By Scott M. Fulton, III, Betanews
It should be no surprise, especially to long-time Mac users, that noted analyst Roger L. Kay, currently with Endpoint Technologies, is a supporter of the Windows "ecosystem." His opinions with regard to Windows are very much on the record, and he and I have often joined together with our colleagues, in brisk, lively, but fair discussions about the relative value of software and hardware on different platforms.
So frankly, Kay's latest white paper (PDF available here) which is a cost examination for home users planning complete at-home networks on Windows vs. Mac platforms (which Microsoft admits to having sponsored), comes to conclusions which should be no surprise to anyone on two fronts: First, Kay illustrates how much more individuals are likely to pay for Apple versus brand-name equipment from suppliers such as Dell and HP. Second, Kay takes Apple to task for charging a premium, and that he's done so isn't news either.
Not even Kay's key metaphor is particularly new for Kay; those of us who've carried on conversations with him have heard it before. But this week, Microsoft has been pushing Kay's white paper by attaching itself to that metaphor -- one that has the strange ring of a similar political approach being taken by the National Association of Broadcasters, on a completely separate issue. Kay -- and Microsoft -- are calling the extra money some customers are willing to pay for Mac equipment an "Apple tax."
"For the past several years, Apple has been gaining share based on improved product offerings and an aggressive advertising campaign as well as Microsoft's stumble on Vista," Kay writes, shocking no one. "The combination of Apple's great execution and Microsoft's missteps has led a lot of converts to the Apple world. Mac is in flood tide. Cool is in... Or was in. Until the economic landscaped changed. Now, formerly carefree spenders are taking a sharper look at how much that cool really costs. And, oh, by the way, is it really so cool, while we're at it?"
Kay's current message plays very well to Microsoft's current marketing message for Windows-based PCs...eerily well. In the last several days prior to the release of Kay's white paper, we've heard and read a lot about the Mac tax, whose symbology is apparently designed to convey the impression that Apple users are paying more for essentially the same equipment and performance. Kay himself has been part of the buildup, writing in BusinessWeek last month that Apple has been a victim of its own success in recent months, as evidenced by the rising number of malicious attacks against the Mac platform.
One can't help but notice how well-produced Microsoft's own presentation of this message is being handled, including the IRS tax form mockup featured in Brandon LeBlanc's blog post yesterday.
There's a certain political ring to Microsoft's metaphor of choice, an unavoidable resemblance to the NAB's campaign against the removal of performance royalties exemptions from terrestrial radio stations, a subject of heated deliberations in Congress for the last three years. The NAB's campaign this week was given the name "No Performance Tax," and paints the recording industry as a cartel conspiring against the entire music promotion business, to collect from broadcast radio what it collects from Internet radio.
It's not a real tax, of course, but the way it's portrayed has made some believe that Congress is truly deliberating a real tax, a surcharge. Kay's language in his white paper isn't that sneaky, but the metaphor can be construed to present a picture that Apple is the principal recipient of a windfall surcharge -- in his hypothetical case, nearly $3,400 more being spent for a complete Apple-based home network, over comparable Windows-based products selling for under $2,700.
But there's a few key facts that Kay left out. First of all, nothing at all about his hypothetical family's PC system of choice -- comprised of Dell and HP PCs, and accessories from notables such as Linksys, LiteOn, and Iomega -- is as hard-wired to Windows as the Apple-based system's parts are to Mac OS. To be fair, Kay's comparison is one between an x86-based platform where Windows is pre-installed, and one where Mac OS is installed -- and in the former case, a home user could choose Linux.
If Linux entered this discussion, then Microsoft's typical argument against Linux could kick in. I've heard it before, even recently: Users will willingly pay something extra for reliability, for performance, for having real companies backing them up when problems arise, for having the better software. If there's a premium, then at least it's worth something. Now, if that argument sounds familiar, it's because it's the same argument Apple has used since the early 1990s to back up the "Mac premium;" and if Microsoft's avoiding echoing that argument, it's probably playing it smart.
Secondly, the tax metaphor gives the impression that Apple is reaping a huge surplus for essentially the same equipment. It's not. Gross margins for Apple aren't terrible, but they haven't been great in recent months. At about 33% overall and flat, Apple does make more for its equipment than competitors such as Dell (18%), but it's not 74% -- which is a conclusion one could draw from Kay's numbers if he were to do the math the wrong way.
Perhaps more importantly, though, it seems a little sad that after all these years of allowing others to make its case for it, Microsoft's first serious charge at Apple is based around something as plainly obvious to everyone who's ever purchased a Mac as its relative expense. By avoiding the qualitative side of the argument -- and I actually believe there is one -- Microsoft is leaving itself open to a counter-attack. And my fear is that Apple, clever as it may be, will create a professorial, number-crunching, metaphor-generating character to represent Microsoft's case...a character who, to some of us, at least, might look a little familiar.
Copyright Betanews, Inc. 2009
