On Friday, September 8, 2000, I sat down with Brian Livingston at Boston's Union Oyster House, the longest continually operating restaurant in America, to discuss Windows Millennium Edition (Windows Me), Brian's new book (Windows Me Secrets), copyright issues, and a recent press release, in which he accused Microsoft of tying two products--Windows Media Player 7 and Windows Movie Maker--into the new OS. As always, it was an interesting chat.

Paul: OK, what's up with this press release?

Brian: The very curious thing about Windows Me is that Microsoft does not allow people, when they install Windows Me, to choose not to install Media Player 7 and the Movie Maker. Once Windows Me is installed, there is also no apparent way to remove these programs through the Add/Remove Programs Control Panel or through any other application. They are hard-wired into Windows for absolutely no good reason. Because there is the ability now [thanks to a third party application] to add Media Player and Movie Maker to the Add/Remove Programs Control Panel, it's clear that Microsoft didn't have to make those programs non-removable for technical reasons. Microsoft has done this to ensure that users who get Windows Me on a new PC for the next umpteen years will have that software. Otherwise, Windows Media Player would have to compete with all that software out there that does streaming video and audio, and other multimedia products.

Let me ask you something. It sounds like this is related to the Internet Explorer bundling issue, although you could make an argument that IE being bundled into the OS has some technical merit: They're using it for the display, they're using it as an integral part of the file manager, and so on. Obviously, these two programs don't serve that purpose. Can Microsoft make the argument that they are establishing a baseline of functionality, so that developers can rely on those products and their associated technology being present in the system? <% ' Added so can inventory as Connected Home articles. kw = "CH" %>

Brian: The argument could be made that you shouldn't remove the HTML rendering engine from Windows 98, because the Help system and other programs using this engine to display text. But that's not the same as saying that a browser--which is essentially a front-end to the HTML rendering engine--should be bundled for free. The antitrust case wasn't really about Microsoft giving away Internet Explorer for free, it was about forcing users to take IE in Windows 98 whether they wanted it or not. More importantly, Microsoft forced Internet service companies into restrictive agreements that prevented them from supporting non-Microsoft Internet products, such as Netscape. So Microsoft wasn't simply giving away products for free, it was taking steps to harm competitors.

So they haven't exactly learned their lesson? (Laughing)

Brian: Right. Microsoft will go before the U.S. Supreme Court sometime in the relatively near future. You would think that they'd want to keep a low profile on the types of behaviors that the court found them guilty of. Instead of playing it safe, however, Microsoft has not only bundled these programs into Windows Me, they have made it nearly impossible to remove them or not install them in the first place. To me, this only makes sense if Microsoft believes that the Supreme Court will tell them not to do this anymore. Microsoft seems to be gambling that the court won't uphold the more severe penalties, but will instead tell them to simply not do this anymore. In this case, it looks like Windows Me is only be released so that Microsoft can work its audio and video programs into the operating system before the Supreme Court has a chance to hear the case and require that they not do that in the future.

So going forward, Microsoft can simply say, hey, it's in the OS now and we've got to update it.

Brian: Right. There aren't that many new features in Windows Me that really make sense as a release. It's really Windows 98 SE 2.

I think the mindset is that Microsoft wants to release a new consumer OS every year, like the auto industry does with its cars. Sometimes the new model has few improvements over the previous year.

Brian: (Laughing) That would be a first. Windows 98 did not come out one year after Windows 95, and Windows Me is not coming out one year after Windows 98. There's no evidence that Microsoft can release a major update every 12 months.

What they're doing is very iffy.

Brian: It's very difficult to get a sense of a strong promotional push for Windows Me. Microsoft is not hosting a single launch event as they did in the past. Instead, they're traveling to shopping malls around the country. This tends to lower the profile of the launch and make it seem like a minor release rather than a major one. The only reason to release a Windows Me now is to get anticompetitive products into the operating system before the Supreme Court can rule whether this is legal. The courts don't like to undo something that's been done; they prefer to draw a line that prohibits that kind of behavior going forward.

So you don't see Microsoft having to recall Windows Me?

Brian: It would be very hard to recall a product like Windows Me, and so I think that Microsoft executives are taking this calculated risk. No one at Microsoft would ever go on record to say this, but they're essentially releasing Windows Me to get their foot in the door, forcing users to use their software going forward.

We already know the types of things Microsoft will say about this. Things such as, "Well, users can install any programs that they want," and "Our usability studies show that people want these features, and that's why we added these things to Windows."

Brian: The question is not about Microsoft giving away software for free. RealNetworks gives away some of its software for free, Web browsers are given away for free, various utilities and shareware have been given away for free for years. There's nothing with that. What's wrong is making contracts with third parties that require them to use Microsoft software to the exclusion of other competing software. In the case of Windows Me, it's obvious that Compaq and Dell and other PC manufacturers can't remove the Media Player or Movie Maker in Windows Me.

However, a utility has become available that allows users to remove Media Player and Movie Maker and over 100 MB of other software from the installation of Windows Me.

What is it called?

Brian: It's called "98lite IV Millennium Edition" (See the 98lite Web site for details). I talk about this on my Web site. It makes Media Player and Movie Maker uninstallable and then reinstallable later through the Control Panel Add/Remove Programs application. In the default Add/Remove Programs Control Panel, those programs don't show up there.

Why is Microsoft making it impossible to remove these programs?

Brian: It's my feeling that, two years from now, or four years from now, we won't watch broadcast TV at specific times of the day as we do now. Instead, our Internet connections will be so fast and so widespread that we can get home late at night, click a button on the TV, and watch whatever programs were on earlier that night. We will become liberated from TV scheduling and we won't have to tape those shows on a VCR or a hard disk-based VCR device like TIVO, which require us to determine what shows we want to record in advance. We will be able to play back any programs from earlier that day, the day before, the previous week, whatever, using the Net.

I believe that Microsoft wants to control how streaming audio and video is operated by end users, and they see that getting this into Windows Me as a static component is the only way to ensure that people use their software, and not competitive software, for these purposes.

Coincidentally, Microsoft issued a bunch of press releases within the past 24 hours in which they discuss Microsoft TV. The server side is all based on Microsoft software, of course, and the client side is all based on Windows and Media Player software. So yeah, it's already beginning.

Brian: Interesting, I hadn't seen that. In the past, when Microsoft has taken a product from a 10 percent market share to a 90 percent market share, they've always said that users could install any software they want. But WordPerfect used to have a 90 percent market share and Word had a 10 percent market share. Lotus 123 had a 90 percent market share and Excel had 10. To reverse these figures, Microsoft persuaded PC manufacturers to bundle Microsoft Office with Windows when they sold a new PC. Because people already had Microsoft Office, they no longer needed to buy WordPerfect or Lotus 123. Aside from the quality or desirability of one product over the other, getting something for free is impossible to beat. They have simply eliminated competition in the market [by bundling products with Windows]: Microsoft Office now has 90 percent market share. We've seen the same thing with Web browsers, where Microsoft is very close to having a 90 percent market share. Including it free with the operating system is not a strategy that anyone can beat.

Microsoft is now in the early stages of doing this again with audio and video, whether it's on PCs, TVs, or handheld devices. But the fact is that Microsoft has not been very successful in getting its software into markets where they can't leverage their OS dominance. AT&T, for example, will not allow Microsoft to supply software for a certain percentage of the set-top boxes that AT&T will make available to its cable TV customers. And Microsoft has been unable to dominate the markets for handheld and palm devices and Internet-enabled cellular phones because these industries are run by people who are smart enough not to let Microsoft ever dominate them. Since Microsoft can't control all the handhelds, set-top boxes, or cell phones, the only option that seems to be left to them is to control how we get audio and video in the future. So they have to get audio and video into Windows in such a way that it's impossible to get it out.

This correlates exactly with my feelings on the subject.

Brian: I'm just surprised this isn't a bigger story.

I am too, actually.

Brian: I decided, hey, who cares about one more book? (Laughing)

(Laughing) Right, isn't that why we're here in the first place?

Brian: Users should not have to worry about whether [Microsoft] is going to be broken into two pieces or be prohibited from publishing new types of software. Users should be able to depend upon a competitive market where you have five or ten major players, they stay in business, and they continue to support you, indefinitely. Instead, Microsoft has put the PC user community in a situation of not knowing what will happen with Windows. Having these things litigated through the courts is a very unsettling way to predict what's going to be available to them in the future. I think it would be much better for Microsoft to accept certain limitations: You can't use one product that you have a dominate share in to go out and gather 90 percent market share for other products. That's why the U.S. has brought this antitrust suit against Microsoft, not to keep companies from being successful, but to ensure that there are five or ten companies that are successful, instead of only one.

Do you have any predictions for the trial?

Brian: I don't think that Microsoft will be broken into two parts. In a way, that's the least important outcome of the court case so far. Far more important are the remedies, which the judge imposed and then set aside until the Supreme Court makes its decision. The remedies require Microsoft to publish every technical API that is in Windows so that developers have the ability to write the same kinds of programs that only Microsoft developers can today, because of their inside knowledge of the product. The remedies also require that Microsoft cannot bundle for free anything called "middleware" with Windows for a period of seven years. In the decision, middleware is defined so broadly that it covers almost every kind of software that is in Windows today. They would not be able to bundle Microsoft Word, Internet transaction software, whatever. You could still download this software for free once Windows was installed, but that encourages competition. If there are ten products you could download for free, that's a great thing for users, because they could download the one that's smaller, faster, or better, as they choose.

Regarding Windows Me, what do you think of the product, any integration issues notwithstanding?

Brian: Windows Me is not Microsoft's most compelling update. I would not say that very many people will buy Windows Me in retail stores and pay real dollars to upgrade Windows 98. But that's not a great concern for Microsoft anyway, as Windows sells about 35 times the number of copies as preinstalled software on new PCs as it does in retail stores. Since that's the case, and retail sales represent only 3-4 of the overall sales of Windows, Microsoft can almost ignore the marketing. Microsoft will completely penetrate the market through the sales of new PCs, which eventually become all of the PCs that people have on their desks and in their homes.

What about down the road? Microsoft is currently working on a future version of Windows Me, based on Windows 2000, which will also incorporate all of these features.

Brian: The consumer version of Windows 2000 will be the product that most users are running by 2005-2006. The Supreme Court decision could be very important if it makes a clear distinction between what a monopoly company can and cannot do to harm competition with other products. If these features are incorporated into the consumer version of Windows 2000, it will be impossible for other companies to make a profit selling the software they're selling now. That would be a tragedy, one that's almost impossible to reverse. Microsoft has a monopoly in Windows and it should be restricted as to what other software can be bundled with it. Product tying is an issue that has come up with Microsoft again and again. Again, the problem isn't that the software is free. The problem is that there isn't a fair playing field because OEMs, PC manufacturers, and ISPs will exclude products made by Microsoft competitors so that they can get Windows. This has been made very clear, due to the contracts that have been revealed during the trial.

If someone is running Windows 98 today, is there any compelling reason to upgrade to Windows Me?

Brian: Of course, there are some new features in Windows Me that are better than those in Windows 98. The System File Protection feature and System Restore are things that should have been in Windows years ago. Having the ability to protect your system against changes that may make it impossible to boot up Windows is something that any reasonable Windows user would like to have. On the other hand, I think it would be crazy to spend $109 to upgrade from Windows 95 or 98 to Windows Me. If the price were $9.95, then sure, it's got a couple of features that are actually worth having. If Microsoft had competition, Windows Me would be $9.99 and not $109. That's where competition really helps the consumer and where a lack of competition hurts them a lot.

Assuming cost isn't an issue, is there any downside to the upgrade? Any incompatibilities with hardware or software?

Brian: I'm going to be writing a series of columns over the next few weeks in InfoWorld (http://www.infoworld.com/opinions/morewindowmanager.html), which will deal with the issues that may affect you if you install Windows Me, and the way in which you should configure Windows Me once you've got it. For example, people should always turn off anti-virus software before installing Windows Me. But you should also disable Norton Internet Security 2000, if you're using that, or any other type of personal firewall software before installing Windows Me.

The main downside that I've seen with Windows Me is actually the System Restore Points feature. Microsoft sets aside at least 200 MB of disk space to save System Restore Points. This is good, because if you have a problem with new hardware or software, you can use System Restore to get your system back to the way it was before you installed it. It doesn't change any of your data. The problem is that 200 MB is only enough room to save two or three points. Windows Me is programmed to save a restore point every after 10 hours of use by default. I believe that people may be better served by not saving restore points every 10 hours, because you may want a restore point that is several weeks old. When System Restore runs out of space, it starts overwriting the old restore points. The amount of disk space you configure for System Restore controls how many steps back you can take your computer. It may actually be preferable to turn off System Restore and only turn it on when you install new hardware or software. I'll be writing more about this in InfoWorld. But overall, System Restore is a good addition to the operating system.

What do you think about Microsoft's .NET strategy?

Brian: The .NET model seems to be an attempt by Microsoft to obtain subscription royalty payments every year for the indefinite future. In Office 10, which is in beta now, Microsoft Word will have a feature that connects to the Internet and let Microsoft know how many people on your network are using the word processor. If more than the licensed number are being used, then it will refuse to run until you upgrade the number of licenses. This is, of course, a better revenue model, but it's not clear to me that consumers will accept that or whether they'll go to cheaper software that doesn't have so many restrictions.

Many people in small companies are used to the idea that they can buy one copy of a piece of software like Microsoft Office and install it on two or three PCs. Of course, Microsoft doesn't like this. But people are also used to buying one music CD and taping it to play in the car. They don't consider that to be a copyright infringement, and laws are based on the consent of the governed. If the people feel that they have a right to make one or two copies of a product they've paid money for, and that's not thievery, then companies need to be sensitive to what users actually want. It's not clear that an attempt to get people to pay for every single piece of software that's ever used will be any more successful that Lotus 123's attempt ten years ago to impose copy protection on the hard disk of users.

That's interesting. In the case of a music CD, you might argue that the content would never be playing twice simultaneously, because you couldn't listen to it at home at the same time as you were listening to the tape you made in the car. But with software, it's conceivable that one copy of a piece of software could make the rounds at a small company and, say, be installed in fifty locations simultaneously. Most people would agree that that's wrong.

Brian: The software industry has ways to handle that scale of software piracy. That is a concern, because they can lose millions of dollars from pirates who are well organized and have distribution channels that allow them to sell perfect copies of software. On the other hand, copyright laws have always contained exceptions for personal use. And making a copy of a copyrighted product that you've bought has always been allowed, if it's for personal use. Making one copy of software to use elsewhere seems to be covered under the personal use exception.

The problem isn't people making backup copies of software. The problem is the mass quantity of perfect-looking pirated software that looks like legitimate software. But software is different because it's one of the first products that you can make a perfect digital copy of. You're not going to photocopy a $50 dictionary: It's cheaper to just buy another one. That's not true of software. There are probably two to three copies of software out there for each copy sold, but Microsoft is not going out of business. The business model of selling one copy and letting the user share it with one or two other people is a business model that has produced the richest men in the world.

The case of the movie industry not wanting DVDs to be copied on PCs running the Linux operating system seems to be the height of absurdity. The DVD companies are simply ticking off some of their biggest fans. If people can't play DVDs on Linux computers, and there are suddenly a lot of Linux computers, you are losing the market.

So what do you think of this whole Napster case? It seems to me that this service was created solely so that people could more easily pirate music.

Brian: Napster is a different case because their software is not enabling the user to make one copy for themselves. Napster is literally making your music available to hundreds of thousands of people at a time. But Napster could be used to bypass the music industry, which is controlled by a handful of powerful companies, and allow artists to publish music personally. Today, most artists would need to sell millions of CDs before they saw any royalties from the music industry. Think of how many artists you see in a given month that are selling two million CDs. It's not very many--Brittney Spears, Santana, and a few others--but for each these, there are many other artists who are selling far less than that, and they don't have any way to get to the major record labels at all. I think we're going to see a type of software, like Napster, that's very successful in bringing music from these artists within recording contracts to the attention of the public. Even the most successful recording artists make far more money from touring and selling t-shirts than they do from selling their records.

The whole discussion about Napster has been twisted into, "Napster is taking money from artists." It's not: Napster is taking money from the recording industry. The record labels want to stop Napster from turning into a large market and making the record labels irrelevant.

So do you think that Napster is operating within the law?

Brian: That would be for the courts to decide. My opinion is that software that makes it easy to make hundreds of thousands of copies of copyrighted works is on the questionable side. We could talk copyright all day, I guess.