Apple’s man behind the curtain

Even though I’m something of a hippie liberal, I’ve generally avoided Apple products. There was always something Wizard of Oz about their chic, and this year appears to be the year for people to finally look en masse at the man behind the curtain.

Consider: In October of last year, iPhone had 4% of the market share but 50% of the profit share. That means that Apple was selling their product at a margin much higher than their competition. That’s a general pattern (Wired reports a 42% average markup on Apple products).

But okay, that in itself isn’t a big deal. Pricing is determined by what people are willing to pay, and Apple has created demand that allows them to sell at industry-outrageous margins and still sell out. That’s not Apple’s fault, that’s the fault of consumers who are apparently unwilling to dig in their heels and insist on more industry-appropriate pricing.

I recently purchased an off-brand MP3 player at MicroCenter for $40. For that price, I got a screen that allows me to pick my music. The mechanism isn’t the best; it’s a bit stiff. But, honestly, for normal usage, I want to be able to select an album and play it. It’s 8Gb, I think.

For ten dollars more, Apple will sell me a 2Gb MP3 player that doesn’t have any screen at all. If I want a screen or more room, I have to go up to their $150 model. And yet, Apple keeps those prices because they keep selling. That’s as much the fault of consumers not making it clear that they’re not willing to pay those prices as it is the fault of Apple.

Even iTunes retains Goliath’s market share even though Amazon’s market is generally cheaper (at least for full albums). I don’t have an audiophile’s knowledge of technical specs, but I think for most consumers, a music track is a music track is a music track. Can it play on my MP3 player? Yes. Good.

Ironically, one component of what’s leading people to realize the mismatch is the iPad pricing. As other tablets enter the market, they’re pretty much matching Apple’s $500 price point, instead of grossly undercutting it like they do for pretty much every other major Apple product. That’s because the iPad price is actually market competitive. I assume Apple came out at that point because they didn’t know what the market demand would be, and at any rate a tablet seems from a feature perspective like it should be cheaper than a laptop: There’s no keyboard, memory capacity is lower (the Samsung Galaxy Tab 10.1 has 16Gb, for instance), most use the Android OS, which people generally know from smart phones, and so on. One might even suggest that Apple was truly forward thinking in maintaining the $1K price point for laptops so they’d have room to sell iPads at half the price and still make a profit.

Except, really, I doubt Apple’s 1990 pricing model was based on 2010 technology.

What’s really apparently making people question the status of the odor of fish and the state of things in Denmark, though, is Apple’s recent spate of IP lawsuits against various Android-based smart phone manufacturers. So long as Apple was the underdog against the behemoth that is Microsoft, the trendy sorts could rally around Apple in good conscience. But now that Apple is going against the innocent puppy that is Open Source Technology, well, that’s simply and plainly the wrong strategy for them.

The reality is, Apple is a for-profit company. Microsoft is a for-profit company. As corporate behemoths go, both are relatively benign, but it’s that “relatively” part that’s necessary to keep in mind. Both are, and should be, willing to reel back and bare their fangs when they fear their bottom lines are being threatened.

I’ve avoided Apple products for a simple reason: They’ve always been expensive. The iPad is pretty much the sole exception, and if I’m going to switch OSes at this stage of the game, it will be to Android. I am, however, feeling more than a little vindicated watching the reeling and gnashing of teeth from Apple supporters realizing that Steve Jobs and his company are not, in fact, benevolent beings from planet Tech come to save us from mundanities of human existence.

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