Apple is rumored to be working on a hardware subscription service that would allow users to pay a monthly subscription fee to get access to the latest iPhone model every year. The company could rake in even more money than users buying a new upgrade for their existing iPhone model, according to a new report. Meanwhile, customers would not have to fork out big bucks upfront for a new iPhone while always upgrading to the latest model.
While the Cupertino-based company is yet to announce plans for such a subscription service for its smartphones, Bloomberg’s Mark Gurman has published estimates in his weekly of how much money Apple could make from its rumored monthly subscription service Power-On Newsletter. Apple could reportedly make a few hundred dollars more from its purported subscription service than the upfront price of a smartphone a customer pays over a three-year period — and more than the average retail price of a new iPhone.
Apple’s newer iPhone models feature powerful hardware and are backed by software updates for more than five years, meaning the average customer will keep their iPhone for longer. However, some smartphone users upgrade to the latest model every year, which can become an expensive proposition. The report quotes counterpoint research claim that the average selling price of an iPhone is $825 (approximately Rs.62,300).
Using three different levels, the report estimates that Apple could fetch more than the median retail price for an iPhone – $1,260 (about Rs. 95,100) by charging $35 (about Rs. 2,700) a month for an iPhone 13 from $799 (about Rs. 95,100) asking for 60,300). The amount is calculated over a three-year period, which Gurman says is the average time a user in the US waits for their iPhone to be upgraded.
Meanwhile, Apple could make $1,620 (about Rs.1,22,200) over three years by charging $45 (about Rs.3,400) a month for the iPhone 13 Pro, which costs $999 (about Rs 75,400 Rs.) costs. Finally, the company was able to earn $1,800 (about Rs.1,35,800) with a monthly subscription fee of $50 (about Rs.3,800) for iPhone 13 Pro Max priced at $1,099 (about Rs.82,900).
The report also notes that Apple is making more than 40 percent margin on iPhone hardware and could benefit from customers returning their older phones, which could be refurbished and resold. According to Gurman, a customer who stays in the program for 10 years could earn $4,000 (about Rs. 3,02,000) in revenue on the lowest iPhone tier. Meanwhile, customers benefit from not having to shell out a large sum up front every year when a new iPhone model is released.
According to a July 2021 report, Apple is said to be working on a service that will allow users to pay for Apple Pay purchases in installments. According to Gurman, the company is now working on developing its own financial backend and payment processing technology that could make it independent of partners. As mentioned earlier, Apple has yet to officially announce details of a planned mobile hardware subscription service.