Apple tipped to launch iPhone subscriptions in a move that could change the phone market

Would you subscribe to an Apple iPhone if you could upgrade it for free every year? It’s a question that loyal users could soon face.

If you regularly stream movies rather than buy them, subscribe to song catalogues rather than purchase CDs, and perhaps even rent a car, why not rent your smartphone too?

The question is more than just an idea, with growing rumours Apple will soon launch a service to let iPhone users subscribe to their best-selling hardware.

And tech industry analysts say the idea has merit.

For the company, a subscription offer would deliver guaranteed revenue and upgraders at a time when people aren’t replacing their phones as often as they once did.

For consumers, a smartphone subscription would give them access to the newest features every time a device launches without a huge upfront cost.

But the concept has downsides and outstanding questions too, including whether consumers will want to be locked into one platform, and who would pay for phones if they are damaged.

Rumours of Apple’s new move emerged earlier this year, with pundits tipping it could be unveiled shortly, potentially winning a mention at the company’s Worldwide Developers Conference in June.

Apple analyst Mark Gurman says an iPhone subscription, while a “major strategy shift” for the company, could be a natural move for customers who are now comfortable subscribing to music, movie and cloud services.

An iPhone subscription would reportedly be available for a monthly fee, and at a price set by Apple rather than just the phone’s value split into 12 payments.

Even though the rumours have attracted plenty of attention, similar services are available or have been tested in Australia.

One third of iPhone owners in Australia are so loyal, they use five or more of the company’s products and services.

Samsung currently offers a service called Samsung Subscription, operated through Latitude Pay, for example, that lets users upgrade to a new phone after making 12 monthly instalments on the device they buy. Based on a $1499 phone, users pay $82.28 per month.

Until 2020, Telstra also offered a service called “New Phone Feeling” that offered yearly upgrades to subscribers.

Telsyte managing director Foad Fadaghi says the hardware-as-a-subscription model made sense for carriers and phone makers, who would not only get to lock in customers but convince them to replace their existing phone more frequently.

Australians are currently holding on to their smartphones for an average of three years, Telsyte research shows, rather than 2.4 years in 2016.

“We have seen the replacement cycle increase over the past few years,” he says. “For manufacturers wanting to address that, a subscription approach would guarantee them sales.”

Mr Fadaghi says the service could work particularly well for Apple in Australia, where one third of iPhone owners are so loyal they use five or more of the company’s products and services.

The finding is backed by Kantar Worldpanel, which found “90 per cent of all iPhone buyers” in Australia were repeat customers.

Mr Fadaghi says there is also “the possibility that Apple will release a subscription-only phone” to appeal to those users, making the biggest question over whether to use a subscription a financial one.

“The question is: what price,” he says. “The price of handsets has been going up and subscriptions won’t be cheap so it will come down to whether the case is viable for customers.”

Concerns also remain over what hardware protections and support the company would provide under a subscription plan, like Apple Care, as well as whether consumer protections would need to change to accommodate the new offers.

Apple could address the rumours at WWDC on June 6.

Originally published as Apple tipped to launch iPhone subscriptions in a move that could change the phone market