The Microsoft Surface Pro went on sale yesterday and immediately sold out, leading many pundits and other observers to declare the launch a failure. Meanwhile the Surface RT has sold an unknown number of units (because Microsoft won’t reveal actual numbers) but let’s use the estimate of 1 million that was popular for a while. Oh, it isn’t popular right now because any time an analyst, any analyst, speculates on a lower number people love to glom onto that. Even at 1 million the Surface RT is considered a dismal failure by pundits. At the same time Google’s Nexus 4 smartphone, far cheaper (e.g. $50 with a two-year mobile plan commitment) and available at far more retail outlets than the Microsoft Surface, took a few weeks longer than the Surface to hit 1 million units. And it is considered a runaway success! You see the Nexus 4 is supply limited. But wait, so is the Surface Pro and that is a “failure”. And how about that iPhone 5 introduction? My wife waited weeks to get her hands on an iPhone 5, because they were sold out from the moment of claimed availability.
Doesn’t it seem like Microsoft is being judged by a higher standard than the rest of the industry? They are. And to a surprising extent, as frustrating as it is, it is fair. Apple has nothing to prove. Google has nothing to prove. Amazon has nothing to prove. Microsoft has a lot to prove. In the court of public opinion, or at least pundit opinion, Microsoft is expected to have big runaway success stories before it can leave its 20th century legacy behind and deserve to be uttered in the same breath with Apple, Google, and Amazon.
For pundits to have declared the Surface a success it would have needed a blowout introduction on the order of the Kinect. Recall the Kinect sold 8 million units in 60 days and was the blowout consumer electronics product of the 2010 holiday season. That is the standard by which all Microsoft product introductions are now measured. And it is a tough standard to meet.
While Microsoft would love to see products like the Surface, Surface Pro, Windows 8, and Windows RT getting love from pundits and sales that blow away all expectations that isn’t their central focus. They know they are running a marathon, not a sprint, and that what really matters is where they are in two, three, four, or more years. They know they could have goosed the short-term results for the Surface RT by using a lower price and making it more broadly available. The headlines would have been great as many millions of units (assuming they overcame supply constraints) were purchased. With feverish demand, and a clear “winner”, being constantly sold out would have then been a plus.
Unfortunately any blow-out short-term success would have come at a high-price. It would have irreparably damaged the OEM channel. It would have set a precedent that Microsoft was a vendor of low-price rather than of high-value devices. With low-price comes the risk of a “race to the bottom” against commodity device manufacturers and the inability for Microsoft to ever make money selling devices. Microsoft needs to make money, Apple-like money, if it hopes to be in the devices business in the long-term. Moreover, a key purpose of having its own devices is to bring its latest innovations and viewpoint to market. Low-price means low-cost, low-cost is the antithesis of new technology introduction.
I know some are thinking it is silly for Microsoft to have worried about setting a precedent by using a low-price to ensure quick adoption of the Surface and Surface Pro, but Microsoft worries about precedent a lot (in many different areas). It is far easier to lower prices than to raise them. The time will come when Microsoft decides it is appropriate to lower prices, either directly or by repackaging (e.g., always include a Touch Cover with the Surface RT at the current tablet-only price; or eliminate the 32GB version and sell the 64GB version for the 32GB version’s price). Meanwhile it will have established its position as a vendor of premium devices and retained its ability to target the market segments that most interest it.
Precedent also plays a huge role in why Microsoft has avoided giving out numbers for Surface, Surface Pro, and Windows Phone 8 unit sales. It doesn’t matter if they are happy or unhappy with the numbers, nor how good or bad the numbers are, they are trying to avoid being drawn into the numbers game. Once they start disclosing weekend, monthly, quarterly, or any other absolute numbers the expectation is that they’ll continue to do so on a regular basis. And that these numbers would then dominate every discussion they tried to have about products.
Let’s face it, if they confirmed numbers that were low then it would just add to the damage caused by speculating they were low. If they announced numbers that were at or slightly above expectations it wouldn’t help them (and the headlines would still shout out “mediocre” or “modest”). The only really helpful number would be something crazy high, and that would show up in so many other metrics that Microsoft wouldn’t need to confirm them. The frenzied speculation would do the positive PR job for them. So they have chosen not to play the game.
In the short-run Microsoft’s approach means taking a lot of body-blows in the press and blogosphere and risking slower adoption rates as a result. In the long-term Microsoft’s success or failure in its approach to the “post-PC era” will become evident and, in the case of success, it will have changed the nature of the conversation. Perhaps not only meeting the higher standards to which it is held, but setting a new standard by which Apple, Google, Amazon and others are judged.
So for now all we can do is be frustrated by Microsoft being held to different standards than others. And wait for the day when we can look back and, hopefully, correct the perceived injustice.