Microsoft: Mac buyers pay Apple tax

Apple may offer lower-priced machines on Tuesday, but one top Microsoft official said Monday that Mac buyers will still be paying an "Apple tax."

In a lengthy interview, Brad Brooks, vice president of Windows Consumer Product Marketing, argued that Mac buyers face hidden costs if they try to add Windows to their Mac or if they decide to forgo Windows compatibility.

"It's really a definition now between choosing something that is limited, and somebody chooses for you, basically the 'i' way, or actually taking it to a much broader scope, which is 'your' way, and defining it through Windows, and the experience that comes with the tens of thousands of partners that build applications, services, and content for the Windows platform every day," Brooks said.

Brooks comments came ahead of what many expect to be Apple's announcement of laptops that move the Mac maker further into the mainstream price range, perhaps with machines as low as $800.

Here is an edited version of the transcript of my interview with Brooks.

Q: Where are things at right now with Vista in the market?
Brooks: No. 1 is that we're seeing consumer perceptions in general swinging in a much more positive direction. We're seeing people have an even better experience after SP1, and we also are starting to see people realize the value that has always been inherent in Windows, that is really starting to play out with the economic conditions that are starting to swirl around us today.

You mention the economic conditions. Obviously, Microsoft is a little bit removed from sort of the end marketing of the products, but what kinds of things should the PC industry do in a time of economic challenge?
Brooks: As we look at the end market going forward, we are getting much more involved in it with our investments in retail, with our investments online, with our investments with PC manufacturers around quality-tested and scenario-enhanced machines. But, we're also looking at the different things that you can get with Windows, and understanding what is really involved with what we call the "Apple tax."

There really is a tax around there for people that are evaluating their choices going into this holiday season and going forward. There's a choice tax that we talked about, which is, hey, you want to buy a machine that's other than black, white, or silver, and if you want to get it in multiple different configurations or price points, you're going to be paying a tax if you go the Apple way.

There's going to be an application tax, which is if you want choice around applications, or if you want the same type of application experience on your Mac versus Windows, you're going to be purchasing a lot of software. And even at that you're not going to get the same experience. You're not going to get things like Microsoft Outlook, you're not going to get the games that you're used to playing. There's a technology tax--Apple still doesn't have HDMI, doesn't have Blu-ray offerings, doesn't have e-SATA external disk drives that work at twice the speed of FireWire. And so you've got all of these things that are truly taxes.

You've also got an upgrade tax. The only machine, as far as I know, within the Apple lineup that's actually upgradeable is the Mac Pro, the $2,800 version, which is (more expensive than) just about any PC configuration that you get from any one of our manufacturers.

It's interesting that you talk about the application tax. Arguably, in some ways, the compatibility story on the Apple side has never been better, given the ready availability of things like Parallels and VMware Fusion. Hasn't that advantage actually declined since Apple switched to Intel?
Brooks: You know, that's the crazy part about it. If people want a Windows experience, then start with a machine that was built for the Windows experience. There's no question, if you look at it, and go to Apple's Web site today, their No. 1 selling feature that they're telling students as to why buy a Mac is because it does run Windows, and that you can get Office when you're running it in Boot Camp or Parallels. But, then you're just paying that tax again. You're paying for an upgrade to Windows, you're paying for the full version of Office, where you could get all of that at one price, at a price point that with a Blu-ray disk drive you can get with an $800 range from an HP or Sony.

If it's a tax, it seems to be a tax that more and more people are willing to pay.
Brooks: You know, I think it's a good point. I think the question is, though, do customers really know what they're getting into? I don't personally believe that customers really know that a copy of Parallels is going to cost them $80, or that when they really look at what they're going to have to pay in terms of another $200 for a (full boxed copy of Windows), that they're going to pay for another $149 for MobileMe to put on there, Internet services, which they can basically get all the same functionality when they have Windows and Windows Live working together.

But I also think that as all of our budgets start shrinking rather dramatically, based on what's going on around us, customers really will start to understand all the things that not only are they giving up in terms of choice, in terms of compatibility, in terms of usability, they're also going to see that they have real out-of-pocket expenses that are significant for their budgets, and for their technology choice.

Some people would argue on the flip side of this, when you buy a Windows PC, you have to get antivirus software, and it's not something that historically a lot of Mac users have seen the need for. Are there some things that line up on the Apple side of this financial equation?
Brooks: That is a fallacy to think that Macs are somehow invulnerable, or impervious to virus, or phishing, or spyware. And we will tell you that based on our own data that you're 60 percent less likely to get any type of virus...if you're running Windows Vista versus Windows XP SP2. And also is that things like phishing scams are very real to the average consumer. And when you have Windows Vista running with IE7, we know that that capability together is blocking well over 11 million different phishing attacks a week. You've even got, No. 1, service providers like eBay out there on the Internet today that won't even recommend you using the Safari browser because it is so compromised when it comes to phishing attacks. So there really is a security story here around Windows Vista running in connection with IE7 that really does create safety for our customers.

You mentioned that Vista is 60 percent less likely to be a victim of virus than XP SP2, but how does that compare with viruses on the Mac?
Brooks: You know, it's hard to get a direct comparison, Ina. I want to be very specific in any kind of the data or the information that I give you there is that you're running one system versus another. The best way to really look at it is based on the Internet services, and what's really going on out there in terms of things like phishing or other types of scams that can actually happen through your browser or Internet experience. That really is much more of a direct comparison.

Just the fact that we're having this long of a conversation about Apple, it seems to reflect a shift in Microsoft's thinking that Apple is more of a threat on the PC side. I mean, how do you guys view Apple in terms of a competitive threat on the desktop?
Brooks: The conversations that we're having really started back around our partner conference in early July. And I came out and said, right there onstage in front of tens of thousands of partners, "we're drawing a line in the sand."

There are two things that are going on here. No. 1 is that we're tired of not defining our own products, and the product experience, and the experience that literally billions of users are getting on Windows every day, and well over a hundred million users are getting on Windows Vista every day. And that is a great experience, it's a secure experience, an experience that gives people more choice, it's an experience that's compatible with their whole lives. And that it's our time to tell that story, and that we will tell that story on every level. We will tell of it in terms of what it brings to people in terms of a world without walls, a life without walls. But we'll also tell it in terms of what they give up when they choose to go down a direction that is not with Windows, and all call out all the costs, particularly this Apple tax cost that people are paying upfront, and that has not been defined in the marketplace effectively.

Is it fair to say that Apple as a competitive threat now is at its highest point in the last 10 or 15 years?
Brooks: What we want to define as a consumer experience is not nearly as limited as what Apple makes it out to be. We have a huge choice, a huge diversity, an ecosystem that can bring a range of choices, whether it be on cost, whether it be on technology, whether it be on the types of magical application experiences that you can only get when you use the Windows operating system. And it's really a definition now between choosing something that is limited, and somebody chooses for you--basically the "i" way--or actually taking it to a much broader scope, which is "your" way, and defining it through Windows, and the experience that comes with the tens of thousands of partners that build applications, services, and content for the Windows platform every day.

I guess I'm still a little confused, though. You know, Apple's market share has been growing considerably in the last couple of years, and their customer satisfaction levels are certainly as high as any PC maker in the industry. I mean, is the argument basically that consumers just don't understand what they're getting, and for some reason think they're happy with a Mac?
Brooks: No. The question is, or the argument is, that understanding what the true value is of Windows and the choices that they make every day, really is not about Apple. It's really about what is Windows, and understanding having customers understand the different things that Windows brings in terms of compatibility and choice to their everyday lives. And we have just not done an effective job of helping tell that story up until the last couple of months.

There's no question that Apple will come out and tell different things. As a matter of fact, we fully expect within the next couple of days for them to announce the lower cost entry into the marketplace. But we really believe that it doesn't matter whether they're talking about a $900 or an $850 laptop, it's really still taking shavings off the iceberg to create a snow cone. The much bigger problem that we have or that customers will face is that there's a much bigger cost that's associated with this. And it is not a question of whether they are satisfied or dissatisfied with the experience, it's a question of whether they really know what they're getting into when they choose to embark upon that path. And once they start to continue down that journey, and realize the cost, it becomes a rather significant equation that they may not realize. And part of defining that Windows value proposition, that Windows experience, is making sure that they do.

If you had to list the top couple of things that you think people don't understand about the value of Vista, what would be on that list?
Brooks: No. 1 is that I think, first and foremost, people don't realize the versatility of what a Windows Vista machine can give them around their entertainment and media experiences. We've talked a lot about security over the last couple of months, but what we haven't talked about is the fun that you can get on a machine. No. 1 is, you can watch, record, and view live TV using a Windows Vista machine with Home Premium or better. That you've got a choice of games, a wide range of games, that you just can't get on any other type of platform

But there's also productivity value that you get on Windows Vista that you can't get on a Mac. You can't get Outlook, you can't get Visio, you can't get Project. And when you do get applications such as that, they're usually stripped-down versions that don't have nearly the amount of features, or the usability like the ribbon on Office. Those types of things just don't come with a Mac. And that you don't get the best in terms of hardware experiences, you don't get high-definition playback on Blu-ray DVD on a Mac. You can't do it, can't get it, it's just not there.

Steve Ballmer used a similar characterization in a recent interview as you did just now, talking about Office for the Mac as a stripped-down version. That's not the way it's historically been positioned by Microsoft. Can you kind of explain that, because the Mac BU always talked about it as the full Office. Different, maybe, but compatible. I haven't heard them use the phrase "stripped-down" before.
Brooks: If you define different as meaning lacking several of the features and choices that come in the latest version of Office, yes, it is different. And that's really the definition I'm talking about here--that in the latest version of Office 2007 there's a number of features, usability improvements, enhancements that are universally liked by our users, and really differentiate the product as being the next generation of productivity suites. Those are things that just don't come with the Mac versions.

How direct are you guys going to get with some of these messages in your advertising?
Brooks: Well, you know, I think that we will continue to get further and further into more detail as we move forward with our ad campaign, and how we talk about it. We will continue to get more and more specific on how we define what Windows is. And if part of defining what Windows is is pointing out that there is a significant tax, a compatibility tax, the hardware tax, the technology tax, a choice tax, an overall price tax that comes with committing, or going toward the different computing experience, you bet we're going to point it out.

Is there risk in the way you guys are doing this that some of the messaging sounds like "you, the consumer, just don't get it?"
Brooks: That's far from the message that I want to deliver. What I want to make sure gets defined, and what we want to make sure gets defined here within Windows, is that there is a lot of information that you're just not getting, that you are not being told in terms of having all of the facts put in front of you around the choices that you may not be making, and you may not know what you are giving up when you go in and look at Apple versus Windows, because the information has not been presented to you. And we feel that that's very much missing from the dialogue today. People really don't understand the Apple tax because it's never been explained to them. We have not done it, and certainly Apple is not going to explain their own tax to their customers.

You used the phrase "get the facts" a few times. It sounds like philosophically you're trying to do something similar to the effort that you guys had versus Linux.
Brooks: Different audience, but very much the same approach. I think it was you that quoted me a couple of weeks back saying, you know what, we're not afraid of the truth; we just don't feel like the truth has been told. And this is another case around getting the facts where we don't feel like the truth has necessarily been exposed.

Is there anything new that people can expect for the holidays in terms of Vista PCs?
Brooks: I think what you're going to see from the holiday PCs is going to basically be defined by a couple of different things. I think you'll see more machines around (64-bit) technology. I think you will see Blu-ray DVDs as more of a standard. Certainly you're going to see HDMI out very much a standard, because people really want high-definition experiences for their photos, movies, and TV watching, as PCs become much more of an all-in-one entertainment device.

But I also think that you're going to see a broader range of price points, and we will continue to see Netbook devices where (Apple doesn't play).

On the Vista front, there is a support document up that suggests you guys have started beta testing Vista service pack 2. What can people expect there?
Brooks: You know, it's still really too early to say what or will not be in the next service pack. We get constant telemetry data and feeds coming back in from the people that are using Windows Vista, so we can see on a mass level the things that are causing experience issues or areas that we can improve the experience, and then we look at what the highest priority is and go after it and fix those things.

So, I don't really have anything specific for you at this point of what we will be prioritizing for SP 2, but at the same time, yes, we're continuing to work toward that and there will be an eventual service pack that comes out for Windows Vista.

And you guys have started limited external testing of that?
Brooks: We are continuing to do testing on a number of different levels. As far as I know right now, we have not started limited external testing yet on Windows Vista SP 2.

For complete coverage of the Apple notebook news, see "Apple polishes up its MacBook line."