Jonathan Schwartz, from Sun, examined IBM’s Departure from the PC Industry and takes current subscription trends to make the case for a zero cost PC over time.
“the devices are sold to consumers as part of subscription calling plans, whose long term value is sufficient to drive some relatively crazy discounting in the carrier’s retail outlets (go check them out, now that carrier’s kiosks are popping up everywhere). The same handset from multiple carriers can range from free to $799. And as mobile data services increase in value (even if most folks over 30 don’t even know what a ringtone or game download is), the insanity (or sanity) at the checkout counter will only quicken.
And as I was saying on Steve’s Gilmor Gang, give it a year, I’ll make a big bet, you’re going to see the same thing begin to happen in the PC industry. Will the average selling price (ASP) of a PC continue to meander south? Yes. Unrelated to component cost. Will it go to free, like handsets? Absolutely. In exchange, consumers will sign up for network plans, DSL, cable, you name it.”
Looking at current trends I would probably agree that this mini-revolution is forthcoming. Hell, didn’t Microsoft when we were going for “Software as a Service” plans? These short term zero-dollar investments make cell phones and could make PCs even more attractive to the masses but will these trends continue? Weren’t there some short lived PC manufactures that have tried this already to a greater extent than the current discounts that lived on long after their companies didn’t? The problem is that there are people already working to spin the pendulum back from subscription subsidized gadget model.
The reasons are similar to some of the “Vendor Lock-In backlash” that people commonly associate with Microsoft software. Over time users will realize that they would only be trading one form of lock for another that overcharges them on a monthly, rather than a one-time basis.
Look at the explosion of people taking advantage of number portability (2.8 million to 8.5 million after a few months) as a leading indicator of people’s aversion to long term commitments to a paid service. We’re creatures of convenience and what is convenient for the first 6 months will not be so 2 years from now when competition has created better opportunities than you signed up for.
Another leading indicator could be the growth of the Virgin Mobile (and other) pre-paid (non-committed services) business that targets tomorrow’s customers. It’s the coolness of the phone and targeted content rather than the specific carrier service that is attractive to the next generation.
Look at the backlash of tivo users who “wanted TV their way” rather than the way of the subscription content providers. In the end there will be a backlash toward consumer choice that will ultimately restrict the growth of zero investment hardware that is currently on the rise.
All of this is purely a good example of how most revolutions are only evolutionary once the pendulum of change adjusts itself back to a happy medium. Enjoy your free PCs while they last if they arrive.
Just in case it isn’t clear the text above is purely my opinion and not some sort of official Microsoft stance. Oh, and I also reserve the right to have my opinions change over time.