At 1:16 PM -0800 12/16/08, John Willkie wrote:
Yes, the switch to Intel (which you variously said would never happen, nor would never work) has increased Apple profit margins, and has helped them increase their share of the computer market from minuscule to at least a notch above. They are still offered at a serious premium to comparable wintel machines. But, both profit margin and market share for computers is paled by both for iTunes/iPod/iPhone, which have continuing revenue streams.
Computers are still 45% of Apple's total business and, if you had read the article I linked, you would note that Apple maintains an enviable 30% profit margin on its computers, while many PC vendors are lucky to make 6%.
Yes, the iPod has a market share that rivals Microsoft's juggernaut in the PC OS market. And I agree that Apple has managed to develop a business model with continuing revenues streams for the iPod and iPhone lines. There were some stories today that they may do the same for the rapidly evolving "netbook" market, using the App Store to generate ongoing revenue streams.
I would note that this matches up nicely with my "vision" of a larger Touch or tablet computer that would have HD resolution. We probably won't have to wait long to find out, as Macworld is January 9th and the 25th anniversary of the Mac is a few weeks later.
By the way. Apple announced today that they are pulling out of Macworlkd after this year - Adobe already announced that they will not exhibit at MacWorld. And Apple pulled out of NAB last year. This is just the tip of the iceberg, as trade shows are struggling everywhere.
And, let me highlight something that you haven't picked up on. iPods and iPhones don't last. Regular users tend to buy them again every year or so. Lucy Kellaway of the FT just loves hers. She reported on a BBC essay that she has bought seven of them for her family, but only one works now, and only in one channel.
I have not had and significant problems with reliability - but batteries do wear out. I am still using my 4GB iPod Mini at the Swamphead warehouse with a set of powered speakers. The battery is all but gone but it works fine with the charger ( and this is a HDD model).
My iPhone is approaching 2 years old and keeps on ticking...My daughter got one for her birthday last year (March). She dropped it recently and a portion of the touch screen stopped working. She scheduled an appointment at the Apple store in Orlando and the customer service rep plugged it into a computer to run some diagnostics. A few minutes later he told her it was broken and gave her a new one.
Actually the street is pessimistic about future growth in the iPod market, since they believe the market is saturated - apparently they are not in agreement that people replace them every year. Clue: since Apple moved to flash memory they don't have many problems.
But the street seems blind to the reality that Apple is migrating the customer base to upscale devices like the iPhone and iPod Touch, which are much more than MP3 players. These devices run a scaled down version of OS-X and the Safari Web browser, and are redefining the mobile gaming market.
Now, I don't want to 'excessively' pick on Apple in this regard. I was a full-frontal participant in the Walkman/etc revolution of the 1980's. I must have bought 20 of various ones, and found that they broke or disappeared. One fell from it's holder on the way home from the department store, thankfully I was able to return it, but I was prepared to pay another $200 for another one. But, iPod users find out when they try to repair something that new units cost less than replacement parts, and this without excessively highlighting the effects of serious price decreases.
There is some validity in the disposable aspect of the iPod and many other consumer electronics products. I think you are exaggerating the reliability problem, but there is another issue that tends to fuel the market for upgrades.
Capacity.People love to collect music, and these collections tend to grow and grow and...
My collection now significantly exceed the capacity of my 4GB iPod. Fortunately, iTunes let's me manage multiple iPods/iPhones and control what I choose to load onto each.
In this light, many people have added an iPod shuffle to their collections of gadgets. For $49 you get a tiny device you can clip to a t-shirt while jogging or working out. That's roughly equal to the cost of three or four CDs. Small wonder the market for CDs is dying...
People don't tend to rent computer hardware. The same cannot be said for iPod/iTunes/iPhone.
I still don't get this whole notion of renting music. A number of companies have tried subscription music services, but this business model has largely failed.
Apple provides a serious set of tools to manage and build your personal music collection, and devices that allow you to enjoy that collection anywhere, anytime. Most iPod users build their iTunes library from the CDs they already own, and enhance their collections with songs they purchase from the iTunes store.
I just checked my iTunes library. It contains 1057 songs, 170 of which I purchased from the iTunes store.
Here's a dirty little secret John. Some of those songs are from CDs that friends brought over to share while we are brewing or playing darts and drinking beer. I just put the CD in my MacBook Pro and import it while it is playing. I can even burn AudioCDs with songs that I purchases and from my collection , just like the custom cassettes I used to spend hours recording to play on my Walkman clones.
Apple does rent movies, but the music business model is not about renting anything. The business model is built around giving you the ability to manage the stuff you already own or buy
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