Apple’s iPhone Upgrade Program was the company’s first attempt to turn hardware into a subscription product, but it certainly won’t be the last. To me, there’s a very obvious opportunity here for an Apple Vision Upgrade Program.
In my view, this would be a win for Apple and consumers alike …
iPhone Upgrade Program
The iPhone Upgrade Program (iUP) is a way to buy an iPhone in installments, spreading the cost over two years.
It can be used in one of two ways. First, you can simply keep your phone, and after two years you own it outright. Second, you can trade it in for a new model after 11 months. In that second scenario, if you keep doing this each year, you’re effectively renting the phone without ever owning it (even if that isn’t quite the legal position).
The benefit for consumers is they pay a fixed monthly fee, with the option of always owning(ish) the latest model. The benefit for Apple is that it creates the holy grail for hardware companies: monthly recurring income. It’s the same reason that many app developers have switched from one-off purchase models to subscriptions.
The iUP solved a big problem for Apple
Back in the days when smartphone purchases were tied to your mobile carrier plan, paying a monthly fee was the norm, and if you were doing that, then it of course made sense to upgrade to a new phone the moment your plan allowed you to do so. Typically, this was every two years.
But once that business model changed, then the smartphone upgrade cycle lengthened. Consumers would decide for themselves when it made sense to buy a new iPhone, and the average is now around 3.5 years. That is, people upgrade their iPhone every 3-4 years, not every 1-2 years.
Apple has a bigger problem with spatial computing
With the Apple Vision Pro, Apple has created a truly stunning product. By taking a no-expense-spared approach, the Cupertino company has succeeded in creating a product most of us lust after, even if we’re still not entirely sure why we want it.
The problem for Apple, of course, is that while many of us want one, very few of us are going to lay out $3.5K to $4K to actually buy one.
Even if the next model is more affordable, the predictions seen to date suggest a price of around $2K, which is still a lot of money for something that currently fits into the lovely-to-have-but-don’t-need category.
Even if we are, in principle, willing to spend that kind of money, there’s a second barrier to purchase: this is still early-stage tech. There’s an oft-quoted maxim that you should never buy a 1st- or 2nd-gen Apple product, and while I don’t personally subscribe to that (duh!), with technology this new and this expensive, the approach does have some merit.
Buying an Apple Vision product is risky
The worst-case scenario with any Apple Vision product – whether it’s the first Vision Pro, or a later Apple Vision or Vision Air – is that you buy one year, and a significantly better and/or cheaper one comes out the following year.
I mean, that’s a danger with any Apple product, of course, but most of the company’s hardware is relatively mature, so the chances of buying, say, a MacBook Pro in 2023 and absolutely kicking yourself in 2024 are not huge.
However, with technology this immature, the risks are far greater. It could be more like buying a maxed out Intel MacBook Pro the year before the launch of the M1 model – or worse.
An Apple Vision Upgrade Program would solve this
For consumers, an Apple Vision Upgrade Program would remove this risk. You buy at launch, pay your monthly fee, and then if a much better model comes out the following year, you just switch to that.
For Apple, it would be a way of kickstarting something the company clearly believes is the future of computing. Far more people would be willing to jump in on day one if they knew they weren’t saddling themselves with a model which would quickly become outdated.
Let’s crunch the numbers…
The iPhone 14 Pro starts at $999. On the iUP, it’s $49.91/month on a two-year contract, allowing an upgrade after just one year. That works out at a fraction under $600 for a year, so Apple is effectively charging you 60% of the purchase price for one year’s rental.
If we assume the same percentage, then …
Vision Pro starts at $3,500. So, 60% of that would be $2,100. That would equate to a monthly fee of $175.
That’s still a big chunk of money, of course, but my guess is that a lot more people would be willing to pay $175/month, knowing that they can upgrade to a new model a year later, than are willing to pay $3,500 for something that wouldn’t be remotely economic to replace just 12 months later.
Would this sell it to you?
If you were already planning to lay out $3,500 on day one, this poll isn’t for you. Otherwise …
Would a monthly $175, with the option to upgrade to a new model a year later, make it a more appealing prospect?
Please take our poll, and share your thoughts in the comments.
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