SciTechTalk: Apple gives away free software. Crazy like a fox?

By JIM ALGAR, United Press Intenational  |  Oct. 27, 2013 at 6:30 AM
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Apple, a premium technology company whose products and services generally command a premium price, announced the latest upgrade of its flagship desktop/laptop operating system last week at a price that had the tech world scratching its head.

OS X Mavericks would be free, Apple announced; free to download, free to install, free to use.

Common wisdom had held, and consumers had come to accept, that Apple products were more expensive that anything from their competitors. Mac Pro computers cost more that Windows PC; a MacBook came at a higher price than other laptops; an iPhone would set you back more than any comparable Android handset.

Whether it was actual or perceived superiority, or simply the cachet of buying a product from a company seen as a leader in design and innovation, consumers seemed willing to pony up, and Apple's coffers swelled accordingly.

So why not charge for OS X Mavericks and make even more money?

Because Apple is, at its heart, a hardware company, and if the computer industry has learned one lesson over the years, it's that software sells hardware.

An operating system has one use; to run a computer. Apple wants to sell computers, and will happily give up a few dollars on Mavericks if it can convince an Apple user to upgrade to the latest, fastest and shiniest Mac computer -- or even entice a Windows PC user into switching.

This likelihood of a free Apple OS has been coming for a while; Apple offered the previous version of Mac OS X Mountain Lion for just $19, pretty close to free as software prices go.

In comparison, the base version of Microsoft's current operating system, Windows 8.1, sells for $120, and the supercharged Windows Pro 8.1 version will set a consumer back $200.

Microsoft sees that as proper because, until recently, it has been at its core a software company; it's where it has made its money.

Apple makes money on software, of course, but it closely controls its own ecosystem, using hardware -- and the operating system that runs it -- to usher customers into its software stores.

iTunes, anyone? Estimates have put Apple's income from iTunes purchases at $4 billion in the most recent quarter alone.

And by offering Mavericks free, Apple can be confident Mac computers sold as far back as 2007 are being brought up to date and happily tethered to its software stores. And many users will likely take the opportunity to upgrade to a new computer to run the free OS.

The strategy seems to be working. Mavericks is being installed on computers at a rate three times that of the adoption last year of its predecessor, OS X Mountain Lion.

Apple's plan with Mavericks -- and the reason for its pricing ploy -- is simple; more people adopting the newest operating system will mean more users wanting to run the latest, greatest newest apps.

That means more downloads from the App Store and more money for Apple. It's business at its most basic; keep the customers happy and they'll keep coming back.

Bottom line: Apple is going to make a lot of money from a free offering.

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