Mac Geekery

I’m all about throwing more fuel on the fire, but many would tell you that I’m not good at starting a fire of my own. Apparently, I buy diesel by the truckload and keep leaving the matches at home. Last month, the codepoet posited his position on Apple selling OS X for Beige Hardware and had a lot of good reasons for why he felt they won’t. Others have given their reasons for why they think it’s in Apple’s future. No one on either side of the issue seems to remember one key fact, though.

Most computer buyers don’t spend a single dollar on their computer after the initial purchase.

It’s a fact you can live by. Ask around your family and poll some friends. You’ll find a few geeks, nerds, and some not-so-nerdy and not-so-geeky who will buy a shareware program here and there, or a cable from time to time, but as a rule people do not spend much money on existing hardware.

In the Apple Store, we focused most of our efforts on attaching peripherals, software, and other add-ons to new CPU purchases, but not for the reasons you might expect. It’s easy – especially for those of us with low opinions of a capitalistic society – to blame this on the salesperson striking while the wallet is open, but this is only partially true. Research – and hard learned direct experience – shows that most customers do their big spending only when doing really big spending. It’s very hard to convince someone to buy a brand new printer or scanner for a 2 year old computer. People buy software only when they absolutely need it and, generally, can’t get away with pirating it any more. Chronic Mac users buy OS upgrades, but even by the time I left the Apple Store in early 2006, a lot of my daily workload was still handling customers with Panther or worse. Most of my Jaguar customers hadn’t even run any of the free OS updates. How many of you Tiger users actually paid for your copy? The number of DVD-Rs of Tiger that I’ve pulled from a customer’s computer tells me that about 20% of you can put your hands down now.

There is a small subset of users who will continue buying software and OS updates after their initial hardware purchase, but many customers are perfectly happy to let their computer live out its life exactly the way it came out of the box. Most users don’t set Software Updates to check daily, don’t read Apple Discussions, and don’t know about Version Tracker. Any customer who would buy Mac OS X for their non-Apple hardware would have to buy whole new software bundles, as none of their existing software would work in the new OS. OS X doesn’t come with iLife or any of Apple’s other CPU-bundled software like World Book or Quicken. Apple already has a strike against it in that customers are reluctant to pay for upgrades of any kind. Now, you’re asking a customer to pay $129 for a completely new OS that will not run any of their applications.

There’s an upgrade game that happens at the Genius Bar daily. It happens any time a customer is considering paying for an out-of-warranty repair or when they’re wanting to upgrade their OS and iLife. It goes like this: I’m about to pay $X just to upgrade, but that new Mac mini is just $599… $300 is a magical point where users start really eyeing that Mac mini. Let’s start with the upgrade customer, though. The most common upgrade package is to buy the newest OS, the newest iLife, and some RAM. A lot of customers throw in an AirPort card, but since Apple made wireless standard, this happens less and less.

• Mac OS X – $129
• iLife ’06 – $79
• 512MB RAM – $99
• ——————
• Total – $307

The customer sees that they have to pay more than $300 to upgrade their computer the way they want it, and they see that for about $300 more they can get a brand new computer that is probably twice the hardware they already have and already has all the software that they want. The new computer virtually always wins the argument, and half the time they don’t even wind up with a Mac mini, but instead splurge on an iMac or PowerBook.

If they pushed an OS for beige hardware, Apple would be making any potential customer consider this same choice. Do I pay several hundred dollars to buy new software that is actually compatible with OS X, or save myself the hassle and just buy a Mac mini?

This reality has a fairly implicit side-effect. It means that the only economically viable option for Apple to push out OS X for non-Mac hardware is not to sell retail boxed copies to consumers. Instead, Apple would have to license it to other hardware manufacturers. This is really how Microsoft makes money on Windows, as well. The difference between retail sales and OEM sales is the difference between being able to buy a really nice house, and buying a really nice country. If you don’t believe me, see US vs Microsoft.

A small handful of PC manufacturers have the girth to resist Microsoftian threats should they license opposing Operating Systems, one of which is apparently Dell. Even if Dell licenses OS X, this doesn’t seem likely to provide much benefit to Apple, and offers a significant liability. Unless Dell were to select OS X as the default operating system on their computers, you probably wouldn’t see 10% of their computers ship with OS X. Dell sells about nine million computers each quarter, which means you would see – max – 900,000 of those ship with OS X, and I doubt you would see half that. Even given the 900,000 theoretically, that wouldn’t even double Apple’s OS shipments. And that’s Dell, the Big Daddy in the industry.

To really make good on such a move, Apple needs to find a manufacturer who can ship OS X as the default choice. Faced with the same challenge in the mid-90s, Apple had to turn to companies like Motorola and Umax that had no history in complete-systems sales and Power Computing, which didn’t even exist before buying a Mac OS license. To find a company willing to risk Microsoft’s scourge today, Apple will likely need to look for the same kinds of companies, further dooming the proposition. These companies lack more than just history. They lack infrastructure. Like Motorola, Umax, and Power Computing before them, a new licensor of the OS will need to license more than just the OS. They’ll need to license the hardware, too. This is starting to sound a lot like the cloning situation that Apple got itself into once before. It’s common knowledge that Steve Jobs killed the Cloners out of philosophical differences with the very cloning business model itself, right? But that’s only part of the story.

The cloners were a large part of Apple’s sickness. In fact, they very nearly killed Apple. Apple was doing all of the R&D on both the hardware and the software that made a Mac a Mac, and the cloners were reaping the benefit by undercutting Apple on the sales floor. Any attempt to license the OS or sell it in a retail box is doomed to repeat this, as well, as Apple would have to radically change its own business model. They’ve learned once – painfully – that you can’t make money licensing the widget and selling the widget at the same time. You pick one, and you do it. Apple chose to sell the widget. Arguably, Apple wouldn’t be the company it is today had they made the other choice, as it’s their control over the entire experience that is their strength.

A recent turn of events, however, has people pondering the extreme opposite. With the release of Boot Camp, many speculate that Apple is gearing up to discard OS X all together and switch to Windows as the default OS. This makes even less sense than licensing the OS. To begin with, Apple survives on moderate volume and high mark ups, and letting Microsoft take a cut of the cake would slash deep into Apple’s profit margins. Apple has a good thing going, why on Earth would they even consider letting another company swoop in and take control of their profits?

More so, switching to Windows would eliminate Apple’s largest selling point – that it’s not Windows. Switchers aren’t flocking to Apple because they hate Dell or Sony or HP. They’re knocking on Apple’s door precisely because they don’t run Windows. It’s not the cheap hardware they’re sick of, it’s the security threat. Customers don’t want Windows, but some need it. This app or that website may be Windows only, and people are willing to deal with the hassle of multiboot and virtualization if they can be free of the hassle of viruses and trojans most of the time. Most software developers won’t stop pushing Mac software because they know their Mac users prefer Mac solutions to Windows ones and because they know that most Mac users aren’t going to shell out yet another $200 for Windows plus the cost of their app.

You won’t see Apple selling OS X for PCs on the shelves, you won’t see Apple licensing the OS to other manufacturers, and you definitely won’t see Apple switching to Windows. What you will see is an influx of customers willing to try out Mac hardware, knowing that they can run Windows on it if the switch to Mac OS proves too much to handle, and knowing that – one way or another – they can run the apps they need at full speed.

Nothing more. Nothing less.