such as O2, Telecom Italia, Telefonica and Vodafone, whilst also tying deals to bundle its Real player with phones from the likes of Motorola and Sony-Ericcson.

Today Microsoft offered to ship Real software on CDs shipped with PCs and laptops in Europe. A place on a CD ROM bundle is certainly not the sexiest “real estate” in the world, but at least Microsoft was putting forward a concession to the notion of concessions. The EU politely declined.

Real, on the other hand, seemed anxious to show that it really doesn’t need protection from Microsoft, with claims it now has access to 180 million subscribers in its battle with its arch-rival, and a far better market position in the 2.5G and 3G network space.

It might pay Real to tread a little bit more carefully if it wants the EU to advocate stronger sanctions against Microsoft. After all, if Real gets into a position to own the mobile multimedia delivery space, pushing out Emblaze and Packet Video, then it will be the de facto monopoly in a hitherto European market. How easy will it be for other media players to integrate with Helix? We shall see.

All in all though, these two stories would seem to indicate the game is moving on. Just as IBM found in the 1970s and 1980s, getting continually hassled by regulators can be enough to see new markets emerge without your participation, whether or not substantive remedies are applied. The DoJ may be toothless, but that doesn’t mean it doesn’t affect business. Ever been gummed to death?

The EU is likely to impose anti-trust sanctions that go beyond what Microsoft would like, just as it did against Big Blue, the last time a single IT company exerted this much market dominance. But the fact is the next waves of computing – mobility and growth of pervasive devices, the technical convergence of enterprise IT and consumer electronics, the outgrowth of what Sun Microsystems likes to call “the network of things”, are unlikely to be dominated by Microsoft. The rest of the market watched and learned—just as it did in the past. Consumer electronics companies are aligning with Linux and even IBM’s Power architecture. No locks for MS there. That’s the thing with markets–you can own one, but another always comes along to change the game. Time and emerging markets wait for no company. No matter how much real estate it owns.