If the latest rumours are to be believed, Apple is working on a hardware subscription service for iPhones that could potentially replace the current iPhone Upgrade Program. Apple, of course, is keeping quiet, but it's being reported that the plan will introduce a traditional, pay-per-month subscription where you can get an iPhone and then trade it in every so often for a new one. The phone and timeframe you could choose would depend on your plan.
This may not sound like an especially sexy development, but a service like this from a major tech company like Apple would be huge news. And I think it could be a big win for both Apple and the consumer, especially when there are question marks hanging over the sales of certain iPhone models...
A replacement for the iPhone Upgrade Program?
The iPhone Upgrade Program involves you getting a loan from a third-party financial institution to cover the cost of a new iPhone with payments spread equally over 24 months. After 12 payments, you can take that phone, trade it in, and begin a new plan with a new phone over another 24 month period. Naturally, a loan like this requires a credit check and payment directly to a financial institution and not Apple.
This service is similar to Google’s Pixel Pass service for its Pixel line of phones. Essentially, you apply for a loan and pay a monthly fee so that every two years you can get a new Pixel phone. Conveniently, your monthly payments also secure extra features and services like YouTube Music Premium, YouTube Premium, and Google One. Apple very well could offer other services and features through a hardware subscription, but an Apple hardware subscription wouldn't involve credit, financing, or loans like the Pixel Pass or the iPhone Upgrade Program.
Rather than going through the hassle of signing up for financing with the Pixel Pass or iPhone Upgrade Program, you could simply sign up for a monthly charge from Apple that gets you an iPhone and lets you trade in your phone for a newer one every so often. An Apple hardware subscription would be a simpler, more direct way to get iPhones in the hands of customers. It also makes it easier (and more cost-effective) to upgrade to a newer model of iPhone down the road.
Plus, the tech company would make its money from subscribers by getting them to stay subscribed to this service over time rather than by looking for a big payday with the sale of every phone. Apple could also make money by offering exclusive deals to subscribers and otherwise encouraging them to buy other Apple products, all of which work well with the iPhone.
This way of monetising a subscription is a different business model than that of the iPhone Upgrade Program, so it’s expected prices will be different, too. Monthly payments for the same device on the hardware subscription will likely be lower than those of the iPhone Upgrade Plan to encourage people to stay subscribed, although you have to assume more expensive phones will demand a more expensive plan.
It could help Apple sell more small-screen iPhones
Cheaper, easier-to-get iPhones are an easy win for everybody, but I think Apple gets a lot out of this deal, too. iPhones are expensive, and iPhones even a couple of generations old are still relatively powerful by modern standards. It’s rare that there's a huge jump in performance between iterations, so even if you have the cash to spare, upgrading can feel less than essential a lot of the time. If Apple offers a convenient way to consistently have a new iPhone in your pocket for a low monthly payment, I expect many will be enticed by the convenience.
It’s also interesting to note that Apple’s reportedly struggling to sell smaller phones like the iPhone 12 Mini and iPhone 13 Mini. An Apple hardware subscription could make them a bit cheaper and easier to get, which might also offer a solution to any potential sales problems. Then, Apple could also offer targeted deals and promotions exclusively to hardware subscribers to push any products that aren’t selling as well as anticipated.
And surely it’s not just about the monthly subscription for Apple. If you trade in your old iPhone when you upgrade with the new subscription service, Apple gets a steady supply of iPhones to repurpose or refurbish that won’t get traded in to service providers. Many people will like the convenience of getting their refurbished iPhone directly from Apple, cutting out the middle man. Plus, if customers don’t always upgrade their phones as soon as they’re able to, Apple can pocket that monthly subscription fee for nothing.
Like Google does with the Pixel Pass, it also makes a lot of sense for Apple to bundle its other subscription services with a hardware subscription. iCloud Storage, Apple Music, Apple TV+, and AppleCare are all going to be attractive to subscribers – they add convenience, content, and value to a hardware subscription while boosting Apple’s subscriber numbers for each individual service.
A hardware subscription doesn’t have to just be about the iPhone, either. What if you got the latest iPhone through Apple’s hardware subscription, and when the time for an upgrade came you could choose, instead, to get an Apple Watch or an iPad for free or extremely cheap? Apple’s already got your money from the subscription, and if the company gets you more invested in their ecosystem, that’s a win for Apple.
The hardware subscription could even fully support other Apple products. Instead of signing up for an iPhone-based plan, what if you signed up for an iPad-based plan that lets you trade in and upgrade your iPad Air every so often? Or, Apple could simply charge a monthly fee and let customers have their pick of Apple devices every year or two. Apple’s offered financing for a variety of products for a while, but a service where you could pay Apple each month directly for hardware would cut out the middle man.
I think Apple could also incentivise people to sign up for an Apple hardware subscription outside of saving money. What if when new iPhones or iPads were announced, pre-orders or the first batch of iPhones were reserved for subscribers? Then, those who do insist on getting the latest iPhone every year might buy into the subscription for fear of missing out. Apple could even offer special colourways to Apple Hardware subscribers, making it the only way to get exclusive versions of iPhone, or even throw in a free pair of AirPods Pro to help sweeten the deal.
Your move, Apple…
Of course, with no confirmation from Apple on the horizon, we don’t yet know the details that really matter. We don’t know which products will be included, what your options for upgrading will be exactly, and most crucially how much the service will cost.
It could all come to nothing, of course, but I think they’d be crazy not to offer this service and package up their content as part of the deal. It could mean good things for Apple fans and might even tempt Galaxy and Pixel users to jump ship. The price just needs to be right.
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