“Something rather curious has happened within Apple’s iTunes, software, and services segment over the past few years: it started generating operating profits,” Evan Niu writes for The Motley Fool. “Apple has long maintained that these divisions operate near breakeven, but Asymco‘s Horace Dediu crunched the numbers recently and estimates that the segment may be generating over $2 billion in operating income per year. Apple’s first-party software offerings are mostly responsible for the segment’s recent profitability. That includes products like iWork and Apple’s wide range of professional software applications like Final Cut Pro.”
“That means that Apple could possibly afford to give some back if it’s feeling generous,” Niu writes. “The Mac maker’s main motivation for doing this would be to strengthen its complementary ecosystem that drives profitable hardware sales, which was always the strategic purpose of iTunes in the first place.”
Niu writes, “Apple’s been working hard to integrate iWork into iCloud for a while now, which is a free service… On OS X, iLife is included on all Macs, while iWork costs $60 for all three components… With that in mind, Apple could conceivably make iWork on Macs bundled for free like iLife and not sacrifice too much revenue. Giving away the consumer-oriented software for free on all of its platforms would be a nice perk to boost hardware sales… That would simplify Apple’s pricing, making iLife and iWork free on OS X, iOS, and iCloud all at once, while putting a little bit of pressure on Google and Microsoft at the same time.”
Full article here.