Apple could upend the status quo by bundling hardware into its services subscriptions
Category : entrepreneur
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On the company’s fiscal Q4 2019 earnings call, Apple CEO Tim Cook teased the possibility of embracing hardware-services bundles as subscription products, according to CNBC.
As the company seeks to regularize revenue streams and ease its reliance on consumers’ increasingly infrequent smartphone upgrades, adoption of combined subscription plans could help it move further away from the single-engagement purchase model on which it built its mobile business. If Apple follows through, it could set off a market shift toward ecosystem-wide bundling among major tech competitors.
Apple already has a quasi-subscription plan in place for iPhones with its annual upgrade program, but it could also incorporate that strategy into other lines of its business. When asked on the earnings call whether Apple would consider hardware-services bundles, Cook said:
“We look at each service, and decide what’s best to do for it … I wouldn’t want to rule out for the future that we might not see another opportunity at some point in time. In terms of hardware as a service or as a bundle, if you will, there are customers today that essentially view the hardware like that because they are on upgrade plans and so forth. And so to some degree that exists today, my perspective is that we will grow in the future to larger numbers that will grow disproportionately. And one of the things we are doing is trying to make it simpler and simpler for people to get on these sort of monthly financing kind of things.”
So while no sweeping changes to its core business seem imminent, Apple is leaving the door open to offering customers a bundle of always-upgraded hardware — ranging from phones to tablets and even potentially smart speakers or smart home devices — and services like Apple Music, Apple TV Plus, and iCloud. Significant adoption of such subscription-based bundles could transform the company’s revenue model to offer more consistent revenue for a variety of products and services, while also allowing the company to improve inventory supply and control.
Should Apple move forward with hardware-services subscriptions, it could spark a rash of similar programs from competitors like Samsung and Google. Companies in the smartphone space are generally also major players in the wider technology arena, and shifting to subscriptions for bundled hardware products — Google could bundle the Pixel with Nest smart home devices and cloud-based security, for example, or Samsung its Galaxy smartphones and SmartThings devices — could enhance brand loyalty and stickiness as well as buoy those secondary products.
Tech giants have been looking to create all-encompassing ecosystems that take their core services beyond the phone, and using subscriptions to get smartphone users to adopt additional hardware as well as services could give companies a means to accomplish this and grow consistent revenue streams.
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