With the plethora of Apple services that users can avail apart from hardware and accessories, investors have been keen on an Apple subscription bundle related to iPhone for years. And judging by CEO Tim Cook’s response to one such question by CNBC, it seems that Apple is finally on board with realizing the idea.
During Apple’s fourth-quarter earnings call, Cook offered that Apple’s iPhone Upgrade Plan – which allows customers to buy iPhones on 12-month instalments after which they can upgrade their model – is already viewed by consumers as a subscription plan. It was also suggested in no unclear terms that Apple views a subscription-like sales model as a potential growth area.
“In terms of hardware as a service or as a bundle, if you will, there are customers today that essentially view the hardware like that because they’re on upgrade plans and so forth, so to some degree that exists today. My perspective is that will grow in the future to larger numbers. It will grow disproportionately.”
Tim Cook, CEO, Apple Inc.
This subscription package informally referred to as ‘Apple Prime’ by observers of the company’s activities, is likely to be a variation of the iPhone Upgrade Plan. A key difference, however, would be the fact that it’ll be offered in a subscription format, meaning to say that the iPhone will be offered along with Apple’s services like Apple Music, Apple tv+, Apple News, etc., for a bundled monthly price.
Apple services revenue increasing steadily
Apple’s fiscal Q4 2019 financial performance has revealed that iPhone and Mac sales have dropped in comparison to the previous year’s sales. At the same time, the growth of Apple’s overall revenue has also been sluggish, increasing from $62.9 billion dollars in 2018 Q4 to only $64 billion in 2019.
Despite the decline in sales of Apple’s signature products – the iPhone and MAC – it has been seen that the revenue generated by Apple’s services is increasing steadily. As of 2019 Q3, the year-over-year growth of Apple’s services revenue had grown 13%.
Apple’s services generated worldwide revenue of $39,748 million in 2018. This figure increased to $46,291 million in 2019.
Good subscription services are a tried and tested strategy for companies to ensure a steady flow of revenue, as well as retain a significant mass of consumers.
Apple’s promotion of Apple TV+ can be seen as a prototype of its speculated monthly subscription. Currently, a year’s access to the service is free with the purchase of Apple devices such as the iPhone, Mac, or iPad. It is also available for free with the Apple Music student discount.
When taken into account along with the Upgrade Plan and the universe of Apple services, as well as Apple’s continuous efforts to improve and expand the services it offers, it isn’t difficult to gather that it seeks to capitalize on its services as much as possible and continue increasing their sales revenue. In this regard, a significant edge Apple has in introducing such a plan is the quality of its services, which are affordable in comparison to competitors, while offering the same range of facilities (for eg.: Apple Music). This means that an ‘Apple Prime’ like the package will offer high utility to customers, along with the exclusivity of the Apple brand name.
