Apple is allegedly working on a new subscription service that could turn the iPhone and other hardware products into a recurring subscription instead of a single payment. The new offering could launch later this year or in early 2023. However, the initiative is still under development and has not been officially announced. As such, it is not very clear how it will work, but here are several details highlighting what the new Apple subscription service will look like.
A hardware subscription service
Apple's new subscription is not about software or services but iPads and other hardware products. According to Bloomberg, Apple is working on an initiative that will allow users to acquire gadgets as a part of a subscription service. The company's model will make device ownership similar to paying a monthly app subscription fee rather than outright buying. It is probably the most significant push towards Apple's efforts of emphasizing recurrent subscription revenue. It is not clear whether this project will launch later in the year or early next year but quoting Bloomberg's Mark Gurman, the subscription service is under development. "Apple Inc. is working on a subscription service for the iPhone and other hardware products, a move that could make device ownership similar to paying a monthly app fee, according to people with knowledge of the matter."
The new service intends to boost recurring revenue
In the recent past, Apple has been emphasizing the 'Apple One,' a unique subscription service that combines up to six Apple services. The subscription service allows you to subscribe to different services and apps. These include Apple TV Plus, Apple Fitness Plus, Apple Music, Apple Arcade, and Apple News Plus. Similarly, the new Apple subscription service will generate new revenue streams for the company.
Buying an iPhone or iPad will be like subscribing to Apple Music
The iPhone Upgrade Program is similar to this new subscription service and is geared towards the hardware shift. It allows customers to pay for the cost of an iPhone and AppleCare in more than 24 months. They also allow you to trade in a gadget after making payments for 12 months. Hardware subscription services have worked for big tech companies like Microsoft. The company provides subscription services for the Xbox Series S Console, where users pay for an Xbox in 24 months installments with a flat monthly fee. The charges incorporate online and software subscription services like Xbox Game Pass. Both the iPhone Upgrade Program and the Xbox program have so much in common with the new Apple subscription service. According to ARS Technica, it is not clear whether Apple will implement a different model, but it is likely to be a combination of the two.
It is not the usual installment program
Bloomberg's report claims that in the new subscription service, the monthly charge will not be the cost of the gadget divided by 12 or 24 months. Instead, it might be an unidentified monthly fee, determined by the device you choose. It could potentially provide the option to upgrade to new hardware when new models come up. Apple often releases new versions of its primary gadgets, including the iPad, Macbook, iPhone, and Apple Watch. In addition, just like other Apple subscriptions, this service will be linked to the user's existing Apple ID account. In addition, there is a possibility of bundling in Apple One and AppleCare services. Currently, Apple allows you to pay a monthly fee for its services and pay for an iPhone within several months, but these are two different plans.
Apple is likely to opt for a distinct subscription model
The new Apple subscription service will probably offer different tiers to get customers into either their standard gadgets or their Pro variants like iPhone 13 Pro and iPhone 13. We are not sure if the company will incorporate all its hardware in this subscription service or whether it will partner with other companies. This project is still in development, meaning it is likely that the company could make a few changes. Apple may simply be trying to eliminate the middleman and expand its installment-based payment program to other products with this new subscription service. The iPhone Upgrade Program is effective in helping customers obtain an interest-free loan with Citizens One and then repay within the 24 months incorporated in this plan. Apple also enables Apple Card customers to pay for its products over monthly installments without interest. The primary limitation of these two programs is that they are only limited to a small segment of Apple customers. An Apple-based hardware subscription service is likely to eliminate those requirements and allow the company to expand subscription services to different hardware products like the iPad and its Mac computers.
Subscription models are lucrative
Business leaders and investors prefer subscription models because they provide predictable and consistent revenue. These models also make it easy to retain the existing clientele and monetize instead of trying to acquire new customers now and then. Apple's business is increasingly prioritizing subscriptions for different services like Apple Music and iCloud. The company reported annual sales of more than $68 billion last year. iPhone hardware sales earned nearly three times this amount during the same period. A well-designed subscription model will increase recurring revenue from selling iPhones and other gadgets like iPads and Macbooks and could increase the stock price. According to CNBC, analysts argue that increasing predictable subscription revenue will probably prompt an investor to value Apple highly.
Unconfirmed reports indicate that Apple is working on a new subscription service that will feature unique offerings and is unlike anything it has done before. The company could soon allow you to subscribe to a hardware package for the first time. You may be able to acquire an iPad or other devices by paying a monthly subscription. Details about this initiative are still scarce, but analysts have been discussing the possibility of such plans since 2020. Apple has not yet launched the new subscription service, and we can only assume that it will be similar to iPhone Upgrade Program or services we have seen from other companies like Microsoft. The company has not confirmed or denied the report by Bloomberg's Gurman, but one clear thing is that the company's subscription ambitions will result in innovative projects.
Written by Dana Hanson
Read more posts by Dana Hanson