Rival Services Are Pitched on XP
Most computer makers are taking advantage of Microsoft Corp.’s antitrust woes to place a variety of rival products and services on the opening screen of the software giant’s new Windows XP operating system.
Flouting Microsoft’s desire for an uncluttered desktop screen, the companies are getting cash upfront for some of the icons and fees from others, including AOL Time Warner Inc., when they generate subscribers.
“It’s certainly an opportunity for [PC makers] and their partners to make money,” NPD Intelect analyst Stephen Baker said. “It’s one of the few ways they can guarantee an audience.”
The rebellion has forced Microsoft to alter part of its message in a $500-million marketing campaign for Windows XP that starts next week.
Consumers shopping for a new PC will get to choose from the biggest range of services and products package in their opening desktop screen in history. And the desktop image can be critical in luring customers to fee-based services offered by the PC makers and others.
Some computer makers are stuffing the screen with as many as 20 come-ons for all manner of products and services, from digital photography programs to ESPN sports news.
The wide range of products built into desktops is a indirect result of the government’s landmark antitrust case against Microsoft, analysts said. Faulted in court for a multitude of restrictions it placed on computer companies, Microsoft backed off an earlier plan to require PC makers to serve up a blank Windows XP desktop screen.
“We have been out talking about the clean desktop and its benefits,” Microsoft spokesman Jim Cullinan said. Now, he said, “it’s out of Microsoft’s hands.”
In previous generations of Windows, PC makers included a large number of icons from Microsoft and some from the manufacturers. Microsoft said consumers were confused and wanted less clutter.
But only one major PC maker, Gateway Inc., is shipping machines with the empty desktop screen favored by Microsoft.
The others won’t disclose how much they are making through their alliances, but analysts say it is much more than before.
“As the business model is changing, they are getting more from the desktop than they are from the hardware,” said Chris Le Tocq, an industry strategist in Los Altos.
Dell Computer Corp., Compaq and Hewlett-Packard Co. all have icons for rival service provider AOL on their Windows XP machines. Once those firms abandoned the clean desktop look, Microsoft required them to display three of the software giant’s icons: one for MSN Explorer Web services, one for the Internet Explorer browser and one for the Windows Media Player.
A clear victim of that requirement is RealNetworks Inc. of Seattle, which makes a rival player for Internet video and music. The company was negotiating with computer companies for placement, said spokeswoman Erika Shaffer, but nothing has come of it.
Shaffer said most consumers will download RealNetworks software anyway because most streaming content is in that format.
And in a bid to sell accessories and higher-profit services, the computer companies are shipping machines with symbols for their own products.
The most extreme example of that trend is Hewlett-Packard. An HP machine with Windows XP for sale recently at a CompUSA store in San Francisco had more than 20 icons. They included the three required Microsoft icons, as well as ones for AOL, Quicken Financial Center and McAfee virus protection, and HP’s icons include HP Tour Guide, HP Learning Adventure and Help and Support.
“We’ve tried to package the desktop for our strategy of delivering personal solutions,” said Rob Wait, an HP business manager.
HP also is pushing digital photography functions, where it is spending marketing money and stands to gain extra from its big share of the market for printers and ink.
Dell and Compaq are taking a middle course, each including about 10 icons, including the three for Microsoft products.
Compaq’s desktop is heavily influenced by a year-old deal with Walt Disney Co.’s Internet arm.
Under that three-year, $100-million accord, Compaq sells computers to various Disney divisions, and it advertises on Disney Web sites. And Compaq’s new XP desktops have icons for three of the entertainment giant’s Web sites, ABC.com, Disney.com and ESPN.com.
U.S. retail sales of PCs to consumers are expected to fall 30% this year from 2000, said NPD’s Baker.
As demand has dwindled, the computer makers have intensified their price competition, leaving profit margins in the single digits at best.
Financially, it makes sense to pile on the options, even at the risk of overwhelming consumers.
“You’ve got someone who’s just purchased a device, and they were prepared to pay money,” Le Tocq said. “The next time you’re going to get them is when they get home and power it up. Your chances after that diminish very rapidly.”
