From: John Anderson (dearjohn_at_everchanging.com)
Date: Fri Jan 09 2004 - 13:15:13 PST
> We [as a group] think Apple should give us a lot free. We move from
> 10.0 to 10.1 - 10.1 should be free. Oh it costs $20, that is too much,
> should be free. Oh I can pick it up for free at a local Mac dealer, no,
> still not enough, I have to spend money on gas, Apple should mail it to
> me free.
To pitch in my two cents...
Apple spends a lot of money on R&D. A few years ago, the hardware was
more expensive than it is now. But .Mac was free, as were the iApps.
And the OS upgrades were cheap (hence, 10.1 for $20). The sticking
point, however, is that much of the hardware, while cheaper now, hasn't
hit the "sweet spot" in price where consumers will snap them up like
crazy, yet Apple still makes a good overall profit without sacrificing
product quality.
So if the hardware prices are coming down, where can the margins come
from? Well, selling copies of .Mac and iLife are a start. iLife '04
will also be included with new Macs, which might provide extra
incentive for existing Mac users to get that new hardware they've been
drooling over. The free iLife included with the new hardware reduces
the effective cost of upgrading the hardware by $49.
Let's make a quick estimate on the costs involved in the iLife upgrade.
Keep in mind that this is an estimate. I don't work with the iLife team
at all, so I have no idea how accurate it is.
We'll (conservatively) suppose that there are 80 engineers, managers,
product managers, and QA techs working directly on the iLife suite.
And, since Apple is in the Bay Area, where the cost of living is
unbelievably expensive, we'll (again, conservatively) assume an average
salary (including cost of benefits) of $85,000. Remember that the
salary includes benefits, such as health and life insurance. So, the
salaries paid for a years' worth of product development on the iLife
products total $6.8 million dollars. This is, again, a very
conservative estimate; ask someone who lives in the Bay Area sometime
what their apartment or house costs them. Plus it doesn't factor in the
real estate space used, hardware costs, promotional costs, etc. So in
reality the cost to develop the products could have been $8-10 million.
So what's the best way to ensure that this group stays put and doesn't
get downsized? Attach a revenue to it. Not just a vague "we're making
people like using their Macs" message, but an actual dollar figure.
They probably get to factor in a dollar amount from every new
(non-server) Mac sold, as well as the revenues from boxed copies sold
in the Apple store.
In the end, you aren't forced to get the new iLife suite (or any of the
parts therein). The existing apps will continue to work for years. If
you don't want to pay $49 to get iPhoto 4, then just keep using iPhoto
2. I think that charging $49 for the iLife suite instead of making it
free for everyone is the more straightforward and logical choice. The
cost of the product is offset directly by iLife '04 sales, instead of
having those who purchase new hardware pay a "tax" to support those of
us who wish to keep our existing hardware and get a free iLife upgrade.
I'd prefer to keep the hardware price down.
Just my two cents.
John
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