Earlier this week, Apple held a special event with the tag line “We’ve got more to cover.” The event was action-packed, with the company not only unveiling new iPads, but new versions of their MacBooks, MacPro and the software packages they run.
Apple has come under more pressure over the last year with Android tablets nipping at their heels and Microsoft’s Windows 8/RT trying to gain a niche of its own. Suddenly, the market that Apple invented and dominated has become a lot more crowded.
One thing the special event made clear is that Apple is beginning to feel the pressure from competitors; specifically, Microsoft. After the Windows maker attacked the iPad via Surface commercial, Apple decided to fire back with a low blow by announcing their new, FREE version of OS X, Mavericks.
This announcement appeared to be a reactionary move to Microsoft’s recent launch of Windows 8.1, which is a free upgrade for owners of Windows 8. But the main difference for Mavericks is the fact that it will be free for users of any OS from Snow Leopard and up. If you look at Apple’s software price dropping, you’ll see it’s a move the company has been heading towards, albeit, very slowly:
Apple customers will now get all future versions of OS X, just like they’ve come to expect from iOS. This puts Microsoft in an interesting position because it’s still not clear if they’ll be offering future upgrades of Windows for free or not. They’ve emphasized a few times that only this version of Windows will be free, but perhaps that will change.
The barrier to getting users on the latest and greatest OS version has always been the price, but now that’s gone. Apple users that have stuck with Snow Leopard will now consider moving up to the latest. Users will upgrade more quickly and more often, which means less legacy software for Apple to support, and every user will have a common feature set.
On top of all of this, Apple also announced that it will be making iWork and iLife free for new Mac and iPhone/iPad purchases. That means Pages, Keynote, Numbers, iPhoto, iMovie and GarageBand will be available to new users at no additional cost. It’s an aggressive strategy, and one that’s a direct response to Microsoft’s stranglehold on the productivity software market. In the announcement, Apple made sure everyone knew that Microsoft’s Office365 requires a $99 yearly subscription.
That move seemed to have touched a nerve in Redmond, WA. Frank Shaw, head of corporate communications for Microsoft, lashed out in a post on the company blog, saying:
“[It] seems like the RDF (Reality Distortion Field) typically generated by an Apple event has extended beyond Cupertino, so let me try to clear some things up. When I see Apple drop the price of their struggling, lightweight productivity apps, I don’t see a shot across our bow, I see an attempt to play catch-up. Apple’s decision to build the price of their less popular and less powerful iWork into their tablets [is] not a very big (or very good) deal.”
Apple clearly disagrees with Shaw, taking a number of other swings at Office’s supposed solid strategy during the special event. Tim Cook didn’t mention them by name, but even without the not-so-subtle visual aid, he didn’t have to:
“Our competition is different, they’re confused. They chased after netbooks. Now they’re trying to make tablets into PCs, and PCs into tablets. Who knows what they will do next? I can’t answer that question. But what I can tell you is that we have a very clear direction and a very ambitious goal. We still believe deeply in this category [of notebooks] and we’re not slowing down on our innovation.”
Microsoft seems to be slowly coming to the same conclusion that Apple has believed since day one; software and hardware should go hand in hand. By bundling software with tablets, the company is moving closer to the Apple model while diminishing the value of the software when sold on its own. Over time, the price of Office will need to drop and Microsoft is well aware that the old days of selling Office products at a massive premium is over. Nobody wants to pay $300 up front for a productivity suite, but nobody can live without one either, which is why Office365 still has a fighting chance.
Despite all the media buzz Apple’s free software has garnered, Microsoft may be right with their assertion that iWork won’t impact their Office business too greatly. It currently only appeals to a small group of users with both Mac and iPad devices, and who probably wouldn’t have purchased Microsoft Office anyway—especially considering it doesn’t actually work on iDevices without a subscription.
But by making their products free on both tablets and notebooks, Apple is locking their current users even deeper into its ecosystem. Those who buy iPads and use Pages, for example, are more likely to eventually buy MacBooks and use Pages there, too. Bundling their software with their wildly popular products will eventually win users over. After all, why would they go out and buy anything else if it’s free and works well enough?
Alex Wilhelm of Techcrunch said, “If Apple can, over time, acclimate customers into not paying for productivity software, it could undercut Microsoft’s ability to sell Office at the margins it has for so long.” As Apple makes its products better and continues to include it for free, consumers will use it more and be less willing to pay for similar products.
The move to “free with hardware” isn’t going to kill Microsoft’s business users, but it has potential to completely decimate Microsoft’s consumer facing Office products that still sell extremely well. As users begin to expect great software with great hardware, Microsoft will need to give away Office with all of their products, not just Windows RT.
Apple’s Eddy Cue snarked, “Others would have you pay a small fortune [to use their software.]” If Apple’s latest keynote is any indication, those days are almost over. From now on, computer companies are going to have to win users over by creating great experiences right out of the box, software included.