Apple as a service: One day you'll rent it all...

Apple’s iPhone Upgrade Program is the shape of things to come from the company.

Apple, iOS, iPhone, AppleEvent, iPhone 11, iPhone 11 Pro, iPhone 11 Pro Max
Apple

With iPhone 11 ordering beginning today, the world may be waiting to join the iPhone Upgrade Program, and it is becoming clear Apple is slowly but inexorably moving to a business model in which its products and services are available for a monthly fee.

Fewer highs, predictable lows

The advantages for Apple shareholders are clear:

They get predictable recurring income, though the cost of that stability may be the loss of the extreme revenue highs you saw when Apple’s fate was completely determined by hit product releases.

There’s an advantage for Apple customers, too: They know they can get an Apple Card, a new iPhone every year, Apple TV+, Arcade, Music and (most recently) AppleCare protection for a monthly fee.

An entry-level iPhone 11 ($35.33/month under the iPhone Upgrade Program), and subscriptions to TV+, Arcade and Music will cost $55/month – though you will receive TV+ for free in year one, which reduces the cost to $50.

If you pay using an Apple Card you’ll get $18/year returned to you in daily cash for a total outlay of $about 582 a year.

If you damage your device, you’ll have AppleCare protection as part of the deal, under the iPhone Upgrade Program. If you need more than the miserly 5GB iCloud space Apple offers you for free, you can step up to 200GB for a cost of $36/year ($2.99/month).

Add it up and you have access to some of the company’s key services, product insurance and the latest iPhone for around $615 (w. Apple Card), or a little more without.

I’m no accountant and all these numbers are beginning to get me down, but the bottom line is that you can already rent your way into Apple’s ecosystem.

Apple gets an income it can predict. You get access for a price you can (I hope) more easily afford, and the platform remains unfragmented.

That’s a win/win.

But why not take this further?

Where is the iPad Upgrade Program?

Apple’s iPad range lends itself to similar treatment.

Apple doesn’t yet offer an iPad Upgrade Program, but it does let you purchase these devices on a finance deal (3% cashback thanks to Apple Card), and offers trade-ins.

I think the company could easily go further.

The iPad Pro (Wi-Fi + Cellular, from $1,149) costs just $50 more than an iPhone 11 Pro Max (from $1,099). Other iPad configurations cost less.

If Apple can take the risk to offer an upgrade program for iPhone, surely it can take the same risk to buoy iPad sales and bring them into reach of a larger slice of the potential market? After all, the numbers are similar.

Once you reach that conclusion, it’s hard not to think about a similar scheme for Macs.

An entry-level MacBook Air sets you back $1,099 – the same price as an iPhone 11 Pro Max and $400 more than the iPhone 11, which costs you $35.33/month.

What might the cost be?

The iPhone 11 Pro Max costs $49.91/month under the iPhone Upgrade Program.

That gives us a guideline figure that suggests a similar scheme to get an iPad Pro and entry-level MacBook Air (as well as the phone) would cost around $150/month.

That’s a large number, and it gets bigger once you add other Apple services, but it’s predictable both for you and for Apple, and gives you access to the latest kit.

You don’t have to look too deeply for reasons why the actual cost of such a scheme may be higher:

  • Part of the reason Apple can support the scheme for iPhones is because there’s big demand for those products and refurbished units can be sold for good money, and recycled components poured into the manufacturing chain.
  • There may be other economies of scale that don’t necessarily exist for iPads and Macs. I’m reasonably confident both CEO Tim Cook and COO Jeff Williams already have precise data on this.

What about the Apple Card?

You could argue that Apple Card means Apple already has some form of infrastructure to support an ‘Apple as a service’ model. If you hold one of those cards you can already purchase these products, get some cash returned to you, and pay for them over the year before you upgrade.

But Apple could make this easier.

After all, if you hold an Apple Card, you’ve already passed your credit check and your identity and fiscal probity have already been verified. Equipped with this information, Apple could conceivably offer Apple Card users access to iPad and Mac Upgrade Programs. 

After all, it is already offering you credit.

Responding to change

I think models like these are inevitable. Not only are existing economic models transitioning from expectation of continuous growth as capitalism hits the walls of environmental/political crisis, but people outside the highest income brackets are moving away from conspicuous consumption toward more discerning models.

Rental models – particularly rental models supported by highly effective recycling schemes and (more green, if not greener) manufacturing processes will become more attractive in future.

Schemes that provide consumers with access to the products they most want at a cost they can tolerably afford will become increasingly valuable as models of ownership change.

Access, not ownership, so they say.

Apple has a chance to benefit from this.

How to get an iPhone 11 today

It seems only fair that to end this op-ed with more immediately useful information.

If you are in the market for an iPhone 11 and want to get hold of one under the iPhone Upgrade Program when they become available at 8 a.m. ET today, you should now follow these steps:

  • You should download the Apple Store app and sign in with your Apple ID before the launch.
  • If you don’t have the app, visit the Apple Store online (it may help to have both open when the launch takes place).
  • Prior to launch, double-check your Apple Store information – if you recently secured an Apple Card, make sure it is entered as your preferred payment method and your personal details are up-to-date.
  • You should also get your carrier account data and credit card security code and have them to hand.
  • Take a note of which iPhone you want, and make sure you know the carrier, finish and which capacity you need.
  • Then when ordering goes live jump in and hope to get a connection – it’s often better to use a direct wired connection rather than Wi-Fi for this, as everyone who has ever tried to get a Glastonbury ticket can tell you.

Ordering iPhones will get much easier in future....

Point and click

iPhone 11 introduces the new U1 chip. This is an Ultra Wideband (UWB) processor with a bunch of talents. Apple has described only one so far - the capacity to point a U1 equipped iPhone at a person holding another U1 device to beam content directly to them via AirDrop.

It won’t stop there, and transforms the world of indoor location, particularly in retail.

In the future, you will walk into an Apple retail store, point your U1-equipped device at the product you want there in store, tap the Buy button and you will quicky receive a notification to let you know when (and where) your product will be available for collection.

You’ll be offered help setting it up and a quick tutorial from the retail staff. The entire experience will be friction free (probably). And the only time you’ll think about the money you are spending is when you look at the informative chart on your Apple Card app – which could make it too easy to spend too much.

(Though I guess you’ll eventually be able to ask Siri if you can afford the purchase.)

Please follow me on Twitter, or join me in the AppleHolic’s bar & grill and Apple Discussions groups on MeWe.

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