Is this a joke?
Wired’s news feed teases Adam DuVander’s Webmonkey piece on the so-called “Apple tax” thusly:
It’s no secret that Apple’s computers cost more than PCs with similar specs.
Well, when you put it like that, it must be true!
But Apple’s disclosure of its sales figures and estimated market share at a press event Tuesday raises new questions about exactly how much money the company is making off each new Mac purchase.
And new questions mean new jackasstic answers! Enough teasing! Let’s get to the piece.
The concept, which has merit, is that Apple’s computers cost more than PCs.
Does it have merit? Of course! Adam just said so!
Just how much? Apple hinted at the number in its event today:
Retail share: 17.6 percent market share of unit sales.
Revenue share: 31.3 percent of retail sales.In other words, where one in five computer sales is an Apple, these account for one of every three dollars spent. Apple has more share of the revenue because its computer cost more.
Cost more than what? Cost more than similarly configured machines as Adam says (remember, the teaser promised we’d be talking about similarly configured machines)? No.
No matter how you crunch the numbers, they imply that Apple charges at least 50 percent more than other manufacturers, maybe even twice as much.
Good lord.
They do not. How would that even be possible? Don’t you think people might notice that? What the numbers show is that Apple competes at the high end of the market and has no presence in the low end of the market.
Are you kidding us, Adam? Are you kidding us, Wired?
-
[…] The Macalope » Blog Archive » Is this a joke? (tags: article editorial blog technology apple) […]
yeah but like, math is *hard*. Punditry… that’s apparently quite easy.
When I’m kidding, I use a little smiley face. Sometimes I make it wink, like this 😉
I started from an assumption that you don’t share: Macs cost more. The mistake I made was saying similar specs, because I think that’s hard to compare (as I later stated). I’m a proud Mac user and I gladly pay more for quality. Not everyone shares my belief. Yes, Apple does not make a low end laptop, but there are people who consider Mac that compare it to low end laptops. To them, the Apple tax exists.
The Macalope has seen reasonable comparisons that show similarly configured Apple hardware is more expensive than Dell or some other comparable brand name. He’s also seen ones where they’re the same or, in very few cases, the Mac is cheaper. He’s never seen a comprehensive comparison of every configuration because that’s a pain in the ass and no one wants to do that. None of this takes into account Apple’s consistently *higher* customer satisfaction rating and other benefits such as being able to run multiple operating systems and the Mac OS at all.
Competing on the high end of the market and having a premium product is not a tax. It’s a barrier to entry, but it’s not a tax. Words have meaning and you and Microsoft are using the wrong word.
To paraphrase Wolfgang Pauli, Adam’s argument is not even wrong. You can’t draw conclusions from comparing percentages of market revenue and percentages of market share, because you’re not comparing the same things when it comes to, say, Apple and Dell, or Apple and Joe White Box PC Manufacturer.
There is no Apple tax, any more than there is a BMW tax.
As you said, there is no entry-level Mac notebook sold at $599. Most PC buyers will flock to the entry model and the average retail price of a notebook PC will reflect that fact. This is not to say that every PC notebook is sold for $599; you can buy a 17-inch Toshiba Qosmio for like $3,000, a Portege R500 for $2,000+, etc. But on average, PC buyers will spend about $800.
Last quarter (ended June 28), the average selling price of a Mac notebook was closer to $1,500 (see: apple.com/investor/). This is why Apple’s revenue share in US retail is that high, and why it’s higher than Apple’s unit share. It doesn’t imply, as wrongly stated by DuVander, that “Apple charges at least 50 percent more than other manufacturers.”
Go Macalope!
What is this tax thing everyone talks about? I guess Antivirus software, the frequent calls to the fix it guy, or even the pain and frustrations of looking at beautiful blue screens are not considered as tax.
Here’s the thing — the comparisons between equipment are almost never outside the 8-10% region. That just really doesn’t matter for serious users.
The essential thing is this: the low-end market is well and truly tied up by the Dells and Toshibas of the world. And that’s fine. Apple’s real selling point (the one they want the investors to see clearly) is that they’re selling machines to people with disposable income, who are decision makers and exemplars to others. Those who the poor trolls buying a Wal-Mart Black Friday laptop look upon and envy.
Also, when you are taking away 30% of the bucks being spent in retail, you are doing pretty well. Especially remembering that you are using the same reference hardware (for the most part up until now) that all the other manufacturers have been using as well. The Apple margins are not remarkable compared with their competitors. Which means that Apple is eating someone’s lunch, and doing it on competitive value at desirable price points (the ones where companies actually make money). And Apple’s doing it without a loss leader.
Yes, Apple does not make a low end laptop, but there are people who consider Mac that compare it to low end laptops. To them, the Apple tax exists.
Interesting. I compare a 52″ Sonny HDTV to my 12″ Philco. To me, the Sony tax exists. I compare a Porsche Carrera to my old Chevette. To me, the Porsche tax exists.
Wow, this is easy — and fun!
This argument is getting harder and harder to make. I switched to a MAC after 10.1 and have loved every minute but now that Apple on Intel hardware they must be careful. Case in point, and this is just one – best buy right now – http://www.bestbuy.com/site/olspage.jsp?skuId=9027705&type=product&id=1218010174398 – now check the specks before you blow up.
Ok, here are my thoughts. I not only use a MAC but 8 months ago I transitioned all my work computers to MAC (10 in all), so I have spent a little money. As of yesterday, with the new notebooks, I feel like Apple is indeed now more expensive and not by a little. I feel like I am paying now for things outside of a good, stable operating system and software. What I mean by this is that now I am paying for leather seats and nicer upholstery. I really don’t want to pay extra for a new manufacturing process that hides a few screws. I want a good quality, above average computer but I don’t want to pay for a piece of artwork. I am all up for paying a little more but I do feel like, at times, Apple has gotten almost twice as expensive. Apple not longer really has an advantage at the hardware level. The main differentiator now is the software/OS.
Is this alone worth hundreds of dollars? I ask you all.
That’s an impressive piece of conflation by Adam. He had a fact, he had the point he wanted to make, and he mashed them together. Blendtec’s got nothing on Adam’s “punditry”.
The writing at wired.com is getting worse and worse. This is just the latest in a long string of irrational and factually wrong pieces there. You’d think the folks who run the place would build on the journalistic excellence of Wired magazine. Instead, they seem to be aiming for an intellectual level just a little bit lower than Gizmodo. Maybe all of their writers are about 14 years old these days. Many of the stories would be rejected even for material coming from middle school boys.
Alright, Adam, then stop using statistics that don’t support your claims. Show us an honest comparison of a PC laptop and the new MacBooks and MacBook Pros. People would respond much more positively to that kind of article than one that tries to prove something with the wrong evidence.
This guy obviously drives a Kia, because why would anyone pay the “Lexus tax”. Good grief. Clearly the only difference between an Apple laptop a Dell is the price.
Dell Latitude E4300, 13″ screen, 2.4GHz, 2GB RAM, 250GB HD, Intel GMA 4500MHD integrated graphics, added wireless N, added BlueTooth, 3 year support included, $2097
Dell XPS 1330, 2.4GHz, 3GB RAM, 250GB HD, NVidia 8400M graphics (128MB), 56Whr battery, 3 year support, $1615.
Apple 2.4GHz MacBook, added AppleCare, $1848 (and I could get it for $1670 from my employer’s Apple Store partnership)
Exactly. Using tax makes it sound like it’s an evil cash grab. Just because I’d rather have japanese built car that doesn’t fall to peices immediately after the warranty expires doesn’t mean I’m paying a tax, it means I”m choosing to make more sound investment based on the idea I’d like my car to last more than three years. Likewise with buying a mac over a pc. Just, you know, shorten the lifespan of the pc, and the frustration of vista, (even GM’s cars don’t randomly drive off the road for no apparent reason….)
“I started from an assumption that you don’t share: Macs cost more. ”
Uh, and then you argue that “Macs cost more”? If that is not begging the question I don’t know what is.
Okay, why are we giving more airtime to this moron. He can’t open a mint tin, why would you expect him to do statistical analysis. This might be the dumbest thing I ever read.
You know what’s funny?
Microsoft arguing there’s an Apple Tax… when the total difference between Vista Super Sucky Limited Edition and Vista Full Feature Super Duper Edition is Microsoft wanting to gouge you for extra money on their operating system (really, for all intents and purposes, it’s the same kernel, just tweaking what ships on the DVD)…. and Apple sells exactly TWO versions of their OS (a client and a server version).
In fact, care to guess what the single most expensive component for a Windows OEM is on their computer, 90% of the time? Licensing the operating system from Microsoft.
There’s a reason why Apple makes more revenue per computer sold than any other Windows OEM: they are smart enough to know that computer hardware, by itself, is commodity, and the features you can realistically add value with are a) bundled software and b) design, so they make damned sure they control both ends of that, whereas Windows OEMs have surrendered one of those means of deriving revenue and the customer experience to Microsoft… and are chasing after the bottom of the food chain by providing generic components as cheaply as possible (and can’t really integrate the OS as part of the design the same way Apple can, because, well, Microsoft controls some of that as well).
Now there are SOME OEMs (like, say, Sony) that do try and invest in design, R&D, as opposed to beige boxes at cut-rate prices. Go compare their prices to Apple’s. Think you’ll find they are comparable.
Anyway, once again, MS is going “LOOK IT’S HALLEY’S COMET” to keep people from noticing that the Windows OEM model benefits them a lot more than the OEMs who license it- please note who has the $40 billion pile of cash (it’s not Dell).
Thank you, dear Logic Guy, for one of the few correct uses of ‘begging the question’ I’ve ever seen on the internet.
Come on people, this kind of discussions are starting to get boring after ten years…
Apple’s margins are the highest in the industry – that’s a fact.
In some cases, more than double than competitors.
So what? It’s a tax? A premium? A barrier to entry?
Judging it a “tax” would imply that there is a such thing as a “right” margin, which is not the case. As long as there are consumers buying, and a working business model, a manufacturer can charge whatever he likes. So please let’s move along…
But it’s silly also to contest “Apple cost more!” claims with endless battles of comparisions with other shops. There are the margins data saying that Apple charges more overall for what it sells. It’s that simple.
And it’s silly to contest “Apple cost more!” with “high-end competition” reasonings.
“High-end” is a price category – so the counter argument is just short circuiting.
Re: the Apple Tax
Isn’t this an inversion of the “Microsoft Tax” people talked about a few years ago, particularly when trying to buy a stock PC without it to run Linux? I think the tax analogy is better with Microsoft since its ubiquity is closer to the actual “death and taxes” certainties.
Someone forward the original to George Ou — he’ll love it, in his “retirement”!
PR stunt, as Forbes outlined it’s payed strategy with distilled talking points:”Microsoft laid out its talking points – among them that Windows PCs come with more power and features for lower prices, while Macs are even pricer than they look because they don’t come with enough software.
In true political style, Microsoft trotted out a hidden “Apple tax,” an extra $1,000 or more Microsoft says people switching from PCs to Macs must pay to “rebuy” software and hardware for their new system.”
@ STEVE:
So you’ve bought about 10 Mac.s over the last year. But the new notebooks are priced too high because they’re works of art. Hey, have you noticed that the new models have THE SAME PRICEs as the old models ? So, any enhanced, shiny bits are on SALE at NO EXTRA CHARGE ?? What business are you in, by the way ?
@Abu: You have missed the point. No one is contesting “Apples cost more” because this is a meaningless statement that cannot be countered. More than what? A relative statement like this /requires/ a comparison, and you cannot compare an Apple laptop with every single laptop out there because no market works this way. This is a made-up argument.
Entire industries are based on the notion of market segments. Pretending otherwise is disingenuous at best.
Yes, “high-end” is a price category. But so is “low-end” and “student” and “mid-range.” Companies cost and price their goods not only on margin but on perceived worth. This is how market capitalism works.
Apple has chosen to compete in a particular upscale market. Yes, there is a significant barrier to entry, but this barrier exists for every single non-Apple item in this upscale market. But when one compares their goods against other goods in that select market one finds there is a clear parity.
It is up to the purchaser to decide if this market is worth the extra cost, and where the point of diminishing returns might be. Some people don’t need an $1600+ laptop from Apple, but then they don’t need an $1600+ laptop from Lenovo or Dell or Toshiba. For those who do want what any manufacturer offers at these price points Apple is usually priced somewhere in the middle.
So, yes, it is perfectly reasonable to counter specious claims about overpriced Apple goods when everyone in the same space is charging the same. It amounts to complaining that Apple does what everyone else in their market does, but is good at what they do, and make more profit in this space than other manufacturers.
Sounds like sour grapes to me.
Perhaps I am naive, but wouldn’t the simplest and most accurate way to determine whether Apple charges more than other PC manufacturers be to simply do a little comparison shopping? Well, I’ve been doing that for the past several years, and if you match specs, the argument of an “Apple tax” just doesn’t hold water.
Forget about profit margins. There are other ways to increase profit besides just charging more. (In fact, “just” charging more is a pretty terrible way to increase profit.)
“Apple’s margins are the highest in the industry – that’s a fact.
In some cases, more than double than competitors.”
OK, let me repeat this so you understand.
Windows OEMs have to pay Microsoft for the OS they ship on their Windows computers.
Apple doesn’t.
Microsoft is insanely profitable as a result of selling software- (really- go compare things like profit per employee for Dell and for Microsoft) some of which is represented by OEM software.
Apple gets to spend a lesser amount on R&D than they would buying Windows/Office/Works/whatever licenses from Microsoft… and KEEPS the difference, PLUS they get to control look and feel, integrate tightly with design, and so on. In essence, Apple is more profitable because by selling hardware AND software and doing a good job of it, they get to be Dell AND Microsoft.
As a mac user there are several arguments that can be made here, that people disdain too fast and dismiss too easily. Someone spoke of “not wanting to pay for the upholstery”. That is a very good point. OK, you want a good, rugged computer with reasonable specs that make sense to *you* and a stable OS. But you might not want to pay for the full monty. That makes good sense, especially when you need to buy several machines. Meaning: not every product cycle might appeal to everybody, and for good reasons.
Also: everyone not blind knows he can find super deals for PC’s with all the specs you can dream of quite easily. Friends of mine have horrible hackintoshes to prove that point. Butt ugly, but very very cheap. Meaning: yeah, if you have eyes in your head and are not a complete moron when it comes to judging PC’s, you can easily find cheaper PC’s and otoh have to work hard to find Apple deals (refurbs, 2nd hand, end of cycle,…). I know all the arguments that say “cheap makes you sorry’ (which don’t translate too well) and personally adhere to them, I have macbooks and macbook pro’s, no hackintoshes. I like quality (even if part of it is just upholstery as some argue) and peace of mind. But the cheapest a mac gets is just before and just after a product launch or adaption. In between, PC’s win on price, easily. Dell’s are not cheap. Every hackintosh freak will tell you (while foaming at the mouth).
Don’t treat these argument as a fashion victim, don’t just yell “yeah but microsoft”.
Well, you can, of course, but it sounds a bit shrill.
Uhh… margins != total profits != price per unit value.
If you have better margins than the other guy, and are selling the same thing, then it means either that you got a better deal on the parts/labor then they did, or the market is willing to pay more for it from you… but, as has been demonstrated, Apple isn’t charging more for comparable hardware than the other guys (Lenovo, Sony, etc). Therefore, they got a better deal than the other guys. Just because you have the lions’ share of the margins, doesn’t mean that you are charging a higher price per unit value to the consumer.
Total profits = units sold * per unit margin… so even if one company is selling a lot of units, if there is no margin on them, they are not making any money on it.
In other words, you can’t get from one figure to the other without more context. The math just doesn’t work.
“Forget about profit margins. There are other ways to increase profit besides just charging more. (In fact, “just” charging more is a pretty terrible way to increase profit.)”
Hmmmm… yeah, that’ll work. Because all those companies that ignore profit margins are so wildly successful. I got some news for you… Apple knows what their profit margins are for each and every one of their products, and the reason they are so successful and profitable is because they won’t sell below certain those margins… except to clear old inventory.
Since there is only one other way to increase profits, you must be suggesting that the only right way, best or proper way of increasing profits is to cut expenses.
You know… doing things like: using cheaper, lower quality build materials; using cheaper parts and components; paying employees less and eliminating benefits… while keeping prices the same.
Unfortunately, there does seem to be a tax for using Apple products outside the US. I’ve been using a mac mini for the last 10 months or so, and was looking forward to getting a 15″ MacBook Pro at some point in the next 6 months, but those plans are on hold at the moment.
The reason you might ask? Well, the 15″ MacBook Pro is now retailing for AU$3199 (used to be AU$2699, which was bad enough).
Even after converting US$ to AU$, that is nearly $1000 in price difference between the US and Australia. I’m willing to accept some difference in price due to taxes and transport costs etc, but almost $1000? I’d love to see the justification for the current price Apple is asking.
“In essence, Apple is more profitable because by selling hardware AND software and doing a good job of it, they get to be Dell AND Microsoft.”
On top of that, like said many times already, Apple only competes in the higher end of the spectrum. Margins are higher in that area, regardless of the manufacturer. Do you really think for a second that a $3000 high-end Dell laptop is sold for the same sucky margin as the $599 one? Neither do I. The difference is that Apple has *chosen* not to go into the low-end, low-margin competition, so its average margins are head and shoulders above those who mainly compete in the sub-$1000 category.
(formerly “There is a tax for using Apple outside the US”)
Oops, that’s a name field, not a title field. I did actually mean to post under a name :).
I’d love to see a comprehensive comparison of Apple and Lenovo pricing. Not because the two brands are equivalent, when they clearly aren’t; Apple care much more about style than Lenovo — but because both are known to prioritise quality and durability. A reasonable comparison would measure Appe products to other similarly targeted products, and not budget-fixated products Dell and bamboo PCs.
Hell, even Steve Ballmer is aware that a segment of the PC market consists of cheap, low quality computers, and that it’s a segment where Apple has on presence. Their management seems quite happy with making money in other segments.
I don’t think that Apple spends less money developing their own OS than they would be buying Windows licenses. A Windows license would be $40, $50. The cost of developing Mac OS X must be $2, $3 billion per year, or $200, $300 for every Mac sold (Apple is selling 10 Million Macs this year).
I think there is a factual pricing gap between similarly-spec’d PCs and Macs. Not when new Macs are released, but a few months later, as PC vendors keep dropping prices while Apple doesn’t. Apple is usually keeping their prices steady for 4 up to a full 12 months, until a new model is released. At the end of these time spans Macs get to be heavily “overpriced” if you look at it in terms of hardware specs alone.
If one would then take the effort to compare prices of Macs and similarly-spec’d PCs over a 12 month time span one would probably find an average price gap of maybe $200. This is the money you pay for the unique features of the Mac like Mac OS X, a handful of hardware innovations like MagSafe or iSight and a beautiful industrial design. I think $200 would be a very reasonable amount for those unique features.
Don’t care really.
I like and appreciate quality both in software, OS and hardware. We have just installed 15 20″ iMacs. Everybody goes ‘Ahhh’ or ‘Wow’. Fit and finish and design ie build quality is most apparent. People respect these machines. Like I respect a BMW or a Jag or a Mercedes. Fit and finish. And you don’t get that for sod all. I expect to pay for that. And when I compare the stuff in that market segment, I find the Mac to be an easy choice.
In the past 12 months, 15 out of 25 staff members have bought a Mac. Some have bought 2 or 3 for their kids. Put their money on the line despite the plethora of screamingly cheap PC deals.
I think that as hardware has become a consumer item, buyers have shifted their focus from ‘just get a computer’ to get something with a bit of quality. And most buyers have had at least one or two computers as a purchase. They are now more informed. And they are now making an informed choice.
So the webmonkey article references a CNET article that was basically a pre-event rebuttal by the MS Windows Marketing VP. He states as fact that the only upgradable Mac is the $2,800 Mac Pro which is “more expensive than just about any PC configuration that you get from any one of our manufacturers.” What a flat out lie..! Leaving aside memory and HD upgrades available on many Macs, the $2,800 Mac Pro has two quad core Xeon processors in it. To get that from Dell you have to shop for small business workstations (why can’t you buy dual quad cores for home?) and a similarly spec’d Precision T4700 costs over $4,000 (with a “free” 19in monitor). CNET let this lie go unchallenged in their puff-piece interview, and from that it gets conflated into an Apple Tax article everywhere else on the web.
Anyone who’s serious about comparison shopping knows that there is no Apple Tax, and I’m sure we’re all getting tired of trying to convince people otherwise. If you want a cheap computer, but a Asus from Wal-Mart. If you want the best computer of a particular mid or high end spec, get an Apple.
Look, if you believe/care/follow anything about Apple published by CNet and/or Wired for the last decade, you’re asking for this kind of tsuris. Both outlets are basically pushed by editorial edict to gin up page views by going for sensationalism; perhaps they truly believe this is acting as righteous “truth to power” gadflies, or breaking real news, but come on — it’s trolling.
Just let them evaporate into obscurity. They’re already irrelevant. Give the page views and your time to quality outlets. Or make your own news.
Tom
“I don’t think that Apple spends less money developing their own OS than they would be buying Windows licenses. A Windows license would be $40, $50. The cost of developing Mac OS X must be $2, $3 billion per year, or $200, $300 for every Mac sold (Apple is selling 10 Million Macs this year).”
1. You really need to read up on the history of PC operating system: Windows was not first. There’s a good reason you have not seen “Dell OS” in the wild.
2. Figures such as you have quoted appear to be less than rigorously sources; or they could be wild-ass guesses.
3. Sometimes it’s inadvisable to begin your discussion with “I don’t think”.
Cheers