In August, a new academic year begins and many -- like me -- are looking for a new a personal computer. The Macs seem to be a popular choice, according to statistics; and until this year Apple had a very enticing Back to School offer: a free iPod Touch with the purchase of a Macbook. I expected the offer to continue and was waiting for a refresh to the 13" Macbook Air. Apple announced their Back to School offer for this year and I was disappointed. It is a $100 iTunes Store credit that one can use to buy applications or media. Microsoft had announced their Back to School offer before Apple and it now seems like a better deal. An Xbox 360 free with a $700 PC is a bargain.
The base Xbox is available at $200 while the 8GB iPod Touch is $230. It is amusing how a game console is cheaper than a portable music player, but keeping that aside, the price difference between the devices isn't huge to the end consumer. The choice is quite personal: a portable media player that can do free video calls and games vs. a gaming console that can be used with the hottest selling accessory, has the best gaming experience and access a huge portfolio of multimedia content.
This brings me to up-sell on these devices for both companies. In Apple's case, apps, books, games and multimedia on the iTunes Store generated revenues of $1,782,000 in 2010 with 82.7% market share. (Asymco says the App Store generated $3 billion in sales.) Users download a lot of apps. Some numbers about the iPod Touch and iTunes store:
- Average iOS user will download 83 apps in 2011 compared to 51 in 2010 (Source)
- App downloads have overtaken song downloads on the iTunes Store (Source)
- More than 50% of the iPods sold were iPod Touch devices (Source)
- More than 15 Billion apps have been downloaded. (Source)
Comparing this to the revenues Xbox generates for Microsoft:
- Xbox LIVE has more than 30 Million members
- 53 Million Xbox 360 consoles
- 40% time spent on XBox is for non-gaming activity (Source)
- Xbox (console, Kinect and LIVE) were responsible for Microsoft's strong Q3 results (SEC Filing)
Xbox offers Live TV, Hulu, Netflix and access to the Zune marketplace. Point being, both devices are not a onetime investment for the customer, they are gateways to revenues for the companies and partners through value added services.
While writing this piece I came across an article where analysts are predicting death of the iPod. A lot of users own iPhones, it offers the same features as the iPod Touch and more, so does the iPad. According to Apple's numbers, Macs and iPhone or iPads make for the preferred combination and in such a scenario, a $100 store credit does make sense. However, I prefer to have a dedicated music player, primarily because I can survive with a media player with no battery but not a phone with no battery life.
Many consumers who buy the Macbook won't be buying the iPod Touch. While the deal offered by Microsoft is more value for money for the consumer, unfortunately the PCs don't compete with Macbooks. For example, the base Samsung Series 9 is $1650 and a similar Macbook Air is $1300 (minus i5 & backlit keyboards, both are expected as part of the refresh most likely at the same price). The Macbooks are good hardware but a $100 store credit doesn't entice me. I would have spent that $100 even if I got the free iPod Touch, and herein lies my dilemma: Do I go for the better PC or the better Back to School deal?
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