Apple’s hardware subscription plan could open new doors

Earlier this week, the consumer electronics industry went into a tizzy following a report claiming that Apple was mulling a hardware subscription service. To put it simply, Apple wants to start a Netflix-like service, but one that dishes out iPhones and Macs instead of films and TV shows. Actually, those too, but more on that later. Apple, however, plans to do more than just rent its polished hardware.

Apple will reportedly bundle its services such as Apple One and Apple Care with its subscription service, adds the updated Bloomberg report. If all goes well, Apple will launch the service later this year. Interestingly, analyst Toni Sacconaghi pitched the idea back in 2016, pushing it as the strategy that could make Apple a trillion-dollar company. Apple is now hovering around the $3 trillion market cap without implementing that trick, but it still sounds like a compelling proposition.

A rental that’s all about the brand

A subscription-based model for pushing hardware sounds like just another moneymaking move by Apple. But it’s hard to ignore the rental appeal here. Apple is essentially hawking a service that will allow interested folks to lease an iPhone and test drive it for a while by paying a small fee for temporary ownership.

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I pitched the imaginary (for now) Apple hardware subscription service to Gursakhi Miglani, a student pursuing a master’s degree in clinical psychology. She wasn’t particularly psyched about renting an iPhone due to the closed software ecosystem, but expressed willingness to rent a Mac because of the fluid software experience and great battery life. “I can already imagine a lot of my classmates jumping at the idea of briefly leasing the latest iPhone and flaunting it all over social media,” Miglani added.

It’s not hard to imagine that there’s already a demographic of users — especially the social media savvy younger generation that loves its iPhones — ready to get their hands on an Apple product long enough to garner some clout on Instagram and Snapchat. Blue-collar workers are not immune to the charm either, and so is the case with celebrities. There’s a reason why a ton of iPhone accessories leave a cutout to show that coveted Apple logo, especially on iPhones.

It’s not a hypothetical concept, however. Duke University research from all the way back in 2008 poured it all in the title itself — Logo Can Make You Think Different. Martin Lindstrom, the author of Brandwashed, cherrypicked Apple as the perfect example of brandwashing, a portmanteau of brand and brainwashing. In a 2019 opinion published in The New York Times, Lindstrom explained the cult following Apple has built around its products. In another story for Fast Company, he attributed Apple’s appeal to sleek hardware and being sociable as a brand.

Well, it’s about the services too

An iPhone is not just about the hardware, but the sum total of fast innards and rewarding services. The best example happens to be iMessage, especially in the U.S. And even if Apple extends the services beyond its own hardware pool, it restricts some of the cool capabilities. Take for example Spatial Audio with Dolby Atmos, which is limited to the AirPods line via Apple Music.

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Apple’s services, on their own, offer good value, even if they don’t beat each of their respective rivals. Apple Fitness+ has been a huge success, and its Apple TV content is now competing for top entertainment industry honors. In 2022 alone, Apple got six Academy Award nominations, with CODA gunning for Best Picture honors.

With iCloud+, Apple offers some convenient tools such as Hide My Email, Private Relay, and Home Kit Secure Video to its privacy-conscious audience. All the aforementioned services are doled out as part of the Apple One bundle, which Apple intends to offer with its hardware subscription service.

So far, users aiming to experience Apple’s services in all their glory were forced to invest in expensive Apple hardware. A rental service removes that deterrent and opens up an affordable path to experience them all as a bundled deal. And even if only a small percentage of testers are swayed by their brief rental experience, it could very well net Apple a long-term subscriber — and possibly a lifelong Apple ecosystem member down the road.

A home for the old and refurbished

But is the market ready for an Apple hardware subscription service? To get the answer, I reached out straight to the other side — the seller. Sunil Motwani, the owner of an authorized Apple outlet that has been selling Apple hardware in an upscale region of New Delhi since the iPhone 3GS days, has mixed hopes for Apple’s hardware subscription plans.

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Motwani says Apple gadgets, especially iPhones, are already available with aggressive schemes such as financing at zero interest rates, while the iPhone upgrade plan is also a less-taxing way of owning Apple’s latest phones. Or a Mac, for that matter. And despite their high aspirational value and popularity among the new generation, most people would actually want to own the device instead of renting it for a few months.

New Apple hardware also comes at a steep price. But there is definitely a market that wants to experience the software ecosystem, without caring much about the latest hardware tricks. “If Apple focuses on refurbished units and previou- generation iPhones for hawking its hardware subscription service,” Motwani noted, “it can give users a taste of its brand without facing any supply issues and pushing away interested buyers with a sky-high rental price.”

Diving deeper into the economy of a hardware subscription service, Motwani added that there’s always the risk of damaging the product and paying a steep price for it. Apple will want to play it safe with that scenario as well, which could end up ballooning the price even further. As per Bloomberg’s report, Apple will likely tackle that risk, for itself and the customer, with an attached Apple Care element to the subscription service.

Apple can win in many ways

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Apple commands a lion’s share of the market in regions like North America and China, and in s growing market like India, it grew by 48% last year. Apple is poised to start making its latest iPhones in India starting next month, and per analyst estimates, the relatively affordable iPhone SE 3 will alone drive 25% of the net shipments this year.

In markets like the U.S., more users go for financing instead of paying a phone’s full price in one go, and the trends are not too different elsewhere. So a hardware subscription strategy won’t really be an alien concept. In developing markets, price happens to be the strongest variable in influencing a person into buying an iPhone. — more than design, feature, and even brand image.

A rental won’t solve all of it, but will definitely be worth experimenting with for some. Especially when it doesn’t come with all the hassles of a financing system, and the risk of being stuck with an undesirable product. Apple has more to win here than lose. Even if an individual doesn’t change his smartphone loyalty after briefly leasing an iPhone, but ends up liking Apple Music or Apple TV, Apple earns itself a paying subscriber. That’s a win in itself.

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