Several financial and tech publications have reported this week that Apple is planning on offering a subscription model for its hardware devices. Apple has been working on the plan for awhile and may launch the services in late 2022 or early 2023. The company, however, has not made any official announcements about it yet.
Easier Access to Apple Products
The concept of subscribing to Apple hardware could bring the tech giant more revenue, particularly for the market that cannot afford Apple products but desires them. The plan could generate automatic recurring sales through monthly subscription renewals. Users will be able to pay for monthly subscriptions with their existing Apple ID accounts for iPhones, iPads, iMacs and other Apple hardware.
Apple Has Been Steadily Embracing Subscription
Apple has been steadily moving in the direction of subscription services in recent years. Its iPhone Upgrade Program was launched in 2015, providing interest-free loans to customers via Citizens One. The program allows users to pay monthly installments over a two-year period and switch to a new model every 12 months. The company has been recently developing a separate “buy now, pay later” service for all of its products.
Currently, Apple services make up 18.7% of the firm’s annual revenue. By contrast, the iPhone represents 52.5% of Apple sales.
Investors in Apple shares have been hoping for years the company adopts a model to sell its hardware on a subscription basis. Apple CEO Tim Cook has told investors to closely watch the company’s services business. This division, which includes warranties, Apple’s App Store, AppleCare, iCloud and Apple Music, grew 27% to $68.4 billion in 2021.
Cook said on a 2019 earnings call that “hardware as a service” already existed at Apple through its upgrade plans. While tech companies have been offering subscription-based software services for years, the idea of hardware subscription services is relatively new in the consumer tech field. Peloton Interactive has recently experimented with hardware subscriptions, leasing bikes and fitness equipment.
Today about 15% of American consumers subscribe to some type of service, with Amazon Prime being the runaway market dominator.
Apple Stock on the Move
Apple stock (NasdaqGS: AAPL) closed up 2.27 percent at $174.07 on Thursday, racking up its eighth day in a row of gains. The stock hit a split-adjusted all-time high of $182.94 on January 4, 2022.
Dil Bole Oberoi
