How Apple “Lost” the PC Wars

From a high-level perspective, Apple is fighting the same battle that it fought–and lost–in the 1990s. It is selling an integrated hardware-and-software device and a closed development platform, while its competitors are aiming for ubiquity and spraying their platforms across every device that will have them.

Apple’s iPhone 5 Delay Just Opened The Door For Google And Microsoft, Business Insider

I started writing this post in response to a different, equally stupid article, but set it aside. Then a few days later I come across the piece quoted above. (Never mind that the “iPhone 5” delay is a speculated delay of a speculated launch.) So I dusted it off and here it is.

Probably the one anti-Apple meme that annoys me more than any others is the idea that Apple lost the PC wars because it wasn’t “open” for some value of “open” (e.g. “open” to cloning, or “open” to third-party music subscription services, or “open” to third-party developers, or “open” source). The reason this meme has currency is that random idiots want to predict Apple’s demise in various new markets (digital music, smart phones, tablets) based on its “failure” in the PC wars.

A very brief history of the PC Wars

  • A few companies create the home computer market, of which the largest and most successful by far is Apple.
  • Most of the others run CP/M (on which DOS will be based) a product of Digital Research and BASIC (ported by Microsoft).
  • Apple’s computers are simply ridiculously good compared to its rivals (including an robust homegrown OS and BASIC) and Visicalc suddenly makes them useful in business. All this without Apple ever having dominant market share. (One estimate I found suggested that, at its peak, Apple had a 40% share of the “micro-computer” market.)
  • IBM notices Apple starting to gain tiny footholds in business and decides to enter the market with its own computer, but it’s in a hurry and mostly uses off-the-shelf components. It tries to buy CP/M from DR, but the head of DR stands them up, so they go to Microsoft. Microsoft says it can provide an OS for the new computer and in fact buys a clone of CP/M that runs on x86 from a local developer which it then non-exclusively licenses to IBM.
  • The IBM PC is a huge success because, despite being incredibly expensive, proprietary, closed, and pretty much horrible, it’s from IBM. By the time Macintosh enters the market, Apple is already facing an uphill battle against an entrenched competitor with dominant market share.
  • Because it was created in a hurry, the one part of the IBM PC that isn’t a commodity item (the BIOS) is easy to clone.
  • IBM tries to prevent clones from taking off by suing them (leading to “clean room” clones) and deriding their “compatibility”, but neither approach works.
  • Because Microsoft only gave IBM a non-exclusive license to DOS, and because the only part of the IBM PC that IBM really owns is the BIOS and the BIOS is nothing special, clonemakers — notably Compaq — are able to make their clones not only better and cheaper, but competely compatible with IBM’s.
  • IBM tries to create a new and harder-to-clone hardware architecture (“Microchannel”) that it will fully own, it’s insufficiently compelling and clonemarkers respond with EISA.
  • IBM loses control of the PC market.

In summary, Apple lost the PC wars because it couldn’t make inroads against IBM in the enterprise. IBM then lost the PC wars because its platform was way too open for its own good.

Apple never dominated the home computer market, nor did it dominate the “enterprise” PC market which didn’t exist until IBM legitimized it. (It was frequently referred to as “IBM PC” market, even when talking about clones, until the mid-90s.) So any story about Apple having created some new market and then slowly losing its dominance because of its closed attitude is simply ridiculous on every possible count. Apple was defeated by an inferior, more expensive, and equally closed product — the IBM PC. The IBM PC was then defeated by cheaper, better, more open clones.

A second question might be why the Mac didn’t carve out a huge share of an existing niche market the way that the iPhone, say, did. After all, wasn’t the Mac as superior to DOS computers as the iPhone was to the smartphones that preceded it? This is an interesting question, and it would be nice if some tech pundits tried to address it instead of trying to draw analogies to an imagined historical event (the “defeat” of the Mac by cheaper, more open clones). You could make the argument that Apple did exactly this — it carved a huge share of the market for “computers for creative people” (eliminating more specialized niche players such as HP and Xerox) — and has pretty much hung on to most of that market ever since.

Short version: IBM defeats Apple in the enterprise because it’s IBM. IBM then is defeated by cheaper, better clones.

So, why did the Mac fail to defeat DOS?

When the Mac was launched in 1984 a typical PC was — for the vast majority of people — pretty much useless, at least for work. It wasn’t networked. It had terrible software that most people had no idea how to use. If you were lucky it was attached to a Daisy Wheel printer (essentially an electric typewriter) which could produce good text output. If you weren’t it was attached to a dot matrix printer and produced horrible output.

Out of the box a Mac could network. It came with MacWrite which, alone, allowed anyone to produce good-looking documents using a variety of fonts and font sizes and print them very easily. It even included a graphics package that was easy to use. Soon, there would be Excel, Pagemaker, Illustrator, the LaserWriter, and Thunderscan.

But, why did most people own a computer? The most popular home computer of the time was the Commodore 64. People used it to play games. Before the C64, the most popular computers had been the TRS-80 and the Apple II. They were used to play games. When people bought PCs for their own use, it was for games. Apple pointedly did nothing to encourage game developers on the Mac at the very time when anyone other than a professional writer or graphic artist had pretty much no use for one other than playing games.

Short version: games.

Why did the Mac fail to defeat Windows?

Even small children were able to memorize the sequence of characters you needed to type to make a game launch off a floppy disk on a C64. I only used one a few times and I remember it involved the number 8. It wasn’t “user-friendly” but it wasn’t that hard to learn. Games players were motivated.

By the time Windows came out, DOS had emerged as the most important game platform in the world, having defeated a number of competitors all of which had, at least at some point, marked technical superiority. Here’s the thing: when the only real reason for buying an expensive piece of hardware is to play games, you tend to be price sensitive. People who used Macs to edit TV commercials or design magazines didn’t care that much about the existence of a significantly cheaper but significantly inferior alternative — their time was valuable. But games players cared deeply, and Apple’s continuing anti-games attitude didn’t help.

Even when Windows failed (i.e. Windows 1.0 and Windows 2.0) it was self-inflicted. Macintosh didn’t defeat those products. People didn’t even use them when they got them for free on computers they had to use. Windows simply became the software that ran on the computers people bought to play games on, and eventually it got good enough that people actually started using it. Not until Windows 95 came out did AAA games actually run under Windows 95 rather than bypassing it altogether.

Somewhere along the way Windows got good enough that important applications started to work decently on it (e.g. Photoshop, Avid) and that meant that people who only used a few pieces of software could now buy a cheaper, faster box to run their favorite programs. At this point Apple started actually losing significant market share, but this was over ten years after the Mac came out.

Short version: games.

What do you do with a gadget for fun?

The elephant in the room for the entire duration of the ongoing PC wars has always been games. At this point we’re way, way beyond the point that a desktop computer is able to handle “office” tasks such as word-processing. The average person doesn’t spend their disposable income on stuff that isn’t fun, for some value of fun. On the other hand, the average person is generally willing to spend more on something that’s fun if spending more will make it more fun.

If you are willing to pay $12 for a movie ticket and $10 for snacks to see Cars 2, will getting a discount persuade you to see some random film that isn’t Cars 2? No. Maybe you’d like cheaper, off-brand snack. Maybe, but probably still no.

How will Apple lose the Mobile Wars?

A good friend of mine once explained to me that there are three important positions in any market: the most respected, the biggest market share, and the cheapest acceptable. (The conversation was about how Commodore had achieved total domination of the home computer market, just before they canned Jack Tramiel.) If you look in the smart phone market that would be Apple, Apple or perhaps RIM by a hair, and Apple. In the tablet market that’s Apple, Apple, and Apple. In the portable music player market that’s Apple, Apple, and… who knows? SANdisk maybe. In the portable computer market that’s Apple, brand P, and brand Q. And in the desktop computer market that’s Apple, brand X, and brand Y. (In online services it would be Google, someone that isn’t Apple, and someone else that isn’t Apple.)

Traditionally, Apple has been willing to cede all but the first position. It has consistently held or been in contention for the position of “most respected” in the markets in which it plays, and if and when it has been in danger of losing that position it has simply left the market altogether. Apple’s lowest point was probably that at which it was in danger of not even being the best maker of Macintosh computers. (A situation which abruptly ended with the advent of the G3 processor followed by Steve Job’s ending of clone licensing.)

I see a number of major trends in digital devices, all of which are completely obvious to anyone paying attention. Moore’s Law continues doing what it does, making anything built out of circuits smaller, faster, cheaper, and better every day. Convergence is eliminating specialized devices and merging multiple devices into smaller numbers of devices. Business and technical problems are being thrashed out with expensive experiments such as The Daily, the NY Times pay wall, Hulu, and GoogleTV. And commodification is creating leverage for converged multirole devices. This is a world with lots of loose threads and usability problems moving forwards, and no-one is going to be better at helping users navigate the mess than Apple.

The only thing that can kill Apple right now is Apple. Maybe the most likely way for Apple to commit suicide would be to get into some kind of stupid fight with Google over online services as “revenge” for Google invading its hardware turf. In the long run, a lot of Apple’s ideas — or ideas attributed to Apple — have have been absorbed into the fabric of software development. Many years ago, one of the original Mac teams (Andy Herzfeld or Bill Atkinson, I think) was asked in an interview how he felt about Apple’s having lost the platform wars. He replied that he felt fine: Apple had won. What? responded the interviewer. He replied (and obviously I paraphrase): every computer you see now is either a Mac, or a copy of a Mac. Apple won the war of ideas, which was what really matters.

In terms of ideas, Apple has already won the OS wars (every OS is now a copy of the Mac), the laptop wars (every laptop is a copy of the PowerBook), the music player wars, the tablet wars, and the cell phone wars.