Sunday, September 4, 2016

De facto monopolies

Sometimes a company, or service, becomes so immensely popular, that it effectively kills or at the very least overshadows all competition, even without the company having to do anything in particular in order to achieve that situation. In other words, that company or service becomes a de facto monopoly in that particular market.

Valve's Steam service is the quintessential example of this. There's nothing stopping other companies from creating their own content distribution / online shop of video games for the PC, and some have tried. However, the fact remains that Steam holds effectively a total monopoly status in this field. If you want easy access to an enormously wide range of video games, often for very cheap, completely legally, Steam is pretty much your only choice. (Other similar services by other companies do exist, but they tend to be significantly narrower in their range of games, and are significantly smaller in terms of their customer base.)

I have never heard of Valve having achieved this status via questionable tactics, so they have achieved it simply because they became popular with the PC gaming public.

Google's web search service is another major example. Again, there is nothing stopping other companies from offering their own search services (and many do), but Google just overshadows them almost to oblivion. It is pretty much the de facto web search service which everybody uses for pretty much everything. It's so ubiquitous that the name has even entered vernacular, in the form of "to google" to mean "to make a web search". The two have almost become synonymous.

YouTube is arguably another example (although possibly not as radical as Steam or Google's web search). There are many free video publishing and streaming sites out there, but nothing can compete with YouTube in terms of size and popularity. While in this case there are viable alternatives, nevertheless YouTube overshadows them quite severely. (Although arguably Twitch is the de facto monopoly on live video game streaming, as well as other types of online content streaming related to not just video games but also other relatively similar events.)

Microsoft Windows has a de facto monopoly on PC operating systems. While Linux is nothing to scoff at, the fact remains that it just can't compete. In many cases you don't have a choice, as most software, which you might need eg. for your work, is made for Windows only. Also, while Linux can run some PC games, it just can't compete with Windows as a gaming system. If you are a PC gamer, you are pretty much forced to use Windows. There is no practical choice.

The problem with monopolies is that they can be detrimental to the customers. Having a monopoly status means that you don't have any competition. When you don't have any competition, it removes the motivation to innovate, to progress, and to keep your customers happy (with eg. low prices). Having a monopoly status means that you can abuse your customers (at least within the law) because there is little chance of losing them; since there is no competition, there is no danger that your customers will switch to one of those.

Often a monopoly means higher prices for the offered products. Since there is no competition, no alternatives, the company with the monopoly can set the prices as they see fit. Othertimes the problems arise in other ways, such as limited functionality (because the company has no motivation to innovate and progress), and abusing their customers, eg. in terms of their privacy. Biased censorship of ideas and expression may also become a problem.

In some cases many customers are actively creating monopolies with their purchasing decisions and even soft activism. As an example, in the "VR war" many people consider the HTC Vive to be the clear winner over the Oculus Rift, and are pretty much advocating for the former to be recognized as the sole option, and for the latter to die off.

This particular example is really obnoxious. These people do not understand that what they are advocating for is a monopoly, which will be detrimental to themselves. A complete monopoly of one single VR system means that its producer company can dictate anything they want, because there will be no alternatives, no competition. It will ensure that prices will remain high, and development will be strictly controlled by the company. The losers in this situation are these customers themselves.

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