My Thoughts on Apple's Software Pricing Strategy

Screenshot from Apple.com

Last year, Apple has revolutionized its software pricing strategy, making almost all of its apps for Mac and iOS completely free with a purchase of new device. I thought it was coming for a long time, so I want to share with you why I strongly believe that it was the right move to make for Apple.

Slowly but surely, Apple's mobile and desktop operating systems are coming towards each other in technological point of view, so marketing and pricing were destined to do the same. iOS updates were free for years now, and Apple has decided to do the same with its desktop OS. At the same time, iLife apps for Mac were provided for free to people who purchase Apple's computers, and it makes sense that Apple wants to apply this principle to iWork as well.

iWork apps haven't receive a major update for more than 4 years, and its main competitor, Microsoft Office, is still more popular and functional. On the other hand, Google with its Drive apps is a real threat to other productivity suits, because it is constantly improving everyday. And since Google is not charging anything for their apps, more and more users are switching to Google Drive. 

What about Apple? Apple is not a software company, it is a hardware company. I think that the most of you will admit that Apple is making the best hardware products on the market. Absolute majority of Apple’s revenue is coming from selling its hardware and content in Stores, so why not make people buy more hardware by providing software for free? Besides, the software cost can be included in hardware’s price. This strategy is widely used by Apple's competitors. For example, Microsoft is proving the free Office with its Surface computers. The problem for Microsoft is that it is nowhere near Apple in selling of the hardware.

I don’t think that Apple is aiming to be the leader in productivity software industry. If Apple really wants to do that, they have to release the versions of iWork for the most widely used operating systems - Windows and Android. I am sure they will not do that. Apple just wants to provide to its customers a ‘homemade' integrated into its ecosystem solution, so users don't have use the 3rd party software, which can lead them away from buying the Apple products in the future. 

Software and web services are the part of ecosystem. By making more people dive into its ecosystem, Apple is making it even more difficult for users to switch to competitor products. By making software and web services free, Apple is raising a huge army of loyal customers, who will eventually continue to buy its hardware. 

Almost at every event, Apple is talking about fragmentation in operating systems of its competitors. Before it was Windows, these days all heat is turned to Android. Less fragmentation makes it easier to provide the support and updates, allowing to focus on adding the new features. According to reports, more than 90% of users are already upgraded to iOS 7. This makes it much easier for developers to develop their apps for iOS. By making the Mavericks free, Apple is trying to archive the same thing for its desktop operating system.

I expect Apple to continue the merging of iOS and OS X. I am sure that in few weeks at the WWDC, Apple will introduce the even more iOS-like version of OS X with deep integration of iCloud.

What do you expect to see from Apple during the WWDC? Do you think iOS and OS X will eventually become one? Is the future lies with iCloud? I will be more than happy to hear your opinion.

Eldar GezalovComment