One way of testing the Halo Effect is to look at how much iPod sales have boosted the Mac’s market share since the iPod’s release.
Rewind to the dark days of the mid-1990s. Microsoft had just released Windows ‘95 and Apple seemed to be in terminal decline. News reports always prefaced Apple’s name with words like “ailing” and “beleaguered,” while tech writers focused on the creaking operating system and uninspiring hardware. The quantum leap forward Apple had made in 1984 that put it light-years ahead of anything else in the PC market had been largely squandered away on poorly thought through initiatives, overpriced products, and unimaginative leadership.
In 1995, Apple’s share of the American personal computer market was a respectable 12-14 percent. But that number fell quickly. In 2001, Apple hit rock bottom with a dismal 3 percent market share, despite the company’s recent success with the iMac. This was also the year Apple released the iPod, and though the iPod wouldn’t become a blistering success for another year or so when Apple released its Windows version, 2001 was definitely a turning point. Since then, market share has consistently increased, reaching 6 percent in 2006.
OK, so that’s not a lot. It’s true that Apple isn’t selling nearly as many computers as Dell or HP. And people aren’t switching to the Macintosh in droves simply because they enjoy the iPod. But market share isn’t everything. Revenues matter, and profits matter even more, and this is where things become more interesting.
Although Apple’s market share is only half of what it was in 1995, its net sales are substantially greater, increasing from around $11 billion in 1995 to over $19 billion in 2006. Apple is also massively more profitable, with net profits leaping from $0.6 billion in 1995 to almost $2 billion in 2006.
What the iPod does more than anything else is double Apple’s income. Of the $19 billion worth in sales made in 2006, Macs and iPods accounted for around $7.5 billion each. So, if there’s a Halo Effect from the iPod, that’s where you see it: in Apple’s bottom line and not in the Mac’s market share.
Naturally, what’s good for Apple should be good for the Mac, but if the iPhone is a success, might Apple dump the Mac altogether, or at least downgrade its importance?