9 ms·

Why Apple Wants Its Software to Be Free

30 points by michalu 13y ago

dmyler 13y ago
It's also a response to google docs. Introducing collaboration on iWork is a good first step to address to the shift towards shared docs. I imagine we'll see that expand significantly in the future.
- dhruvmittal 13y ago
  I just wish they'd gone ahead and made iWork free across the board (or perhaps for Mavericks users), rather than only with the purchase of a new device.
  - dmyler 13y ago
    Ditto.
  - cincinnatus 13y ago
    I suspect they will at some point in the next ~18 months.
  - gonzo 13y ago
    if you already had iWork, they just upgraded you for free.
  - a_c_s 13y ago
    This likely has to do with GAAP (Generally Accepted Accounting Principles). iOS updates used to cost a nominal amount of money because new features have to have new revenues. (Why? Imagine you are selling a physical good, and promised a 1 year warranty - you have to reserve some revenue to cover the costs of honoring that warranty. If you didn't it would artificially inflate profits now by hiding future liabilities.) So what Apple does to get around this is reserve a bit of revenue from each new iPhone and realizes it on the balance sheet to cover the ongoing costs of iOS updates. I imagine this is what they are going to do with Macs too to cover OS X costs, and if this is correct it will likely be mentioned at next week's conference call.
    - slantyyz 13y ago
      I think the GAAP part of it is that Apple has to be consistent with their previous revenue recognition strategies. GAAP itself doesn't force similar companies to recognize revenues in the same fashion that Apple did with the iPhone, i.e., you can make a phone and provide software updates that provide new features for free.
xutopia 13y ago
I think this guy completely misses the most important point. Apple sees how much fragmentation hurts Windows and Android and they want to avoid it. Imagine if as a developer you only have to worry about a single platform? Imagine if as a distributor you only have to worry about releasing a single package? It makes things much easier for everyone and allows efforts to be on quality rather than compatibility.
- danieldk 13y ago
  Imagine if as a developer you only have to worry about a single platform? Actually, this was one of my first reaction as a developer. I developed and maintain a scientific software package (treebank search) that I maintain for Windows (>= XP), OS X (>= 10.7), and Linux (latest Ubuntu LTS). My first reaction after hearing that Mavericks is free was: great, if most people will upgrade, I am freed of supporting the legacy OS X versions. Hopefully they can bring things to the point where, like iOS, practically everyone will run the latest version. Of course, this would require smooth transitions.
  - felixr 13y ago
    > My first reaction after hearing that Mavericks is free was: great, if most people will upgrade, I am freed of supporting the legacy OS X versions. And if software developers cease to support older OS versions, those people with old computers that cannot upgrade have a stronger incentive for buying new hardware.
    - JTon 13y ago
      That's a lot of wins rolled up into one. Better for the consumer, developer and Apple. Better for Apple by not only selling more hardware, but by spending less resources supporting older software releases.
    - cwp 13y ago
      Nah, that's a very minor consideration at best. "Cease to support older OS versions" means that new versions of applications won't run on older operating systems. It doesn't mean that older versions of applications suddenly stop working. If you're running an old OS on old hardware, running an old application is fine. In fact, it's preferable, because it was written with the capabilities of that hardware in mind.
otikik 13y ago
Because why charge peanuts for an operative system, if you can charge $3000+ for a machine?
- MPetitt 13y ago
  Well I don't think that is entirely fair. To get to that price you have to take the most expensive mac product, then add tax. I just bought the highest end MacBook pro today with the student discount and it only cost a little over 2k. Which if I wanted another computer of comparable hardware quality (aluminum vs. plastic), screen resolution, and weight and dimensions I would be hard-pressed to find a comparable PC for that much cheaper. And that is disregarding the crappy support of most PC manufacturers. So I wouldn't say their prices for hardware are even that crazy, a MacBook quality laptop that only ran windows or Linux could still sell for 80-90% of the price.
codecrusade 13y ago
The real reason is the fear of fragmentation- This becomes more and more critical for mobile and personal devices. Utility Software updates in future will be seamless(transaction free)
r0h1n 13y ago
> By going free, Apple has acknowledged something that’s been true in the industry for years: Software is a means to sell hardware. What? How has this "been true in the industry for years"? Maybe its true for smart phones & tablets, that too for just the OS, but how does he go from there to all software and all hardware?
- kbutler 13y ago
  This is actually basic economics - reduce the price of your complementary goods. Thus, Apple wants to drive the software cost to zero, to increase sales of hardware (this includes apps). Google wants to drive the software and hardware cost to zero, to increase ad viewing. Amazon wants to drive the software and hardware cost to zero to sell more content.
  - theorique 13y ago
    As Joel Spolsky said: "commoditize your complements". http://www.joelonsoftware.com/articles/StrategyLetterV.html http://www.joelonsoftware.com/articles/StrategyLetterV.html
    - netcan 13y ago
      I'm not sure if that includes the complements that you yourself produce. At least that's not what Joel argues. There are business models (eg, razors & razor blades) where you commoditize one to sell the other, but commoditizing complements that someone else now makes at razor thin margins is the coup.
      - theorique 13y ago
        I think it can be both. For example, in the Apple context, they commoditize software (including operating systems, mobile apps, and desktop apps) in order to make their platform attractive and appealing, and then make their money through high profit margins on hardware sales. An operating system is a special case of software, since it's so much more intimate with the Apple-designed and controlled hardware than most (any?) other applications. In this case, creating their own software is a cost that makes money indirectly, by making their hardware and their platform more attractive. And certainly, more apps and cheaper apps (commodity) available for Apple computers (non-commodity) is good for Apple, whether those apps come from Apple themselves or from external developers. (Obviously having both is good for different reasons - in house, you have more control; external apps create a developer base with lock-in).
deleted 13y ago
[deleted]
deleted 13y ago
[deleted]
mvkel 13y ago
Disagree. It's about selling apps, not hardware. What holds Apple back is user OS adoption. With iOS updates being free, users can get the latest apps, and Apple doesn't need to worry too much about backwards compatibility. OS X didn't have that luxury until today. With the free play, Apple is giving their customers zero reason to stay on older versions. They want to see 90 percent adoption rates in 6 months. Why? The App Store ecosystem. The more users on the App Store, the more developers will build apps, the more revenue it will generate for both.
- blueblob 13y ago
  If it was just about apps, why wouldn't they release OS X for all x86* architectures instead of just their hardware? Then projects such as hackintosh/osx86 would be irrelevant.
  - zdw 13y ago
    Increased support burden, by several orders of magnitude. People blaming the OS for hardware deficiencies. Etc. I'm not seeing any upside for Apple if they did this.
    - mvkel 13y ago
      Exactly. This is also the reason they released Mav for Macs going back to 2008. To reduce the support burden of previous OSs
- Samuel_Michon 13y ago
  > It's about selling apps, not hardware. Apple makes very little from app sales, profits from iTunes purchases (including both App Stores) are under $1 billion a year. Apple rakes in tens of billions in profits a year from Mac sales, and even that is a minor business compared to profits from iOS device sales.
  - mvkel 13y ago
    Apple doesn't offer ios updates for free to sell more idevices. They do it to keep every single device relevant, and able to run the latest apps. It reduces their support burden and increases the value of the app ecosystem, however small its contribution to the bottom line. Yeah it only generates a billion on revenue, but it also DIDNT EXIST 5 years ago. That's a crazy growth curve Apple could replicate in the OS X world if they play their cards right.
iSnow 13y ago
Man, this brings back memories of MacOS 7.x, the last versions that could be downloaded free of charge. Only 20 years later, it again costs nothing. Nice.
- Samuel_Michon 13y ago
  I believe you’re confusing updates and upgrades. Apple OS updates have always been free. Also, the Mac OS X 10.1 upgrade was free.
chatman 13y ago
From the title, it almost sounds as if their software is going to be free software. Just giving out proprietary software without charge doesn't make them free (free as in freedom for users).
cygwin98 13y ago
The fragmentation issue in Mac OS X [1] is the hurdle that has been holding me off from writing apps for Macs. According to [1] (published about half a year ago), the Mac OS X market share breakdown: 26.8% Mountain Lion 10.8 28.0% Lion 10.7 35.1% Snow Leopard 10.6 10.0% Leopard 10.5 and Tiger 10.4 If we assume that half of the macs running Snow Leopard (10.6) are pre-2007 and ineligible for 10.9, we have about 72.3% macs that can upgrade to the free Mavericks, which is great news for Mac App developers. [1] http://www.zdnet.com/ad-network-os-x-is-becoming-fragmented-7000013426/ http://www.zdnet.com/ad-network-os-x-is-becoming-fragmented-...
- coldtea 13y ago
  >The fragmentation issue in Mac OS X [1] is the hurdle that has been holding me off from writing apps for Macs. Doesn't seem to be doing much damage to Mac software houses/indies... >According to [1] (published about half a year ago), the Mac OS X market share breakdown: Mountain Lion 10.8 26.8% Lion 10.7 28% Snow Leopard 10.6 35.1% Leopard and lower 10% So just target Lion and above, that's 54%, which might sound small, but it's tens of millions of users. Mac software houses thrived in 2005 with 1/4 the user base that what that 54% represents. That said, I highly doubt SL is 35% still.
  - cygwin98 13y ago
    So just target Lion and above, that's 54%, which might sound small, but it's tens of millions of users. Mac software houses thrived in 2005 with 1/4 the user base that what that 54% represents. That's true. Though it's still way better to support 72% in one API than 54% in two slightly different APIs. That said, I highly doubt SL is 35% still. I think you're right. Those 32bit Intel iMacs are probably on their last legs at this moment. In one year, I predict Mavericks may have 80% or even higher market share, comparable to its remote cousin iOS7's share on iOS devices.
- afreak 13y ago
  Chances are that if someone is two point releases behind for their Mac OS X install then likely they're not a potential customer if what you're doing fills a niche.
netcan 13y ago
I think with Apple, you kind of need to consider their aesthetic. I don't think they like selling anything cheaply. The last few OS upgrades were cheap. iWork is cheaper than MS Office (because it is often an optional extra with office being mandatory) and (ironically) being in the iOS market means that they have an €8.99 version of iWork anchoring he price. Overall software sales are not big money makers for Apple. OTOH, you they can simplify a bunch of things by making OSX upgrades cheaper. Users no longer need to worry about OS updates (eg time their purchase). They can sell macs as "ready to go with all the software you need" for creative or office workers. A new mac will be easier to get used to. Developers can target a single OS version, this includes Apple. Apple can release features relying on new OS features. It's just simpler. Apple have an aesthetic preference for simpler. For the cost of whatever revenue these software sales were bringing in they get to improve and simplify the mac ownership experience. They get to differentiate themselves from PCs in one more difficult to quantify way. This is another thing they like. You don't have to buy antivirus & Office or worry about Windows upgrades. Financially it's probably a wash. Slightly better mac sales or increased pricing power will more or less make up for lost revenue.
bradleyland 13y ago
The author doesn't understand Apple. Apple doesn't view software and hardware separately. Coincidentally, I just wrote about this, but I'll copy and paste here because it seems relevant. A friend of mine recently asked me how Apple expected to continue making any money while giving away software that Microsoft charges $200 for. Understanding how Apple can give away their software and still make money comes in understanding Apple's business. Apple pundits frequently circle back to the point that Apple is a “hardware” company. As it turns out, they are wrong. Apple is a “devices” company. What is unique about Apple is their view that a device is made up of hardware & software, and that these two are inseparable. Apple believes this is the best view if you want to deliver a superior experience to the users of your products. If you look at Apple as a hardware company — which I believe is a mistake — they make better margins than any of their competitors. Following that flawed line of thinking, what they're doing now is using that extra profit to subsidize the software side. This viewpoint only holds if you view the hardware and software sides of the business as separate entities though. Apple has combined the two. You're not buying hardware or software, you're buying a device. What good is a microwave without the software that connects the buttons to the timer, microwave generator, etc? Thats how Apple views their devices. By making Mavericks and iWork free, theyre expanding their notion of the "post PC world". They're not just talking about iOS devices, theyre talking about their entire line up. If youre wondering why Apples “PC” sales continue to grow while everyone else is sinking, I think youve found your answer. http://www.bradlanders.com/2013/10/23/apples-greater-vision-of-the-post-pc-world/ http://www.bradlanders.com/2013/10/23/apples-greater-vision-...
- adolph 13y ago
  1. My impression was that Apple has had a couple flat/lower year to year quarters in lap and desktops. Their chart of iPad sales shows slowing/maturing of that market segment. 2. Apple sells experiences. If it were selling devices, then software updates for older devices (other than bugs and security/safety) would make no sense. 3. Giving away iWork and iLife is an interesting move that starts building a moat of out-of-the-box productivity software and somewhat incentivizes new sales without totally pissing off previous software purchasers (thru iTunes rebates) and acts as a stronger introduction to their cloud services. It'll be interesting to see if that strategy works enough to continue development on iWork (which I enjoy using although acknowledge is a not widely used product).
skyjedi 13y ago
Apple doesn't want all software to be free. They want all the devices on the same platform to then have ALL the apps available to them. That 30% cut is a much bigger piece of pie than selling a $30 OS
doctorwho 13y ago
Apple hasn't been charging for iOS or the software that ran the first iPod. It's included in the cost of the device, just like the cost of the embedded code in your Keurig is factored into the overall cost of the device. Software isn't where Apple makes their money. It never was. They NEED software to make their hardware do anything but that's all they ever should have considered. The many years of rivalry with other OS makers was stupid and costly. They weren't really in competition. You get a free copy of OSX with every Apple computer but charging for OSX upgrades only makes the job of keeping all that hardware running smoothly more difficult. It generates avoidable support calls and support is a huge cost. If the software (they have to write anyway) is free and hundreds (or thousands) of bug fixes are always just a free download away then everyone benefits. Apple can stop focusing on feature parity with other operating systems and focus on what makes their devices better for their users.
racbart 13y ago
At today's Apple, both software and hardware are means to sell 3rd party software. They earn so much on their ecosystem that it's more profitable to give OS updates for free and provide more unified and less fragmented ecosystem to both users and 3rd party developers. Lowering prices for next generations of their hardware is also a sign that they really want to put their foot in as many users' doors as possible. I think they rarely lowered hardware prices just couple years ago, before they had this massive revenue stream called App Store.

30 points by michalu 13y ago

It's also a response to google docs. Introducing collaboration on iWork is a good first step to address to the shift towards shared docs. I imagine we'll see that expand significantly in the future.

dhruvmittal 13y ago
I just wish they'd gone ahead and made iWork free across the board (or perhaps for Mavericks users), rather than only with the purchase of a new device.
- dmyler 13y ago
  Ditto.
- cincinnatus 13y ago
  I suspect they will at some point in the next ~18 months.
- gonzo 13y ago
  if you already had iWork, they just upgraded you for free.
- a_c_s 13y ago
  This likely has to do with GAAP (Generally Accepted Accounting Principles). iOS updates used to cost a nominal amount of money because new features have to have new revenues. (Why? Imagine you are selling a physical good, and promised a 1 year warranty - you have to reserve some revenue to cover the costs of honoring that warranty. If you didn't it would artificially inflate profits now by hiding future liabilities.) So what Apple does to get around this is reserve a bit of revenue from each new iPhone and realizes it on the balance sheet to cover the ongoing costs of iOS updates. I imagine this is what they are going to do with Macs too to cover OS X costs, and if this is correct it will likely be mentioned at next week's conference call.
  - slantyyz 13y ago
    I think the GAAP part of it is that Apple has to be consistent with their previous revenue recognition strategies. GAAP itself doesn't force similar companies to recognize revenues in the same fashion that Apple did with the iPhone, i.e., you can make a phone and provide software updates that provide new features for free.

xutopia 13y ago

I think this guy completely misses the most important point. Apple sees how much fragmentation hurts Windows and Android and they want to avoid it. Imagine if as a developer you only have to worry about a single platform? Imagine if as a distributor you only have to worry about releasing a single package? It makes things much easier for everyone and allows efforts to be on quality rather than compatibility.

danieldk 13y ago
Imagine if as a developer you only have to worry about a single platform? Actually, this was one of my first reaction as a developer. I developed and maintain a scientific software package (treebank search) that I maintain for Windows (>= XP), OS X (>= 10.7), and Linux (latest Ubuntu LTS). My first reaction after hearing that Mavericks is free was: great, if most people will upgrade, I am freed of supporting the legacy OS X versions. Hopefully they can bring things to the point where, like iOS, practically everyone will run the latest version. Of course, this would require smooth transitions.
- felixr 13y ago
  > My first reaction after hearing that Mavericks is free was: great, if most people will upgrade, I am freed of supporting the legacy OS X versions. And if software developers cease to support older OS versions, those people with old computers that cannot upgrade have a stronger incentive for buying new hardware.
  - JTon 13y ago
    That's a lot of wins rolled up into one. Better for the consumer, developer and Apple. Better for Apple by not only selling more hardware, but by spending less resources supporting older software releases.
  - cwp 13y ago
    Nah, that's a very minor consideration at best. "Cease to support older OS versions" means that new versions of applications won't run on older operating systems. It doesn't mean that older versions of applications suddenly stop working. If you're running an old OS on old hardware, running an old application is fine. In fact, it's preferable, because it was written with the capabilities of that hardware in mind.

otikik 13y ago

Because why charge peanuts for an operative system, if you can charge $3000+ for a machine?

MPetitt 13y ago
Well I don't think that is entirely fair. To get to that price you have to take the most expensive mac product, then add tax. I just bought the highest end MacBook pro today with the student discount and it only cost a little over 2k. Which if I wanted another computer of comparable hardware quality (aluminum vs. plastic), screen resolution, and weight and dimensions I would be hard-pressed to find a comparable PC for that much cheaper. And that is disregarding the crappy support of most PC manufacturers. So I wouldn't say their prices for hardware are even that crazy, a MacBook quality laptop that only ran windows or Linux could still sell for 80-90% of the price.

codecrusade 13y ago

The real reason is the fear of fragmentation- This becomes more and more critical for mobile and personal devices. Utility Software updates in future will be seamless(transaction free)

r0h1n 13y ago

> By going free, Apple has acknowledged something that’s been true in the industry for years: Software is a means to sell hardware. What? How has this "been true in the industry for years"? Maybe its true for smart phones & tablets, that too for just the OS, but how does he go from there to all software and all hardware?

kbutler 13y ago
This is actually basic economics - reduce the price of your complementary goods. Thus, Apple wants to drive the software cost to zero, to increase sales of hardware (this includes apps). Google wants to drive the software and hardware cost to zero, to increase ad viewing. Amazon wants to drive the software and hardware cost to zero to sell more content.
- theorique 13y ago
  As Joel Spolsky said: "commoditize your complements". http://www.joelonsoftware.com/articles/StrategyLetterV.html http://www.joelonsoftware.com/articles/StrategyLetterV.html
  - netcan 13y ago
    I'm not sure if that includes the complements that you yourself produce. At least that's not what Joel argues. There are business models (eg, razors & razor blades) where you commoditize one to sell the other, but commoditizing complements that someone else now makes at razor thin margins is the coup.
    - theorique 13y ago
      I think it can be both. For example, in the Apple context, they commoditize software (including operating systems, mobile apps, and desktop apps) in order to make their platform attractive and appealing, and then make their money through high profit margins on hardware sales. An operating system is a special case of software, since it's so much more intimate with the Apple-designed and controlled hardware than most (any?) other applications. In this case, creating their own software is a cost that makes money indirectly, by making their hardware and their platform more attractive. And certainly, more apps and cheaper apps (commodity) available for Apple computers (non-commodity) is good for Apple, whether those apps come from Apple themselves or from external developers. (Obviously having both is good for different reasons - in house, you have more control; external apps create a developer base with lock-in).

deleted 13y ago

[deleted]

deleted 13y ago

[deleted]

mvkel 13y ago

Disagree. It's about selling apps, not hardware. What holds Apple back is user OS adoption. With iOS updates being free, users can get the latest apps, and Apple doesn't need to worry too much about backwards compatibility. OS X didn't have that luxury until today. With the free play, Apple is giving their customers zero reason to stay on older versions. They want to see 90 percent adoption rates in 6 months. Why? The App Store ecosystem. The more users on the App Store, the more developers will build apps, the more revenue it will generate for both.

blueblob 13y ago
If it was just about apps, why wouldn't they release OS X for all x86* architectures instead of just their hardware? Then projects such as hackintosh/osx86 would be irrelevant.
- zdw 13y ago
  Increased support burden, by several orders of magnitude. People blaming the OS for hardware deficiencies. Etc. I'm not seeing any upside for Apple if they did this.
  - mvkel 13y ago
    Exactly. This is also the reason they released Mav for Macs going back to 2008. To reduce the support burden of previous OSs
Samuel_Michon 13y ago
> It's about selling apps, not hardware. Apple makes very little from app sales, profits from iTunes purchases (including both App Stores) are under $1 billion a year. Apple rakes in tens of billions in profits a year from Mac sales, and even that is a minor business compared to profits from iOS device sales.
- mvkel 13y ago
  Apple doesn't offer ios updates for free to sell more idevices. They do it to keep every single device relevant, and able to run the latest apps. It reduces their support burden and increases the value of the app ecosystem, however small its contribution to the bottom line. Yeah it only generates a billion on revenue, but it also DIDNT EXIST 5 years ago. That's a crazy growth curve Apple could replicate in the OS X world if they play their cards right.

iSnow 13y ago

Man, this brings back memories of MacOS 7.x, the last versions that could be downloaded free of charge. Only 20 years later, it again costs nothing. Nice.

Samuel_Michon 13y ago
I believe you’re confusing updates and upgrades. Apple OS updates have always been free. Also, the Mac OS X 10.1 upgrade was free.

chatman 13y ago

From the title, it almost sounds as if their software is going to be free software. Just giving out proprietary software without charge doesn't make them free (free as in freedom for users).

cygwin98 13y ago

The fragmentation issue in Mac OS X [1] is the hurdle that has been holding me off from writing apps for Macs. According to [1] (published about half a year ago), the Mac OS X market share breakdown: 26.8% Mountain Lion 10.8 28.0% Lion 10.7 35.1% Snow Leopard 10.6 10.0% Leopard 10.5 and Tiger 10.4 If we assume that half of the macs running Snow Leopard (10.6) are pre-2007 and ineligible for 10.9, we have about 72.3% macs that can upgrade to the free Mavericks, which is great news for Mac App developers. [1] http://www.zdnet.com/ad-network-os-x-is-becoming-fragmented-7000013426/ http://www.zdnet.com/ad-network-os-x-is-becoming-fragmented-...

coldtea 13y ago
>The fragmentation issue in Mac OS X [1] is the hurdle that has been holding me off from writing apps for Macs. Doesn't seem to be doing much damage to Mac software houses/indies... >According to [1] (published about half a year ago), the Mac OS X market share breakdown: Mountain Lion 10.8 26.8% Lion 10.7 28% Snow Leopard 10.6 35.1% Leopard and lower 10% So just target Lion and above, that's 54%, which might sound small, but it's tens of millions of users. Mac software houses thrived in 2005 with 1/4 the user base that what that 54% represents. That said, I highly doubt SL is 35% still.
- cygwin98 13y ago
  So just target Lion and above, that's 54%, which might sound small, but it's tens of millions of users. Mac software houses thrived in 2005 with 1/4 the user base that what that 54% represents. That's true. Though it's still way better to support 72% in one API than 54% in two slightly different APIs. That said, I highly doubt SL is 35% still. I think you're right. Those 32bit Intel iMacs are probably on their last legs at this moment. In one year, I predict Mavericks may have 80% or even higher market share, comparable to its remote cousin iOS7's share on iOS devices.
afreak 13y ago
Chances are that if someone is two point releases behind for their Mac OS X install then likely they're not a potential customer if what you're doing fills a niche.

netcan 13y ago

I think with Apple, you kind of need to consider their aesthetic. I don't think they like selling anything cheaply. The last few OS upgrades were cheap. iWork is cheaper than MS Office (because it is often an optional extra with office being mandatory) and (ironically) being in the iOS market means that they have an €8.99 version of iWork anchoring he price. Overall software sales are not big money makers for Apple. OTOH, you they can simplify a bunch of things by making OSX upgrades cheaper. Users no longer need to worry about OS updates (eg time their purchase). They can sell macs as "ready to go with all the software you need" for creative or office workers. A new mac will be easier to get used to. Developers can target a single OS version, this includes Apple. Apple can release features relying on new OS features. It's just simpler. Apple have an aesthetic preference for simpler. For the cost of whatever revenue these software sales were bringing in they get to improve and simplify the mac ownership experience. They get to differentiate themselves from PCs in one more difficult to quantify way. This is another thing they like. You don't have to buy antivirus & Office or worry about Windows upgrades. Financially it's probably a wash. Slightly better mac sales or increased pricing power will more or less make up for lost revenue.

bradleyland 13y ago

The author doesn't understand Apple. Apple doesn't view software and hardware separately. Coincidentally, I just wrote about this, but I'll copy and paste here because it seems relevant. A friend of mine recently asked me how Apple expected to continue making any money while giving away software that Microsoft charges $200 for. Understanding how Apple can give away their software and still make money comes in understanding Apple's business. Apple pundits frequently circle back to the point that Apple is a “hardware” company. As it turns out, they are wrong. Apple is a “devices” company. What is unique about Apple is their view that a device is made up of hardware & software, and that these two are inseparable. Apple believes this is the best view if you want to deliver a superior experience to the users of your products. If you look at Apple as a hardware company — which I believe is a mistake — they make better margins than any of their competitors. Following that flawed line of thinking, what they're doing now is using that extra profit to subsidize the software side. This viewpoint only holds if you view the hardware and software sides of the business as separate entities though. Apple has combined the two. You're not buying hardware or software, you're buying a device. What good is a microwave without the software that connects the buttons to the timer, microwave generator, etc? Thats how Apple views their devices. By making Mavericks and iWork free, theyre expanding their notion of the "post PC world". They're not just talking about iOS devices, theyre talking about their entire line up. If youre wondering why Apples “PC” sales continue to grow while everyone else is sinking, I think youve found your answer. http://www.bradlanders.com/2013/10/23/apples-greater-vision-of-the-post-pc-world/ http://www.bradlanders.com/2013/10/23/apples-greater-vision-...

adolph 13y ago
1. My impression was that Apple has had a couple flat/lower year to year quarters in lap and desktops. Their chart of iPad sales shows slowing/maturing of that market segment. 2. Apple sells experiences. If it were selling devices, then software updates for older devices (other than bugs and security/safety) would make no sense. 3. Giving away iWork and iLife is an interesting move that starts building a moat of out-of-the-box productivity software and somewhat incentivizes new sales without totally pissing off previous software purchasers (thru iTunes rebates) and acts as a stronger introduction to their cloud services. It'll be interesting to see if that strategy works enough to continue development on iWork (which I enjoy using although acknowledge is a not widely used product).

skyjedi 13y ago

Apple doesn't want all software to be free. They want all the devices on the same platform to then have ALL the apps available to them. That 30% cut is a much bigger piece of pie than selling a $30 OS

doctorwho 13y ago

Apple hasn't been charging for iOS or the software that ran the first iPod. It's included in the cost of the device, just like the cost of the embedded code in your Keurig is factored into the overall cost of the device. Software isn't where Apple makes their money. It never was. They NEED software to make their hardware do anything but that's all they ever should have considered. The many years of rivalry with other OS makers was stupid and costly. They weren't really in competition. You get a free copy of OSX with every Apple computer but charging for OSX upgrades only makes the job of keeping all that hardware running smoothly more difficult. It generates avoidable support calls and support is a huge cost. If the software (they have to write anyway) is free and hundreds (or thousands) of bug fixes are always just a free download away then everyone benefits. Apple can stop focusing on feature parity with other operating systems and focus on what makes their devices better for their users.

racbart 13y ago

At today's Apple, both software and hardware are means to sell 3rd party software. They earn so much on their ecosystem that it's more profitable to give OS updates for free and provide more unified and less fragmented ecosystem to both users and 3rd party developers. Lowering prices for next generations of their hardware is also a sign that they really want to put their foot in as many users' doors as possible. I think they rarely lowered hardware prices just couple years ago, before they had this massive revenue stream called App Store.