Apple is rumoured to be working on a hardware subscription service that would let users pay a monthly subscription fee to get access to the latest iPhone model every year. According to a new report, the company could rake in even more money, compared to when users purchase a new upgrade for their existing iPhone model. Meanwhile, customers would not have to shell out a large amount of money upfront for a new iPhone while always upgrading to the latest model.
While the Cupertino company is yet to announce any plans for such a subscription service for its smartphones, Bloomberg’s Mark Gurman has shared estimates of how much money Apple could generate from its rumoured monthly subscription service, in his weekly Power On newsletter. Apple could reportedly earn a few hundred dollars more than the upfront price of a smartphone paid by a customer over a three-year period — and more than the average selling price of a new iPhone, with its rumoured subscription service.
Apple’s recent iPhone models are equipped with powerful hardware and are supported by software updates for more than five years, which means that the average customer holds on to their iPhone for a longer period. However, some smartphone users upgrade to the latest model every year, which can be an expensive affair. The report cites Counterpoint Research’s claim that the average selling price of an iPhone is $825 (roughly Rs. 62,300).
Using three different tiers, the report estimates that Apple could make more than the average selling price for an iPhone — $1,260 (roughly Rs. 95,100) by charging $35 (roughly Rs. 2,700) a month for an iPhone 13 priced at $799 (roughly Rs. 60,300). The amount is calculated over a three-year period, which is the average time a user in the US waits to upgrade their iPhone, according to Gurman.
Meanwhile, Apple could make $1,620 (roughly Rs. 1,22,200) over three years by charging $45 (roughly Rs. 3,400) a month for the iPhone 13 Pro that costs $999 (roughly Rs. 75,400). Finally, the company could earn $1,800 (roughly Rs. 1,35,800) with a monthly subscription fee of $50 (roughly Rs. 3,800) for the iPhone 13 Pro Max priced at $1,099 (roughly Rs. 82,900).
The report also states that Apple makes more than 40 percent margins on iPhone hardware, and might benefit from customers returning their older phones, which could be refurbished and sold again. According to Gurman, a customer who remains in the program for a 10-year period could bring in $4,000 (roughly Rs. 3,02,000) in revenue, on the lowest iPhone tier. Meanwhile, customers will benefit from not having to shell out a large amount of money upfront every year when a new iPhone model is launched.
According to a report from July 2021, Apple was said to be working on a service that would allow users to pay for Apple Pay purchases in instalments. The company is now working to develop its own financial back-end and payment processing technology which could offer it independence from partners, according to Gurman. As previously mentioned, Apple is yet to officially reveal any details of a planned mobile hardware subscription service.