Many companies are trying to move to a subscription model for their software and Apple really has something going for them in that respect if you think about it. We, OS X Users, are already accustomed to the automatic updating of the OS and like it. dotMAC actually looks nice all in all, even if some might feel it is expensive. What people don’t like is unpredictability; they have nothing against change as long as they like the outcome and know where it is going.
What some people really feel surprised about is that Apple is taking big bucks for the Jaguar release of OS X and they want money for dotMAC on top of that. Where is this going in the future? Can we not trust anything to be part of the Apple package we have grown to like in the future? iTunes 3 was advertised to be free as if this would be out of the ordinary and while it might be in the general software world out there, it’s likely not in the eye of OS X users. The iApps are part of our OS X experience and while iCal is free, the synchronization features with other people need a dotMAC account, giving non dotMAC users nothing more than a crippled iCal.
In Q2 of this year, Apple had sales of 1.495 billion USD and came out of the quarter with 40 Million in profit. Their net operating cash flow was also positive with 44 Million USD. Based on this one can say, relatively safely, that Apple is profitable, as they are running their ship now. What Apple is doing with their recent move is to please some of their stakeholders, including their shareholders, which is something that is without a doubt very important. You need to have an integrated approach to please all of your stakeholders or you will stumble and fall. In the future, Apple also needs more money to push into new markets and extend their R&D and get a good return on investment from their activities. This charging for added features is in that sense a good one.
What people don’t like I believe, is this charging on several fronts for something they have taken for granted up till now. Many companies have long seen that the way of the future is services, not web services mind you, that’s just a small picture, but services in general. In short, this could be said to be giving people what they want, enabling them to do what they want or have to do. I don’t want an OS. I don’t care for the OS. I want something that will let me do what I want to be doing in the best possible way and Apple has been known for being very user friendly. Many believe this is what OS X is all about, or what MacOS was all about. A better way of doing what you do. Less hassle, more fun, more efficiency.
Going further into Apple’s SEC filing for the recent quarter, they had sales of $383 Million for Power Macs, $198 Million for PowerBooks, $448 Million for iMacs and $180 Million for iBooks. Peripherals, software and other sales were $286 Million, which includes things like the iPod. Even if we include all of this as software, that’s an amount that doesn’t seem to hard to beat.
Where does this lead me to? Services and services only. Apple has or had some 2 million iTools, now dotMAC subscribers when it was still free. Let’s play a little game. Let’s suppose Apple were to move into services with force and stop “selling” the OS. It is part of the service. Also part of this service is dotMAC and all iApps. On top of that, you have a community on dotMAC where everybody can go to help, with users helping each other. Apple could give some of the best people some support and special pre-release info and other things to make them happy. Companies could monitor it for questions for their own software. Think of it as a self help or P2P help network. Again, it would be part of letting me do what I want to do. It needs to be frank and peer monitoring will make it as correct as possible.
Would you be willing to pay $10 per month do be part of that? That would be $120 per year, $20 more than the current subscription for dotMAC, and I think a lot of people would do that. At 2 Million subscribers, that would be $240 Million each year, without interruption, predictable, certain. And 2 million subscribers is nothing. Provided Apple can grow their market share they can get several more million using the service, who would be sure they have an up to date product, online storage space, a life-time e-mail, a place for a homepage, a place to put their images and sync their computer. On top, it creates a lock-in for future hardware sales.
There are a lot of added benefits, besides a predictable revenue stream too. They can sell to those people directly, give them suggestions for new hardware and give them the option to kind of sync their old mac and then their new mac to continue working without lots of difficulties. In a sense they would be able to loyalty into their sales package and wouldn’t shareholders just love the notion of seeing each new customer as a customer for live?
About the Author:
Oliver Thylmann is a management student and freelance journalist writing mostly for infoSync, an online publication which specializes in covering the handheld and wireless consumer sectors with a global span. In the past few years, Oliver was running BeNews, the premier news site for the BeOS community.