Apple Has Found a New Golden Opportunity
In the beginning there was the Macintosh. Then came the iPod, iPhone, iPad and Apple Watch and everything in between.
Apple (AAPL) – Get Apple Inc. Report has managed to find products that increase revenue and preserve some of the fattest profit margins a company can claim.
To complement the product line, the Cupertino, Calif., group led by Tim Cook began to build an empire in services as well: Apple One, AppleCare Technical Support, loans in partnership with Citizens One Personal Loans (CFG) – Get Citizens Financial Group, Inc. Report, and the Apple Card with Goldman Sachs (GS) – Get Goldman Sachs Group, Inc. Report.
All these initiatives have proved lucrative. And now Apple seems to have found a new golden opportunity.
Apple is working on a subscription service for the iPhone and other hardware products, a move that could make device ownership similar to paying a monthly app fee, Bloomberg reports, citing anonymous sources.
Hardware Subscription Service
The service will enable users to subscribe to hardware, rather than just digital services.
Apple didn’t immediately respond to a request for comment.
The project is still in development, the report cautioned. But such a service would be a real revolution at Apple, which has always sold its hardware products at cash prices or in installments via the partnership with Citizens One.
And almost certainly it would enable Apple to pull in consumers who consider its products too expensive and are reluctant to all at once lay out large sums for a smartphone or a laptop.
The base price of the iPhone SE, Apple’s low-cost smartphone, is $429.
Apple in late January reported revenue of $123.94 billion for the quarter ended Dec. 25, up 11%. Revenue generated by products accounted for $104.4 billion, or 84%, of that total.
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Apple is planning to let customers subscribe to hardware with the same Apple ID and App Store account they use to buy apps and subscribe to services, Bloomberg said.
The program would differ from an installment program in that the monthly charge wouldn’t be the price of the device split across 12 or 24 months. Rather, it would be a yet-to-be-determined monthly fee that depends on which device the user chooses.
The company has also discussed enabling users of the program to swap out their devices for new models when fresh hardware comes out. Apple historically releases new versions of its major devices, including the iPhone, iPad and Apple Watch, once a year.
An open question: Will Apple link the hardware subscription program to its Apple One bundles and AppleCare technical support plans? Apple launched the bundles in 2020 to let users subscribe to several services — including Apple TV+, Arcade, Music, Fitness+ and iCloud storage — for a lower monthly fee.
A Page from Peloton and Google’s Book?
Apple would not be the first tech company to offer a subscription service for its products.
Early this month, Peloton Interactive (PTON) – Get Peloton Interactive, Inc. Class A Report started testing a subscription service that lets customers lease bikes and health content material for between $60 and $100 monthly. The program is available at select Peloton retail stores in Florida, Minnesota, Houston and Denver, with about nine locations in total offering the option. The test applies only to the company’s standard bike, which currently costs $1,495.
Google (GOOGL) – Get Alphabet Inc. Class A Report tested a similar strategy with its Chromebook laptops.
Nor is the idea of an Apple hardware rental subscription service new. As early as 2016, analyst Toni Sacconaghi of Sanford C. Bernstein & Co. came up with this idea. He estimated at the time that such a strategy would enable Apple to reach a market capitalization of $1 trillion. Apple was recently valued at $2.84 trillion.
The reactions on social social media were quite mixed.
“Turning everything into a subscription has genuinely been the worst trend of the 2010s and beyond,” one user commented.
“I am guessing this is how they will get consumers to adopt their expensive VR headset way easier,” another reacted.
“Can’t take Apple serious ever since uhhh I started having my own consciou. apple really is becoming a giant money vacuum,” another user said.
