Hey guys, it’s Greg with Apple Explained and today we’re looking at one of the most
infamous company rivalries in tech industry, and maybe even in all of business.
And that is the rivalry between Apple and Microsoft.
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So in order to understand how the relationship between Apple and Microsoft developed, we
have to travel back to 1976, the year Apple was founded.
The Apple I was released in early April of that year and Steve Wozniak built it around
the idea that it would run a custom version of Microsoft’s BASIC operating system.
When the Apple I system was phased out in September of that year and development on
the Apple II began, Microsoft caught wind of it and asked Apple if they wanted to license
a more full featured version of BASIC.
Steve Jobs declined, as they were happy with their version of the operating system Wozniak
wrote.
But when they showed off the Apple II at the West Coast Computer Faire in April 1977, they
were overwhelmed with complaints since their operating system didn’t have floating-point,
which basically means the machine didn’t understand numbers below −32,768 or any
numbers above 32,767.
As trivial as this might sound for consumer-level apps, it became a big problem as businesses
began using computers for accounting and couldn’t use the machines to process any sizable numbers.
After Apple heard all these complaints, they ultimately licensed Microsoft’s BASIC software
for a flat rate of $31,000, or around $130,000 in today’s money.
This license, which ultimately created an operating system called AppleSoft BASIC, actually
saved Microsoft from near bankruptcy.
Microsoft had previously licensed BASIC to Commodore for their PET system and ended up
loosing a ton of money on the agreement.
But the Apple II was a run away hit, with over six million units sold over its 16 year
run on the market.
Now when Steve Jobs approached Microsoft and asked them to write apps for the 1984 Macintosh,
they jumped at the opportunity.
Some of the first Microsoft productivity apps, known as Office today, were made with the
Macintosh in mind.
In fact, Word, Excel, and PowerPoint were all published in 1985 exclusively for Macintosh.
At the time, the two companies were great partners and actually helped support each
others businesses, until Bill Gates and Steve Jobs had a disagreement about the management
of Apple.
Bill Gates was reviewing Apple’s business plan and thought it didn’t make much sense,
they weren’t planning on licensing their software to anyone.
He brought it up to Steve, but the idea of licensing Apple’s operating system to other
hardware companies was unthinkable for Jobs.
So Bill, being the clever businessman he was, went back to Washington and began development
of Microsoft’s own operating system with a graphical user interface, called Windows.
Now when Windows 1.0 hit the market in November 1985, it was met with mixed reviews.
The most striking thing about the Windows operating system was its curiously close resemblance
to Apple’s Macintosh System 1.
With clickable icons, mouse and cursor interface, and multiple windows for multitasking.
Now Apple had licensed some bit and pieces of their own operating system for Microsoft
to use, but the similarities went beyond minor details.
Some journalists had high hopes that Windows would be a high performing operating system,
but it fell short of expectations, which tends to be the case with initial versions of software.
And one of the most criticized aspects of Windows was its high system requirements,
which meant users needed an expensive, powerful computer to run Windows properly.
But despite all that, Windows 1.0 served an important purpose in the long run, since it
became the core building block on which modern day Windows is run.
So two years after Windows 1.0, Microsoft brought Windows 2 to market in the winter
of 1987.
This was an incremental release and introduced more advanced VGA graphics with 16 individual
colors, keyboard shortcuts for pro users, and desktop icons for quick access to different
parts of the operating system, and resizable and overlapping windows, all of which were
very similar to the Macintosh operating system.
So when Steve Jobs saw Microsoft’s Windows 2, he wasn’t thrilled.
He accused Gates of stealing Apple’s user interface and style.
But as much as he hated this, he knew Apple was in no position to take legal action against
Microsoft.
And shortly after the Macintosh was released, Jobs was replaced as CEO by then board member
John Scully.
Now Jobs advised Scully not to sue Microsoft, or else they wouldn’t be as willing to develop
apps for the Mac anymore.
And keep in mind that a huge selling point of the Macintosh was its massive library of
software.
So Microsoft abandoning their hugely popular suite of Mac apps would be platform suicide.
Which was part of the reason why Jobs didn’t want Scully to go through with the lawsuit.
But another reason was that the case would be very difficult to win.
The grounds of the suit were basically theft of the “look and feel” of the interface,
which wasn’t really something a company could copyright or patent.
In spite of this, Scully went ahead and brought Microsoft to court in July 1994 and the case
was thrown out in September of the same year.
The court ruled that "Apple cannot get patent-like protection for the idea of a graphical user
interface, or the idea of a desktop metaphor under copyright law.”
Now I should also mention that in the middle of this whole ordeal, Xerox sued Apple for
stealing the interface they were suing Microsoft for from their Xerox Parc system, but that
case was thrown out as well.
Anyway, Bill Gates appeared to be right about licensing an advanced operating system to
different manufacturers.
Because their licensing of Windows ended up generating a whole lot of profit for Microsoft
and essentially established their operating system as the standard, leading to a virtual
monopoly on the computer OS market.
Because by 1990, Windows ran on 84% of computers worldwide, and increased to 90% in 1994.
As Microsoft’s market dominance grew as they released newer and more advanced versions
of Windows, the bitterness between Apple and Microsoft grew even more palpable.
It became so tense that during an interview in 1995, Steve said Microsoft “[has] no
taste” and that “they just make really third rate products”.
But that attitude didn’t last long, because when Steve Jobs returned to Apple in 1996
he enlisted the help of Microsoft to return the company to profitability.
Microsoft invested $150M in stock and paid another $100M in compensation to Apple for
various copyright infringements.
When the deal was announced at Apple’s Worldwide Developers Conference in 1997, Steve was met
with a less than favorable reaction from the audience when a video stream of Bill Gates
was projected on a 70 foot screen above the stage.
Now many years later when Jobs looked back on
this event, he regretted allowing Bill’s head to loom over him on stage since it appeared
Microsoft was in a more dominate position.
Now this substantial investment from Microsoft helped Apple produce some of the products
that made them the company we know today.
A year after Steve was boo’d, he went back on stage and announced the first iMac which
was met with resounding approval by the media and customers alike.
Three years later, Apple shipped the iPod, securing Apple’s reputation as a lifestyle
brand as well as a tech company.
Now around 2006 what we now know as Windows Vista was in public beta under the codename
‘Longhorn’.
And the similarities between Longhorn and Mac OS X weren’t immediately obvious to
customers until Apple began pointing them out during their keynotes.
For example, OS 10 Tiger introduced a system wide file search called Spotlight.
Months later, a Windows beta included a search bar in the start menu.
And Internet Explorer 7 was a total redesign from the ground up in an attempt to compete
with Safari but that never really worked.
The same year, Microsoft released the ultimate iPod killer called the Zune, the only problem
was it never reached the same level of success as the iPod.
And to give you an idea of why Microsoft even decided to make the Zune, you have to remember
that at the time, Apple had essentially total market dominance in the portable music industry.
Their steps in releasing iTunes for Windows, creating different versions of the iPod for
different markets, and changing the port from Firewire to a USB powered 30 pin connector
all helped Apple cement their position as the dominate music player brand.
Now Microsoft recognized this and initially tried to compete with iTunes by creating the
MSN Music store in 2004.
Within a year, the library of songs on MSN Music actually decreased from 1.5M songs down
to 1.1M due to awful sales numbers and Microsoft not investing many resources into the service.
Finally in 2006, Microsoft discontinued MSN Music to release the new Zune music service
along with the Zune 30 music player.
To help create hype around their product, Microsoft ran some interesting TV ads and
also some pretty desperate marketing campaigns.
For example, Microsoft hired 200 college students to be “Zune-masters” on their campuses.
They would promote the music player and host what were called Zune events.
But unsurprisingly those efforts failed to generate any meaningful level of excitement
for the device.
Now the Zune 30 had a few features to make it stand out from the iPod, including a larger
display, a built in FM radio, a navigation touch pad some critics found easier to navigate
with, and the ability to share music files between other Zune users within a 30 foot
radius over wifi.
Over the course of six years, Microsoft would continue to upgrade the Zune and refining
its design, introducing a smaller version which ran off flash storage to compete with
the Nano, and a fully touch screen version to compete with the iPod touch but resembled
more of a 7th gen iPod nano in size.
At its peak, the Zune only accounted for 9% of the music player market, coming in behind
the iPod’s 63%.
And at the time the Zune was being phased out, it was barely at 2% total marketshare.
But Microsoft didn’t let the Zune dampen their spirits.
Because weeks after the release of Windows 7 in October 2009, Microsoft opened their
first retail store in Scottsdale, Arizona.
The design of the store was, as Cult of Mac put it, “a carbon-copy remake of an Apple
Store” down to the light stained hard wood floors.
The cash-wraps were designed down to a T to resemble the genius bar in Apple Stores.
And the employees were even recruited from Apple Stores in the area.
But it’s wasn’t a total copy, though.
Since Microsoft invested $60,000 in touch screen tables and likely thousands more in
wide screen video displays for customers to demo certain products.
Now in recent years, the blatant copying from Microsoft has subsided quite a bit.
Sure, they released the Surface tablet which was compared to the iPad in Microsoft’s
own ads, but there are quite a few iconic features that separates it from any iPad released
to date.
Even more recently, Microsoft has begun shipping Microsoft branded computers like the Surface
Book and Surface Studio with a unique design language of their own.
So looking back, it’s easy to see why Microsoft and Apple had such a tumultuous relationship.
Both have felt wronged by the other at some point, although most of their bitter feelings
have slowly faded away in recent years.
So that is how Microsoft and Apple became rivals, and if you want to vote for the next
video topic, don’t forget to subscribe.
Thanks for watching, and I’ll see you next time.