iPhone Subscription Was Apple's Big Win

There might have been a whole heap of announcements in Tim Cook's keynote speech earlier, but the biggest and most important seems to be getting little discussion.

Apple launched a monthly payment service that lets you get a new iPhone every year.

Why is this so important? It's because the iPhone accounts for two-thirds of Apple's top and bottom lines. Which makes anything that means more iPhone sales a very big deal indeed.

The iPhone subscription doesn't just mean more iPhone sales, it potentially means twice as many iPhone sales. Current iPhone upgrade cycles are driven by carrier contracts and subsidies and run two years. Now Apple is able to cut carriers and their contracts out of the deal and reap the benefits directly via an annual upgrade cycle.

Currently customers don't see the true price of the iPhone they buy because it's hidden in their monthly carrier payment. In future customers won't see the true price of the iPhone they buy because it will be hidden in their iPhone subscription.

For Apple the opportunity to push iPhone sales skywards (in the US anyway) is a huge win. Especially as it appears that the net value of your returned iPhone is low and could itself lead to a profitable refurbishment business for Apple.

The entry-level 16GB iPhone 6S will cost $32.45 a month on the plan, with the phone being replaced annually. Those looking for an easy life and no big upfront payment will be on to a winner here.

However if you can run to the $649 outright purchase price then selling your iPhone at one year old is sure to get you more than the $260 which would be required to match the lifetime cost of Apple's deal.

For Apple and its diehard fans that's unlikely to be a problem. For its executives and shareholders it looks like another license to print money.

Which is pretty much what Apple is all about.


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