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The Apple Tax Revisited

All right, a new report from the NPD Group says that 48% of the retail dollars spent on personal computers in the U.S. now goes to Apple. However, that doesn’t add up to a 48%% market share by any means, because of the price of admission. But, folks, I still maintain there is no Apple Tax.

So how does Apple gain such a huge percentage of the money? Well, obviously, the average price of a Mac is way higher than the average price of a PC. Without going into the numbers specifically, the answer why is obvious: Apple won’t play in the cheap PC playground, because they don’t think it’s worth it.

You have to wonder just what Apple is thinking here and why it’s not going for the jugular in the alleged battle to the death with Microsoft, but the answers are crystal clear. Despite the fact that such industry giants as Dell and HP sell way more units than Apple, the latter makes higher profits and has loads of cash in the bank. So who can argue with that?

More to the point, with the great popularity of netbooks, it’s clear that millions of buyers are struggling to compute on the cheap. With products selling for less than $300, including a basic Windows OS license, it’s clear that the PC makers who sell such gear aren’t making a whole lot of money from each sale. They hope to make it up with volume, or perhaps entice you to customize your box and stock up on high profit extras, such as more memory, larger screens, extra software and other goodies.

Contrast this to Apple, which basically sells fully-outfitted Macs with very limited, carefully defined configurations. Yes, there is a “build-to-order” option that allows you to customize your new Mac with extra memory, a larger hard drive and a handful of other goodies, but your choices are limited. That is, other than the Mac Pro, where there are far more selections with which to cater to the needs of the content creators who are willing and able to afford expensive workstations.

But even the basic Mac mini, at $599, comes with a pretty decent bundle of software, including the latest iLife suite, plus components that may be optional on a low-end PC, such as gigabit Ethernet, 802.11n Wi-Fi and Bluetooth. A common scheme the PC makers pull to keep prices low is to scrimp on the Windows OS licensing. Although there is but one fully-featured version of the Snow Leopard client product, there are several variations of Windows 7. Most of the time, the cheap boxes come with a Home version, but you need to buy Ultimate to unlock all the features, and that’s usually $100 to $150 more.

Apple just won’t sell stripped machines, even though I can see a need, particularly in the enterprise where some of the usual frills, such as a Web cam on the note-books and iMac, and even Bluetooth and Wi-Fi, may not be needed for obvious reasons, such as office security. Forget the cost of the software, since it’s just a disk image that entails no extra expense for Apple when building the product.

But Apple’s main sales focus is on the consumer. Yes, that consumer may run a business, and it’s very common for people these days to want to bring their Macs into the office. There are countless stories of corporate executives taking their Macs and iPhones to the IT departments and demanding they support such gear. When the boss says do it, the IT person must say yes, even if they are wedded to the known trials and tribulations of Windows machines.

As I’ve said before, when you actually equip the PC with something comparable — or mostly comparable — to the Mac, you find the cost differences largely vanish. The Mac is sometimes a little more expensive, sometimes cheaper. PC makers are more inclined to tout instant discounts to grab a quick sale, and that’s where they might offer an added price advantage. But there’s no evidence that there’s such a thing as an Apple Tax. That was long ago and far away.

On the other hand, there is a Microsoft Tax, even though Windows fans usually can’t handle this uncomfortable truth. It comes in the form of the annual subscription fee paid for name-brand security software, and the higher level of maintenance the PC box usually requires.

Also consider the plight of the PC user with Windows XP installed. If they want to upgrade to Windows 7, which is actually a pretty decent operating system despite still being saddled with such land mines as the dreaded Registry, they are forced to do a clean install. By clean, I mean wiping the hard drive after backing up your stuff to an external drive. Microsoft’s migration utility is limited to your own documents, not applications, such it’s of little help in dealing with the real issues, which involve reinstalling all your apps and hoping all your settings will still work even if they are restored to the same location on your PC’s drive. Yes, that’s not a given.

If you can’t handle that clean install yourself, you are forced to pay someone to do it for you, or just buy a new PC. Either amounts to added expense — a Microsoft Tax. Is it even worth it? I don’t think so.