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What the Muses Deign: $129 in the grand scheme

By Porruka (porruka@macedition.com), August 2, 2002

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Much is being made about Apple’s current policy of upgrade pricing for Jaguar, aka Mac OS X 10.2. It does seem Apple is attempting to maximize the revenue from this revision to the OS, charging a much larger group of users the full $129 price (assuming you didn’t get it at a discount from someone like Amazon). It costs money to develop an operating system, so why the outrage?

Mac OS X, a work in progress

It seems that Mac OS X has been a series of disappointments to those who have paid for the OS so far. The 10.0.x versions were slow and buggy, with 10.1 supposedly the savior. Currently, the OS is on Version 10.1.5 and similar complaints still abound, specifically about the way older machines behave under the stress that the OS itself places on the hardware. Now it is true that for most people, 10.1 was significantly better than 10.0.x, and 10.1.5 continued to improve, but it is still common to read (or even experience) “Mac OS 9 being faster than X for similar tasks.” These people feel like they have yet to get the value of the original purchase, much less the “benefit” of upcoming Jaguar features.

All aboard the upgrade (revenue) stream

While those of us who have been on the platform for many years like to hold Apple to its own standard (typically a few notches higher than the rest of the industry), we have to compare the company’s actions to the industry in general as well. Apple doesn’t operate in a vacuum, and as much as we (the customers) might want, the high road isn’t always what a company takes.

Over the past couple of years, Apple has been rather blatant in its copying of business practices of a certain successful business in Redmond. To a point, that’s not a bad thing. It helps ensure that Apple the company (love it or hate it) remains around for us to continue to love or hate. The latest transferred practice surrounds the sale of the operating system. The costs of developing the operating system used to be hidden in the price of the Macintosh systems we bought. Ironically, now that Apple has open-sourced the underpinnings, the cost of the OS is being separated from the hardware, being “unbundled,” if you will. This allows the company to effectively raise the price of the Macintosh system while deflecting some of the more potent criticism. Those who follow the financials of the company (or the stock market, which does) know that Apple is almost obsessive about protecting its industry-high margins. Perhaps that has something to do with the fiscal beating the company took a few years ago?

Sure, there’s a firestorm right now, but as long as there are software vendors that will use features only available in Jaguar, or there are compelling features, the upgrades will sell – even to reluctant customers. It’s a strategy that’s as old as the software industry itself. It’s only been recently, though, that Apple included the OS as “software.“

Subscription Macintosh

Where is all this leading? Essentially, Apple wants you to subscribe to your Mac OS and periodically shell out hard-earned cash for the continued benefits that your Mac provides. It’s called recurring revenue, and every company would love to have stable sources of it. No, Apple is currently not going the route of that “other company“ and truly tying access to the OS to registration. Watch for it, though, if the “other company” succeeds, because Apple is dipping its toes into that particular water with the iTools/.Mac transition.

As Apple falters in bringing newer, faster machines to market (regardless of the source of the difficulties), the “upgrade cycle“ gets longer and longer. The hardware sales cycle that Apple historically has relied upon will continue to be augmented by previously free (or hidden) services being broken out and charged for, either as part of an essential package or a la carte. Part of this is good business and part of it is milking the installed base, and it’s just the beginning.

Better get those credit cards ready.

Porruka (a pseudonym) is Editor-in-Chief of MacEdition. Read previous “What the Muses Deign” columns.

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