a masterstroke in profit maximization
oct 25, 2015
Here's the way I see it:
According to this article, it costs Apple approximately $236 to purchase the components for an iPhone 6s+ (16gb).
According to Apple's subscription information page, an iPhone 6s+ (16gb) will cost a consumer $36.58 per month, on the iPhone subscription plan.
The plan dictates that you will "get a new phone every 12 months" (assuming "new iPhone every year" means every 12 months). This means you will have 12 payments of $36.58, equaling $438.96 given to Apple over these 12 months ($877.92 over 24 months).
According to Apple's purchase page, an iPhone 6s+ (16gb) will cost a consumer $749 full retail-to-own price.
Before the subscription plan, these iPhones purchased by consumers are either kept as old devices, traded in to carriers, or sold to other consumers and private parties.
Apple gets $749 every two years per customer (which equals $31.21 per month) — this is looking at a generic consumer buying a new iPhone every other cycle, per the traditional 2 year service contract with carriers — but now on the subscription plan Apple gets $877.92 every two years per customer (or $36.58 per month). This is an increase in per-customer profit of $5.37 per month, or an increase of 17%, by offering the consumer nothing more. Apple turned a 17% profit overnight, without adding a single new offering to their lineup.
But wait, that's not all.
Now Apple gets these "old devices" (keep in mind they're only 12 months old, and iPhones keep their value better than any of Apple's competition), as opposed to these iPhones saturating the market. Apple could throw this old phone into a trash compactor and make more money than before this subscription plan. I doubt they do that. Now they can do a host of things: sell these as used or refurbished phones in either the US or other global markets, offload at wholesale costs to carriers, use as swap-outs for replacement requests, harvest for parts, donate for tax write-offs — the list is endless.
The unique thing about whatever they do with these "used" iPhones is that now, they don't have the requirement of getting back that $236 for production, because it's already been paid. If Apple sold these phones at $1, it's $1 of 100% profit. Jeez.
According to articles like these, approximately 63% of Apple's revenue stems from iPhones.
I think consumers should consider investment as opposed to consumer acquisitions.