boomberg bloopers

[Frank Hecker]

Chloe Hoffman wrote:
> * As an aside predatory pricing was never raised in MS' antitrust troubles
> probably because of the bashing this theory has had in antitrust circles.
> Further, to make that charge stick is very difficult especially when the
> facts were not there - the competitor MS was allegedly trying to drive out
> with free Explorer was already (and continued thereafter) giving away
> Navigator for free.

I don't disagree with the overall thrust of your comments, but I do want
to correct a error of fact here: Netscape was _not_  "giving away
Navigator for free" (at least not before January 1998 -- see below)
although I concede it may have appeared that way to the "person on the
street". The reality is somewhat more complicated and interesting, so
I'll beg your pardon for a brief digression:

For 1995 through 1997 Netscape Navigator and Communicator were made
available under a proprietary license that allowed 90-day evaluation at
no charge; after 90 days the license expired and the user no longer had
a valid license unless they purchased the product. Many home users
ignored this and continued to use the software without paying for it,
and Netscape had an unofficial policy of looking the other way and not
pursuing home users for "piracy". Other home users got Navigator or
Communicator truly at no charge through their ISPs or PC vendors, who
signed OEM contracts with Netscape allowing them to distribute
Navigator/Communicator; the OEMs paid Netscape through a combination of
per-copy fees and bounties resulting from Netscape users signing up for
ISP services. For this latter group of home users Navigator/Communicator
was "free" in the same sense that Windows is "free" when they buy a PC:
it had been paid for by someone else.

However there were no such "good deals" for corporate users of
Navigator/Communicator, who paid relatively large license fees to
Netscape directly or indirectly (i.e., through resellers); typical
prices ranged from $30-40 per user down to a few dollars per user for
large site licenses. We in Netscape government sales did a client/server
site license with the US Department of Defense in September 1997, and
Communicator accounted for several million dollars of the total deal
price.

Netscape Communicator and Navigator were not made truly gratis until
January 1998, when Netscape reduced the price to zero in response to the
pricing of IE and Outlook Express. Not so coincidentally, this is the
same time that Netscape announced its intention to release Communicator
source code; this had been proposed internally for quite a while, but
was only implemented once Netscape gave up all hope of charging
licensing fees on the binary version.

So regardless of whether you consider this an instance of predatory
pricing or not, the fact is that Netscape derived significant revenues
from licensing of Navigator and Communicator from the beginning of 1995
through the end of 1997, and those revenues declined drastically over
that period, first in relative terms and then in absolute terms. I just
looked at a 10-K that has a breakdown of product revenues for 1995-1997;
for those three years Netscape had $365M million dollars of revenue
attributable to Navigator/Communicator, more than a third of total
revenues over that period. Navigator/Communicator revenue accounted for
over 90 per cent of Netscape's revenue for 1995, just over half in
1996, and less than 20 per cent in 1997. If Netscape had had the same
relative amount of Navigator/Comunicator revenue in 1997 as it did in
1996, then its revenue would have been about $325M higher than the
actual figure; as it was Netscape lost $115M in 1997.

Frank
-- 
Frank Hecker            work: http://www.collab.net/
frank at collab.net        home: http://www.hecker.org/