Apple's Premium Pricing

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What price Macintosh?

5/16/2006 4:19:01 PM, by Jeremy Reimer

Doing Mac versus PC price comparisons is an old, old, sport, and often the comparisons are done by one side or another with a particular axe to grind. Some people go directly for the cheapest, flimsiest PC ever built and compare it directly with the most expensive Macintosh just to say that Apple's computers are overpriced, whereas others go to ludicrous lengths to match the specs of one particular Apple model exactly to the point where only a single boutique model of PC fits the bill, in order to claim the reverse.

Because of this, I always approach price comparison stories with a wary eye. In the old PowerPC days, the different architecture at least offered some escape from price comparison madness. For example, when I bought my iBook five years ago, the low-power G3 offered a five-hour battery life that stood out from most PC laptops of the time, and the 12" form factor was hard to find except in very expensive "ultraportable" laptops from Sony and other high-end vendors. The main problem was figuring out exactly what PC hardware was equivalent in performance to PowerPC-based Mac kit. Often, it depended on what applications you ran.

These days, as Steve Jobs has said, "We're kind of done with Power" and new Macintosh hardware is pretty much identical to PC equipment. Apple has even gone so far as to enable booting Windows XP on their new Intelmacs (Wintelmacs?) which makes it hard at times to distinguish them from PCs. This hardware parity provides an opportunity for more sensible price comparisons, and a recent study by Piper Jaffray analyst Gene Munster has come up with a pretty good one.

Munster has found that while most people's conception of Macintoshes is that they command a 20 to 30 percent price margin over equivalent PCs, analysis of the new Intel-based Mac hardware shows that the actual price premium is much less: only 13 percent for desktops (well, iMacs, since the PowerMacs haven't transitioned yet) and 10 percent for laptops. This is a pretty reasonable margin, and certainly shows that Apple has come a long way from the company that once made more than 50 percent profit on both the Apple ][ and Macintosh lines.

However, the numbers don't tell the full story. While Apple may command a small price premium on the computers they do sell, they only sell a few models and they are all in relatively high price ranges. For example, instead of making the new MacBook a US$699 model with a Celeron, Apple chose to keep the high-end Core Duo processor and differentiate the US$1099 unit from the more expensive MacBook Pro by using integrated Intel graphics.

The majority of PC sales are for models that are cheaper than Apple's Mac prices. The average PC desktop with a display sold for US$744 last year, which is about the same as Apple's cheapest Mac, the US$599 mini, once you add a display, keyboard, and mouse. The average laptop sold for US$1070, slightly less than Apple's cheapest MacBook at US$1099.

Whether or not the prices Apple charges are worthwhile depends primarily on how much you value Apple's hardware designs, little additions such as the MagSafe power cord, or a licensed and legal version of OS X and the bundled iLife software. For Apple fans, of course, these additions are well worth the price premium.

http://arstechnica.com/news.ars/post/20060516-6848.html