How an Apple subscription could change business far beyond tech

Apple is reportedly working on a subscription model for iPhones, according to Bloomberg, in a move that has the potential to influence the very idea of ownership far beyond the phone.

What’s happening?

The idea is that users can subscribe to hardware as they already do for some of Apple’s digital services like News+ or TV+. Bloomberg’s report deploys a lot of ‘would’ and ‘could’ as most of the details are under discussion and, therefore, the implications are hard to anticipate, but it’s clear that it would fit quite comfortably within Apple’s wider strategic shift toward recurring revenue. 

Similar schemes already exist in tech. In the UK, Sky Glass is attempting something similar bringing together the TV service and the device for a monthly fee.

Microsoft already offers a ‘no money down’ hardware plan for its Xbox that bundles the Xbox Game Pass (access to games) with an additional $10 a month payment for the console itself. While the services are the recurring revenue part, the console is actually a loan over 24 months, designed to widen access to the services. So not really that new. 

How is this different from a contract that you upgrade every now and then?

Effectively, a contract or instalment plan is really a loan that you pay back and once it’s paid, the phone is entirely yours. This is different in as much as the monthly fee would continue beyond the device repayment as part of a service. The firm has discussed device swaps when new versions come out.

What is confusing is how it would fit with the existing iPhone upgrade programme, through which customers will receive a new iPhone every year for a hefty fee. This is most comparable to a car leasing scheme, however, and doesn’t cover the additional services that Apple provides beyond hardware.

The likelihood is that Apple is really just planning to simplify the payment structure, integrating hardware payments into Apple One (the all-in services package) and make it less of a headache to manage. Though there is a lot to be said for reducing headaches.

These ideas have generally struggled to take off for major purchases, but Apple’s influence here is critical.

Why it matters

Apple didn’t invent the smartphone or most of the technologies that make up the iPhone, but it brought them together in a package that wasn’t just fun tech for nerds but a device essential to how people around the world live their lives. That knack for taking the new(ish) and thrusting it into the mainstream could now come to the very business models that power tech companies. 

The beauty for the company is that investors love subscriptions or recurring revenue streams because they are more predictable. While Apple’s services are already big business, hardware revenues are roughly three times the size. Should it become the norm, it will be a big push for Apple.

A subscription model also plays into the growing ESG agenda, enabling the tracking of resources through a product lifecycle – important to companies like Apple whose devices require hard to find, environmentally costly materials. Waste reduction is not just better for the planet, it’s also good for the bottom line. 

What it means for marketing

The marketing perspective will likely shift from the current approach that brings advertising, product, PR and stores together to help sell devices that can cost more than £/$1,000. The changes that this differing relationship could bring about have the potential to go far deeper.

It’s quite possible that a subscription-based consumer tech market shifts closer to financial services: phones are repositories of vast quantities of personal data, they are also our points of access to work, socialising, fitness, games, TV, finance. What you’re selling, then, is effectively a relationship rather than a product.

 – SPT

Sourced from Bloomberg, WARC, Microsoft, Apple