Why Apple Wants Its Software to Be Free

http://www.businessweek.com/articles/2013-10-22/why-apple-wants-its-software-to-be-free

by michalu • 13 years ago

30 61 13 years ago

xutopia2• 13 years 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.

microtonal• 13 years 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• 13 years 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.

Symbol• 13 years ago

I won't be surprised if we get to the point where OS updates can be done seamlessly in the background without user prompting. I also won't be surprised if Apple will be the first vendor to sell us on it.

anuraj• 13 years ago

Yes it definitely makes sense as iOS is free and apple's future is in integrating all devices to work seamlessly. This requires simultaneous updates on all different devices.

roc• 13 years ago

That's part of it, but it doesn't speak to why they also made iWork and iLife free.

xutopia2• 13 years ago

Admittedly the reasoning behind iWork and iLife is different. The competition (Google Docs/Drive) is doing it for free. No point in selling software if a high quality competitor will offer theirs up for free.

The point here is to keep people using their hardware and the tight integration into iCloud for those products ensures a longer term lock in.

otikik• 13 years ago

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

MPetitt• 13 years 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• 13 years 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)

dmyler2• 13 years 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• 13 years 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.

dmyler2• 13 years ago

Ditto.

cincinnatus• 13 years ago

I suspect they will at some point in the next ~18 months.

gonzo• 13 years ago

if you already had iWork, they just upgraded you for free.

a_c_s• 13 years 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.

r0h1n2• 13 years 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• 13 years 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.

theorique2• 13 years ago

As Joel Spolsky said: "commoditize your complements".

http://www.joelonsoftware.com/articles/StrategyLetterV.html

r0h1n2• 13 years ago

Before we get into hand-picked examples, let's define what the "industry" is. Is it smartphones & tablets? Is it PCs? Is it e-commerce?

Sure, Apple has an incentive to give away its OS free, because its virtually indivisible from its own hardware.

Google derives the bulk of its revenue without any hardware being sold. When it does sell hardware (the Nexus phones or Moto devices), it gives away Android of course. But then it gives away Android for free to everyone else but for an entirely different set of strategic reasons.

Amazon is primarily an e-commerce company, and then maybe a cloud computing one. Hardware doesn't play much of a role in either case.

Samuel_Michon8• 13 years ago

Apple wants to drive the software cost to zero [...] Google wants to drive the software and hardware cost to zero [...] Amazon wants to drive the software and hardware cost to zero

But where does that leave Microsoft? It makes most of its profits from Windows and Office products. For enterprise, this probably isn’t a problem, as most of those customers pay Microsoft for seats, not software versions. For the consumer market however, I don’t think Microsoft can afford to charge for software upgrades much longer. Perhaps Microsoft’s strategy is to convert those users to subscribers: have them pay one annual fee to get support and the latest releases of Windows, Office, and online storage.

bluecalm• 13 years ago

Let me correct it for the author:

By going free, Apple has acknowledged something that’s been true in the industry for years: software is a means to sell hardware for hardware companies Apple being one of them.

mvkel3• 13 years 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• 13 years 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• 13 years 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.

Samuel_Michon8• 13 years 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.

mvkel3• 13 years 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• 13 years 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_Michon8• 13 years 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• 13 years 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).

cygwin983• 13 years 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-...

coldtea• 13 years 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.

cygwin983• 13 years 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• 13 years 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.

ryandrake• 13 years ago

Doesn't seem like Apple is really concerned with fragmentation, as they deliberately prevent their newer operating systems from installing on older hardware. They understandably would rather sell newer hardware. I'm pretty much stuck on Lion because Mountain Lion and above will not install on my hardware (which incidentally means I cannot develop for iOS7 since XCode5 requires ML+).

Samuel_Michon8• 13 years ago

I just looked at the sales figures Apple reported. Apple has so far sold 95 million Macs that run the Mac App Store (Apple sells between 4 and 5 million Macs per quarter). The Mac App Store came preinstalled with Lion and was added to Snow Leopard in version 10.6.6.

If you are planning to offer your app on the Mac App Store, you don’t need to worry about compatibility with Leopard and Tiger, as those customers won’t see your app anyways. To me, that seems like a much better situation for developers than it is on the Windows side, where 40% of users still run XP.

cygwin983• 13 years ago

Even for the same method each version of Mac OS X can behave slightly different, which causes pains for the users due to crashes and the developers to scratch their heads to reproduce. I've read quite a number of blog posts that the developers tried to reproduce a bug only happens to Snow Leopard. Extra code had to be written only for that. You can imagine how the code will smell if extra efforts need to be made for each version. That's the fragmentation issue I talked about and had concerns with.

netcan2• 13 years 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.

bradleyland2• 13 years 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-...

adolph4• 13 years 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).

gshubert17• 13 years ago

If it were selling devices, then software updates for older devices (other than bugs and security/safety) would make no sense.

On the other hand, I am more likely to buy an expensive device, knowing that updates will be available. In my mind, updates help the device retain its usefulness and value.

bradleyland2• 13 years ago

Just a nit pick on the word experience. Experience is ephemeral. It has no link to the tangible thing that we're buying. The experience is the result, but I disagree that we can take the abstraction that far. A movie theater sells an experience. An app developer sells an experience. Apple sells devices.

When I say device, I mean the totality of the hardware, the operating system, and the core apps. This, to me, is the atomic unit of a product that Apple has packaged. To go the step further to "experience" is too broad.

ksec• 13 years ago

I am not quite sure if devices is the right word. I would choose Product instead. But then Product in a sense doesn't include services. ( To me at least ) So they would be a Product and Services Company. Of coz if there are any one words that include both meaning please enlighten me.

skyjedi• 13 years 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• 13 years 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• 13 years 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.

Why Apple Wants Its Software to Be Free

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