iPhone Subscription could soon be a new way for us to own an Apple device without emptying our bank accounts in one go. No, it is not EMIs.
As per a report by Bloomberg (1), Apple is working on a hardware subscription service for its iPhones and iPads, and it can arrive either by the end of 2022 or early next year.
Even though Apple has never sold hardware on subscription before, it fits with the tech giant’s plans of pushing “subscription services as a whole.” Over the past years, Apple has been pushing subscriptions like Apple Music, Apple TV Plus, Apple Fitness Plus, Apple News Plus, and even Apple Arcade to users.
Reports suggest that Apple could also bundle many of these services conveniently and affordably into the Apple One Subscription. Also, it seems that Apple has been working on its plan for a while, albeit slowly.
The Cupertino-headquartered company had introduced a monthly subscription model for Apple Care’s warranty extension back in 2019. And from 2015, Apple has also been offering iPhone Upgrade Program, allowing users to pay for AppleCare and a new iPhone for the next 24-months with an option to trade their phones after 12-months of payments. Practically, both of these plans are partly hardware subscriptions.
According to Bloomberg’s report, the monthly charge people will pay for Apple devices will not be the price of an iPhone or iPad over 12 or 24-months. Instead, it would be like a monthly subscription with an option to upgrade to a new device when launched. Similar to all other Apple subscriptions, this will also be linked to an Apple ID, and there may also be an option to include Apple One and AppleCare services as a part of the bundle (2).
Apple already offers monthly plans for these services and an EMI option for its devices. However, these plans are independent.
A report by ALJAZEERA also suggests that the service is Apple’s other push for increasing its recurring revenue, enabling users to subscribe to hardware for the first time instead of simply subscribing to digital services.
Meanwhile, another report from The Verge points out that it is unlikely for Apple to lend out its devices monthly (3).
“Would you really be able to pay Apple just to ‘subscribe’ an iPhone for a single month as you pay for Apple TV Plus? Similarly, it is equally unlikely to imagine a world where Apple has customers invest months of capital in renting an iPhone only to have them return it at the end,” suggested The Verge report.
However, it could be possible that Apple is merely “looking to reduce the middleman and expand its installment-based payment offerings to other products.”
If we look at Apple’s current plans, for example, the iPhone Upgrade Program available in other countries, customers take an interest-free loan with Citizen One, which they repay over 24-months. Apple offers EMI options from several banks with different interest rates in India.
In addition, Apple allows Apple Card users to purchase Apple products with monthly installments at no interest. However, there are not as many Apple Cardholders compared to total Apple customers.
A subscription service entirely controlled by Apple would slash third-party involvement and also allow it to expand to any of its hardware products.
Even though the monthly cost of the bundled subscription remains unknown, it could tie into AppleCare and digital services bundles and trigger more recycling. And suppose this service continues to offer more revenue and assist the world in its recycling efforts. In that case, we will see consumer electronics becoming green and even make green in the upcoming decade.
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iPhone Subscription: A Shift in the Strategy
It is worth mentioning that iPhone sales account for as much as 52% of Apple’s total revenue, generating about 192 billion USD last year (4).
Simultaneously, its services business grew by 27%, with more than 785 million subscribers for 68.4 billion USD in sales. The new hardware subscription program can be attached to its Apple One and AppleCare technical support plans (5).
Apple One bundles allow users to pay a monthly fee to subscribe to several services, including Arcade, TV Plus, Music, iCloud Storage, and Fitness Plus. And the introduction of this new plan can lock users firmly within the Apple ecosystem.
Nonetheless, Apple shares have climbed to a session high after the news. As of 29th March, its prices closed up 6.07% at 175.60 USD (6). Even though the stock is still down about 3% YTD, Apple posted increases last week, its longest streak since November.
Also, there are chances that the new approach could make Apple’s existing services less appealing to its customers. A subscription program linked to an Apple ID would be simpler than a carrier program or even Apple Card’s installment plans.
Many of Wall Street had urged Apple to launch a subscription model in the past. For instance, Toni Sacconaghi, an analyst at Stanford C. Bernstein & Co., had pitched the idea of hardware subscriptions to Apple back in 2016. He said it could help Apple get to a one trillion USD market valuation (7).
It is worth highlighting that Apple has already hit that milestone without embracing the approach, and it is currently worth 2.84 trillion USD. However, it had not stopped Sacconaghi from recirculating the report when this development news emerged last Thursday.
He added, “compared to New York Times or Starbucks coffee subscriptions, the iPhone is a bargain.”
“Several customers would struggle to name a single possession they use more than their iPhones. In addition, the cost of iPhones is a relative bargain compared to other services for which people willingly pay.”
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Samsung’s Subscription Plan
Notably, the iPhone maker is not the first company to push hardware subscriptions. Besides iPhone subscriptions. Peloton Interactive Inc also started testing a subscription service that allows users to lease bikes and fitness content for about 60 to 100 USD per month (8).
Google also tried a similar approach with its Chromebooks, targeting corporate customers.
But all other industries aside, Samsung was the first (as far we know) to offer such a subscription program in the smartphone segment (9).
Last year, Samsung launched its subscription program called Samsung Access, which is currently only available for its US customers.
Here’s what Samsung Access offers:
- Anytime upgrading (every nine months or earlier for 100 USD) for users with the subscription
- Users can trade in an existing device for a new one
- Premium care membership
- Free Microsoft 365 subscription
- Free cancellation upon return of your phone (after three months or earlier for 100 USD)
- Flexibility to pay over monthly payments
- 1 TB OneDrive cloud storage
This upgrade program is available for people purchasing a new Samsung Galaxy S21, S21 Ultra, S21+, Note 20 5G, or Note 20 Ultra 5G for US customers.
And the launch of a rival iPhone subscription service could lead Samsung to expand its offerings to more countries to keep up.
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Recurring Revenue With iPhone Subscription
After the news of an iPhone subscription came out, investors started to predict the value of recurring income. For instance, a 999 USD iPhone 13 Pro costs about 41.62 USD a month for 24 months. However, an individual uses an iPhone for about three years (10).
Even if Apple decides to drop its iPhone subscription fee to 40 USD a month, it would still make about 1,440 USD in three years, and it is about 30% more of that same phone.
In addition, since the launch of its first iPhone in 2007, Apple’s mammoth success has come at a high cost with tons of raw materials like cobalt, copper, gold, aluminum, lithium, glass, and several others that go into making all our devices and gadgets, including iPhone.
An iPhone subscription program could help Apple move closer to its aim to be carbon neutral by 2030 (11). The tech giant already uses robots to dismantle its phones to reuse parts (12, 13). In addition, this subscription program will also give Apple a healthy boost to two of its most important business aspects: revenue from its iPhone and its digital services like Apple TV Plus and iCloud.
It also translates to more revenue for Apple as it would create an iPhone completely sourced from recycled materials.
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The Move Towards Sustainability
In the long term, Apple wants to build its iPhones without sourcing new materials. It is already progressing in that area. The iPhone 13 was the first product to use 100% certified recycled gold in its main board’s plating. Also, Apple has announced its plans to make the new iPhone SE with low-carbon aluminum (14).
These developments indicate that Apple is putting its resources into the behind-the-scenes work to recycle iPhones. It could also make its green initiatives a crucial part of the iPhone shopping experience.
Both Samsung and Apple have stopped including wire headphones and chargers in their packaging to reduce waste (15).
Regardless, Apple’s commitment to its carbon-neutral pledge can inspire other phone makers to join the bandwagon, especially as “sustainability” efforts become a crucial business benchmark.
Besides the new iPhone subscription program adding more recurring revenue for Apple, it could also be better for our planet.
Source :- https://timesnext.com Author :- Team Rucha Joshi Date :-March 30, 2022 at 12:17PM