I believe today marks the day war was waged on the humble productivity app. We’ve been teetering on the edge for a while now. Open hostilities from Microsoft on everyone not named Microsoft and then Google on Microsoft itself meant a Cold War broke out. But that’s all it was: a Cold War. Google, after all, still charged businesses $50 per year to use its productivity suite. Apple, too, played in this game, once charging $80 and more recently $30 for its Office suite. The three sides faced off.
Until today.
Today Apple announced that the iWorks suite will forever more be free. Couple this with iCloud sync and web versions of iWorks (all free) and suddenly the game has changed on productivity apps. We are now at war.
This is how good businesses work: make money on your thing and commoditize everything else. Apple makes money from hardware so it wants everything else to be free: syncing, back up, web storage, apps. Google makes money by selling us (ads) so it wants all software and hardware to be free.
Historically, as a developer, our priorities lined up nicely with the big player in the market: Microsoft. Microsoft makes money from software so it wants hardware and peripherals to be free. Since we make money from software, too, us developers have been in pretty good shape. Add in the fact that Microsoft primarily sells productivity software and us productivity app developers have done really well business model-wise [1].
But the market has shifted. Apple and Google are the top players now and their priorities don’t align as well with ours. Neither store offers upgrade pricing, both emphasize low prices and neither does a good job of enabling recurring business models. [2] And making money from productivity software has just become a little harder with Apple making their word processing, spreadsheet and presentation software free, available on the web, on the Mac and on the device, and syncing between them. Those are amazingly complex and powerful products.
Where does that leave developers of fine productivity apps? Clearly fighting an uphill battle. Adjust your businesses accordingly.
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[1] Except, of course, when we got stepped on. That happens in all businesses.
[2] Yes, Apple offers subscriptions for newstand apps but not other applications. Plus the 30% charge is really high for annual subscriptions.
Elia Insider 
Regarding your second note: you don’t need to be in Newsstand to use autorenewable subscriptions.
Interesting. This wasn’t the case six months ago for apps. Thanks for the update.
Great post. It is a good move for Apple. It is a sad day for Microsoft.
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Well, maybe.
On one hand you are right, but the bigger picture is more nuanced.
Firstly, the drop in software prices was mostly brought on by the forced competition and egalitarian exposure enforced by the App Store but made possible by the guarranteed large market access and flat distribution cost.
This particular move by Apple could actually help reset pricing expectations.
When Apple was selling them for $5 (iPhoto) or $10 a piece they were seen by many as pricing signals for what level of functionality should be expected at certain price points.
Interesting point mim. I talked to a friend at Microsoft and he said the same thing. That iWork wasn’t a very good product and he likened the pricing move as waving a white flag and not attacking Office. I have never used so can’t comment but i bet you are right.
I would expect someone at Microsoft to say it isn’t a very good product. 🙂 In all seriousness, I really like Keynote better than PowerPoint and prefer Pages because of it’s start-up speed, although I rarely use it anyway. As for Excel, it crushes Numbers.
I hope you are right. That would be a silver lining.