I Have Seen The Enemy, And He Is...
March 11, 1997
by: Bryan Chaffin (bchaffin@webintosh.com)
Great news! The Mac OS market share has increased an average of over 10% in the last two months! Where now oh ye purveyors of doom and gloom? WooooHoooooo! We're making significant progress!
While I am sure that the mainstream media will swiftly pick up on this turn of events and begin to sing the praises of Apple in a glorious fanfare unseen since the days when... ok, it's never been seen. Before we all break out into a chorus of "Ding Dong The Witch Is Dead", beware. There may be a dark cloud on the horizon. This impending disaster comes not from Microsoft or any other competitor. Surprisingly enough, it comes from those masterful decision-makers... the people at Apple Computer.
I am referring to the recent rumors of an increase in the licensing fees charged to clone-makers. With the apparent divine revelation that the version of the Mac OS hitherto known as MacOS 7.7 (a.k.a. Tempo) is in fact actually MacOS 8, Apple is now free to force changes on their clone makers' licensing agreements. Mac clone makers are currently only under license agreement to make computers supporting MacOS 7.x. A "new" OS means a new licensing agreement, and a new licensing agreement might mean more money. According to Business Week, Steve Jobs is pushing like the Castanet Tuner for Dr. Amelio to enact these increases. I think it likely that these naming shenanigans are nothing more than an easy way out of the MacOS 7.x agreements. The timing has the kind of convenience usually achieved only in an Aaron Spelling drama.
When you get right down to it, increasing the fees is all well and good. For in the true spirit of that paragon of Capitalism, Ayn Rand, Apple is and should be free to charge whatever the heck they want. After all, the MacOS is their operating system. If the clone makers don't want to pay any new charges, they don't have to. They could always make Be machines. Or maybe even go the Wintel route. Yeah, right.
At this point, I would like to direct your attention back to my first point, the increase in market share for the MacOS. The astute reader will note that their is a vast difference between MacOS market share and Apple market share. A larger MacOS market share is a very good thing for the world in general and Mac users in particular. A larger Apple market share is a very good thing for Apple shareholders, period. Not that I have a problem with Apple shareholders, at US$16 and change, I hope to be one very soon myself. A larger market share for the OS means that more software and hardware vendors have more reasons to develop more cool Mac stuff, which means that more people will buy more Macs, and we start the whole process all over again. In the long term, I think that the Apple shareholders will benefit much more by an immediate OS market share increase rather than an Apple market share increase.
You may be asking yourself what the connection is between this recent increase in market share (over 61% increase according to the number crunchers) and the licensing fee increase.
The increase in market share is attributable to our trusty new, and in some cases fragile, clone makers. From Power Computing to Power Tools, their cheaper, better, faster, stronger, we have the technology, in your face Mac Clones have brought much needed competition to the market. This has brought new customers to the Mac and kept others from straying. Motorola in particular has brought a lot of clout to the corporate market which has remained so elusive to Apple for so long. In many cases however, a lot of the clone makers' growth has also come at the expense of their erstwhile mother hen and would-be benefactor, Apple.
The truth of the matter is that MacOS computers are better today than they were before Power Computing burst onto the stage two years ago. This is not just because the clones are better, Apple's products are also superior. While Dr. Amelio and company can claim the majority of the responsibility, increased competition has had its impact. Faster CD-ROMs, better software packages, more RAM and the like can all trace their roots back to clone makers.
The impact on the public is evidenced by the recent sales figures. New people are buying Macs and wayward Mac owners are returning. It is plain and simple.
"Bryan," you say, "you digress."
This being true, I will get back to my point.
Apple pays the vast majority of R&D costs when it comes to developing new motherboards (whose implementation Apple controls) and the new version of the OS necessary to make it go. There are voices at Apple who say that those cost-cutting, lower-the-perceived-value-of-our-previously-overpriced-Macs, cherry-pick-the-best-motherboard clone makers should pay a larger portion (i.e. their share) of those costs. I happen to think that this may be true, but the numbers being tossed around by those in "the know" is a staggering $100-$1100 per machine (a much higher figure than the $50 each vendor pays now)!
If anything approaching that higher figure were enacted, many clone makers may well be forced out of the market. Not only that, many other potential clone makers may be frightened off from joining the market. Remember that there is yet another new OS (Rhapsody) on its way that would entitle Apple to still more sets of licensing fee negotiations. Just imagine what could happen if developers thought that Apple might pull the rug out from under them too.
Apple does have an obligation to the bottom line. Disagreement is denial. If they must recoup more R&D costs then so be it. This need must be balanced by the need to increase the OS market share. This will only be accomplished by healthy, happy, trusting clone makers. Most of these clone makers need to be manufacturing inexpensive Macintoshes (for the masses); made possible by lower licensing fees. So from this armchair CEO, Dr. Amelio, please be careful when deciding what to do here. |
