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It has dick to do with snobbery and everything to do with a tight control on your sales numbers. Apple started out with conventional distribution channels, and they got murdered every time they tried to go back to it.
When they experimented with the clones, they had to kill the program because instead of servicing the server market as intended, the cloners went after the desktop market and undercut their own PowerPCs.
By largely selling Macs through their own channels, Apple has a crystal clear picture at any given moment of what's selling and what isn't, and some of Apple's darkest moments historically were the result of upper management only finding out too late what was gathering dust on shelves.
I don't think the industry structure's going away, but trends change and companies survive by accepting that change and die when they can't.
My bad experience with Dell is the unbelievable amount of unnecessary variation under the hood: incompatible PC100 RAM, mobos without USB jumpers, inconsistent standards on specifying master/slave configurations, BIOSes that don't understand large HDs, built-in video with wretched lowest-common-denominator features, even nonstandard bay faceplates. The worst I ever had to deal with when buying hardware for a Mac was putting the model number through a RAM configurator.
Alcibiades makes good points, but still I wonder if we're not just feeding that variety of troll known as the "tech journalist" by even referring to articles like the one by the guy, Kress. We all know it's the thing to do in tech journalism to be either stirring the pot and digging up old flame wars like microkernel vs monolithic, or simply predicting doom for this company, that product, etc. It never fails to attract our attention, but also ensures it remains omnipresent. Would we all not be better off to simply ignore these kinds of articles and maybe encourage them to write about something more worthwhile?
Would we all not be better off to simply ignore these kinds of articles and maybe encourage them to write about something more worthwhile?
Topic writing 101
1: Write a good article to provoke intelligent reposnses.
2: If you can't do #1, then write a inflamatory article.
3: Result: Hit traffic.
Linux. While Apple's OS10 is a great OS,(arguably the best one out there) people just don't want to be locked out of their boxes as they are with OS10.
With Apple, that's Apple's OS.
With Linux, that's *MY* OS.
Which would you choose? Ownership? Or a permanent loan? I personally have chosen Ownership.
And by "savior", I mean the break of MS' dominance. Firefox has shown the way, and provides a first step into OSS. While it might be small steps, slowly, linux is gaining users and marketshare wheras the mac platform is not.
Edited 2006-05-30 21:12
Linux is gaining marketshare among nerds like us who compose a statistically invalid sample and don't usually influence PHBs. Even showing people a MythTV and the cost doesn't interest them in Linux. I know veteran UNIX programmers who can't be bothered to experiment with Linux.
OS X gains tiny marketshare among nerds who want the friendliest desktop UNIX they can imagine, but its real marketshare are college students who want simplicity, convergence, and the appearance of freedom. These people will buy more Macs in adulthood, and don't see political issues in it.
Each new Windows flaw or virus that makes the news sells Macs. Period.
Gamers stick with Windows because they have to, but their noise online is disproportionate to the actual size of their niche, a market served by unstable businesses and given to periodic market collapses.
There's room for everyone on this ride, but Linux is an unknown quantity to most people and its lack of a common platform or trusted vendor will keep it that way for a while. Apple's inability to embrace corporate markets will keep it inside a small proportion, but one it knows how to manage. Windows has nothing more than inertia and FUD to hold its place.
You've apparently never handed out Knoppix disks.
More often than not, you raise eyebrows.
Most people have had some sort of expensive or even catastrophic(in their view) event surrounding their computer and/or OS and would be much more willing to give something else a try if they knew something else even existed. Remember, Linux doesn't have mindshare.
You say "linux" most will reply with "what's that?".
I've handed out tons of Knoppix disks, both CD and DVD. People look impressed when I show them off but never have the nerve to check them out on their own. Not one has asked me to repartition for a dual-boot. There's a line between impressed and willing to leave their comfort zone.
The Mac's market share has not flat-lined.
For evidence:
1. Use of the Mac's default browser, Safari, has increased 75% over last year and is now the #3 browser behind IE and FF.
2. Last year, the Mac's sales share was growing at 2x the rate of growth for the overall PC market.
On the other hand, I haven't seen any reports to indicate a surge in Linux desktop adoption (other than "this is the year for Linux on the desktop blah blah").
The browser quotent doesn't seem very relevant given Apple's 2% of the market. Safari could never have more than 2% even if 100% of mac users used it.
And Mac sales share isn't all that relevant either. It is, but it isn't. Their sales are increasing but their marketshare isn't. If they released OS10 for the masses, then they'd gain both market and sales share.
===========On the other hand, I haven't seen any reports to indicate a surge in Linux desktop adoption=============
This entire article is self explanatory....
http://www.wired.com/news/mac/0,2125,64504,00.html
Whereas this one,
http://channels.lockergnome.com/linux/archives/20060518_xandros_see...
It's what's part of the article that's relevant.
----------------DC forecasts that the market for new and redeployed PCs running Linux will grow to $10-billion (U.S.) and 17 million units by 2008, with an installed base of more than 42.6 million units.-----------
That's not servers. And keep in mind, according to apple themselves.....
http://www.businessweek.com/technology/content/jan2004/tc20040126_9...
They've only got 25 million users.(which very likely is 30 mil now)
So clearly Linux is head of the game.
Apple zealots on the run?
The post from halfmanhalfamazing is not offensive, not off topic, does not contain spam or advertising, sooo... Why mod it down, unless it's because some disagree with his view? But disagreeing is not a valid reason for modding down, so that can't be it
In order to figure out the actual Mac number of OS X desktops, I'd like to look at the browser marketshare. To me it seems to indicate a Mac OS X userbase of 3-4 % and not 2 %.
From Mercury News (Steve Langberg):
"Meanwhile, the two research firms that track computer market share -- Gartner and IDC -- are in close agreement on Apple's decline.
"Gartner puts Apple's 1996 share at 4.6 percent, IDC at 5.1 percent. Market share in 2005 was 2.2 percent from Gartner and 2.3 percent from IDC. According to Gartner, Apple's market share peaked at 15.8 percent in 1980 -- four years before the Mac was introduced.....
"Apple is somewhat stronger in U.S. consumer market share, with Gartner giving Apple 5.8 percent in 2005 and IDC at 2.9 percent.
"It's also worth noting that Apple's worldwide market share did move up slightly last year from 1.9 percent in 2004, according to Gartner, or 2.0 percent, according to IDC.
"That's because Mac sales are exceeding industry growth rates. Apple shipped 38 percent more Macs in the fiscal year ended Sept. 24, 2005, than in the prior year, and shipments were up 20 percent in the last three months of 2005."
It is not what the article is mainly about, but it is not disputable.
Apples and Oranges .....
not more.
Apple makes stylish tech equipment, for a small group who is willing to pay Apple's prices, because they think that what they get is worth it.
Anyway, Apple has to keep on releasing clever product lines to stay alive, while Dell is doing it's buisness at corporate level, where the only counting arguments are the price and the service (what isn't a real argument when the price is low enough and all competitioners are as bad as you).
Sorry for my English.
-pady
Edited 2006-05-30 21:30
Even if Apple were catering to the corporate market I don't think they'd follow the same methods Dell has. You are correct in pointing out that Dell mimics Microsoft in simultaneously targeting two markets (home and corporate), but it bears notice that the markets are diverging enough to make one business model for both unfeasible. Corporate markets need consistency more than new features, and Windows has suffered for this ever since 98 and NT were merged to form XP.
Where the comparison is valid is to observe how a more targeted product manages to serve its base while making drastic changes in its software and hardware frameworks, compared to the difficulties of being all things to all people even when the architectural changes are comparatively minor. The trick here is to stop thinking of Dell and Microsoft as separate companies, since their goals and markets are indivisible.
Walt Mossberg was specifically addressing whether the end-to-end or component model was better for NON-PC devices. Alcibades' so-called "rebuttal" relies almost entirely on stats regarding the PC (marketshare, etc.), while ignoring the statistics for the actual kind of device Mossberg was talking about (e.g., the dominating marketshare statistics for the iPod/iTunes/iTMS).
Also, it is not true that there is no difference between the end-to-end and component models (for PCs or non-PC devices). The difference is that in the end-to-end model), one party is responsible for integrating and supporting everything. Even though Dell sells you a PC with a bunch of apps installed, they don't support all the apps. YOu have to go to the the third-party app provider, if not from the get-go, definitely once you upgrade the app. With apple, they support everything for as long as you own it - the hardware, the OS and most of the key apps everyone uses.
In the end, we've got here just another sloppy piece from an open hardware, techie zealot that can't accept the facts when it comes to the end-to-end model -- the model is simpler for non-technical users that just want to use their device (mp3 player, phone, whatever), without a bunch of glitches and fingerpointing among multiple component providers when something goes wrong.
Another point worth noting is that while alcibades makes note of the higher apple margins compared to Dell, he ignores the 80 percent plus profit margin generated by MS on windows. Further, the idea that the mac is insulated from competition is absurd. Apple/the mac was almost put out of business by wintel. Apple has to constantly strive to offer something more than wintel, otherwise people will not even think about buying a mac (because of the somewhat higher prices and perceived/real compatibility issues).
Edited 2006-05-30 21:58
PC or Non-PC, it's irrelevant. The music industry has always been a commodity market. Being tied to Apple hardware when purchasing from iTMS is, in principle, no more acceptable than it would be if I were to required to purchase a Virgin branded CD player to play CDs bought at a Virgin Record store and a Wallmart CD player to play music bought at Wallmart.
Once the novelty of online distribution wears off, consumers will demand the same type of interoperability they've always had with music.
They have it.
It's called an audio CD. You can make one right from iTunes.
Or use the analog hole and your cutting-edge 8-track recorder. Whatever suits your needs.
If you want the full quality of the original file you downloaded, you have to play it through iTunes or an iPod, or just leave the house and get a real CD, but it's not like people are buying iPods because they're locked in. They buy them because they're better. Fairplay just offers much more flexibility than WMDRM ever will.
They have it.
Only if you find a further degradation in sound quality an acceptable trade off for the interoperability you've had all along. I don't and I see no reason to believe that consumers in general will over the long run.
Fairplay just offers much more flexibility than WMDRM ever will
False. On the technical side, MS's DRM scheme offers a greater range of enforcable policies than FairPlay, making it more attractive to publishers, and it's available on a far greater range of devices, which will eventually win over consumers.
Hello! McFly! Anybody home?
I think the previous poster was referring to more flexibility for the consumer. Guess what? He's correct.
Your statement about MS's DRM only amplifies why Apple's scheme has been more successful. MS provides more flexibility for the content provider, therefore, it creates more confusion for the consumer.
False. On the technical side, MS's DRM scheme offers a greater range of enforcable policies than FairPlay, making it more attractive to publishers, and it's available on a far greater range of devices, which will eventually win over consumers.
Not gonna happen. MS DRM is dead, just no one bothered to announce it yet.
I worked with Windows Media DRM (Janus to be exact) on a development level and with customers directly. Its a wash. The SDK is about as a solid as using quicksand for the foundation of a house. Look at the support forums of any company using windows media DRM and you'll see post after post about licensing issues, tracks that suddenly become unplayable, device licenses that expire without rhyme or reason, Burn rights that fail. Its a wash out.
Customers get confused with all the different 'policies'. They don't get that one track might be transferable to a device, but not burnable to CD, or burnable to CD but not transferable to a device.
Windows DRM is NOT reliable and it has so many licensing options that it does nothing but confuse users.
Only if you find a further degradation in sound quality an acceptable trade off for the interoperability you've had all along. I don't and I see no reason to believe that consumers in general will over the long run.
Which is why I buy CDs, and then rip them in iTunes so I can listen to them on my iPod. People who buy from the iTMS have their own reasons. For one, it's instant music that may be hard to find in stores. Or maybe because they just want one song and not a whole album. Or again, because you get the neat previews and then can't resist the impulse buy. But I think the big seller is that "plays for sure" is a fact, not a slogan. If they currently or ever don't have an iPod, they can burn a CD for the car, or hook up a Mini or any other computer to a stereo. It's a few clicks to move their entire downloaded library to a new computer. Also, on top of being the best service, iTMS has a great amount of momentum. Other music download services may be gone in the morning.
False. On the technical side, MS's DRM scheme offers a greater range of enforcable policies than FairPlay,
What good is a range? Customers don't get to choose which DRM policy their files will have on them. Fairplay has one policy, and it's very pro-consumer.
making it more attractive to publishers,
Because they can more effectively restrict the customer's freedom. This is why a "range" is bad.
and it's available on a far greater range of devices, which will eventually win over consumers.
You'd think so, but it ain't happening. The iPod gets more popular with each iteration. MP3 players that aren't iPods are a true anomaly in the wild.
Once the novelty of online distribution wears off, consumers will demand the same type of interoperability they've always had with music.
Or simply demand that DRM is not used; the only people who want it are the music industry - the tech industry? hell no, its yet another damn thing they have to maintain, audit and provide security updates for, the less they have to worry about, the better; the last people who will want DRM, along with consumers, tech companies.
At the same time, however, tech companies know that if they don't provide DRM technology/facilities, the chances of them being able to offer online services, music players etc. would be gone.
If people *really* wish to vent their anger at the DRM issue, target it at the companies who are demanding that DRM to be used; simply refuse to purchase their music; purchase off independent labels who refuse to offer their music protected by DRM, who offer vanilla mp3's for download rather than extorting money out of customers per month as with the subscription models do today.
Agreed. With the exception of DVDs, where the protection scheme is trivial to circumvent and there exists no other alternative, I personally refuse to purchase DRMed media. While I find it heartening that eMusic is doing as well as it apparently is, I think it's highly unlikely that major content cartels will agree to such a distribution scheme anytime in the near future (although that might be their eventual undoing).
Also, while I'm kinda reflexively opposed to DRM, I must say that I have a hard time seeing anything inherently wrong with rental models such as the ones currently used by Napster and Real. The price is still too high for what you get in my view (not to mention that their services aren't available on my operating system of choice), but the model itself seems basically fair to me. If Netflix were to sell a closed piece of hardware and corresponding service which downloaded DVD quality video from the internet and allowed me to select from among their entire catalog (essentially changing their turnaround time from 48 hours to 4 hours), I'd be very tempted even if the device was heavily locked down and limited to playing the content on a single display.
...are doomed to be eaten alive by them.
The computer market is, with a few important provisos, a commodity market. Apple has long been a niche player in the computer market because it has opted to fight the inevitable by offering a so-called end-to-end solution. It's often said that Linux has been the primary cause for the flat growth seen in the Unix market over the last 6 years, but that, I believe, misses the primary economic motivator at play: commodity hardware. Sun didn't lose business to RedHat because CIOs picked Linux over Solaris, but because Linux was "good enough" while enabling a transition to commodity x86 hardware.
As regards music, it should be noted that the overall music industry has been a classic commodity market for a very, very long time. While the music itself is arguably not an interchangable commodity (a position which can tough to maintain after listening to radio for an hour or two), it is distributed in the form of standardized media (or standardized radio broadcast protocols) available from numerous suppliers and played on standardized equipment available from numerous suppliers.
Although Apple has done a surprisingly good job (much better than Sony's similar attempts) of leveraging its first mover status in the newly emerging market for online distribution so as to counteract the economic pressures which inevitably lead to market commoditization, they will fail in the end. I have absolute confidence that 5 years from now iTMS will be, assuming it still exists at all, a bit player in online music distribution. Unless, of course, Steve Jobs overcomes his allergy to commodity markets and allows FairPlay to be widely licensed to any device manufacturer who wants to implement it. Otherwise, in 5 years time MS's Play for Sure DRM scheme will be ubituitous. Your cell phone, your TV, your computer, your car, your wristwatch, and maybe even your toaster and refrigerator will all interoperate with each other and your Play for Sure media, while iTMS purchased media will locked into to a couple of devices.
As companies, I don't particularly like either MS or Apple, although I would generally pick Apple as the lesser evil. I also don't like DRM, but I'm not naive enough to believe that it's going to go away. If there's going to be DRM, MS's offering is far more beneficial to consumers than is Apple's. MS is content to get a small part of a lot of pies, but Apple only wants to play in markets where it gets the entire pie.
I used to read arguments like this in economics classes, usually in the context of demonstrating particular fallacies. Much of your argument depends on what makes the most sense to you. Commodity markets overtake non-commodity markets because they're a more sensible business model.
Unfortunately, our elections prove that consumers don't make their choices based on those reasons. Comfort, price and inertia play a larger role in those decisions. Apple didn't get out of traditional retail because they weren't getting a big enough percentage of sales, they got out because it didn't work for them. Repeatedly.
The iPod is overpriced, its newest features are routinely cribbed from hackers who've demonstrated them on previous models, its product life is ridiculously short, and yet it's still the dominant music player, iTunes is still the dominant vehicle, and the government of France blinked in a staring contest. Either you have to accept these facts and adjust your understanding of markets accordingly or make up some "people won't stand for this forever, you know!" response that dismisses it. Pick the more intellectually honest one of the two.
Music players aren't computers. They don't adhere to any platform and so far there hasn't been a reason for vendors to adopt one. They don't have to be built to a particular set of specs and run a familiar OS, so your comparison of consumers to CIOs is nonsensical.
If you truly believe building an OS to the widest distribution of hardware available is a market-building strength, look at Linux and Microsoft. One OS has to reverse engineer chipsets and the other's vendor has to sign NDAs with the manufacturers of those chipsets. It's a technical nightmare at times.
Your other fallacy is extrapolating long term trends from short term trends. What happened during the 90s was a short term trend. Cheap PCs on a common platform made it possible for Windows to dominate. Short term, it worked beautifully. Long term, it yoked the Windows OS to a platform they have limited control over.
When it works, it's beautiful. When it doesn't, it sucks terribly. People actually care about those things and remember them when buying their next PC. And on that subject, those commodity PCs only last 36 months before most of their owners are convinced they have to be replaced, and that accounts substantially into market share. I kept a Mac running the latest OS from 1995 to 2002 and the upgrades still cost less than replacing the system.
No offense, but I'm having a very difficult time making much sense of your comment. I'll try and respond insofar as I can.
Commodity markets overtake non-commodity markets because they're a more sensible business model.
Yes and no. Commodity markets don't necessarily make more sense to producers. Producers generally fight commoditization over the short term. Consumers though are greatly advantaged by commodity markets, which represents the economic pressure that normally leads to commoditization.
Unfortunately, our elections prove that consumers don't make their choices based on those reasons. Comfort, price and inertia play a larger role in those decisions.
Are you speaking of rational choice models? Genreally speaking, I have a lot of objections to rational choice theory (although it is a useful assumption for constructing certain models).
Either you have to accept these facts and adjust your understanding of markets accordingly or make up some "people won't stand for this forever, you know!" response that dismisses it. Pick the more intellectually honest one of the two.
Nothing I've said ignores the fact of Apple's present dominant status. Instead I've presented the opinion that, absent a change in position over the licensing over FairPlay, they will eventually fail.
Music players aren't computers. They don't adhere to any platform and so far there hasn't been a reason for vendors to adopt one. They don't have to be built to a particular set of specs and run a familiar OS, so your comparison of consumers to CIOs is nonsensical.
Sorry, I can't make sense of what you're saying here.
If you truly believe building an OS to the widest distribution of hardware available is a market-building strength, look at Linux and Microsoft. One OS has to reverse engineer chipsets and the other's vendor has to sign NDAs with the manufacturers of those chipsets. It's a technical nightmare at times.
And yet that business model, whatever technical difficulties it may involve, represents well over 90% of the entire market. I'd say the market has chosen a winner.
Your other fallacy is extrapolating long term trends from short term trends.
Please point out to me one single instance over the last century of a commodity market which has shifted to a non-commodity market. (hint: there isn't one)
Please point out to me one single instance over the last century of a commodity market which has shifted to a non-commodity market. (hint: there isn't one)
Never say never. The market for high-end steel string accoustical guitars is a counter example. As recently as 1990, the market was dominated by a small number of commodity manufacturers, most notably Martin and Gibson.
Due to many factors, there has been a rebirth of luthier-built guitars, and in 2005, more custom high-end guitars were sold than factory manufactured guitars in the same category.
Nothing I've said ignores the fact of Apple's present dominant status. Instead I've presented the opinion that, absent a change in position over the licensing over FairPlay, they will eventually fail.
The successful companies in the computer business have been the ones whose business models evolve to at least some extent. That said, Apple's core business model has been stable for them, and their core business is selling hardware which doesn't require a nerd to help you with it. That's a two-part sentence and the first clause is the linchpin. Because the second clause holds true, they haven't had to ally themselves with enormous distributors to stay alive. Remove either part and the model disintegrates. While Apple has changed their PR repeatedly over the years, the general impression of what their product line stands for hasn't. Apple brings you the power to do X without having to learn Y.
Pundits foam at the mouth telling everyone that Apple should compete on the same terms as a software company with virtually no overhead whose primary markets are hardware manufacturers and corporate customers. Microsoft's revenues are at least two-thirds inside sales, and the poor adoption rate for upgraders in both the OS and office suite bears this estimate out.
Back to FairPlay. No company in its right mind is going to give up an advantage until either market pressure or litigation forces them to. What I fail to hear from anyone predicting iTMS' demise is the exact mechanics of it happening based on current trends, or anything other than the nebulous threat of Microsoft suddenly overtaking a market they've had years to penetrate without demonstrable success. Dell had every economic and distribution advantage on their hands and still blew it completely.
First to market is not to be underestimated.
"Music players aren't computers. They don't adhere to any platform and so far there hasn't been a reason for vendors to adopt one. They don't have to be built to a particular set of specs and run a familiar OS, so your comparison of consumers to CIOs is nonsensical."
Sorry, I can't make sense of what you're saying here.
Your earlier post made an analogy of CIOs buying PCs rather than Macs to music players, and I was reminding you that analogies are illustrative devices to explain an unfamiliar concept by showing a familiar one, but they are NOT to be used as a logical proof. Computers, mobile phones, and music players are markets covered by the same news outlets and manufactured by the same kinds of companies, but there's a repeated logical failure on the part of pundits who assume that the market forces in each area are substitutable. They aren't; Dell can't sell music players and Apple can't sell ROKRs.
"If you truly believe building an OS to the widest distribution of hardware available is a market-building strength, look at Linux and Microsoft. One OS has to reverse engineer chipsets and the other's vendor has to sign NDAs with the manufacturers of those chipsets. It's a technical nightmare at times."
And yet that business model, whatever technical difficulties it may involve, represents well over 90% of the entire market. I'd say the market has chosen a winner.
1. Anthropomorphizing an abstraction of complex phenomena to explain its actions is the business of religion, not economics. That's why I quit the major with a 4.0 average and half my credits finished. "The market" is not a person any more than Lady Luck is.
2. If you've learned anything in econ, it's that things always change and the losers are the ones who cannot see it coming or resist it. What works beautifully now may have less of a competitive edge five years in the future. The phrase "all other things remaining equal" depends on the word 'remaining.'
3. Mediocrity usually wins out because it's easiest to maintain and cheapest to produce. This isn't sour grapes, it's a definition of free market capitalism. Never laud a product based on how many units it sells.
Pundits foam at the mouth telling everyone that Apple should compete on the same terms as a software company with virtually no overhead whose primary markets are hardware manufacturers and corporate customers.
I've made no complaint about Apple's business model for selling computers. It's not a scalable model, but it's worked well enough keep Apple in business servicing a small but not insignificant niche.
What I fail to hear from anyone predicting iTMS' demise is the exact mechanics of it happening
As I've stated elsewhere, under the assumption that DRM protected media, whether distributed online or on a physical medium, will eventually grow to replace the current model of unprotected media distributed on CDs, were Apple to continue to dominate the market for DRM media to the same extent they currently do, it would result in an Apple monopoly occupying the role currently played by every record store and every manufacturer of CD players.
There are purely economic reasons why such an eventuality is highly unlikely, mostly having to do with market efficiencies, but the most immediate reason is that the major content cartels (RIAA, MPAA, etc...) will never allow it to happen. And it is largely going to be the content cartels, not Apple, who will exercise the deciding vote in determining how the distribution model for DRM protected media eventually works out.
Would you rather negotiate licensing and distribution agreeements with a monopoly interest or an array independent vendors and various industry consortia?
As of right now, Apple and MS are the only games in town for DRM. While Apple's licensing of FairPlay would result in an Apple monopoly position clearly contrary to interests of the content cartels, MS's offering allows for what is essentially a continuation of the status quo in the existing market for media distribution; multiple retail channels and multiple hardware manufacturers competing with one another around standardized and interoperable media.
he nebulous threat of Microsoft suddenly overtaking a market they've had years to penetrate without demonstrable success
The installed base of devices more-or-less compatible with MS's DRM is already larger than the install base of devices which work with Apple's scheme (eg., cell phones, DVD players, game consoles, computers, MP3 players, etc...). What's missing currently is a corresponding retail channel, although you might say that Apple is currently working the kinks out of the basic business model and doing the heavy lifting in generating initial consumer interest, which others will in good position to capitalize upon a little further along in the game.
First to market is not to be underestimated.
Agreed. I don't want MS to win this war. Actually, I'd really prefer almost anyone else win this war. Apple could, if they were license FairPlay under RAND terms to other retailers and hardware manufacturers, give MS a serious run for its money. But by sticking to an end-to-end business model, Apple is ensuring that it will never grow beyond a niche player and, absent the arrival of another serious contender, is all but handing MS the win.
analogies are illustrative devices to explain an unfamiliar concept by showing a familiar one, but they are NOT to be used as a logical proof
Absolutely true. Economics doesn't traffic in logical certainty or analytic truth; it arbitrates among competing claims according to standards of statistical probability predicated upon models derived from material inferences, which are themselves not fully interpretable in a formal sense (the problem of the "hidden variable" being a pretty much intractable one within the domain of economic inquiry).
We must deal with limitations of the tools we have at hand.
there's a repeated logical failure on the part of pundits who assume that the market forces in each area are substitutable
That's not an assumption which I've made. At least not knowingly. My prediction of Apple's inevitable marginalization in the media distribution market isn't based upon a specious analogy with the computer market, but is instead premised primarily upon the fact that they are offering a distribution channel which, when compared to the status quo, disadvantages consumers, cuts many powerful and heavily vested interests out of the loop, and which would result in severly diminishing the relative power of the single most important and powerful players (eg., the content cartels).
Anthropomorphizing an abstraction of complex phenomena to explain its actions is the business of religion, not economics.
My anthropormorphism ("the market has decided") was simply a turn of phrase intended to serve as shorthand for an aggregate statistical phenomenon arising from a large number of individual choices distributed across many autonomous agents.
Mediocrity usually wins out because it's easiest to maintain and cheapest to produce. This isn't sour grapes, it's a definition of free market capitalism. Never laud a product based on how many units it sells.
Au contraire. Mediocrity coupled with the economies of scale attainable in commodity markets uniformly represent a greater collective good, measured both in terms of wealth and utility, than technical excellence which remains the exclusive purview of a select few. In other words, interoperability beats innovation in all but a few corner cases.
As companies, I don't particularly like either MS or Apple, although I would generally pick Apple as the lesser evil. I also don't like DRM, but I'm not naive enough to believe that it's going to go away. If there's going to be DRM, MS's offering is far more beneficial to consumers than is Apple's. MS is content to get a small part of a lot of pies, but Apple only wants to play in markets where it gets the entire pie.
Where is Microsoft playing for small portions? They have the majority of the market on operating systems, office suites, and web browsers. They're desperately pushing to hold on to the web browser dominance and for more control of game systems, servers, and multimedia. If Windows Media catches on, it'll be a disaster for consumer choice. MS doesn't even offer a basic player for a second platform anymore. Anyone with Windows Media is forced to use Windows, period. How is that beneficial to consumers?
Where is Microsoft playing for small portions?
Every single transaction in which MS profits involves other players, each of whom profits more than MS does (harware OEMs, consultants, third party software publishers, systems integrators, etc...).
If Windows Media catches on, it'll be a disaster for consumer choice
Speaking as Linux user, I'm sympathetic to this claim. That said, an MS victory in the DRM standards war is far better for consumers in general than an Apple victory (Linux user lose either way).
MS doesn't even offer a basic player for a second platform anymore.
True, but what's important is that they will license their DRM scheme to anyone for use on any platform. In fact, MS will license their DRM scheme to someone who wants to implement a compliant player on Linux (which already exist but only for embedded Linux use).
Anyone with Windows Media is forced to use Windows, period. How is that beneficial to consumers?
They can use Windows or the thousands of media devices which already support MS's DRM. The door is also open to third parties to make compliant players for use on either Macs or Linux boxes.
Every single transaction in which MS profits involves other players, each of whom profits more than MS does (harware OEMs, consultants, third party software publishers, systems integrators, etc...).
I understand what you meant now about only controlling part of the process, but I don't agree with this at all. If those services made more money, Microsoft would be doing those services. Pressing a copy of the bits they've written costs virtually nothing. Licensing it costs even less. With WMDRM, they've created a product that they can distribute on an infinite scale, making money whether the devices that use it turn a profit or go bankrupt. That would make for a lot more control over the customer and the industry than Apple has if it ever caught on.
Speaking as Linux user, I'm sympathetic to this claim. That said, an MS victory in the DRM standards war is far better for consumers in general than an Apple victory (Linux user lose either way).
Linux users will choose whatever device supports mp3 or vorbis. I admit Apple doesn't make it easy for people without iTunes, but now that we have GTKPod, the device is just as usable with unprotected music for Linux users as it is for everyone else. There's no reason to think the iPod will ever lock out unprotected files (and if it did, people would switch to RockBox), but with the quagmire of WMDRM devices out there, you can bet some others will. Remember when Sony tried this with ATRAC3? They're still licking their wounds, and Apple is gaining at their loss. Less protection = more sales. Apple has been fighting the industry about the strength of their DRM for some time now, and the consumer is still winning.
They can use Windows or the thousands of media devices which already support MS's DRM.
You mean Windows and one of however many devices. You can't load DRMed files onto a DRMed device without a DRMed operating system, of which Apple supports twice as many as Microsoft. But Apple makes it easier to avoid DRM anyway. You can download and reassemble a CD or buy a real CD and rip it to an unprotected format. WiMP rips to MP3, but not by default. One reformat or migration where unsuspecting users find out their backed up music doesn't work anymore, and it's straight to iTunes. I'm sure quite a few happy iPod owners have WMDRM horror stories.
It is worth taking the time to look at them carefully. There can not be much argument about what they show. They show that for 10 years, Apple's revenues and profits have fluctuated, but Dell's have grown consistently.
Ok Steve Jobs hasn't been back at the helm of Apple nearly that long, and just before that was a couple of total idiots of CEO's who went for profits instead of market share.
From this, you can see that in computers, Apple is basically a no growth company. Apple sold around 1.4 million machines/quarter in 1999; there was then a decline to around 800k a quarter, which lasted for several years, and we are now back to the 1999 levels.
Actually since Steve Jobs has been back at the helm and all these Apple Stores have been opening up, Mac market share has gone up. Read the reports how well these Apple Stores are doing, or for cristsake go visit one yourself, they are all mostly jam packed.
Second, Apple considers itself a Consumers Product Company[/b] sure this is a smaller market share that BIG GOVERNMENT or BIG CORPORATION that can buy several thousand PC's at a stroke of a pen.
The needs of general consumers is different than the needs of BIG X.
[i]The revenue growth which the Apple chart shows is mostly due to iPod sales, which are now reported to be 40% of revenues.
I agree the invention of the iPod/iTunes combination is a great success for Apple. That's how this company (under Steve Jobs) survives, through innovation and market domination for as long as possible. They need and will most likely continue, which is a great benefit for us consumers.
From the Ars charts, Apple PC market share was 4% in 1999, then fell, with some ups and downs, to a bit over 2% currently. There seems to be a lower limit of around 2%, but the trend has been steadily down for the last 5 or 6 years. In summary, Apple is not growing in computers, and its market share is falling.
Well first of all Apple caters to consumers, which tend to buy just one machine, instead of business/government which needs are different and buy in bulk. A business that wishes to have very little problems with their machines and can deal outside of the Microsoft software environment, with a bit of self customized software thrown in, can reap a much higher ROI than with cheap PC's and Windows high IT costs.
In fact supposedly the installed base of Mac's is closer to around 10-16% because they last and people don't feel the need to "get a new computer" because their operating system is always appears messed up and complicated like it is on Windows PC's
Another thing I read that Dells have a average turnover rate of 2-3 years compared to 3-5 years for Mac's. So how can you count yearly market share by unit sales if your forcing your customers to prematurely upgrade?
My Dual 2 Ghz w/30" has a low $500 year Total cost of ownership, and that's a 3D gamers machine. What's the use if one has to pay $1500-$2000 for a Dell every two years? Who really pays more?
Why has this happened? Two main reasons. Apple is in a distinct segment: the segment of the locked hardware/software combination. This segment has not been growing. The segment consisting of OS on hardware from a variety of sources has been growing. Second, Dell has executed better. It has controlled costs, increased share of its growing segment, and supplied what the market wanted in terms of total mix, channel, package, support.
Yes Dell caters to the larger, more multi-purpose big business and government markets. Apple caters to the smaller vertical, "appliance like" consumer market and art fields.
Is Apple growing as fast as the industry in the immediate past? If you look at performance in the last quarter, you will find the industry grew at 13% quarter on quarter, and that Apple sales declined 11% quarter on quarter. As you would expect, this shows that Apple is not converting large numbers of Windows users. The number of converts buying from the US stores has gone up a little, but this rise is some thousands per quarter as a percent of 1.1 million or so total sales.
It doesn't matter, Apple caters to a niche market and that niche market will grow according to the overall growth of the general PC market. We Mac users don't expect Apple to take over the world. We are quite happy with our market niche much like there is a BMW niche amongst the sea of everything else. There will always be a certain percentage of the population that will want something different that what everyone else uses, something better than Windows.
All that matter is Apple remains profitable with the success of the iPod and the Apple Stores being immensely profitable, it doesn't matter too much that the market share is substantially less than Dell or HP or Windows. Apple has billions in cash, they are doing fine.
Apple is the last survivor in the PC space with this business model.
And the oldest, and still profitable and still going. Where is Compaq? Where is Gateway? Where is IBM PC division?
Who is providing new innovations to the computer industry? Dell?
Only Dell and Apple are making any profit in selling computers and Dell is eyeing Apple with worry since all those Intel Mac's can now run Windows. They are changing their business model and opening Dell Stores!
Apple's margins are about 30%, Dell's are about 15%. Check out Morningstar to confirm this. It has also permitted Apple to milk the base. If you are locked into OSX, you have to pay the Apple price to get your next hardware. If you're running Windows, you can get your next machine from anyone you like.
Uh one doesn't figure in all the free software that gets thrown in a new Mac. Quality games, iLife software, the almost headache free computing experience (one Mac virus in 21 years for me) the hardware generally just lasts and lasts.
You pay a bit more upfront YES, but the yearly total cost of ownership is LOWER on most Mac's because we turn over our machines LESS often!
Dell strives to be the low cost producer
Exactly and Apple (under Steve jobs) strives to be (and is) the industry innovator, it lives on the bleeding edge. It's business strategy is different from Dells.
With the recent announcement of Windows running on Apple hardware, combined with all the Apple Stores. Steve Jobs pulled a neat trick and made Michael Dell most likely shit his pants. Steve Jobs is addressing the problems Apple had inflicted by years of incompetent management and direction and Apple is reaping billions.
<1>Second, is Apple's a more viable model? No, there is no evidence at all for this. We have seen from Morningstar that Apple has not performed any better than Dell. We've seen from the Ars Technica material that the Dell model accounts for some 97% of global PC sales. Apple is the only survivor using its business model, and no-one has tried to enter the industry recently using it.[/i]
Apple business model has changed, now their machines can run Windows, which is the established OS in the major business and government markets.









