Steve Jobs embraces what is "best" for consumers

Even as I write the headline I start looking to see if the sun has decided to set in the east.  Anyone who has followed Steve Jobs knows that one of the last things on Steve's mind is doing what is best for consumers.  Maybe Steve thinks he needs to start influencing the pool of potential jurors in case federal investigators find that he has done something illegal in the options mess that refuses to go away.

The phrase "consumers' best interests" just does not come to mind when I think Steve Jobs.  Usually Apple has to be forced into owning up to customer problems.  They've managed to keep their hardware warranty at a minimum compared to some other companies. I'm sure my comments will offend some people who have been fortunate enough to have had great luck with their Apple products, but I doubt many will disagree that Steve thinks about Steve first.

I find it really hard to keep from laughing when reading Steve's first "post."

Imagine a world where every online store sells DRM-free music encoded in open licensable formats. In such a world, any player can play music purchased from any store, and any store can sell music which is playable on all players. This is clearly the best alternative for consumers, and Apple would embrace it in a heartbeat.

I am not going to pretend that I know all the ins and outs of the DRM arguments, but I tend to agree with Bill Thompson from the BBC that we may see the end of DRM, but it will not be because of Steve Jobs.  Perhaps articles like "Apple Refuses to Remove DRM even when Artists do not want it" have made me a little skeptical of Apple's intentions especially since Apple is undeniably on the hot seat in Europe.

Actually what really makes me dismiss Steve's new found love for a DRM-free world is that Steve Jobs has a proprietary heart.  That is what has always makes him tick.  His history has been one of only embracing non-proprietary standards when there were no other choices. 

USB and Intel's chip sets are good examples.  Now there is little Steve could do to make USB proprietary, but look at what Mister "Best for consumers" has done with OS X.  It could run on other hardware makers' systems.  Even some manufacturers like Michael Dell have said they would ship OS X if Apple would give them the green light.  Apple has locked its OS X to Apple hardware.

Would it not be best for consumers if we had a real choice in operating systems?  Before all of the folks come out of the woodwork and claim that this would be a road to destruction for Apple, let me say that none of the arguments hold water. 

First, the people that love Apple hardware like me would keep on buying Apple hardware.  Past experience in the days of the Mac clones is irrelevant, given that Apple was producing plenty of over priced junk in those days.

Second, Apple doesn't have to provide support for OSX on non-Apple hardware.  They have clearly demonstrated the ability to do whatever pleases Steve.  They could sell a version of OS X with no support.

Third, selling software is far more profitable than selling hardware especially if you have already amortized the expenses based on another market. 

Fourth, I don't buy the argument that Apple has to control the full experience for users to have the true benefit of OSX.  If I am wrong and that is the case, then Apple needs to get off its rear and start making all in one printers, scanners, and faxes because I can assure you that part of the OS X experience isn't that much fun.

If you'll bear with me on a little "what if math," I'll throw out a scenario that could be the breakthrough that Apple needs to become a serious operating systems vendor.

No one seems to know how many consumers will buy Vista upgrades.  Most of the assumptions assume that 80% of consumers will get Vista by buying a new computer.  Those people buying new computers with Vista might even end up being so frustrated by Vista's DRM and annoying security that they end up part of the OS X equation later.

We know that there are over 230 million computers in use in the US.  We also know that there were roughly 65.5 million computers shipped last year in the US.  Of those approximately 3.1 million were Macs.  For purposes of our sky hook projections let us assume 62M relatively new computers in the US running mostly Windows XP or some other variant of Windows.  I have seen one optimistic projection that 12 million households will "own" Vista this year, perhaps that is the Vista upgrade forecast, but I want to be very conservative.

I'm willing to guess that 50% of the 62M computers probably could run Mac OSX without a lot of difficulty considering that Windows seems to be harder to run than anything I've ever seen. Let's assume that just 1% of the 31M computers decided to try Mac OSX in its special unlocked version priced at $150 in each of the next three quarters. That means a minimum of 310,000 units of OS X  per quarter and ends up equaling $46.5M in high margin quarterly revenue, but more importantly it seeds the most adventurous (and potentially most influential) part of the Windows world with Mac OSX.

By the end of the FY 2007, Apple would have added 930,000 new Mac OS X users and $139.5M in very profitable revenue.  It would be highly unlikely that someone intending to buy a Mac would decide to change their mind and buy a Dell and then pay another $150 to get what Apple includes with its systems. By only making an unlocked upgrade copy available, Apple would limit cannibalization of its hardware sales.

In a world given over to viral marketing OS X might be the greatest virus of them all.  We could  assume some percentage of new computer users would get frustrated with Vista and switch to Mac OSX.  Maybe Steve could offer a special $129 upgrade to real Vista users?   I bet Bill would not like that.

Of course all of this is irrelevant because Steve Jobs is not going to let it any of it happen no matter how wonderful it might be for consumers. The reason is that Steve is all about control as long as he is the one doing the controlling. Not far below the surface, the proprietary heart that has kept him going for years still beats strongly.  That's why I'm suspicious on his DRM change of heart.

Actually it would be a great thing if consumers had a real choice in operating systems, but providing consumers with the best options has never been a part of Apple.  Just think back to all the proprietary connectors and the changing video outputs.  Lots of things have been more important to Steve than providing consumers with the best choice.  He might have tried for the most elegant solution or the most profitable, or the technical best, but the best for consumers?  I don't think so.

If you can't remember being frustrated when Apple announced hardware without adapters for the older products, think about the Apple operating system tax that is coming due once again this year. It has been argued that Apple needs that full price upgrade because they aren't making enough money.  That thought doesn't hold much water these days. 

I don't begrudge Apple their fairly earned profits, but when Steve Jobs stands up and starts talking about what's best for consumers, first I think of the $11.9B they have as a cash balance, then I start holding on to my wallet.

Whatever reason Steve has for embracing a DRM free world, it doesn't have much to do with what is good for consumers unless that has somehow become the same as what is good for Steve.

This is yet another reason to keep me banging away on my Ubuntu Linux box so I have a non-Windows option.  I wonder which is crazier trying Mac OSX in my Realtor® career or Linux?  Even the Realtor® association is warning about holding off on Vista.

I hope the DRM battle & options mess are not the beginning of the unraveling of Apple.  There is definitely a place in our world of increasingly complex and linked technology for a company like Apple, who in spite of its proprietary heart, has made computing life a pleasure most of the time for many of us. 

Comments

[Chris]

So Apple makes profits now. Even if they are huge, who cares. As for DRM, who really knows what goes on in Steve's head. I think that it would be best for consumers and would streamline the online music business, shut up th European regulators (who seem to be forgeting that the record companies are the ones demanding DRM, and they are more than happy to have the market fragment because it suits their purpose of maintaining control). Actually, I suspect a certain amount of vengeance in Steve's actions, sort of payback for the record companies periodically demanding increased fees for online sales. He has once again transferred the pressure back to the industry. If they keep DRM, it is the music industries fault, if they remove it Steve is a hero and iTunes sales will only increase further. Either way, Apple comes up the better.

[PGE]

Hi.

I'd just like to say that even Bill Gates think DRM is bad and by blasting Steve for his thoughts on DRM without researching what M$' Bill Gates and others has said about it is just plain sensationalism.

http://www.playfuls.com/news_06165_Bill_Gates_and_Steve_Jobs_Agree_DRM_Is_Bad_Are_They_FairPlay.html

/PGE

[howlongtoretire]

There are many shades of "choice." To say that Apple... or any company... should provide consumers with an unlimited ability to "mix and match" is unrealistic.

I like the action on a Kawai piano but that doesn't mean I should expect Steinway to provide me with the choice of including Kawai's keys on their grand pianos.

Steve does not view the OS as separate from the computer. You do. That means he "only cares about Steve?"

[ocracokewaves]

So I wonder how Bill Gates refusing to sell Windows products for the Mac would be viewed?

You might want to do a little reading on what happened several years back in the mainframe world regarding restrain of trade.

Nothing will happen with this government, but I am still willing to bet that Bill Gates would be skewered if he added something to the Windows OS that would keep it from operating on a Mac.

Steve gets away with it, and it has nothing to do with the survival of Apple.

[howlongtoretire]

You are right about Gates being skewered... because he would be *selectively* licensing his OS. Apple does not license OS X. What is Steve "getting away with"??