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Apple is building a subscription service specifically for its devices where a subscriber would simply pay a monthly app fee for their devices, a move that would mark Apple’s effort into recurring sales, allowing users to subscribe to hardware for the first time, the company’s iPhone upgrade program.
According to report from Bloomberg, the new subscription service “is still in development,” and isn’t expected to announce it until the end of 2022 at the earliest. With inflation continuing to climb and the money in your pocket is increasingly able to buy less, schemes like these may be the only way for Apple to show growth to its shareholders.
| Initial value | Equivalent value |
|---|---|
| $1 dollar in 2007 | $1.37 dollars today |
| $5 dollars in 2007 | $6.84 dollars today |
| $10 dollars in 2007 | $13.68 dollars today |
| $50 dollars in 2007 | $68.42 dollars today |
| $100 dollars in 2007 | $136.83 dollars today |
| $500 dollars in 2007 | $684.17 dollars today |
| $1,000 dollars in 2007 | $1,368.35 dollars today |
| $5,000 dollars in 2007 | $6,841.74 dollars today |
| $10,000 dollars in 2007 | $13,683.48 dollars today |
| $50,000 dollars in 2007 | $68,417.40 dollars today |
| $100,000 dollars in 2007 | $136,834.79 dollars today |
| $500,000 dollars in 2007 | $684,173.97 dollars today |
| $1,000,000 dollars in 2007 | $1,368,347.95 dollars today |
At one point (2007) a new iPhone was a $500 purchase, the days of a $500 standard iPhone are long gone since inflation has made a $500 iPhone costs $684.17. In fact, if you consider for a moment the retail price of today’s “standard iPhone” the iPhone 13 mini, it retails for $699, not far off from $684.17. Why not consider the iPhone SE that retails for $429 the “standard iPhone?” Because, the iPhone SE uses scale and cheaper components to achieve its very low price, while retaining the design and many of the components from the iPhone 8 and some would say the iPhone 6 from 2014.
Our take
From Apple’s perspective this could expand its efforts into recurring revenue much like other companies have pivoted towards. This also enables customers to use Apple hardware for a low monthly payment in which the hardware itself is also a portal to Apple’s digital services. There is a downside to all of this, however, you won’t own any of your devices. Unlike paying for a Phone through a carrier’s 0% interest monthly payments, where once you pay your device off you own it, this new subscription service may never allow you to own the product outright.
For some customers, this may not be a problem, but if you take a step back and think about what life was like 10-15 years ago before streaming music and video, when you wanted movies, TV show seasons and music, you simply bought it and actually owned it. Today both Apple and Samsung have phone upgrade programs where you pay for a device for a set number of years and then have to turn it in once the term is over, regardless if the new device is better or a good value the next year, which often results in slowed innovation.
Once a customer signs up for a program like this, they enter into an economic imbalance with the company. The ideal economic situation you could be in with a phone is to simply own it outright and be able to switch to any number of products or services at any time. A great example of this is owning your phone and being able to switch to any carrier at anytime and for any reason. When you buy a carrier locked phone, you are submitting yourself to an economic imbalance and giving the carrier too much power over your market choice.
Ultimately, these schemes lock you into a silo of products and services that will eventually be difficult to leave – step into my parlor said Apple to the customer.
