Why Apple Makes Pro Apps

Bill Gates taught us, and Steve Ballmer has reminded us, that developers are important, if not the lifeblood of a computing platform.  A computer running an operating system without them is nothing more than an expensive way to enable global warming.  So why would Apple, an operating system maker, want to compete against Adobe, a developer?  There are two reasons why Apple makes its professional applications like Aperture for photo organizing and Final Cut Studio for video and audio editing, one, to guarantee a minimum level of software quality that is available to the marginal professional user; two, to enforce its tacit development agreement with Adobe.  To unpack this we need some background on the professional software market.  I will use the photography workflow market as a case study.  In this space Apple produces Aperture, and Adobe produces Lightroom. 

These two programs assist photographers in handling photo processing, namely RAW processing.  RAW is a new file format for pictures, which gives photographers more control over how photos make the transition from the bits that the camera captures to the computer files stored on hard drives.  In most cases the camera does this processing for you and outputs JPEG files.  Giving photographers control over this process allows them to change several aspects of the resulting picture like color balance.  Lightroom and Aperture are two front ends for this process.

These two products sell for $199 each.  Lightroom is currently at version 1.4, and Aperture is at version 2.0.  It is difficult (well, impossible) to determine the number of copies that have been sold of either product, so we’ll do some guessing.  These numbers come from the EDGAR database at the SEC.  In Adobe’s fiscal 2007 quarter, during which Lightroom was introduced, sales in its “Creative Solutions” division increased by $461 million.  We can assume that this is an upperbound of Lightroom’s sales.  Since Creative Suite 3 came out in this same period, most of this number is not Lightroom sales.  I’ll assume that Lightroom made up 10% of these sales (which translates into 1.5% of the companies revenue).  At $199 a piece, this means Adobe sold approximately 230,000 copies of Lightroom.

Aperture’s numbers are even more difficult to approximate, because the sales category they are in includes, “sales of Apple-branded operating system, application software, third-party software, AppleCare, and Internet services.”  Aperture also came out in fiscal 2007, so we can assume its sales are contained in the difference between fiscal 2007 and 2006 revenues for this category, which is $229 million.  Since I have nothing to guide me, I’ll be consistent and assume 10% of this was Aperture (which translates to 0.1% of Apple’s net sales).  At this time Aperture cost $299, so Apple sold approximate 76,000 copies.  These seemingly arbitrary assumptions do, however, get us to sales numbers that are consistent with the perception that Lightroom 1.0 vastly outsold Aperture 1.0.

In summary, both Lightroom and Aperture make up small portions of their respective companies’ revenues.  The market size seems to be about 300,000 copies per year.  A going price of $199 results in a pie in the neighborhood of $60 million over which Apple and Adobe are competing.  Let the small size of this market not deceive you into thinking that the fervor of competition is dim.

As the benefits of RAW were becoming apparent, a need to create software to take advantage of it arose.  Apple was first to market with Aperture 1.0, and, initially, it was very well received by photographers.  However, when Adobe released Lightroom 1.0, what Lightroom lacked in organizational tools it more than made up for in processing speed.  Since time is money to photographers (and to everyone else for that matter), Lightroom won and was adopted by more users, as our imputed (much fancier than wild-ass guess) numbers show.  Apple responded by getting feedback from big-name photographers.  See one account here.  Aperture 2.0 is seen as a strong response to Lightroom’s dominance.  It includes a new plugin platform to extend its functionality and is much faster at processing than previous versions.

This competition is great for photographers.  It also accomplishes something for Apple: it forces Adobe to continually improve its products for the Mac.  Adobe faces a choice.  It can spend development dollars on improving its products for Windows or Mac OS X by utilizing the platform specific features of either operating system.  Apple wants Adobe to spend those dollars on Mac OS X.  One way to accomplish this is for Apple to produce products that take full advantage of the capabilities of Mac OS X.  This forces Adobe to improve its products for the Mac platform.  If it doesn’t, it risks ceding a big portion of its sales to Apple.  This strategy locks these companies in a continual battle of innovation that benefits Apple and the Mac community (which of course benefits Apple!).  These benefits are exclusively captured by Apple to the extent that these innovations do not spill over to the Windows versions of Adobe’s products.  This process also creates a legion of programmers that specialize in Mac specific technologies.  Some of these programmers might even leave Adobe and create entirely new Mac software.  One way, and a very Jobsian way at that, to keep developers on your platform is to compete with them.

The other reason for Apple to produce Aperture is that it guarantees a minimum level of software quality that is available to the professional Mac user.  If Adobe decided to forsake the Mac or, less drastically, just rest on its Mac laurels and improve only its Windows versions, the software quality available to the professional Mac user would decline.  By maintaining the institutional knowledge to create cutting edge professional software, Apple can always ensure its users have access to it.

This line of reasoning makes any rumors of Apple selling its professional software business to some other software company or even to Adobe seem baseless.  Apple has every incentive to continue its development of innovative professional software to ensure that the user experience on a Mac is top notch.