The Apple Luxury Tax column generated a huge amount of discussion. In fact, in preparation for a response, I printed out the comments and the final page count was just under twenty pages. Jesus, folks like to discuss all things Apple.
There were many issues that I wanted to comment on, but upon reading and rereading the comments, a thought popped in my head that I want to lead off with.
I would like to suggest that Apple Computer is an absolutely huge success that need do nothing radical than stay it’s current course in order to continue to be a spectacular success story.
Huh? HOW’S THAT KOOL AIDE RANDS?
Once you get by the Apply ][ and early Mac years, Apple made a career of being just about out of business. Having not been there nor wanting to go over Apple’s balance sheet from ‘88 to ‘98, I can’t say whether or not Apple was on the brink of bankruptcy. I do know that while Apple was stumbling along, their major competitor in software, Microsoft, was putting together an unheard of string of hugely profitable quarters combined with phenomenal market share growth.
The story is similar if you choose to compare Apple with it’s hardware competitor, Dell. In the intensely competitive PC space, Dell has apparently come out on top, scaring the likes of HP into buying it’s competition (Compaq) in order to compete.
Problem is, both comparisons are flawed. Folks want to compare Apple to Dell and Microsoft because “they build the same stuff” and, in a very basic sense, they do. Still, they are in very different markets. Microsoft and Dell sell to the folks who need software and a computer. Apple sells luxury versions of these and sells them very well. Apple owns the high end luxury computer market and no one else comes close and when someone tries, they suck because that isn’t their primary business.
The Apple Luxury Tax is applied to those people who to make a statement about their hardware and software. The statement is not, “I hate Microsoft”, it’s “I appreciate the finer things in life.” The finer things are, by definition, scarce and; therefore, more expensive. This means the folks who can purchase these expensive items are in the minority and THEY LIKE IT THAT WAY.
This is stockholder heresy, but the absolutely worst thing Apple could do is become a market leader in software or hardware. The moment such a thing occurred, those who espouse the delicate beauty of Apple products would begin to rail on how Apple had sold out and turned it’s back on those people who got them there, the minority.
Apple is in a delightful, profitable Catch-22.
First, you have the business world who is saying, you must grow to survive. Take that four billion in the bank and give Microsoft a run for their money. Then,, you have the Apple zealots. They want Apple to grow, to be successful, but doing that means Apple could become mainstream (and very profitable) and WHO WANTS THAT? Well, everyone… sort’f.
Understanding this kooky contraction actually illuminates a couple of recent Apple news events:
1) Apple sucks at enterprise/big business sales not because they don’t know what that customer base wants, it’s just that customer can’t afford them — Apple’s gig is high-end niche player. This would suggest that for their enterprise play, Apple should be targeting an customer base who has lots of money and hasn’t already spent a lot of it on Windows infrastructure. I’m thinking BioTech… clusters… emerging uses for servers.
2) Apple continues to lose the education market share. Sure, they owned it in the beginning because they were the first ones there and they had the “ease of use” bit going for them. Rumors are that 80-90% of current Apple education customers are still on OS 8/9. It’s not that they don’t want to upgrade, they don’t have the money and if they did, they’re buying value and value = PCs. The main reason Apple hangs out in this market is because STUDENTS MAKE GREAT ZEALOTS. This idea alone must drive the deep discount Apple must be throwing at accounts of a reverse switch.
Ok, other random feedback from readers comments:
- Instantaneous sign that you are an Apple zealot: Usage of any of the following preposterous terms when describing Apple products “it just works” or “it never breaks”. I tend to stop reading articles when they include such claims because they don’t always work and they do break. Yes, even iPods… a lot.
- “There are no ‘OEM’ Macs. It’s a closed platform”: Of it is, only Apple can make Macs. If everyone made ‘em, they’d be more and they’d cost less. Bad.
- “iApps rock”: I agree. What these applications do well is have a compelling answer to the question, “How quickly can I build the thing that I want” where thing may be a photo album, movie, CD, etc. The point is the mean time to productivity with Apple software is simply less than comparable products. The Final Cut Pro success story appears to imply the same is true of the Pro-version products. I can’t comment, I haven’t used them.
- “The truth worth”: The point made here was that there is no way to describe the Mac experience in words. You must touch Apple products in order to have an opinion… this also helps with swallowing that 30% tax. This must be one of the main reasons for the retail stores.
MacWorld is next week and the rumor sites are a buzz with tidbits of fact and fiction regarding potential announcements. I predict the following based on this column:
1) Following the steps of .Mac, the iApps suite will become a product that you must purchase.
2) While Apple may throw a new eMac out for education customers, it will continue to be very expensive relative to PCs. (Where very = >30% a comparably equipped PC)
3) Whatever the “dazzling secret” is, it’s going to cost us.