Can Apple Cut a Swathe Through the Home PC Market?
Can Apple make significant inroads into the PC market? Last week we decided it was possible provided you accepted that notion as being significant relative to Apple’s current market-share. However, within the whole PC market exists smaller market segments. The three major ones are business, home and education. The business market could be further segmented and you will find Apple doing very nicely in the multimedia segment.
However, let’s look at the home PC market. Can Apple make significant gains, not only relative to its current market-share but also as a portion of Windows PC home market-share?
Looking again at last week’s graph, we see that it has been done before.
That massive spike in 1983 was the Commodore 64 making huge inroads into, or possibly even creating the home PC market.
Could any computer do a “C64” and leap to 40% market-share overnight? Quite unlikely. In 1983 the market was fragmented among dozens of vendors, each with its own OS. The IBM-PC and clones were still only selling in the business market. Another factor was the market was tiny, so for example, Commodore sold 2 million C64’s in 1993 and achieved 40% market-share, whereas in 1993, Apple sold 4.5 million Macs, but that only equated to 12% of market-share. And nowadays its only about 4% of market-share.
Commodore’s success in 1983 is similar to the iPod’s success. The right device entered a small and fledgling market with many players but none significantly dominant. However, unlike Commodore with the 64, Apple has been able to successfully leverage the early success for ongoing success.
Commodore’s C64 sales would have been almost exclusively in the home market. Could Apple release a Mac that could chomp away such a large segment of the home market? On the one hand no, given people’s attachment to Windows, they’re not going to get out of their comfort zone.
But on the other hand, if something pushed them, then maybe. And what’s more, getting out of the comfort zone is not such a big issue because people’s real attachment to Windows hinges on two things: Windows and MS Office; familiarity and compatibility. Both of these are things Apple can overcome, and are tackling. Eg Bootcamp and the “Get a Mac” ads mentioning Office for Mac regularly.
Apple can make serious inroads into the home computer market with the right device and the right marketing. In personal computing, with the convergence of computing and home entertainment, the home market is at a point of upheaval. Recently on ZDNet there was a report that “70% of Americans are unaware of what Media Center PCs can do” despite many of them owning PCs with media center capabilities.
Can Apple convince consumers that the media center is a fledgling device and all vendors are on equal footing? And/or can Apple convince consumers that the ability to run MS Office and Windows on Macs puts it on equal footing with any Windows PC? If Apple can do either or both of these, it will take a huge chunk of the home computer market.
There is another segment Apple could use to make inroads into the home market. Games. (If you’ve all finished laughing, I’ll continue.) Recently there has been talk of Apple getting into games development, and Business Week ran a story on the possibility, with an interview with Glenda Adams of Aspyr Media. She believes Apple should get serious about games.
Games are an interesting beast. It seems in the games market, every year there’s a “killer app” released. Titles like Quake, Halo, The Sims, and Civilization easily spring to mind.
Could Apple develop a game that is a “killer app”? Given Apple could limit it to OS X only, yet still sell a computer that runs Windows, it’d have some decent leverage. But would gamers buy a computer they couldn’t upgrade? Gamers tend to like tricking up their machines with triple overhead foxtails and so forth. No current Mac for the home market allows that. You have to get a PowerMac (Mac Pro?) and the entry cost is quite high.
If Apple takes Nintendo’s approach though - i.e. that gameplay, not graphics, is king - then they really could produce a game that gamers would want and that would run on an iMac or even a Mac mini. Civilization and The Sims are two example of must-have games that didn’t rely on eyeball busting graphics.
As Business Week says:
...why doesn’t Apple try its hand at building good games for the Mac on its own? Apple is full of creative people turning out great software, but why hasn’t it ever turned out a game? After all, gaming is in Apple’s very DNA. Early in their pre-Apple careers, Steve Jobs and Steve Wozniak (some accounts suggest that Woz did most of the work) created Breakout for Atari
Between this week’s and last week’s articles, we now are at a point where we’ve identified a few ways Apple could crank its market-share up, such as by:
- Having a superior and stable OS when Vista comes out
- Producing a true Media Center computer, that like the iPod, defines the device and the market
- Developing a must-have game
- Allowing Windows to run on Macs (which of course they’ve already done)
The home market is open again and for the first time in several years. If Apple plays its cards right, it can take a sizable chunk of the market. Although I didn’t intend this to become a series, I will discuss in the next couple of weeks one of the factors I see preventing success and why switching to Mac is a real option.
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In you list of things Apple need to do you list:
- Having a superior OS to Vista when it comes out.
and then you list
- Allowing Windows to run on Macs (Already Done)
of course the superior os is already done as well. I can envision no way that Vista will surpass the current OS X, in its current state (with so many features already pulled and more probably to come) it has no chance of even catching OS X.
I personally don’t understand why we want Apple’s market share to grow. I rather like being apart of this small tightly-knit community of computer-literate people. Imagine what it would be like if all the fools started clogging up Apple’s Discussions and related forums. I don’t want my Mac to become an everyday product, I like the look of awe when I whip my iBook out. I like being different. And the small market share keeps Apple working hard to produce great products in pursuit of the large market share I hope they will never achieve.
I was on vacation when Boot Camp was released and first heard about it in a USA Today article on the flight back to the states. My first reaction was “Why???” Why would I want to run Windows on a Mac? I chose Apple for the OS, not the hardware itself. The next question then is would I by a PC if it could run OS X? I can’t imagine any other manufaturer to be able to offer the speed and stability of Apple hardware, so probably not. Not to mention the distinct look of all Apple products. As far as why we want to increase Apple’s market share. Well, being a stockholder helps drive that desire…LOL. Plus being a computer technician as long as there are more Macs being purchased job security looks good. If gaining a larger market share becomes the driving factor in development though I think that quality and stability will suffer. So lets hope than more people buy Apples because of the quality, stability and security rather than the price or trying to fit in.
Imagine what it would be like if all the fools started clogging up Apple’s Discussions and related forums. -bonniejonnie
tundraboy? Is that you? Regardless, I’d like to reiterate what I said last week: Apple is a publicly-traded company, and so it has a legal obligation to not give a damn about whether mac users enjoy exclusivity, “being different,” and just generally being smarter than everyone else. They need to pursue marketshare whenever they can - to do otherwise would be negligent squandering of shareholder wealth.
With that in mind, I completely disagree with Howard’s list of things Apple can do to increase share. There are only two things that matter: being cheap and being extremely developer friendly (including game developer friendly). Apple isn’t a game company, so the suggestion is a bit silly - let outside developers do that.
Or better yet, just stay out of the game market and tell mac users to buy a Wii.
Oskar, there is something to be said in bonnie’s being so honest and proud about being an insufferable snob.
I forgot to mention…
Chris, I actually like your idea of creating a media center device that defines the market like the iPod did - but again, it all comes down to low price and support for industry standards (both of which the iPod had).
Also, I was actually serious about the Wii comment - leave the gaming to Nintendo, but partner with them to create the ultimate home media center. They are both already competing with Microsoft, but in a fragmented, non-integrated fashion.
I won’t hold my breath, though, for a reason I think was alluded to by Apple Matters before: Apple and Nintendo are both hardware companies, and would feud over who gets to control the hardware just as Apple and Motorola did.
Oskar, there is something to be said in bonnie’s being so honest and proud about being an insufferable snob. -Beeblebrox
Honesty is always good…but I’m just happy that this kind of thinking (low marketshare = good) doesn’t exist in Apple’s management, since if it was they would’ve made the iPod a $600 luxury item and only mac-compatible. Then iPods would only be used by artsy Bay Area folk and I’d have to listen to my music on a “Ditty” :-(
Oskar, no it’s not me. Kinda pooped right now. Don’t have the energy to engage in the usual rhetorical jousts. Just got back from coaching my son’s football (oops, soccer) team. Dang kid scored a hat trick. Sorry, had no one else to boast to right now.
Anybody follow the World Cup?
Sorry, I’m waaaay off topic.
And no, I’m not in the low-market-share-is-good camp.
Otherwise I would not have loaded up on AAPL. Sadly, I have INTC and MSFT too. :-(
Just got back from coaching my son’s football (oops, soccer) team. Dang kid scored a hat trick. Sorry, had no one else to boast to right now. -tundraboy
Now that’s something worth being insufferably snobby about
The iPod was initially successful because it was tied to the iTunes store. It was an easy way to get music and play it portably. As the iTunes store grew, requiring an iPod to take advantage of it generated a lot of revenue for Apple. But, the real key was keeping the price down to $.99 per song. No other online store could afford to sell songs at that price. The iTunes store was a loss leader for Apple until sometime last year, when it finally began generating a profit based on its growing huge volumes.
Competitors have tried selling more feature rich MP3 players, but not being able to connect to the iTunes store with them doomed them to niches as well. Similarly, others have tried their own online music stores, but there was no compelling reason to use them. To generate a profit they had to come up with other more expensive schemes for their customers, including subscription models which are basically designed to generate an ongoing revenue stream without having to create any new product.
I believe Apple fought so hard to keep the individual song price at $.99 just for this reason. It makes it impossible for new competitors to get into the market. It also explains why MS is trying again by creating a consortium to compete with Apple in this area. It can afford to throw cash at the project. It just needs to create a compelling MP3/WMP player that only works with its Windows-only store, just as Apple did (albeit with a cross-platform solution which MS certainly doesn’t need to emulate). With the technical part of the equation in hand, it concurrently needs to get the rights to sell millions of songs at the same $.99 price as Apple. Once that’s done, it can then bring to bear the power of its Windows monopoly to squeeze out Apple. If it can’t get the rights to sell songs at $.99, it may sell them at that price anyway at a loss, while paying the industry more, just to start to squeeze Apple out of the game. It has the resources to pull this off, the question is whether it has the perseverance to do so.
All that said, my point is that the iPod was the trojan horse that hooked people on the iTunes store. What’s Apple going to sell that will hook them on using Apple hardware for home media playing? It’s unlikely that the media moguls will agree to let Apple sell movies online cheaper than its competitors. They’re far too greedy for that. I suspect the only reason they agreed to Apple’s terms for the iTunes store originally was that they never envisioned it growing so large so quickly. They probably thought it was just another easy revenue stream for them from the niche company Apple, that they could easily strong-arm later when real dollars started to be generated.
Oskar makes the common mistake of assuming that price is the most important determiner in the decision to buy a computer. In an “apples for apples” comparison (forgive me, couldn’t resist…), of Dell versus HP, when there is nothing else in it, price becomes a factor. And for those on a strict budget, price could well be the main factor.
However, for those of us with at least some capacity for discretionary expenditure, our choice of personal computer is likely to be determined by other factors. We buy notebooks despite the extra cost because we want portability, or dont want some large and ugly plastic box cluttering up our apartments. We buy BMW’s when a Ford would do, and we buy designer clothes instead of no-name labels.
Apple is a desirable brand and commands a price premium. There are many, many examples of this. And just because your product is more expensive, it does not mean you are relegated to a small portion of the market. Look at BMW. The 3 series is relatively very expensive for its market segment - but I read recently that in the UK, the 3 series outsells every other car in its segment. Similarly equipped and sized cars costing much less cannot compete with the cachet associated with the BMW. It has become an aspirational brand - people dream of the day that they can afford a BMW.
Apple is on its way to becoming an aspirational brand. And in the meantime, there are cogent reasons for spending the extra to buy a Mac. For a start, no viruses! How much is that worth?
Oh, and Oskar, the iPod is not the cheapest MP3 player on the market either, yet it has by far the greatest market share of any product of its type… I just saw this on another site (Mac Daily news)...
In what can only be described as a stunning development, undergrad students have rated Apple’s iPod as the most “in” thing (according to a Student Monitor study reported by the AP), eclipsing beer for only the second time in the study’s 18 year history. 73% of the students surveyed rated the iPod as “in”, while beer and social networking website Facebook.com garnered second place with 71%.
The last time beer was knocked from the top spot was 1997, when the Internet took top prize.
Hee hee… yes, I admit it, an insufferable snob is what I am.
But don’t read me too wrong. I want to see Apple do well, and I certainly don’t just use a Mac to be different, although that’s a nice wee extra. And of course Apple, on behalf of its shareholders, has an obligation to profit maximise. Yet still… I fear of a time in which Apple is a Microsoft-style monopoly with no incentive to continue making such great products.
Technically Apple has to pursuit a greater market share, but secretly I’ll always hope for a small one (but not too small). I guess I’m the only one who thinks that way.
The iPod was initially successful because it was tied to the iTunes store. -Dave Marsh
This is false. iTMS debuted on April 28, 2003. The iPod already had 64% market share in ’03, and a very respectable 33% share in 2002. It was already a success before iTMS came along.
Anyway, the claim just defies common sense, since most people put songs ripped from CDs or stolen from P2P networks on their iPods, not iTMS songs. I’m not saying that the music store doesn’t help, but it’s just icing on the cake, not the key to their success.
Oskar makes the common mistake of assuming that price is the most important determiner in the decision to buy a computer. [...] We buy BMW’s when a Ford would do, and we buy designer clothes instead of no-name labels. -sydneystephen
Who is “we”? Not most people. The majority of computer buyers look at price and whether it can run the software they want - they don’t give a damn about the Apple logo. And don’t compare apple to BMW - car companies and clothing designers can afford to be a tiny luxury niche, but computer companies rely on the network effect. Without getting as many users as possible, their developer support (and thus the value of their platform) will plummet.
Oh, and Oskar, the iPod is not the cheapest MP3 player on the market either, yet it has by far the greatest market share of any product of its type… -sydneystephen
iPods might be slightly more expensive, but the difference between it and a Zen is NOT the same as BMW and Ford. The premium you have to pay over competitors is pretty small, if anything at all, and the value you get (great design, ease of use, the “cool” factor) is worth it. Macs, on the other hand, have a substantial premium over competitive products, because they’ve barely even entered the low end of the market (where’s my sub-1000 laptop?). Without doing so, they won’t increase market share.