Roger Fingas
To keep growing services revenues, Apple may want or need to bundle hardware and services into a single subscription, according to one analyst.
The fundamental issue is that Apple is competing for customers with companies like Amazon — which pulls people into its ecosystem with Prime memberships and low-cost devices — and Google, which makes Android free to phone and tablet developers so people will use its ad-based services, Horace Dediu commented to the Wall Street Journal. To build services revenue under the current situation, Apple will likely have to keep selling and maintaining older iPhone models, suppressing its typically high profits on hardware.
Apple customers already spend an average of a dollar a day on hardware and services, Dediu noted. Pair something like the iPhone Upgrade Program with a bundle of services — such as Apple Music, iCloud, and/or the upcoming TV slate — and the company could count on more consistent revenues, not dependent on one device or another being a hit.
In the December quarter, iPhone revenues rose 13.2 percent year-over-year even as iPhone units shrank slightly. This can be credited largely to the $999-plus iPhone X, as well as a $699 baseline price for the iPhone 8. An "Apple Prime" model might put less pressure on Apple to continually grow hardware numbers.
Dediu didn't address the potential obstacle of competition regulators, who might argue that such tactics would shut rivals like Spotify and Netflix out of a major platform.
William Gallagher
Charles Martin
Christine McKee
36 Comments
This is one of the most nonsensical "strategies" that I've seen. Apple isn't struggling to find customers for it's hardware or grow it's services. Amazon and Google, on the other hand, do struggle to sell hardware.
I am very calm in the knowledge that Apple would never do such a lame brained, idiotic, counterproductive scheme.
Surprised that Dediu would come up with something like that. The best way to grow service revenue is to offer compelling services, not to try to sweeten the deal with old hardware.
Be curious to see what he actually did say.
Apple already invented Prime Membership - we as Apple hardware purchasers are all members. Apple rewards its members with "free services" (basic iCloud, iWork apps, iTunes ecosystem, etc) many of which may be upgraded to expanded (at increased prices) services (increased iCloud capacity, Apple Music streaming service, etc).