According to Bloomberg, Apple is working on a way for users to purchase iPhones as part of a subscription service. The service could start later this year, but also in early 2023.
The new offering would fit seamlessly into Apple’s ongoing efforts to emphasize recurring subscription revenue. This model has worked well for large tech companies like Microsoft, which derive most of their revenue from subscriptions, though mostly not from hardware.
However, Microsoft does offer a hardware subscription for the Xbox Series S console, and that subscription could be similar to what we’d see from Apple with the iPhone. Users pay for an Xbox in installments with a flat monthly fee that also includes online and software subscription services like Xbox Game Pass.
Apple already offers the Prime-like Apple One subscription service, which includes (depending on the package) Apple Music, Apple TV+, Apple Fitness+, and more. And there’s a program called the iPhone Upgrade Program that allows customers to pay a monthly fee for ongoing iPhone upgrades and a warranty.
We don’t yet have details on how this new service would differ. But we could see it as a combination of both, similar to Microsoft’s Xbox subscription. If the report is true, we might hear more when new flagship iPhones are announced this fall.
Investors and business leaders typically prefer subscription models because revenue is consistent and predictable. These market leaders also favor subscription models because revenue is consistent and predictable, and because it can be easier to retain and monetize existing customers than it is to attract new ones.
Apple’s services business, which is already powered by subscriptions like iCloud and Apple Music, posted more than $68 billion in revenue last year. But iPhone hardware sales brought in nearly three times as much money over the same period.