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Netbooks Destroyed the PC Market

January 6, 2013

The Theory

Reading some commentary this week, I saw an interesting idea. Namely, the idea that netbooks destroyed the computer market. The argument goes like this, people started buying cheap, plastic, crap computers and as a result they are reluctant to spend $1,000 on a more powerful ultrabook. In fact, another writer jumped on this idea and suggested this is exactly why Apple is such a superior situation. After all, Apple has no problem selling laptop computers for $1500.

They are WRONG

Here’s the thing, this line of thinking is absurd! It’s absurd for a few reasons. First, people buy computer devices based on what they need to do with the device. At one time, yes, people would buy a very powerful desktop computer because it could do everything. As a result, buying the biggest and fastest just makes sense. But, if you are going to surf the web then does it make sense to pay $1000 or more for that device? Of course not. This isn’t because of netbooks, rather, it’s due to changing dynamics in the market.

Illogical Analysis

As for the line of thinking about Apple, let’s be honest, Apple doesn’t sell many computers. Do they sell high-end devices? Sure. But all of the Apple laptops and desktops combined, amount to about 5% of the PC market. In other words, they don’t really sell anything of substance as they are a niche player in the PC market. Certainly, they sell many fewer high-end laptops than the combination of Microsoft laptops by: Samsung, Dell, HP, Acer, Fujitsu and Lenovo. The truth of the matter is this. Apple sells more and makes more money off the IOS devices than they do off of their PC business. In fact, this coming year, Apple will sell many more iPads than traditional computers. As I have written before, there is a convergence occurring as part of the post-pc era and there really is no difference between a tablet and computer. In other words, Apple doesn’t sell computers for $1500, instead, their most popular computing device, the iPad computer is about $500. That is right on track with the lower end PC computers and that is what they are selling in some quantity, low end computers.

Changes in the Market (low-end computers/tablets)

To say that selling low-end computers/tablets has wrecked the market, well, that is just ignoring the fact that compute power has increased to the point where lower end computers/tablets get the job done. Just because you can make a computer faster doesn’t mean people NEED the computer to go faster.

Certainly, they may not be willing to spend money to make it happen when the faster computer may have no impact to their experience. Consider this, a new computer may boot faster than an old computer. But, when we are talking about a desktop computer, who turns it off? If you leave it running all the time, is there any difference between the old computer and the new computer? Sure, for the 10 times per year you actually reboot it.

Here’s the reality, the bottleneck for computer use is often unrelated to the compute capacity of the device. In other words, the speed of the connection to the Internet (the network) is often a bottleneck far more than the speed of the computer. Buying a faster connection from your ISP would demonstrate a much better experience than buying a faster computer. As such, getting a faster computer doesn’t even speed up the experience. Let’s face it. Most people check email, surf the web, maybe run some videos, play a few games (not talking gamers here) and likely dabble in some sort of office productivity. For these users, it’s not a case that the cheaper computers “ruined” the market, it’s that the demand for compute power is better matched by cheaper computers/tablets.

New Era

Enter the new era of computing. People need a device that is capable of doing what they need to get done. News flash, the economy sucks right now too. As a result, demand for higher end devices will be reduced. Additionally, computer capacity has simply outpaced the requirements for what normal people do on a computer. For this very reason, we are seeing that households have several different devices instead of a single home PC. Now, a household may have a couple Kindle Fire devices, an iPad, a laptop or two and an old desktop that is never used. People use the specialized devices in place of the single PC.

This is why the Microsoft gamble is so important. Recognizing that we are in a new era of computing, they have to adapt. The new reality is that a real marketing campaign should still push a family PC for every home as the hub (likely to be an Xbox, not a traditional PC). The Hub device can be used as the central access for music,  movies, TV, web surfing on the living room TV and it can connect seamlessly to the other PC’s/tablet computers.

If Best Buy really wanted to sell Windows RT, it would be the easiest way to do it. Bundle a cheap home PC, a Surface (or two) and an Xbox. Guess what, you could buy all of that for about the same price as a high end laptop.

The beauty of this configuration is that they all work together. Also, by having the low end-desktop, you enable a lower price Windows RT device to run the full power of a desktop through remote control if desired. If a family already has an existing desktop, enable remote access and buy two Surface tablets instead. Are you kidding me? That’s awesome for consumers!

I See and I Laugh

When I am out and I see someone with a high-end Mac, or a high-end PC (laptop, desktop, it doesn’t matter), I can’t help it. I laugh a little on the inside. Why? Times have changed. There is no need for the high-end device 99% of the time. Forgive me, I know I am laughing at someone undeservedly 1% of the time. Regardless, for almost everyone, in every household, the netbook didn’t “wreck the market”, the netbook just filled a niche as times were changing. The same niche is being filled by mid-range and low-end tablets now. This isn’t because Microsoft’s “high-end” was being destroyed. Consider the only real sales of Apple, or Google products are also the low-to-mid price range tablets.

Microsoft is in a great position if they can tell the story. Neither Apple, or Google has anywhere near the same ecosystem. Here’s the deal, buy a substantially cheaper Microsoft Surface (or two if you have an old desktop), buy and Xbox and if you need the family hub, buy a desktop (cheap). At the end of the day, you will have far more capability. You will be more mobile. You will have all day battery life while on the go. You can play games, surf the web, read email, write documents or build presentations, you can share files, pictures, movies or music seamlessly across each device. Embrace the changes because computing improvements have enabled us to do more with less. For the same spend, you can do so much more and have more fun making it happen.

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