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May 3, 2022

Apple device subscription – interpreting the rumour mill

Apple is rumoured to be planning a hardware subscription program this fall that will lease out its devices, enabling users to get a new iPhone without a heavy upfront investment or commitment to a monthly payment plan. The rumoured subscription program could make iPhones more affordable and reduce device ownership cycles, allowing Apple to reuse hardware components and expand its reach to new user groups. The program would also help bulk up Apple’s monthly recurring revenue share by potentially requiring customers to subscribe to device protection and insurance plans.

Beneficial to OEMS and customers

The current reported smartphone upgrade cycle is three years, due in part to the high prices of premium devices. Apple’s subscription scheme would create a viable path for customers to own the latest iPhone model without a high down payment or steep monthly installment commitment. The monthly lease payments would likely be more affordable than traditional equipment installment payments.

The scheme would go a step further than current equipment financing plans, which are an important component in the promotional toolbox used by both carriers and major original equipment manufacturers (OEMs). These allow users to pay for the cost of their device, interest free, over a fixed period of time – typically 24 or 36 months – making it easier for customers to own the latest smartphone models.

Hardware leasing programs such as that reportedly planned by Apple are not a novelty in the US. Sprint launched a leasing program dubbed Sprint Flex in 2017, which was retired by T-Mobile in August 2021, after the two carriers merged, in an effort to streamline policies. But if the rumors materialize, Apple will be the first OEM in the US market to offer a device leasing or subscription program to customers.

Apple’s current upgrade program allows its users to pay for devices in 24 monthly instalments. The main difference between the rumored subscription program and device financing programs is that with the latter, users can own the device at the end of the payment plan while with the subscription program, a customer would only lease their device for a limited amount of time and never truly own it. The device would need to be returned to Apple at the end of the lease’s tenure.

Will Apple succeed?

The success of Apple’s rumored subscription program would ultimately depend on how it compares against existing device financing options, both from wireless carriers and Apple itself. It is important to note that current promotional deals from carriers offer customers up to $1,000 if they trade in a device or switch carriers, which act as an incentive for device ownership.

Users would lose out on these lucrative promotion deals if they started to lease their iPhones and stopped owning them. Like everything else, the program’s cost and time commitment structure would determine its uptake rate.