iCloud may debut as partially free service; Apple may price OS X Lion very aggressively

Wed, Jun 1, 2011


More details are beginning to emerge about Apple’s upcoming iCloud initiative and steps the company may take to ensure a mass and wide adoption of OS X Lion.

Earlier this week, Apple uncharacteristically tipped its hand when it pre-announced its upcoming iCloud service. In the wake of that, AppleInsider is reporting that Apple may offer its iCloud service as a free service to users who upgrade to Lion.

iCloud is expected to replace the company’s existing MobileMe service, which offers e-mail and remote file storage, along with syncing of bookmarks, contacts and calendar events, at a price tag of $99 per year.

That price tag may remain for users who do not make the upgrade to Lion, or for Windows users. But it is expected that the cloud services will become free to Mac users who run the latest version of Mac OS X.

It’s unlikely, however, that all of iCloud’s services will be free, namely the music streaming component. Rumor has it that Apple this week will finalize a licensing deal with Universal Music for streaming rights, meaning that it will have achieved deals with all four of the major record companies. Though details are somewhat scarce, it’s believed that Apple’s streaming service will enable users to play their purchased music content from the cloud on any iOS device. As pointed out by AI, because Apple is actually securing licenses, as opposed to Google and Amazon, Apple will inevitably pass on that cost of doing business to consumers.

But with competition fierce, it’s also possible that Apple may offer the service for free for a short introductory period in order to wet the musical palette of consumers and showcase why the service will be worth paying for in the future.

Also interesting, though not surprising, is Apple’s efforts to really push OS X users to upgrade to OS X Lion.

“Free access to iCloud may not be the only carrot that Apple dangles in front of users to incentivize upgrades to Lion,” Neil Hughes writes for Apple Insider. “A separate source that reached out to AppleInsider also indicated it’s possible that the company could be planning a one-two punch, offering not only iCloud, but also a low sale price for Lion.”

Indeed, Apple implemented the same strategy when it released OS X Snow Leopard in 2009 for just $29. This resulted in impressive Snow Leopard sales that were more than two times as high as OS X Leopard sales were when it was first released and four times as high as OS X Tiger sales were when it was first released.

“Even though some considered Snow Leopard to be less feature-focused than the releases of Leopard or Tiger, the ease of upgrading to Snow Leopard and the affordable pricing made it a win-win for Apple computer owners – thus helping to push sales to record numbers” said Stephen Baker, vice president of industry analysis at NPD.

It’s possible that the lower price could also be tied to purchasing Lion through the Mac App Store. The company already does this by selling its professional photography software, Aperture, for $79.99 in the App Store — a price $120 lower than the $199.99 Apple charges for a boxed copy of Aperture 3, and even $20 less than the $99 Aperture 3 Upgrade.

With hardware being Apple’s bread and butter, lowering the cost of purchase for its line of software and services can only be a good thing – not only for consumers, but also for Apple who now has to compete with Google who has perfected the strategy of giving everything away for practically free.

One thing to note, though, is that OS X Lion will be a lot more feature-rich than Snow Leopard, which may make a sub-$30 pricepoint a harder sell for the higher ups at Apple.

At the very least, we only have to wait 6 more days to find out.


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