Now let us consider headless iMacs; and what will arrive at MacExpo

OK. So Think Secret has its very interesting rumour of a headless iMac to cost $500, to be announced on January 11 at Macworld. (Update Tue 1055: my story for the Indie on this, which is pretty much pro-forma, is here.)The basic idea being that people are buying iPods like they’re going out of fashion (which in a way they are..), and find them easy to use, they’ll want to buy a cheap iMac without a monitor for about $500 (say, 400 pounds) because they’ll have a spare monitor hanging around from their old virus-ridden PC which they’ll want to be getting rid of.

The specs Think Secret offers are:

  • 256MB of RAM
  • USB 2.0
  • FireWire 400
  • 10/100 BASE-T Ethernet
  • 56K V.92 modem
  • AirPort Extreme support (note that’s support, not the wireless thing itself. Lots of Mac gear comes with “support”, meaning “you have to buy this part yourself.”)

There’s also the expectation it will have a G4 processor running at 1.25GHz.

Now let’s rehearse arguments in favour of this happening. They are:

  1. Lots of people might be tempted to buy a $500 machine, especially if it came with a big software bundle for things like music encoding (iTunes), movie editing (iMovie), consumer DVD production (iDVD), making your own music (the really-not-as-usefful-to-so-many-people-as-you-might-suppose Garageband). And lets you do email and surfing easily.
  2. People might like it if they thought there weren’t going to be any viruses and spyware issues.
  3. $500 is an easy price – hell, you bought an iPod for about that money.
  4. Other PC companies are selling cheap PCs.
  5. the latest iMac has a screen built in and it’s pretty thin.
  6. Apple could make this so the only thing you could add would be the Airport (Wi-Fi). You couldn’t change the hard drive, perhaps not even the RAM. After all, Apple doesn’t care if you expand the machine afterwards; it makes no money from that. Making it non-expandable could cut down costs. And there must be a motherboard template that could be re-used from the iBook.
  7. Think Secret has a pretty good hit rate on rumours.

Got those? Now let’s look at the arguments against.

  1. Apple has never aimed for the low-cost market. It doesn’t feel the need to wrestle that pig.
  2. It likes a 25% – or more – margin on its hardware. It is very careful not to cannibalise sales of its pricier machines – see how it doesn’t advertise the eMac (a cathode-ray tube G4 desktop) but pushes the iMac like mad. The eMac is pretty cheap, but not $500, and leaving its monitor out won’t make it a $500 machine. (Then again, the eMac is pretty much the template of this “headless iMac”.) How are you going to make $125 from something with the specs above?
  3. Apple has never marketed OSX (or previous OSs) on the “free from viruses” tag, despite years of journalists and amateur marketers asking them why on earth they don’t. Steve Jobs is on record saying last August that doing that would just be a red flag to virus writers.
  4. A $500 iMac would surely cannibalise sales of more expensive machines. Peope would buy them in preference to something else. Apple does not pursue market share over profit. Profit is rare in the PC business. Market share isn’t.
  5. Who says there’s really demand for $500 headless machines? I don’t see PC companies selling them. (This is, I’ll admit, a weak argument for anything Apple might or might not do.)
  6. Apple has done headless before. Remember the Cube? People who loved it, loved it. Most people didn’t. True, it didn’t cost $500 (might have sold better at that price). Apple put it on ice in July 2001. (Though with a “small chance” that it would reintroduce an upgraded version at some point in the future.)

Basically, my feeling is that this is not a headless iMac. If it is coming, it’s something else. Maybe costing around $500 – perhaps a media server? – but the money angle, as in its potential effects on Apple, is what says to me this isn’t coming, not quite in that form. I mean, look at what this company charges for a small hard drive and a 2″ LCD screen packaged in a friendly form-factor. It’s not about to start doing pizza-boxes. (Also, it would only offer a CD-burner, not a DVD-burner, at that price, so you couldn’t run iDVD, which works against the “enticing software package” argument in favour.)

What will we see? I think:

  1. Keynote 2
  2. “Tiger”, the next version of OSX, to be launched on March 24 2005, four years after the 10.0 release. (Someone else suggested this. I’ve nicked it shamelessly, but will link to it if someone will remind me who.)
  3. G5 Powerbook, a top-end machine, delivery some time around March.
  4. More Powerbooks using G4s.
  5. That will do, I think.

15 Comments

  1. A fair enough take on the headless rumors- I think it will be an accessory device for ipods- a library manager/stereo component gadget perhaps. As far as the low cost angle goes, the question is whether apple will really push this device on price- I think that even if it is a traditional computer as such, it wont be marketed primarily on price, rather on the combination of simplicity, lifstyle aspirations and value. I feel like a dirty markerter just by writing “lifestlye aspirations”.

    Another question is whether apple will actually sell a display to go with these pcs at all: offer a range of crts or a cheap ish 15″ lcd, for example? basically I want to buy a 17″ widescreen Cinema display for my pc, so i hope they use this as an oppurtunity to release one. Not gonna happen, methinks.

    Also, any thoughts on the ‘iWork’ rumors on ThinkSecret today? Could be very interesting to have it bundled on all macs…

  2. Whether Apple will or will not introduce a headless Mac at MacWorld is some cause for speculation even now this close to the Expo. That there are solid rumors about it mean that if it is not released at this expo it will, as the 17″ iMac rumors eventually came true also aka eMac. That Apple needs a bare bones box to grab market share is apparent and necessary, so obvious this is the decisive thing to do at precisely the decisive moment to capitalize on iPod switcher momentum is to the business strategist a master stroke. Would be a shame if apple dosen’t do this, but will be wonderful when they do.

  3. There was a follow up report on the “headless” Mac from Apple Insider that said the price would be $600. Amazing how the press jumps on the first report but generally ignores the second one. It should be noted that Think Secret has a good track record of predicting product but at the same time gets prices and even specific specs wrong. A recent example, I believe, was their prediciton that the rumored iPod mini was going to be $199.

  4. I don’t see where there is enough generic “glue” for Apple to do a TV related device. Also note that Apple (esp Jobs) has said over and over again that the home computer is the best place to serve from.

    Last year we heard rumors of a stereo controller. Everyone imagined a fancy remote and few (if any) predicted the AirPort Express. Apple tends to build their way component by component.

    Apple has talked quite a bit about second computers – ever since the Switch campaign. They have spoken about not getting into the sub $800 market “at this time” at every quarterly call for a couple of years. “At this time” may be the operative word. Remember they also stressed the eMac was only for education (and it was thrown together for that market when the old iMac went away). A consumer push for a sub $1000 full machine materialized it even though it isn’t as elegant as other machines.

    When Apple started making iPods the margins weren’t great. At first they were probably testing the market (remember that sales went way down a couple of quarters after introduction). Some major marketing tweaks and iTunes for WIndows changed things forever.

    That said I think there is a case for a marketing based exploration of the lower end/windows replacement and second computer market. Our company has done quite a bit of work studying various segments of home computer users and we note the low end likes (a) a “low price”, (b) bundled software and (c) promises of ease of use. They are frequently upsold and don’t seem to mind it – very few of the $399 machines are actually sold. Most people end up buying something that costs about $150 to $200 more.

    I also want to stress that this is probably sold as a second rather than an only computer. People on the low end with a single PC have to take a larger psychological leap to switch – some will do it, but their group is smaller. Since PC people at the low end also tend to have dialup or no Internet service at all. Apple really is focused on broadband users.

    So here is my prediction – based only on observation of Apple’s marketing, a rough knowledge of the margins on something like a monitor and an eMac in 1 million unit quantities and studies of a couple of consumer segments (something Apple does very well these days)

    – for the Think Secret specs I think Apple would charge $599. The psychological distance from $499 to $599 isn’t big if the product is sexy.

    – the machine would have limited expansion to force the user to consider looking upwards in the line. There would be no DVD write capability and the hard disk size might be fixed. You could add RAM because this class of consumer will not do it themselves and selling RAM is a high profit center for Apple.

    – Apple would not sell a matching CRT. The user would think in terms of the old 15″ sitting next to their three year old Gateway at home. Apple would roll out one or two slick white LCD displays (15″ and 17″). A really nice 17″ would probably be in the $599 range, which is why I think there might be a 15″ at $399.

    – There would be other matching add-on hardware. Speakers and airport would be major items. I doubt they would do bluetooth. Bluetooth seems more like a product differentiator rather than something they want to offer to everyone.

    – The rumors of an updated iWork suite make a lot of sense. The same for iLife. Bundling makes a lot of sense to this crowd. Other than tax software this group is notorious for not buying anything. They go with what is on the machine use programs friends give them.

    – Of course you push extended warranties.

    Now consider the calculus that the user must go through. A person just looking to add a Mac could do so for $600. Seeing the machine with a sexy white LCD monitor will be very attractive and some will bite. Others will think about the $1000 plus that this might cost. They could get a better price by getting a 3rd party LCD (which Apple doesn’t have) or they could get an eMac. The eMac, btw, might have a DVD writer in the lowest priced model and possible another speed bump. But the eMac, some consumers would reason, doesn’t look sexy. Besides – there is this great deal where you get a free extended warranty on the LCD if you buy the headless Mac with an extended warranty and a LCD at the same time (Apple uses this to great effect now in their Pro line).

    Some consumers will think about a $1000 or $1000+ headless Mac with an LCD and think — “the G5 iMac only costs a bit more..” Others will think “I can get a laptop iBook for that” … I don’t think you will see people thinking the other way around. An entry upsell into a line of established “luxury” doesn’t work that way. Car, boat and jewelry dealers know that very well.

    I doubt that this works outside of an Apple Store.

    Don’t expect Apple to do ads bragging about virus/worm/spyware issues. An excited press would do that for them for nothing.

    If I look at some PC figures I’ve seen for this segment I would project about 50% of the new consumers (who come in to look at a headless Mac and end up buying something) would end up with a bare headless Mac, a small fraction would go for an eMac, about 30% would buy a headless Mac with an Apple LCD (assuming a beautiful white one exists), 10% would go for an iBook and 10% would get an iMac G5.

    ___

    I have no idea if Apple would do any of this, but they haven’t excluded it and Jobs has been breaking “rules” … I would claim they couldn’t have done this last year. They can this year and that might be enough to have them do it.

  5. Wow, lots of views here, and I’m not going to second guess too many (my personal desire is more towards the media server end of things).

    However, steve says it won’t have bluetooth, but I think if this device is to fulfil some potential either as a media server or a headless device, then bluetooth support is essential and will indeed differentiate it. Use of Salling Clicker for instance would be quite powerful. And those who plug it into their tv might like a bluetooth keyboard so they can surf from their sofa.

    I’m also concerned about lack of DVD burner. If this device is to be a server, it will be a pretty odd server that has no easy way of backing stuff up (and critics would go to town on this). Same could be said for a fixed hard disk, perhaps (80GB is not in the current TIVO range, especially if it also is the repository for a 40/60GB iDisk). So, there will either have to be a separate box for additional storage/back up capabilities (how about a hot-swappable consumer-friendly cheap raid array?) and/or DVD burner.

    Can’t wait till Jan 12th to see how foolish we’ll all look!

    Ian

  6. One point which Charles isn’t making – nor anybody else – is that 1,25 Ghz is really very little compared to todays mac lineup. iMacs are 1,6 Ghz+ and with a G5 processor. Powermacs are faster and mostly dual processor systems.

    How many mac owners are ready to switch to such an almost obsolete processor? Only those who are really having trouble paying for, say, the cheapest iMac anyway. Apple isn’t making a lot of money on those people anyway!

  7. The media server idea has merit. How many people are buying widescreen High Definition TV’s right now and are looking for a DVD player? Instead of paying $200 dollars for a decent analogue one, spend a bit more and get a mac with built in DVD player, that outputs digitally through a DVI, or better, HDMI connector for digital audio and video blown up to High Def resolution. Plus you get iTunes and everything else a computer supplies. Throw in high quality recording using H.264, and a channel guide through .Mac and built in video conferencing and now we’re talking. Apple (like with iTunes and the iPod) is one of the few companies that has all the technology, they just have to integrate it better.

  8. I like Steve’s analysis. It’s just that Apple has never, ever played that clever in the retail market. Or the anywhere market.

    It might be able to get a few more people to trade up, but it would still have to sell the low-price boxes. At 256MB, the machine isn’t going to be much of a fun experience.

  9. Well, if it is going to run OS X happily, then a new ‘low end Mac’ needs to be upgradable in RAM. If people cannot enjoy using it, what is the point of making it?

    It would be like making a Volkswagen with a 33hp motor.

    How will Apple put a DVD burner in and keep the price down?

    It will look similar to the XServe, eh? Or will that be the media centre?

  10. Once again the call for a cadillac at chevy prices.
    The only reason to get into this marketing fracas is for the sake of market share. Why bother investing in a whole new product line that would certainly cost R&D dollars as well as fab costs?
    If you want a money losing proposition in order to get market share, there is an easier way. Simply offer a $500 credit to any consumer who brings in a functional windows machine as a trade in. An emac would then cost only $299.00 (or 799.00 for a iMac) and you’d be able to target windows users, not cheap skate macophiles.
    Then you could reconditon all the PC’s and donate them to schools who have abandoned the mac platform. The schools save money, Apple gets a write off, and dell loses sales. A strategic hat trick.

  11. I think Kelly is more on track with a new product that fits with new High Definition TV purchases. I don’t think Apple is going for cheap PC markets. Appliances is what they seem to be up to these days.

  12. Re comment 9: My first VW had 32 horsepower. I enjoyed it (even though the turn signal flippers kept falling off). Later on, I bought a Porsche.

    Even 256 KB RAM could suffice for letter writing, blogging, kids’ homework, Web surfing and downloading music/ripping CDs to service an iPod. But forget serious video editing on the low-cost headless Mac — for that, move up to models with more power. Same for big databases, serious photo editing, GarageBand and so forth. This would be the bare entry level, or the second or third Mac in the home. Bring people into the Mac world, then tempt them into upper level Macs.

    In volume, there could be a pretty decent profit margin. The time may be right for a low-cost Mac — if not this year, when?

  13. More thoughts on this topic.
    There are those wishing for a media server mac, and those wishing for a low-cost entry level mac that can be used with an existing CRT/LCD. The requirements for the two do not stack up other than the box size and the headlessness (!).

    A media server must be well-equipped or expandable – hard disk, ram, dvd burner, bluetooth, 802.11g, optical audio and 5.1 sound, DVI and decent graphics card, TV tuner (many flavours for different markets) are a minimum. If it’s not, it is going to be panned by those who want one. For instance, if the disk is not much bigger than the largest iPod, those iPod owners are not going to consider it as the home/docking station. Any idea of storing music in lossless compression format would be impossible, so you lose the audiophile population too. HD TV or plasma users would expect DVI too.

    On the other hand, a low-cost device is not going to be low-cost if it has to allow for all of these things. For instance, a low-cost device with DVI only and not VGA is not going to work easily with most existing monitors.

    I do think a 1.25GHz processor will be basically ok (my 667Mhz Powerbook is still fine for all the media type apps), and I suspect a higher end dual core version will be released later which will improve it’s ability to do multiple tasks concurrently and smoothly. Remember, neither group of users needs this to be a WORKSTATION for iMove creation, iDVD, Garageband etc.

    The problem with the media server concept is the actual size of the market. I would want one (as a laptop owner only), but I’m not sure how many others would, and also at what price point. The viability therefore is whether Apple can please both segments with a similar form factor/packaging whereby the low cost higher volume segment gets a relatively simple unexpandable box (circa £350-400) and the media server audience get a properly-equipped/expandable box (circa £600-800 or more)

    There is also a problem to be sorted in the naming of such a device. In some ways a breakthrough name would be something like XPod or HomePod, but this would not stress the macness. Perhaps XMac makes more sense, but then again, would Apple want to stress the consumer-oriented nature of the device and let people think of it less as a computer (Mac/PC) with all it’s implications and more of a super-iPod for the home?

    Not sure why I’m putting my head on the block for all this, as there will only be criticisms I guess.

    Ian

  14. Someone mentioned that the eMac wasn’t sexy, well my nephew bought himself one for Christmas after his father did all the research and I did some of cajoling, but on the whole I left it up to his dad to decide and you know what swung it, the great software bundle, the lack of viruses and the fun his dad has with iTunes. Well the rest of the family including mum have fallen in love with it. Mum’s words is that it’s beautiful. $500 headless machine just lower the price of the eMac and beef up the spec and that’s your intro machine for the pc folk. Oh, I have never had to give any instruction on how to set it up etc the kid took to it like a duck to water.

  15. I’m not sure if you read the AppleGeeks forum but they made some good points about the G5 Processor, it runs hot, and drains the battery fast. So he may announce a project that they’re working on a G5 Powerbook, but it will be a while until release. I feel that you are right about Tiger however. As far as the headless iMac, it is a possibility. Apple has been working to steal some of the PC crowd by using iPods to interest them, and then try to ween them onto Macs. It’s not impossible that this is their snare which will capture all the little interested PC users. (sounds a bit like hunting..) But all will be revealed tommorow, right?
    -James

    P.S. Like the blog.

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