April 9th, 2008

Why OS X costs twice as much as Windows

Posted by Robin Harris @ 4:05 am

Categories: Marketing, Software

Tags: Apple Macintosh, Microsoft Windows Vista, OS X Upgrade, Microsoft Windows, Apple Mac OS X, Microsoft Windows Vista (Longhorn), Desktops, Operating Systems, Software, Apple Mac OS

Because people are happy to pay it.
Microsoft’s continuing Vista woes, including price cuts and a retreat to Windows XP on the low-end, obscures an important fact: Mac users pay more than double for Mac OS X than Windows.

Are Mac users mindless robots, buying whatever Cupertino ships, or is Vista really 50% inferior?

Update: What this shows is that people are willing to pay good money - 2X more than Microsoft is currently charging - to get stable, feature rich, user-friendly software. Why can’t Microsoft do that? End update.

Let’s run the numbers.
Since Windows XP’s release in October, 2001 Mac users have had four releases of OS X:

• Jaguar 10.2 released August 2002
• Panther, 10.3 released Oct 2003
• Tiger 10.4 released April 2005
• Leopard 10.5 released Oct 2007

At $129 a pop your loyal Mac user paid $516 for new OS releases. There is no “upgrade” pricing for OS X.

Over the same period the steadfast Windows user would have spent a paltry $219 - had they waited for the Vista price cut - for an upgrade to Windows Vista Ultimate - less than half what Mac users spent.

You can get Vista and an Xbox for less than Mac users paid for OS X alone!

Mac OS 2X
This isn’t an academic question. OS X upgrades are popular with the Mac faithful. Many gladly fork over the money.

Less than 2 years after Tigers release, Steve Jobs, Apple’s CEO, announced that 67% of the 22 million Mac OS X users were using Tiger. Compare that to Vista’s 15% penetration 14 months after announcement. Ouch!

What accounts for the difference?
Why are Mac users happy to pay double while Windows users are demanding downgrades to XP?

The chief reasons:

• New releases are stable. There is little penalty for buying the latest and greatest.
• Obvious value of new features. In Leopard, for example, Time Machine replaces backup software that might cost $30 - and that most people weren’t buying anyway. Many other features, such as data detectors, Quick Look and PDF editing, make using the system more productive.
• Cool new apps appear with every new release. Software vendors use added OS features to build low-cost cool new apps like Pixelmator, a low-cost Photoshop for the rest of us.
• It’s easy. Buy the box, pop in the DVD, a few keystrokes and your upgrade is underway. No activation hassles. Existing apps still work, as do drivers. What’s not to like?

It’s like getting a new computer for $129.

The Storage Bits take
Microsoft is leaving a lot of money on the table. Apple proves that by delivering value - instead of problems - computer users will happily fork over twice as much as Microsoft can get for Windows today.

Microsoft’s focus on OEM sales is part of the reason they’ve lost sight of what users really want. When Vista slipped past Christmas 2006 all the focus was on how this would hurt Dell and HP - not users.

In fact, users would have been helped if Vista had slipped another 6 months. Instead the PC industry conducted, in effect, a giant paid beta test on millions of trusting buyers.

Microsoft shareholders need to understand that the current management team’s decisions are killing shareholder value. Nothing will change until the management does.

Comments welcome, of course. If you didn’t get Vista on a new system, would you pay to upgrade your current Windows machine?