According to Bloomberg, Apple is working to enable users to purchase iPhones as part of a subscription service. The service could be launched as early as this year, but it could also appear in early 2023.
The new offering fits in perfectly with Apple’s ongoing efforts to increase subscription revenue. This model has worked well for big tech companies like Microsoft, which get most of their revenue from subscriptions, although not primarily from hardware.
Apple already offers an Apple One subscription service similar to Prime, which includes (depending on the specific package) Apple Music, Apple TV+, Apple Fitness+ and so on. And there is a program called “iPhone Upgrade Program”that allows customers to pay a monthly fee for current iPhone upgrades and warranty.
We do not yet know any details about how this new service will differ from the previous one. But we could see that it’s a combination of the two, similar to a Microsoft Xbox subscription. If the report is correct, we may hear more when new flagship iPhones are announced this fall.
Investors and business leaders tend to prefer subscription models because income is constant and predictable. These leaders also prefer subscription models because revenue is consistent and predictable, and because retaining and monetizing existing customers can be easier than acquiring new ones.
Apple’s services business, which is already based on subscriptions like iCloud and Apple Music, reported more than $68 billion in sales last year. But iPhone hardware sales generated almost three times as much money in the same period.