Hardware as a service is the next logical step as Apple seeks recurring revenue

Apple Iphone Ipad Availability Beijing Iphone 13 Pro Close Up
Apple Iphone Ipad Availability Beijing Iphone 13 Pro Close Up (Image credit: Apple)

This week, a new report has Apple getting ready to begin selling its hardware as a monthly subscription that's similar to the iPhone Upgrade Program — but for more than just iPhones. It makes sense, too, because it allows Apple to continue to tie people down without making them spend enormous sums upfront.

The recent Bloomberg report that Apple has plans for a hardware subscription service wasn't the first time I'd heard something along those lines, either. Analysts were making the same noises back in December of 2020. Loup Ventures' Gene Munster and David Stokman made a case for it more than a year ago, pointing to the massive percentage of Apple's revenue that is already subscription-based.

Today, about 55% of the company's revenue can be purchased as a subscription. By adding Mac, iPad, and Watch subscriptions, that number will approach 85%. This dynamic will increase Apple's revenue and earnings visibility which should, in turn, expand their earnings multiple.

Fast forward to this week, and we have Bloomberg's Mark Gurman saying that not only is Apple now considering offering hardware as a service, but it's also now potentially ready to get it up and running by the end of this year. So perhaps we could be buying iPhone 14 handsets via subscription!

Apple Inc. is working on a subscription service for the iPhone and other hardware products, a move that could make device ownership similar to paying a monthly app fee, according to people with knowledge of the matter.

But what makes a subscription so desirable?

For customers, it's simple. They get the chance to pick up the latest iPhone, iPad Air, MacBook Pro, and other hardware without having to hand over hundreds or thousands of dollars to do it. It's easier to justify a purchase if it's only going to cost $50 per month, for example. It's easier to afford, too, making it the best iPhone deal you're ever likely to find.

It could also mean that you're always using the latest and greatest hardware — no more living with an old iPhone because you don't want to stump up the money for a new one. Damaged iPhone? No problem, just like the current iPhone Upgrade Program, Gurman says that AppleCare+ will be included. And Apple One, for that matter. All the services, all the time. And it's all intertwined into a service other companies would kill for.

That then brings us to Apple's side of the bargain. For its part, sure, it loses out on the big splurge of iPhone income that it generally receives towards the end of the year. But that income slows as we get closer to the arrival of a new iPhone the next time September rolls around. Moreover, a subscription fee means that the income is spread across the entire year, both calendar and fiscal. That makes for easier planning, for one. Something the likes of Tim Cook will always be down for.

And then there's the lock-in. A dirty word to some, lock-in is the holy grail of companies like Apple. By offering a single subscription via Apple One, Apple could pick up not just an iPhone user but also a subscriber to every one of its services. So everyone with an iPhone is also an Apple Music subscriber. An Apple TV+ subscriber. An Apple Arcade subscriber. An Apple TV+ subscriber. Increasing subscriber numbers for services is never a bad idea, and shareholders love it. And all because someone wanted an iPhone or a new Mac but didn't want to strain the credit card to do it.

It's genius on the one hand and cynical on the other. It's very Apple.

Oliver Haslam

Oliver Haslam has written about Apple and the wider technology business for more than a decade with bylines on How-To Geek, PC Mag, iDownloadBlog, and many more. He has also been published in print for Macworld, including cover stories. At iMore, Oliver is involved in daily news coverage and, not being short of opinions, has been known to 'explain' those thoughts in more detail, too. Having grown up using PCs and spending far too much money on graphics card and flashy RAM, Oliver switched to the Mac with a G5 iMac and hasn't looked back. Since then he's seen the growth of the smartphone world, backed by iPhone, and new product categories come and go. Current expertise includes iOS, macOS, streaming services, and pretty much anything that has a battery or plugs into a wall. Oliver also covers mobile gaming for iMore, with Apple Arcade a particular focus. He's been gaming since the Atari 2600 days and still struggles to comprehend the fact he can play console quality titles on his pocket computer.