First, it was the MP3.com Beam-It service, which the record labels sued into oblivion (but which I used while it lasted, and which was extremely well-done). Then, it was Lindows, sued unsuccessfully by Microsoft for trademark infringement.
Now, Michael Robertson’s new outfit has received a nastygram from Microsoft. And I think Microsoft is in the right.
MSFreePC.com offers a streamlined way for users to submit claims for their share of the billion-dollar Microsoft California settlement. Users are told that they can get up to $100 in free merchandise for filing a settlement claim and assigning their settlement rights to the company. If they just happen to have purchased the one configuration of software, for use in California, that gets them the maximum $100 settlement amount, the site claims that they will receive a free PC while supplies last. No documentation is required for these claims, so anyone can file a fraudulent claim with little chance of getting caught.
All claimants receive free downloads of Lindows software, but no physical product. The 10,000 free PCs don’t get shipped until the settlement administrator disburses the settlement money, which won’t be for nearly a year. Of course, users aren’t told of this delay until after they’ve electronically signed a power of attorney document authorizing Lindows.com to file for and cash their settlement check.
It’s a brilliant scheme, really. Lindows.com takes almost no downside risk. If they don’t get paid, they just seeded the market with a bunch of their software, and they never have to ship the free PCs. If they do get paid, they ship 10,000 machines that retail for $150 for $100 each. There’s probably no loss there, but I’d expect they’re counting on more than 10,000 $100 claims, and any settlement money received beyond the cost of 10,000 cheap machines is pure profit. The marginal cost of each copy of Lindows distributed is close to zero; if we add in the network effect value of the distribution, the net cost may be negative.
“So,” you ask, “Why do we care? This is a wealth transfer from Microsoft to Michael Robertson, and he does cool entrepreneurial things and innovates with his money. There’s no waste here. Most of these people would never have filed claims if it weren’t for the site, so they’re not really losing anything.”
Trouble is, two-thirds of the leftover settlement money, if any, goes to California public schools. Is society better off, for example, if Michael Robertson gets $1,000,000 or if the schools get $666,666 and Microsoft gets $333,333?