Nerve Touching

Friday, 4 March 2005

I think I’ve figured out why last week’s iPod FireWire cable hysteria struck such a nerve for certain Mac users. It’s an unfounded fear that as the iPod succeeds, the Macintosh will — somehow, in some unspecified but surely dreadful way — suffer.

Prior to the iPod, Apple had been a one-product company for over a decade — and that product was the Macintosh. The Apple II line had effectively been dead since the late ’80s (although they were still producing them up through the early ’90s, believe it or not). And no offense to Newton aficionados, but that’s a platform that never caught on.

For all practical purposes, the only thing that’s kept Apple alive has been the Mac. Desktops, laptops, software — a huge variety of individual products, but together constituting a single platform. And so as the Mac went, so went Apple.

Hence the common conflation of “Apple” and “Mac”; e.g. clueless armchair industry analysts predicting throughout the ’90s that “Mac would be out of business in a year”, or a declaration that the company’s relatively low market share was the result of there being “more software for Windows than for Apples”.

But Apple is not the Mac, and the Mac is not Apple. Many Mac users have, therefore, misstated their love. They say they love Apple, but what they love is the Mac. What the mainstream press calls “the Apple faithful” are really the Mac faithful. (Admittedly, you can get a ton of hits searching for “Mac faithful” too.)

What has made the Mac such a long-lasting success is that despite the fact that it holds “only” 2-4 percent of the overall PC market, it isn’t just any random 2-4 percent slice, it’s a base of around 10-20 million loyal customers.

While this has made the Mac a steady and stable source of profits for Apple, it is also exactly what has kept it from being a source of growth. For all the success surrounding Mac OS X — Looks beautiful! Based on Unix! — it hasn’t really made a dent in the Mac’s overall position in the industry. It has sustained the Mac as a profitable platform, but it hasn’t grown the user base. Apple executives have been claiming an “installed base” of 25 million Macs in use for over a decade.

This isn’t to say the Mac is doing poorly. It’s not, it’s doing fine. But doing fine is not the same thing as doing great. Great means growth, and growth is what drives a stock price up. (For more on market share doom-and-gloom, see my previous piece on the importance of the Mac’s market share.)

And so I think some Mac users look at the phenomenal continuing growth of the iPod, and they think, I wish this were happening for the Mac. And then come the fears of abandonment: What happens if iPod growth continues at the current clip for another year? Or two years?

The iTunes Music Store is widely considered a major success, and it’s certainly the undisputed leader in online music sales. But online music sales currently account for only two percent of total music sales. In other words, CD sales still dominate. But what happens if ITMS continues to grow? What if it starts accounting for 10 or 15 percent — or more — of recorded music sales?

What happens is that the Macintosh becomes one division among several in a larger more widely-focused Apple. Over the course of many internal reorganizations over the years, there have been several Macintosh “divisions” within Apple, typically split along hardware/software lines. But what I mean by “division” here is more than just a branch on an org chart. The iPod is truly a separate division, a peer to the Mac platform rather than a component of it.

And so the fear is that in the face of fantastic growth and profits from the iPod and ITMS initiatives, Apple will neglect or even outright abandon the Mac. I see no rational reason to believe this. Business analysts have been calling on Apple to abandon the Mac for over a decade; at one point calling on Apple to become a software company, later on, calling on them to become a “stylish” maker of x86 Wintel hardware. The latest version is that Apple ought to turn itself into a consumer electronics company. But without specifying new consumer electronic products — i.e. an actual course of action — saying that Apple should “become a consumer electronics company” is like telling someone they should “become a millionaire”.

The fact is that the Mac has been and remains a consistent source of profits for Apple. The difference is that it used to be the company’s only source of profit. Now it’s one among several. The continuing success of the iPod doesn’t take anything at all away from the Mac, other than perhaps additional slices of attention from Apple’s most very senior executives — those who sit atop all divisions in the org chart. (And this might not be a bad thing, considering how many times you-know-who has waved his brushed-metal-window wand.)

If you take it personally that the Mac has perhaps slipped to Apple’s second-most-profitable division, you’re weird.

Cause, Meet Effect

Several readers emailed to suggest, more or less, that with regard to USB-vs.-FireWire, Apple should have done the opposite — and removed the USB 2.0 cables from the kits. Or that it was a mistake for Apple to have added USB support to iPods in the first place. The idea being that by favoring (or solely supporting) FireWire, Apple could have used the iPod’s phenomenal success to make FireWire a widespread PC standard.

This is completely backwards, confusing the horse for the wagon.

The iPod became a phenomenal success only after Apple added USB support in the third generation models — which was months before iTunes for Windows shipped. This chart of iPod sales growth at iPodlounge shows the trend. As a FireWire-only device, Apple sold one million iPods in 18 months. After introducing the third-generation models with USB 2.0 support, Apple sold its next million units in just six months, and the third million just four months after that.

Gartner research analyst Mark Margevicius told The Mac Observer’s Brad Gibson, “In the PC market in 2004, high-speed USB has nearly saturated the desktop market, and now comprises over three-quarters of the notebook market.” As for FireWire, Margevicius estimated it is present on only 25 percent of PCs.

Even if for the sake of argument we concede that if Apple had kept the iPod FireWire-only, they could have driven more PC makers to include FireWire ports on new PCs (and this is a huge concession, in that I don’t think it’s true) — that wouldn’t change the fact that the majority of existing PCs don’t have FireWire ports.

What the adherents of this theory miss is that people aren’t buying new computers just to use with their iPods — they’re buying iPods to use with their existing computers.

FireWire, much like the Macintosh, is neither a failure nor a phenomenon. It is simply successful in a nice-sized niche, but not the entire market. The idea that Apple should be using the iPod to drive support of FireWire is asinine; the iPod is a product, FireWire is a technology. Sure, the world would be a better place if FireWire were everywhere. But Apple’s interest is in selling iPods, not raising the average quality of de facto standard data-transfer buses.

The idea that Apple owes Mac users something for their long-term loyalty is a nice idea, but that doesn’t mean they owe us “free” FireWire cables. The only people they truly owe anything to are their shareholders, and given the vector of their stock price over the last two years, I suspect very few shareholders indeed are complaining about Apple’s development of the iPod platform.

Further Reading

“The Art of the Parlay, Or: How I Learned to Stop Worrying About Platform Licensing and Market Share” — wherein I offer the idea that Apple’s music triumvirate (iPod/iTunes/ITMS) is a meta-platform built on top of the existing Mac and Windows platforms.