You may have heard recently that Apple is rumored to offer hardware subscriptions for its products, basically meaning you would be able to subscribe to have an iPhone. According to AppleInsider, a lead Morgan Stanley analyst believes this would be a broad business shift away from iPhone shipments to installed base monetization if, of course, those rumors end up being true.
Apple hardware subscription could shift focus from iPhone shipments for the company
Lead Morgan Stanley analyst Katy Huberty wrote that if the rumored hardware subscription is true, that would shift the Apple investor narrative from transactional to recurring sales. Pretty much, for those of you who don’t know, there are rumors that Apple would change its business model and allow users to own an iPhone with monthly payments. The analyst believes that the average user pays Apple $1 per day for hardware and services, but she notes that the average user would be willing to pay more in case it grants them access to both Apple devices and software.
Well, a subscription program for the iPhone could have multiple offerings at different pricing tiers, as speculation goes. It is possible that Apple would have a lower tier that offers a legacy iPhone every 24 months, while higher tiers could probably give access to newer devices and even other perks.
The analyst also states that there could be different bundles Apple can create with a subscription offering, and this would allow Cupertino to capture your willingness to pay based on your consumption of Apple products and services.
Well, what are really the benefits of this subscription model for Apple, according to the analyst? Huberty notes that this model could reduce hardware replacement cycles. It would also be beneficial for Apple in increasing the amount of money a single user spends, and also shift more customers to a direct-to-customer model, therefore bypassing carriers and retailers.
This move, according to the analyst, would increase the value of Apple’s shares. So far, she maintains her 12-month Apple price target of $210.
Keep in mind that, so far, hardware subscriptions for Apple products are a rumored project, it has not been made official or even hinted at by the company. We will just have to wait and see if it turns out to be real, or just a rumor.
