Monopolies suck… and then they die

In 2000, I was in a meeting in the headquarters of one of my clients Air Canada when it was announced that Air Canada’s acquisition of rival Canadian Airlines had been completed.  At that point Air Canada controlled over 90% of the domestic commercial air travel market in Canada.  The atmosphere was festive and there was much discussion about how now that the competitive battle with Canadian was finally over, Air Canada would dominate the market for the foreseeable future.  But competitive markets abhor a vacuum.  Almost immediately, tiny WestJet, a Calgary-based airline that had been a niche player in the Canadian market up to that point went on a major expansion into eastern Canada and within a year it became clear that Air Canada faced a fiercer competitor than ever.  Today, Air Canada is still the largest airline in Canada but it controls less than 50% of the national capacity, WestJet is a very strong competitor and several other start-ups such as Porter Air have also established themselves as pesky competitors.  One could easily argue that the market is even more competitive than it was on that fateful day in 2000.

At this point you might be wondering what that anecdote has to do with the golf industry.

I’ve been hearing persistent rumors that the largest golf software company (GolfNow) may be in negotiations to acquire its largest competitor (EZLinks).

(PLEASE NOTE THAT I HAVE NOT HEARD THIS DIRECTLY FROM ANYONE INSIDE EITHER COMPANY AND THIS COULD BE COMPLETELY FAKE NEWS.  BUT THERE IS A POINT TO BE MADE WHETHER OR NOT THIS PARTICULAR ACQUISITION OCCURS.)

If GolfNow and EZLinks were to consolidate, the combined company would be 5-10 times larger than its next largest competitor and I suspect visions of monopoly power would be dancing in the heads of the company’s executives.  I have even heard two golf course owners whose opinions I highly respect suggest that a software monopoly in the industry would be a good thing because the surviving vendor would have enough capital to properly serve the market and we could reach “a consensus” on an industry solution.

IMHO, that’ll never happen even if #1 and #2 join forces.

Why not?  Because monopolies suck.  Unless you are operating in a non-capitalist market, monopolies are not sustainable.

Monopolists almost always get greedy, overplay their hand and leave openings for competitors.

Monopolists almost always get complacent and allow customer service to deteriorate.

Monopolists almost always get ‘big company disease’, creating opportunities for more nimble competitors.

And… in the end… even if a monopolist plays a strong hand… stuff happens.

One size doesn’t fit all. Customers in free markets demand choices and will make decisions based on their specific needs… different strokes for different folks.

Innovative entrepreneurs invent better mousetraps and disrupt markets.

Crossovers from adjacent categories change the very definition of markets and new competitors appear overnight.

It will be interesting to watch the golf industry software market evolve over the next few years… but no matter what happens don’t ever believe that we have reached an “end game”… there is no such thing.

Got an opinion on this?  Please share it below.