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Apple considering hardware subscriptions to entice price-conscious consumers

Apple considering hardware subscriptions to entice price-conscious consumers

Interpret data shows that Apple consumers in the US subscribe to many more products and services than the general population.

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Apple is planning to offer a subscription-based way for consumers to acquire their products, according to a recent Bloomberg report. While plans have not been finalized and officially announced, it’s expected that the tech giant will begin selling iPhones, iPads and other popular Apple products via subscriptions either later this year or in 2023.

The move aligns with the growing subscription trend in the tech industry overall, and it’s clearly something that Apple has already dabbled in with its Apple One bundles and individual subscriptions to services like Apple Music, Apple News, Apple TV+, Apple Fitness+, and Apple Arcade. Moreover, through its iPhone Upgrade Program, Apple has been enabling customers to pay for iPhones and the AppleCare program with a monthly fee over 24 months (with the option to trade in the phone after a year).

For consumers who use the Apple Card, Apple also allows its customers to pay for Apple products monthly without interest. Extending this idea to the wider Apple audience is a logical step, as Apple Card users are likely a much smaller subset of the Apple customer base. It also could serve as a lure to potential Apple customers who have desired an Apple product but didn’t want to (or couldn’t afford to) deal with the large upfront cost that iPhones, Macs, Apple Watches and other Apple devices currently require.

Selling Apple products through a subscription “smooths out the cyclicality [of revenue generation]” for the company, as explained by Harvard Business School professor David Yoffie, and it also has the potential to help Apple grow its services business by bringing more customers into its ecosystem. If these consumers are not only subscribing to be able to own an iPhone but also subscribe to Apple TV+ or others, then Apple can more easily grow its average revenue per user – a key metric for most tech and entertainment firms. Hardware in many industries is often commoditized and used as a trojan horse to secure recurring revenues from services. The Xbox and PlayStation, for example, have always been sold at a loss initially.

For Apple, the decision to go the subscription route is backed up by data from Interpret’s New Media Measure®. Apple Watch, iPhone, and Mac owners all subscribe to twice (or more) the number of products or services than the general US population – this includes not just entertainment such as games, but also food, coffee, clothing, home goods, and more. The Apple customer is therefore more inclined to agree to a subscription, which would give the company a good chance at success with this business model among its base. Whether or not this biz model also proves attractive to those not yet in the Apple ecosystem remains to be seen.

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