iPhone 7 as a service

iPhone SE
iPhone SE (Image credit: Rene Ritchie / iMore)

I'm old school. I buy something I love and then I hold onto it as long as I can. One of my relatives is the opposite. He drives a wonderful Lexus. Brand new. In two years he's going to get another brand new car. As long as he keeps paying a monthly fee, his car will always be the latest and greatest. It's called a lease.

Funny thing about car leases. They're just another way to buy a car. You've bought it, taken the depreciation, but you get a new one every two years or so. Just keep on paying.

Phones are different than cars. For a long time in North America, people got a new phone every two years — every time they renewed the contract with their carrier. Some people bought unlocked and full-price, but not many, not in the U.S.

Now things have changed, though. Apple and carriers are offering new phones even faster — as fast as every year. They're doing it through upgrade programs, which are subscription services very close to leases.

Back when I worked as an analyst at Gartner it was drilled into us that subscription based services or "Net Contract Value Increase" was a license to print money. That's why Wall Street loves subscription models and why so many vendors, from hardware to software, are trying to shift to them. They're predictable, as long as renewal rates are high, and more people come on board.

Last week on Apple Talk Serenity, Rene, and I talked iPhone upgrade cycles. They're both going to upgrade immediately, of course. Me? I already consider my iPhone SE my "upgrade". It's my Acura and I'm going to hold on to it.

At least that's what I tell myself today. We'll see what happens tomorrow.

If Apple can really drive an upgrade program strategy, it puts them in a great position. It's a guaranteed source of continued revenue from customers who, in exchange, always have the latest and greatest iPhone.

If enough customers embrace it, Wall Street will be thrilled. Predictable revenue of an installed base always upgrading? Then add in opportunities to drive new users & switchers? Fantastic.

All of sudden, customers like me, who prefer to buy once and hold on as long as well can become the outliers. There's a whole new set of buyers to appeal to who will view a monthly charge for the latest phone as just another line item.

But can Apple get enough customers on the subscription model? Will the desire to always have the latest and greatest iPhone be enough of a driver?

For me, I love my 2004 Acura TL. I'm also really happy with my 2016 iPhone SE. I have no desire in buying a new car at the moment. It will be interesting if Apple can convince me to buy an iPhone 7.

We'll know in short order.

I’ve covered the personal technology beat for more than two decades at places like Gartner, Jupiter Research and Altimeter Group. I’ve also had the fun of contributing my $.02 on the topic at Computerworld, Engadget, Macworld, SlashGear and now iMore. Most recently I spent a few years at Apple as Sr. Director of Worldwide Product Marketing. On Twitter I’m an unverified @gartenberg. I still own some Apple stock.

24 Comments
  • My girlfriend sees right through my statements that are very similar to yours. She knows what I'll be doing at 2:59am EDT Friday. Technology is my vice though. For normals it's easy to say the iPhone 5s through 6s Plus is simply good enough. And my 6s is good enough for me too but I'll always want that shiny new piece of iPhone goodness.
  • Interesting question. Mine are always free for me. If they weren't, then I'd still find a way. I do stay away from financing them and cling to an older plan. Never pay full price for an apple device. I think the masses care more about redesigns so some of this depends on Apple.
  • I assume by "older plan" you're referring to the 2-year contract? If you do the math on a 2-year contract subsidized phone vs. an installment plan (I used AT&T Next) it is cheaper to buy the phone on installments since AT&T reduces monthly fee of service. I don't know about the other carriers; I would hope they reduce or else they're robbing you. And if you are on a subsidized plan, and don't upgrade at the 2-year mark, you're likely still paying the marked up monthly plan even though you "subsidy reclamation period" is complete.
    .
    The same reduced service fee is true for AT&T with an iPhone leased from Apple, or a purchased-outright phone. If you BYOP, your monthly service fee should be less than that of a subsidized plan. With AT&T Next, they also don't charge any activation fees.But you do have to pay tax on the entire $650 at the beginning. Still ends up being cheaper over the 2 years, and you have the option to trade-in, just like a lease, at the 12-month point (or whatever your agreement is).
    .
    The monthly "discount" varies from plan to plan, but mine was $30 less EACH MONTH for EACH DEVICE. But the 18 monthly installments of the phone was $41 for the iPhone 6 64GB ($750 retail), but that was only for 18 month, not 24, and I didn't pay the $300 upfront nor the $40 activation fee.
    *I'm so good at rants.
  • No, Verizon doesn't cut the service fee. You just stop paying the monthly phone fee once the 2 years are up.
  • How much is the phone fee? Does it work out to more or less than the payment plan? I heard VZW was discontinuing the subsidized plans soon.
  • I definitely wouldn't be upgrading anything wether it be a car or phone if it looked exactly the same as I already have. Now if there redesigns in it then maybe. Sent from the iMore App
  • So, even if everything was upgraded but the look (for a car say it has 100 more HP, gets 3 times the gas mileage, has more interior volume and is rated better for safety, or a phone gets better battery life, has a better camera, a brighter screen, and is mil-spec for drops and waterproof) you'd pass it up? Sent from the iMore App
  • I have some very specific reasons for planning to upgrade to the iPhone 7: 1) I currently own an iPhone 5S, which I have loved using, but my vision is not as good as it has been, so getting a 5.5" display will make using my iPhone much easier. 2) I takes lots of photos with my iPhone, so having a much higher resolution, 2 lens camera that can do optical zoom, and has optical stabilization will be a great upgrade. 3) I'm looking forward to higher quality digital audio (both on wired digital headphones, and on better quality Bluetooth... possibly version 5.0) I plan to sell my older iPhone, so that will help pay for the iPhone 7 Plus.
  • If iPhone does go down the lightening output route, the audio quality isn't going to be dictated by the phone, but by the headphones you're using.
  • "I currently own an iPhone 5S". You could have stopped there. I'd encourage anyone with a 5S or earlier to upgrade.
  • I'm in Apple's upgrade program already with my iPhone 6s so I'll be upgrading to the iPhone 7 through that. Now I'm just hoping for details on how I can order and get my iPhone 7 ASAP through that program.
  • Same here, I'm going to hold on to my 6s. It serves me well. Excited for iOS10, WatchOS3 & MacOS! Sent from the iMore App
  • iPhone as a subscription. Now if they had mac and watch and iPad as a subscription then they will be winning. Right now its not enough for apple to do something small. if they really want to shake things up, then put all of their devices on subscription. They have the customer base.
  • iPhone as a subscription (via lease or financing) is clearly what Apple and the carriers are pushing. But is it what customers want? As for me, I leased three 6s'es last year but plan to buy them after their lease ends and just replace the battery. I just added a fourth iPhone SE for my daughter and bought it outright. It makes more financial sense to keep phones as long as they can do what you want them for. I have no need to get the latest and greatest CPU or gimmicky feature (that will take years to mature). I see the iPhone going the same way as the iPad - people keeping the device 3 or 4 years with little need to upgrade. And saving a lot of money.
  • I know this is off topic but I'm wondering if Fast Food service will eventually do something like this because in a way regular customers are paying a daily, weekly, monthly, and yearly amount to that restaurant. Sent from the iMore App
  • Yeah, just got my SE a few months ago, going to stick with it. I would rather not subscribe to anything that I don't want to be. I like buying my phones outright and then using it for as long as I want. I normally use my phones for a year.
  • What I love about iPhone is the longevity. Yes, I will admit, ANY new version of it would be desirable to me. However, I'm just happy my 5S is getting me through another year. I got him the day it came out and he's been my trusty sidekick ever since. It helps I'm also not that serious of a phone user in an app sense. He can still power through any task I demand of him with barely a hiccup. I find no incentive to upgrade at this point. Once Duke Russell Freedman III gets a new battery, my goal is to get a fourth year of use out of him and I'll finally be ready for the next one.
  • I agree with that. I bought my 5S in 2014 when the price dropped after the 6 was released. Still a great phone performing well, so no real desire to change yet. I'll see what the 10th anniversary phone offers next year, although I'm still not sure if I want a larger phone. Sent from the iMore App
  • There's always the SE if/whenever you'll want a refresh.
  • Yes, let's hope they continue to upgrade that size and include all the enhancements the larger phones are getting. My wife got the SE and it's a great phone. Sent from the iMore App
  • Please let us know tomorrow,if they convinced you. Would be interested to know. Thanx. Sent from the iMore App
  • But you already got your upgrade: The 2016 iPhone SE.
    So you are not ready for an iPhone 7.
  • This is true, but at the same time, a good number of people got the SE temporarily to upgrade to iPhone 7.
  • Not sure I'd want an iPhone as a service, especially an iPhone 7. Sent from the iMore App