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OS X Lion's download-only distribution will hurt retailers

Gregg Keizer | June 11, 2011
But Apple's Mac App Store approach means bigger profit per unit than with Snow Leopard in '09, says retail analyst.

Apple's decision to sell the Mac OS X Lion upgrade through its own Mac App Store won't hurt the company's bottom line but will certainly impact traditional retailers, a market analyst said Friday.

"The Best Buys, the Staples, the PC Connections, they all still have a decent Mac software business," said Stephen Baker of retail research firm NPD Group. "This will have an impact on all those guys. [The release of an OS upgrade] is always a good opportunity for them to connect to customers, get them into the store and thinking about upgrading their devices."

And with Apple pushing Lion only through its download Mac App Store, those retailers will be out of luck this time around.

Likely forever, said Baker.

"The software business is in the throes of significant changes, and [Apple's move] is a part of that," said Baker. "The whole business is clearly changing how operating system developers deliver upgrades."

On Monday, Apple announced that it would start selling Lion on the Mac App Store some time next month for $29.99.

Baker declined to estimate the impact of Apple's decision on U.S. retailers, saying it was impossible to gauge because NPD has no insights into how much revenue the Mac App Store was generating or how customers will react to Lion.

But he said that Apple would easily make more money on Lion than it did on the predecessor, 2009's Snow Leopard.

That upgrade sold $29, but because it was a traditional DVD-based boxed product, Apple didn't bring in as much per unit as it will with Lion as a download-only title.

Two years ago, NPD said its data showed Snow Leopard had sold twice as many copies in its first two weeks of availability than the 2007 upgrade to Mac OS X 10.5, aka Leopard, which was priced at $129 for a single license, $149 for a five-license Family Pack.

Baker wasn't surprised that Apple will use its Mac App Store to sell Lion.

"The software guys always resented the retail distribution and its physical costs," said Baker. "They're used to selling bits and bytes."

During the Monday keynote at Apple's Worldwide Developers Conference (WWDC), Philip Schiller, the company's head of marketing, claimed that the Mac App Store was the world's largest seller of personal computer software, and was beating Best Buy, Wal-Mart and Office Depot in that arena.

But other factors beyond cutting out the middleman were probably more important to Apple.

"This affords them an additional level of control," said Baker, referring to Apple's well-known fondness for holding tight to the reins of business, from hardware and software design to retail with its own chain of stores. "For them, controlling the user experience [of purchasing and upgrading] is more important than the money."


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