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.

Michael Gartenberg

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.