In the latest edition of his Power On newsletter, Apple analyst Mark Gurman has outlined more detail regarding Apple’s rumored hardware subscription service. Gurman claims that Apple will offer a leasing model for the iPhone which will enable customers to upgrade on an annual basis.
As it currently stands, Apple does offer the iPhone upgrade program. The program enables users to upgrade to a new device after making 11 payments of a total of 20 here in the UK (the number of payments varies by country). But unlike leasing, the upgrade program is a loan in which customers can choose not to upgrade and own the device instead. And at that point, they will have paid for the entire retail price of the iPhone and AppleCare+. Not so with leasing in which users would have to return the phone and either upgrade or walk away empty handed. The benefit, however, would be much lower monthly prices.
Gurman has provided a worked example:
“Here’s how much Apple would generate over three years from the monthly subscription compared with the upfront price:
- iPhone 13 ($35/month): $1,260 over three years instead of $799
- iPhone 13 Pro ($45/month): $1,620 instead of $999
- iPhone 13 Pro Max ($50/month): $1,800 instead of $1,099
This is obviously just back-of-the-envelope math, but Apple is suddenly able to generate significantly more money per consumer”
The AppleTLDR take
This is a smart move. Most customers are not upgrading on an annual basis due to the cost consequences. Only the most hardcore Apple fans are typically willing to shell out the cost to upgrade at the full retail price. And not only would Apple encourage regular upgrades via this program, but they would also get the old devices back to refurbish and sell as secondhand. It’s a great way to keep people in the Apple ecosystem and continue to generate services revenue.