Tuesday, October 26, 2004

Apple is no longer so much a computer company as a digital entertainment company.

It's good news for Apple, because the entertainment business is far more profitable than the computer business. While the company's total revenue was up only 37 per cent, its profits doubled, indicating the much higher margin Apple earns from iPods compared to the iMac, for instance.

Sadly, Apple's retailers aren't enjoying the same returns. They're still stuck on the pitiful 8 per cent that makes their existence more than a little fragile. They're probably only surviving on the thriving trade for iPod appliances, where the mark-up is probably somewhat higher.

In that and one other respect, Apple is still a computer company: from time to time it still treats its customers badly.

Apple's quality control is better than the average and its products generally perform very well but they're by no means perfect. Over the years we've reported on a range of software and hardware faults. The company has mostly failed to acknowledge them.

It has been able to get away with this in the past because of extraordinary forbearance by its customers. Indeed, Apple doesn't really have customers so much as disciples. Journalists who dare to criticise the company or its products can expect a flood of insulting emails from users.

The danger for Apple is that it might expect this attitude to continue. Now it's in the entertainment business, it won't. These new customers aren't one-eyed Apple supporters and they're going to expect a more immediate response to problems.