Getting Off the Upgrade Treadmill
Is the PC business suffocating because Android and iOS are sucking all the air out of the room? Could be:
Sameer Singh over at Tech-Thoughts has gone over some recently released Gartner data and has found that consumers are replacing their PCs much less frequently than they used to, and are instead opting for cheaper, more mobile options such as tablets and smartphones.
Singh also says that consumers are using their PCs less than they used to for critical functions that can also be accomplished by tablets and smartphones. Thus, users don’t feel the need to upgrade their PCs as frequently as they used to since so much innovation has shifted over to the mobile space.
“Over the last couple of years, it has become more and more apparent that PCs are seen as appliances, in that owning a PC is a necessity, but upgrading one is not,” he writes. “This has been driven by a shift in development activity from the traditional PC platform to mobile devices and the web/mobile web. When was the last time one of us had to upgrade a PC in order to run a new application?”
That last thing is the key right there. I used to upgrade PCs every 30 months, just to play the latest games at the highest resolutions, but those days are long over. Even Windows was hungry enough to need a faster processor every few years.
But we reached “good enough” somewhere around the two gigahertz barrier.
Casual gaming has moved to mobile devices. Tablets are taking casual users away from traditional laptops and desktops. And there simply aren’t enough hardcore gamers to drive PC growth.
Come to think of it, my phone and tablet are both on two-year upgrade cycles — even quicker turnarounds than when I felt like I had to stay on the bleeding edge of PC tech. But that doesn’t mean history won’t repeat itself.
I barely use my iPhone, just because I don’t much like phones. And the camera on it is so good, I can’t imagine needing a newer, better model just one year from now. It’s a similar situation with my iPad. It has a Retina screen, LTE, and a wicked-fast processor. To get me to really need to upgrade in 2014, Apple would have to come out with an attachment — one that will fit only on the 2014 iPad — that would iRon my shirts for me.
Sometimes there’s nothing worse than a happy customer.
or, as my kids would say:
“Whats a PC?”
They missed the seminar in Detroit on designing-in failure. Cars and trucks could be designed to last 10-15 years (mine always last that long, but I’m an outlier), but if everyone only buys once every 10 years, you don’t sell a whole lot of cars. So, legend had it that Detroit designed cars that really ought to be replaced after 3 years of standard use and maintenance.
When the processing power doubled every 18 months, you didn’t need for any parts to break in order to need to replace your PC. So, they didn’t learn the trick.
I was using my Android phone for everything, then I got an Android tablet (Motorola) and my phone went back to being a phone (mostly). My tablet is only wifi (intentionally, so I don’t get killed on data charges in Europe), so I do still need web access on the phone when I’m on the move. My desktop PC (the game machine) broke 2 months ago and I don’t miss it much….
And this is why Jeff Bezos was making such a big deal last week about how Amazon makes money when people use devices, not when people buy devices. Amazon makes the same money whether you buy that ebook with a brand-new Fire HD or on an original Kindle.
For Amazon to be making money on Kindles (at this point in time), we have to assume a couple things.
First, we have to assume that Kindle brings in new Prime customers, but Amazon won’t say.
Next we have to assume that when people buy content on their Kindles, be it music, video, or books, that it is content they wouldn’t have bought unless they had a Kindle. Again, Amazon won’t say. I’ve given up buying non-digital books for the most part, but I’m not buying any extra books just to feed my Kindle. The same goes for music and video. Customers are more likely substituting one kind of purchase for another, rather than making additional purchases.
And then there’s another problem. Selling somebody else’s content is a low-margin affair. Just ask Apple, which runs the massive iTunes Store on a more-or-less break-even basis. Even if Amazon is making better margins than Apple on content, those margins can’t be that much better, due to the nature of the business.
So the question is: How do you make money selling Kindles for around cost, just to sell incrementally (if at all) more low-margin content?
This is why Amazon’s P/E ratio (300-to-1) is so high: Investors believe Amazon is going to make tons of money any day now — but it hasn’t yet happened.
Meanwhile, Apple isn’t too worried about users like me, who might put off upgrades for a year or two. Apple is more concerned about selling high-profit margin devices to new customers. And then, of course, getting them to upgrade, even if only every third or fourth year.
Smartphones and tablets are still relatively young markets. For example, smartphone penetration in the US only recently broke 50% of the total market for mobile. That’s right: There’s still half of the US market left for (iOS and Android, presumably) to conquer. The tablet market is even less mature. In fact, nobody yet knows what the upper limit is of tablet-for-computer substitution.
Now: Would you rather be breaking in those virgin fields on the promise of making money, or by actually making money?
Apple has chosen one route, and has over $100,000,000,000 sitting in the bank. Amazon has chosen another route, and is a distant second in marketshare. And profits? So far, Amazon hasn’t shown any in tablets. Their upside potential, for now, looks quite small.
“I’ve given up buying non-digital books for the most part”…
I have books on my shelf that are over 100 years old and I can still read them. They require dusting every few years and I have to move them to paint behind them. When I die, I can bequeath them to whomever I wish.
I do wonder what becomes of the bits we buy today in 100 years. Will we remember to copy them off the cloud before the service provider goes belly-up? Will we still have a version of Acrobat that can still render these files? I suspect that if we do it comes at a steep price. How about that TurboTax return from 1995 backed up on a 3.5″ floppy disk? What would it cost to retrieve that one?
Mountain Lion and Adobe CS6 are combining to actually make me look seriously into upgrading. Was going to upgrade to Final Cut X as well but my old laptop will not run it. Or Mountain Lion for that matter. But it’s just there to p/u the slack. I’m gonna have to take a good look at the new iMac (my workhorse) when the new ones come out. If I don’t buy a new iMac then I’ll do as much upgrading as possible to the one I got.
And Apple may be able to get me to replace my iPad 2 next year. A new iPhone next year is going to be a much harder sell. W/ the excellent camera and the iPad taking up most of the jobs the phone used to do, I don’t see any need. Maybe if Siri becomes really useful but only on an iPhone 5S.
Maybe.
Upgrade? My 3 year old MacBook Pro handles all the Mountain Lion I throw at it. My original recipe iPad with 3G might get replaced with a newer one to get 4G. Maybe.
My iPhone4 and my son’s 3GS might get upgraded it there’s some amazing feature announced tomorrow. Maybe.
So I’m reading that Amazon is offering a lower priced broad band service for the new Fire. Could that generate profit for Amazon? Or just cause AT&T and Verizon to shudder?
I wonder what will happen when new, more-powerful systems are released by thousands of companies every day.
When the product cycle time becomes so short that products are outmoded before they are produced, what then?
Happens all the time, even to major companies. Remember the Zune HD? Released September 15, 2009- six days after the third-generation iPod Touch.
But we reached “good enough” somewhere around the two gigahertz barrier.
For most things, yeah. But I think quadcore CPUs are what really did it. Crappy code can still bog down a single-core design, no matter how fast, but even Redmond’s Finest has to be truly awful to make a quad feel sluggish.