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.Mac subscribers grow steadily

Another 80,000 people sign up to pay for Apple's Web tools, bringing the total to 180,000. Still, that figure pales in comparison with the number who used the services when they were free.

Apple Computer said Tuesday that 80,000 people have signed up for .Mac accounts over the past two weeks.

The new figure bring the total number to 180,000 paying customers for the .Mac service, which offers online services such as e-mail and storage. In mid-September, Apple reported that 100,000 people had signed up for .Mac, a fee-based service that replaced an earlier, free service called iTools.

Still, that total pales in comparison with the number of people who used iTools. Before Apple announced plans to replace the free iTools suite of Web services with the paid .Mac service, the company claimed about 2.2 million subscribers.

Jupiter Research analyst Michael Gartenberg called the 180,000 users "a significant number--but a far cry from the 2.2 million users that were signed up for iTools. While the loyal enthusiasts have signed up grudgingly, Apple needs to come up with better pricing and loyalty incentives to go after the masses that bought Apple products over the last few years in part because they were enticed by the free iTools offer."

Last week, Apple extended the deadline for existing customers to convert their existing iTools accounts to .Mac at a discounted rate. The Cupertino, Calif.-based company had planned to pull the plug on the offer Monday. Those customers now have until Oct. 14. The upgrade fee is $49 for the first year, which is $50 off the announced $99 annual fee for .Mac.

Apple did not reveal how many of the 180,000 subscribers were new accounts versus iTools converts. But assuming all of them were upgrades, that would work out to about $9 million in revenue.

Resistance to .Mac has been stiff but appears to be waning. An online petition against the switch garnered nearly 34,000 signatures since mid-July. But the number has remained essentially unchanged during the past two weeks.

Gartenberg said Apple could make some changes to ease tensions.

"Apple would also be wise to allow users to keep their Mac.com e-mail address for free with limited storage options, similar to Yahoo and Hotmail's free services, and then try to upsell them on services and storage over time," Gartenberg said. "There were a lot of annoyed Apple users at Macworld who felt that even if Apple never explicitly promised a free e-mail address for life, it was strongly implied."

The company also has not addressed a potential problem in its education-related business. Some educators partially based their Mac buying decisions on access to iTools. Students would use the accounts for e-mail or posting projects on Web sites, using Apple's Web publishing tools. The online storage feature, known as iDisk, made transferring work from the school Mac to a home Mac or Windows PC an easy process.

While Apple continues to work out its .Mac problems, market research indicates that consumers are increasingly ready for paid services. According to an Online Publishers Association and ComScore Media Metrix study, consumer spending for online content, mainly in the form of subscriptions, rose 155 percent during the first quarter over the same period last year.

Apple isn't the only company making a shift to paid services. Microsoft plans to launch MSN 8 on Oct. 24. The new version of the online service will mark a dramatic change in Microsoft's Web services strategy. Like Apple, Microsoft envisioned delivering a la carte services to a broad Web audience. The company now plans to funnel all consumer Web services through MSN 8, in which customers must pay anywhere from $10 to $50 a month to use depending on Internet access.

Apple began its move into Web services in January with the release of iPhoto. The image management program includes features for ordering prints online. In August, the company released Mac OS X 10.2, which includes the Sherlock 3 search feature for online purchases of movie tickets, airline tickets or digital images, among other items.

In mid-September, Apple released iCal, its desktop and online calendar program. On Saturday, the company released a test version of iSync, which is used for syncing Palm handhelds, iPod music players and some Bluetooth-enabled cell phones with Macs.

iSync's importance
Release of iSync could be important for Apple as the company looks to push Macs as a hub for attaching digital devices or to offer additional services through those devices.

"Apple has now grabbed a critical part of system software--namely sync--for itself," Gartenberg said. "As the PC continues to fill the role of digital hub, whoever controls the sync point to the PC will wield a lot of power in the future."

Microsoft offers a connection technology known as ActiveSync, which right now is mainly used to connect Pocket PC handhelds to PCs.

"Look for Microsoft to make ActiveSync a core part of Windows in the future and to specify what devices and media formats it will sync with," Gartenberg said. "Sync is critical to the future. And whoever controls those access points will help determine what devices will be successful and which will end up in desk drawers."