Apple is working on a way for users to acquire iPhones as part of a subscription service, according to Bloomberg. The service could launch as soon as this year, but it could also arrive in early 2023.
The new offering would fit neatly into Apple’s ongoing efforts to emphasize recurring subscription revenue. That model has worked well for big tech companies like Microsoft, which earn most of their revenue from subscriptions, albeit mostly not hardware ones.
Microsoft offers a hardware subscription for the Xbox Series S console, though, and that subscription might be similar to what we would 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 that includes (depending on the specific package) Apple Music, Apple TV+, Apple Fitness+, and so on. 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 know any details yet about how this new service would differ from that. But we could see it being a combination of the two, 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 tend to prefer subscription models because the revenue is consistent and predictable. Those leaders also prefer subscription models because the revenue is consistent and predictable and because it can be easier to retain and monetize existing customers than acquire new ones.
Apple’s services business, which is already driven by subscriptions like iCloud and Apple Music, reported more than $68 billion in sales last year. But iPhone hardware sales earned almost three times as much money during the same period.