How much would you pay every month for a Mac, iPhone, iPad, Apple home accessories and a handful of Apple services, including health and residential security services? More to the purpose, how lots of Apple’s 2.5 billion users can be willing to pay for the Apple Plus Services suite, and the way much would this generate every month in high-yield, high-margin predictable income for the previous hardware company?
Apple-as-a-Service? It’s possible
The Apple-as-a-Service idea has hovered at the sting of Apple speculation for years, and while Apple has skirted with the concept (iPhone Upgrade Program), it’s never quite found a technique to mix hardware and software in a services-led bundle. But things can change. Bloomberg’s Mark Gurman last yr suggested Apple had considered offering a hardware subscription service, but shelved the concept fearing the impact on “normal” hardware sales.
What’s certain at this stage is that it feels as if it might be easier than ever for Apple to pivot its entire business into services, particularly because it has greater than 1 billion people using at the very least certainly one of its services already. Breaking those use patterns down, Apple recently shared some glimpses into the performance of the services segment:
- 900 million energetic iCloud+ subscribers.
- 850 million energetic App Store users.
- 58 million Apple TV+ subscribers.
- 15 million merchants who accept Apple Pay.
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The corporate followed this news up with the introduction of the outstanding value Creator Studio suite, which unleashes industry leading tools for audio and video production, Final Cut Pro and Logic — together with apps for imagery and productivity — for $12.99 a month. Apps that create opportunity for creative expression are arguably fundamental to the Mac, a purpose that runs deep into Apple’s DNA.
When it decided to introduce its leading creative apps as a service, Apple moved the needle on each software and services sales, taking a bite out of 1 segment to learn a second. The way in which Apple sees it’s that perhaps it doesn’t really matter how Apple sells something, as long as the market takes it, and keeps that prime margin (c.70%) services segment revenue rolling in. (The segment was value $30 billion within the just gone quarter.)
The parable of ownership
One argument against hardware-as-a-service is that folks wish to own their stuff. That’s true. But if you stop to give it some thought, the reality is that we already use hardware we don’t really own — that iPhone in your pocket you acquired with a carrier deal; the bank card debt you’re paying on your current Mac; the iPads on your field services team you acquired with help out of your bridging loan; the Mac you’re about to buy for a monthly cost direct from the Apple Store.
Even 4 years ago, “Almost half iPhone owners already finance their iPhone purchase, paying monthly for a brand new phone,” said CIRP Partner and Co-Founder Josh Lowitz. “And about one-third trade-in their old phone once they buy a brand new one. So, a good portion of the user base is accustomed to never owning a phone, as an alternative principally leasing it.”
We use kit we don’t quite own on a regular basis. An Apple hardware-as-a-service offering could accommodate that, offering hardware ownership as one result, after an agreed upon variety of payments are made. The second result can be what tempts users though.
Take into consideration how attractive a brand new Mac upgrade every two or three years and an iPhone upgrade every other yr as a basic subscription may be, with AppleCare rolled in. Reflecting that form of pondering, many already use Apple Trade in, sending their old hardware back to Apple for parts in exchange for money off the following bit of apparatus. It’s an ownership model that shows many are already accustomed to treating hardware as if it were a subscription item.
Improving the experience
But why would Apple abandon hardware sales in favor of services? To construct margins, after all, and to develop a predictable income stream, but additionally to higher control the user experience. Not only can Apple then proceed to give attention to improving its hardware, but since it knows what hardware its customers are running, it may well focus improvements in software and services on the hardware.
Consider it as an extension of Apple’s “whole widget” approach, one encompassing hardware, software, services, and silicon with management of the ecosystem itself.
There are solid environmental reasons for this ecosystem, because it becomes much easier to call in old kit and arrange for it to be recycled, feeding those cannibalized components straight into the circular manufacturing system we all know Apple wants to construct. It gets loads easier to construct a system like that after almost exactly what number of recycled components you’ll must work with in any week; that’s the form of granular insight a subscription hardware offering might provide.
The numbers game
Would consumers be willing to simply accept an ownership model like this? To some extent that doesn’t matter. It doesn’t should be adopted by every consumer to succeed. With 2.5 billion people already one email away from Cupertino, Apple only needs to change a small fraction of that group over to a hardware/software/services subscription model to generate predictable revenue.
As a thought experiment, imagine if just 1% of those Apple users (25 million) stepped right into a services/Mac/iPhone deal at $129/month, that’s $3.2 billion in revenue every month. While I feel the fee can be higher (since it’s Apple), that provides you some sense of the revenue the corporate can raise with the addition of a subscription option when ordering products on the Apple Store.
As a numbers game, Apple starts with the form of advantage that ought to make Wall Street nod, within the sense that investors already value tech firms with high recurring revenue more highly than those depending on cyclical hardware sales.
Who knows, in the event you could pay money for a Mac and iPhone in such a way for a monthly fee, Apple might find it even easier to upsell consumers to higher specified options through its recently updated Apple Online Store, generating a couple of more dimes every month with every consensual memory upgrade.
Plus, after all, with user satisfaction numbers within the high 90s, Apple would likely find it even easier to lock its customers into the full Apple experience. That potentially features a highly secure Apple HomeKit AI-augmented and personal home security service with which to guard all this kit, which some imagine the corporate might announce through the yr.
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