Will Lion Be Apple's Last Boxed OS?

In what has become a yearly/bi-yearly tradition, Apple fans line up at an appointed time to get the latest version of the Mac OS X operating system at the nearest Apple store. (There are rumors that in my days working Apple retail, I may have had my hair painted as a tiger print to celebrate one launch. I will not confirm or deny.)

Are those days about to become a thing of the past? is the communal spirit of an OS launch about to disappear and be replaced, like so many things, with hunching over a computer in the solitude of your home and pressing "purchase?"

It would certainly seem that with the Mac App Store, Apple now has the perfect delivery model for the next OS, and it wouldn't be surprising if Lion ends up being available through the store. Of course not everyone can access the store yet, depending on how current their OS is. So this time around, shiny boxes of Lion at the Apple Store are pretty much a sure thing, but what happens next?

The most noticeable impediment to a download only model for operating system sales would be the lack of a backup disc, or other way to re-install if things go awry. But look at the iPhone and iPad: they both get along just fine without any kind of installation disk. Adding the ability to burn a startup disk at installation could be a quick solution, but given the indications that optical drives aren't long for the Apple world, a more innovative solution could be around the corner.

Sure people have already speculated countless ways the new Apple data center could be used, along with plenty of wishlist features/ideas for the next iteration of MobileMe. It doesn't seem like a stretch to think Apple could add the ability to remotely re-boot/re-install the operating system to those services.

Would the lack of a physical OS disk be bad? From Apple's perspective it is probably substantially cheaper to move bytes around, rather than shipping physical media. It would also cut out re-sellers like Amazon, Best Buy, etc: If you want the new OS, you go through Apple. It also wouldn't be a stretch to see one more aspect of iOS carry over to the desktop: free upgrades. With the cost of getting the OS to consumers reduced to the price of a download, and with the new features of each OS increasing hardware sales, or enabling more purchases from within the Apple eco-system (ie the App Store) it's certainly plausible for the OS price to drop to zero.

The bigger question would be what would this decision do to competitors, particularly Microsoft. If Apple commits to delivering free OS updates, how Microsoft continue to justify upgrades costing hundreds of dollars? Can Microsoft even survive without the revenue of OS updates? And won't they eventually have to bring Office into the App Store, where it will face new price pressures?

Stay tuned.