Apple Demands a High Price to Be Cool

Stated another way: How long will people spend so much to be cool? It's the question I'm asking after seeing more rumors about new Mac notebooks. Rumors point to even cooler MacBooks, quite possibly with touchscreen trackpads. The multi-touch possibilities are intriguing, to say the least.

AppleInsider's sources "described" the new Mac portables in the most roundabout of ways—and without names! Who are these mysterious people?

Engadget has an actual, gasp, photo, but with stern warning: "Naturally there's zero info on who the source is, and we're expecting a 'hah, I totally fooled you guys' to spring up at any moment, but there's clearly some pent up demand for this thing if the rumor mill is any indication." The photo comes from a story on French gadget site Nowhere Else. Seeing how this picture, real or fake, really is worth a thousand words, I've lifted it and linked back to original site as accreditation.

GOT A TIP OR RUMOR?

From the picture, the new MacBook Pro styling lifts a little from MacBook Air and a bit more from the iMac. That kind of blending is typical of past photo fakes. So I'm suspicious—all the more so because the computer is kind of ugly, which is typical of fake photos and not Apple design. But I want to pretend for a moment that photo is real, that the touchpad really is a small multi-touch screen. Would you really want one, and what would you pay for it?

The question is quite serious, because of how Apple upgrades it products, new trends in mobile computing and the dire state of the U.S. economy. No matter what the next MacBooks look like, their prices are likely to stay about the same—unless this is the margin-sucking product transition Apple executives warned about in July. Apple typically brings in a new product line at Price X, adds new features in several subsequent iterations and drops at least one model's price before the next big redesign. The redesigns almost always raise the prices higher again, as Apple repeats the process. By the way, redesigns and new ones tend to bring slightly underpowered models compared to Windows PCs; Apple justifies higher pricing through design, and learned behavior that people will pay to have the coolest thing.

I'll offer some examples. For my controversial August post comparing Mac and Windows PC average selling prices, NPD provided retail sales data. Mac desktop (e.g. iMac) ASPs rose from $1,432 in June 2006 to $1,592 a year later but dipped to $1,543 in June 2007. In September 2006, Apple refreshed the iMac line, by raising the price of the top-end model by moving from a 20-inch to 24-inch display. The entry-level model dropped to $999. In August 2007, Apple introduced a brand new iMac, which raised the entry-level model to $1,199 but lowered the high-end computer by $200 to $1,799. Same pricing remains in place today. Apple has since incrementally upgraded the microprocessors and system memory and hard disk capacity on the $1,499 and $1,799 models. A heftier-configured $2,199 iMac is special order. Based on Apple's past actions, iMac is due for a low-end price cut before Apple brings the next redesign.

Rumored MacBook Pro (Source: Nowhere Else)

MacBook Air is classic Apple—offering more for less because people really will pay for design. The Air is thin and sleek, but is it functionally worth $1,799 when compared to cheaper Mac portables? The $1,299 MacBook has 2.4 GHz Intel processor (compared to 1.6GHz on the Air), twice the hard disk capacity, an optical drive (a $100 add-on for the Air), same graphics chips, same size display with same resolution, one more USB port and a FireWire port (Air has none). When factoring in cost of the external hard drive, price difference is $600. From that perspective, Air is a skinny white MacBook with a lot less for the money. Air also is due for major upgrade—or replacement.

Apple Reaches High, While the Market Goes Low
Apple's portable strategy is bucking against industry trends. Apple got it right with Air that small is in. But consumers and even some businesses want something more—or is that less: Small and cheap. The Netbook category is sizzling hot, which is strange in a way given how many past failures there have been selling diminutive, somewhat unpowered portables. Netbooks are lower-powered, subnotebooks typically with displays 11-inches or much smaller.

In June, Market Intelligence Center predicted that worldwide netbook shipments would exceed 8 million units this year. That's pretty good for a virtually non-existent category a year ago. Gartner predicts 5.2 million units this year, reaching 50 million in 2012. Two weeks ago, IDC credited low-cost portable PCs—where netbooks are major contributors—as driving worldwide PC shipments.

Amazon offers more than 50 netbook models, something that sure surprised me. Many models sell for under $400. Pricey models sell for more than $600, but they're less common than those selling for under $500. What's interesting is how some of these small notebooks compare to MacBook Air. Remember: I assume people paying more for Air want the diminutive size and style.

Many of the newer netbooks come with Intel Atom processors and Windows XP Home, because Vista demands too many hardware resources. For comparing to the MacBook Air, I picked one of the priciest netbooks offered by Amazon: HP 2133 Mini-Note PC, which has an 8.9-inch display with 1280 x 768 resolution, 1.6GHz processor (Via not Intel), 2GB of memory, 120GB hard drive, Webcam, 2 USB ports, 802.11 a/b/g wireless, Bluetooth and more. The notebook measures by 10.04 x 6.5 x 1.05 inches and weighs 2.8 pounds Price: $743.99. The Air has a 1.6GHz Intel processor, 13.3-inch display with 1280 x 800 resolution, 2GB of memory, 80GB hard drive, Webcam, 1 USB port, 802.11 b/g/n wireless and Bluetooth. The Air measures 12.8 x 9.6 inches X .16-.76 inches and weighs 3 pounds. The Air is thinner, but the Mini-Note is smaller and weighs less.

HP Digital Clutch Mini-Note

The comparison is of course inexact, particularly because of screen sizes. But if dimensions and weight are the major buying criteria, the laptops are comparable enough. Amazon sells the MacBook Air for almost $1,000 more than the Mini-Note. The point I'm trying to make: Apple reaches high, while the market goes low.

Something else: Some of the newer netbooks look good. Earlier this month, during a New York fashion gala, HP and designer Vivanne Tam debuted the digital clutch Mini-Note, which goes on sale in January. It's an intriguing concept, a computer about the size of a clutch handbag carried like one.

The market trend is cheaper and smaller, but Apple appears on track to continue above $1,000 laptop pricing. The main selling points: Cool. Trendy design. For years, Apple hasn't faced much competition with respect to design—other than, say, Sony. But Windows PC manufacturers treat design more seriously than ever, if for no other reason than differentiation. The computers all run Windows. Innovation must come elsewhere, if one manufacturer's computers are to stand out from the others. Design's importance is growing, for three primary reasons—other than the aforementioned differentiation:

• Windows PC manufacturers recognize Apple's success selling cool and good design—at premium prices.
• Most people are buying a second or third computer, and they're choosing based on factors other than processor speeds or storage capacity. Something else: Those additional computers tend to be portables, which are more personal and speak to who you are. Design matters more.
• Newer and cheaper production technologies let manufacturers do more interesting things with laptop case moldings. For example, the design for the HP Artist Edition notebook is injected into the case molding during production. It's not a skin but part of the laptop casing.

Related: Component manufacturers such as Intel are bringing to market hardware that consumes less power, produces less heat and better accommodates smaller portables or non-traditional computer designs.

The point: Windows PCs are getting cooler and smarter looking, and it's a growing trend. Bad design or failed trendy attempts have been the norm for too long. Perhaps the question I should have asked: How much longer will people pay for Apple cool, when they can get a Windows computer that is cool enough, looks good enough and costs lots less? I pose that question to you. Please answer in comments or respond by e-mail.

[Please send your tips or rumors to watchtips at live.com]

Posted by Joe Wilcox on September 26, 2008 12:25 AM