A week ago, Bloomberg’s Mark Gurman did something he is popular for; revealed exclusive news. This time around, it is about Apple working on a hardware subscription service for iPhone. If you’re reading about this for the first time, let me know how interesting this idea sounds to you, as this news garnered a lot of attention.
Now, if you have questions like, how is it different than buying iPhones in installments or through carrier subsidies? How will I as a customer benefit from this, and how will Apple make profits from this subscription model, etc.? Read along to find answers to all these questions.
What is Apple’s hardware subscription service?
Apple’s hardware subscription service for iPhone will make using and owning iPhones easier from an economical point of view. The rumored service model is where Apple will lease iPhones to users at a subscription fee which is still unknown.
The whole idea is to treat a hardware commodity as a software service like Apple Music, Apple TV Plus, Apple Fitness Plus, etc.
Apple’s services accounted for 18.7% of Apple’s market share. While the number might not seem huge, it plays a substantial role as it ranks higher than other hardware products sold by Apple like the iPad, Apple Watch, etc.
Would you believe me if I told you Sony sells their PS5 at a loss? At the start of its cycle, it sold PS5 at a loss, and most companies do the same. Companies do this as they profit from selling games in the form of subscriptions or CDs.
When will Apple’s hardware subscription service launch? – Well, Apple has not announced its subscription service while writing this article.
How is it different from installments and carrier-provided iPhones?
When you buy an iPhone on an EMI (monthly installment), all you need to do is pay a certain amount up front (down payment). After which, every month, a fixed amount will be deducted from your payment method, and at the end of the tenure, you will own the device.
When you buy an iPhone through a carrier, you need to make monthly payments to the carrier, including the cost of the iPhone. If you buy an iPhone from AT&T, the device will be locked to AT&T for around two years. You can now unlock the device through a certain process and use it with other carriers. Once you’ve paid off the iPhone’s amount, it will belong to you.
You can now unlock the device through a certain process and use it with other carriers.
Now, with Apple’s hardware subscription service, you do not get to own the iPhone at all. It will always belong to Apple. However, since it is a monthly subscription system, you can upgrade to a newer iPhone annually or by the terms Apple sets.
Wouldn’t the hardware subscription kill iPhone upgrade program?
Apple’s iPhone upgrade program was launched back in 2015. Once you’re a member of the iPhone upgrade program, you can upgrade to a new iPhone once you’ve made 12 payments. You own the device after 24 payments if you choose not to upgrade to a new iPhone after 12 months.
Given Apple’s track of killing its products or services, Apple might kill the iPhone upgrade program and push its subscription model. How will this model help Apple as a company? Let’s find out.
How will Apple benefit from a hardware subscription model?
An average Apple user pays only a dollar for the hardware and services used daily, says Katy Huberty, lead analyst at Morgan Stanley. According to her, the average user would be willing to shell out more money to use Apple’s hardware and services. Let me know if you’d be willing to spend a little more money if you can access more of Apple’s devices and services.
Apple may launch several subscription models at different prices. The base subscription might include one generation older iPhone (iPhone 12), while the costliest subscription might include the flagship iPhone (iPhone 13 Pro/Max) bundled with other Apple subscriptions.
Is a hardware subscription model for iPhone good for users?
Subscribing to an iPhone surely sounds enticing. Managing these services becomes easy as all services and the iPhone are linked with one Apple ID.
Besides, upgrading to a newer iPhone would also become easier. You do not need to make full payment to buy an iPhone which will be replaced within a year by its successor. Also, if you are a subscriber, Apple will prioritize any issues you face as you are a repeat customer.
But aren’t there any downsides to this iPhone subscription model? Think of this model as renting a house. You keep making repeated payments, but you never own the house. The same applies here. Also, since more people will repeatedly upgrade their iPhones, it’ll generate more e-waste. But as the devices will be returning to Apple, they can and will recycle these devices.
Please note that Apple has not announced anything about the aforementioned hardware subscription model. This is all based on a report by Mark Gurman, and given his credibility, we shouldn’t be surprised if this comes to life.
Well, how it fares then is something only time will tell! Nonetheless, let me know your thoughts on this model in the comments below.