Apple presents itself as a company that ships hardware, software, and services that integrate together elegantly. While Apple makes the majority of its money from its hardware, Apple makes use of its free, popular internet services and software to sell their hardware. For example, the iLife suite of Mac apps that are included for free with new Mac purchases is a common reason that people choose to buy a Mac. On the iOS side, Apple offers free services like iCloud, iBooks, iMessage, Game Center, and later this year, iTunes Radio.
But on both the Mac and iOS Device side, one particular Apple service has stuck out as being a paid offering: Apple’s iWork suite that includes the Pages word processor, Numbers spreadsheet maker, and Keynote presentation creator. For years, Apple has sold iWork for Mac as a bundled suite, but with the Mac App Store, the company split the three programs into separate $19.99 downloads. On the iPad, iPhone, and iPod touch side, the three apps are distinct $9.99 downloads. Apple, thus far, has kept iWork as a premium priced suite, but this fall, the company will introduce a free tier: iWork for iCloud…
iCloud is Apple’s free set of cloud services that includes Mail, Calendar, Contacts, Notes, and Reminders. At WWDC 2013, Apple Vice President of Productivity Apps Roger Rosner announced iWork for iCloud, a replication of the desktop and mobile iWork apps that is suited for web browsers on both Macs and PCs. iWork for iCloud, as part of the free iCloud.com experience, will go into public beta this fall (following the current developer and Apple employee testing phase), and it will seemingly be free (likely with the same 5GB of free storage that Apple provides with iCloud).
But iWork on the web being free poses an issue: this creates an inelegant, inconsistent document, spreadsheet, and presentation management solution for Apple.
New iPad and Mac customers may be confused that they could access and edit their iWork files for free via a web browser on a computer, but what happens when they want to continue their work on the road from their iPad or at home or work on their Mac desktop? Customers could be confused that the web is free and the native apps are highly-priced. One common complaint from new Apple customers, that we have heard, is that they go to buy a $500 iPad but have to spend an extra $30 to outfit their new tablet with Apple’s productivity software.
Also at WWDC, Apple announced that it will ship brand-new versions of both the native Mac and iOS iWork applications. We have already taken a look at what a new iOS 7 design-inspired iWork could look like on iOS, and Apple’s productivity Mac apps were last updated in January, 2009, so the company likely has some new features to provide Mac users. To go along with these new native apps, we believe that it makes sense for Apple to either introduce a new free iWork apps tier or make the iWork Mac and iOS apps completely free for new customers. This would not be an unprecedented move based on Apple’s past steps to make its services free.
In 2011, to coincide with releasing the free iCloud services, Apple adjusted its OS X, iOS, and Services accounting procedures to defer revenue over a period of multiple years. This allows Apple to provide incremental software updates to its customers at no additional charge. An example of this was Apple’s ability to eliminate the price of iPod touch software updates in recent years. Operating system updates for the iPod touch used to be sold in $20, $10, and $5 increments.
Besides the factor of elegance and the want for an integrated experience leading to the possibility of free iWorks apps on iOS and OS X, we have heard uncorroborated whispers, in recent months, claiming that Apple has been discussing ways to make its iWork for iOS and Mac apps free at some point in the next year. It is unclear if the internal talks will amount to anything to affect customers. The thinking, just like with iCloud and iTunes Radio, is that free iWork apps could be a way to sell more hardware. We have also heard that, over the next couple of months, Apple will engage in its strongest push yet to sell (high-profit-margin) iPhones in its retail stores, so perhaps free iWork apps is part of the same general strategy.
In a world where Microsoft is said to be developing its own advanced Office productivity suite for Apple’s devices, and in a place where the popularity of Google Docs/Drive is growing rapidly, Apple making its powerful, native apps could be a serious blow to its competition.