Apple could face slower upgrade cycles as study shows iPhone owners clinging to devices longer

Posted:
in iPhone edited June 2016
A slower rate of technical improvements in the iPhone, coupled with new carrier financing plans phasing out two-year subsidies, have helped to change how frequently mobile customers upgrade their Apple handset, a new study has revealed.




Most iPhone owners are now keeping their Apple an average of three months longer than they did in the past, according to a new survey published this week by Consumer Intelligence Research Partners.
"Over the past almost three years, the average age of a new iPhone buyer's previous iPhone has increased by approximately three months" - Mike Levin, CIRP
In the past, iPhone owners upgraded roughly every two years, thanks to typical two-year service contract subsidies. However, the pace of upgrading has been steadily slowing: In 2013, only 5 percent of all iPhones were three years old, but by the end of the March 2016 quarter, that share had increased to 12 percent.

And in June 2013, 66 percent of all iPhones were either under a year old or at most two years old. By March 2016, that had fallen to 51 percent.

"Overall, over the past almost three years, the average age of a new iPhone buyer's previous iPhone has increased by approximately three months," said Mike Levin, a CIRP partner and company co-founder.

Levin and fellow partner Josh Lowitz attribute the longer ownership times to two factors: the slower rollout of new features, as well as a change in carrier financing plans.




In the past, carriers encouraged customers to upgrade their phones every two years by offering subsidies and discounts on new phones. Now, however, the plans reward customers who hold on to their phones and have paid them off in full.

"This motivator appears to outweigh the impact of any early upgrade options that carriers offer with the new financing plans, and the increased availability of trade-in programs and used phone purchase websites," the study reads.

Since new iPhone sales are increasingly made to existing owners and these owners are keeping their phones longer and upgrading less often, Levin and Lowitz predict a slowing of iPhone sales in the future.

Apple is widely expected to launch its next-generation handset, unofficially known as the "iPhone 7," in September. Leaks thus far have suggested its appearance will be largely similar to that of the current iPhone 6s series, but with a thinner design that could ditch the 3.5-millimeter headphone jack.

The largest changes are expected to be exclusive to the larger 5.5-inch "iPhone 7 Plus" model, including a new dual-lens camera design, and potentially a magnetic Smart Connector that could be used for charging or even data transfer, just as it works on the iPad Pro lineup.
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Comments

  • Reply 1 of 50
    volcanvolcan Posts: 1,789member
    This is what I have been saying ever since they announced the new financing plan, although others have been saying it makes it easier to trade up every year with the trade-in program. Still I think there are many other factors that could impact iPhone sales such as financial downturn in China, smartphone saturation in the US and also the lack of stigma regarding the higher end Android phones, since their OS is maturing to almost be on parity with iOS, not that I would buy one mind you, but there may not be as many switchers in the future.
    edited June 2016 saltyzip
  • Reply 2 of 50
    Come on ATT and the likes. This is a direct result of your stupid ATT Next style plans. I want a discount on a phone and I want to keep my unlimited data. Not interested in paying monthly for the phone on top of the my service with a limited data usage. I used to upgrade every year... 
  • Reply 3 of 50
    slprescottslprescott Posts: 752member
    This is why Apple's overall ecosystem -- and expansion into services -- is important.

    Often (especially in the future) a customer's reason for upgrading iPhone will be the combination of multiple Apple offerings.  e.g.,
       - iPhone + Apple Pay
       - iPhone + Apple Music
       - iPhone + Apple TV
       - iPhone + Home Kit
       - iPhone + Watch
       - ... etc.

    As there are changes in these other 'ecosystem' offerings, in some cases that will motivate customer to upgrade their iPhone to access the new upgraded services.
  • Reply 4 of 50
    ericthehalfbeeericthehalfbee Posts: 4,073member
    Nonsense. There are so many iPhone users now that even if people held onto their phones for 3 years Apple could still sell 200 million a year just to the upgraders (let alone the people who always want the latest or new iPhone users).

    How long a phone lasts has nothing to do with how many you sell. Eventually those people are going to upgrade. And I would think having a phone that lasts longer would further cause people to buy an iPhone since they know they'll get more use out of it before wanting/needing to upgrade (unlike your Android flagships where support disappears less than 2 years after you buy it).
    geekmeefotoformatlkruppargonautjony0palomine
  • Reply 5 of 50
    volcanvolcan Posts: 1,789member
    ericthehalfbee said:

    How long a phone lasts has nothing to do with how many you sell. 
    It is not a matter of the hardware lasting a long time, which it always has, it is a function of separating the service from the financing. Previously there was little advantage to keeping your phone past the contract because they charged you the same monthly fee even once it was off contract. You could sell your old phone and use the cash as a down payment on a new iPhone. Now, since the older iPhones are in most cases perfectly adequate and there is no penalty for keeping it longer than two years, there is an incentive to actually keep it longer.
    edited June 2016 icoco3baconstang
  • Reply 6 of 50
    It doesn't help that the new iPhones looks exactly like last year's and 3-4 years ago. Not a lot compelling reasons to upgrade.
    LPmagooKawhi
  • Reply 7 of 50
    I never seem to see people making the same complaints about Samsung phones, it's only Apple that gets this criticism even though no cell phones out there are dramatic changes from the prior models. They put in rubber gaskets to prevent water damage, made stronger glass, made Touch ID, which are all major functional features that even if you don't like them, they are bigger changes than pretty much every iPhone hardware cycle has had so far. But yet, everyone judges by the fact that the phones still look the same, which is really stupid!
    baconstangpalomine
  • Reply 8 of 50
    dick applebaumdick applebaum Posts: 12,517member

    In the past, iPhone owners upgraded roughly every two years, thanks to typical two-year service contract subsidies. 

    In the past, carriers encouraged customers to upgrade their phones every two years by offering subsidies and discounts on new phones. Now, however, the plans reward customers who hold on to their phones and have paid them off in full.

    "This motivator appears to outweigh the impact of any early upgrade options that carriers offer with the new financing plans, and the increased availability of trade-in programs and used phone purchase websites," the study reads.

    The Apple iPhone Upgrade Program offers a better deal than AT&T subsidies ever did.   Lower initial cost, interest-free loan, lower monthly cost, AppleCare included -- and the ability to upgrade after 12 months.

    In our household of 5 (2 adults, 3 children) we had 1 iPhone under subsidy when the Apple upgrade program was announces (the 4 other iPhones were old enough that their subsidies had finished).  We bought 5 new iPhone 6s under the iPhone upgrade program, so we all have the latest iPhones -- and we will, likely, all upgrade again to the next iPhone ...   No brainer, really!


  • Reply 9 of 50
    volcanvolcan Posts: 1,789member
    sog35 said:

    While in past years the majority of iPhone buyers were hardcore Apple fans and very rich people. Now 10 year old kids are getting brand new iPhones. People in China making $5000 a year are getting iPhones. People on food stamps are buying iPhones. 
    Your post is full of contradictions. So these 10 year old kids are buying an iPhone with their paper route money? I think it is probably the rich parent who is buying it.  Median annual income in China is $4,800. iPhones cost from $850  to $1,000 in China. Absolutely no one would spend 20% of their gross annual income on a cell phone.  I'd also really like to see a citation on the iPhone customers who are food stamps recipients. Perhaps they could buy a used iPhone but that doesn't factor into slower Apple iPhone sales figures. 

    Sure it is a wider market now but the US still accounts for the most sales, 19% whereas China 12% so the subsidy is a measurable factor in my opinion.
    edited June 2016 baconstang
  • Reply 10 of 50
    geekmeegeekmee Posts: 320member
    Let's see Apple is saturating the market with... What was that satisfaction rating again?
    pscooter63
  • Reply 11 of 50
    TurboPGTTurboPGT Posts: 355member
    Come on ATT and the likes. This is a direct result of your stupid ATT Next style plans. I want a discount on a phone and I want to keep my unlimited data. Not interested in paying monthly for the phone on top of the my service with a limited data usage. I used to upgrade every year... 
    Well that's stupid.

    It used to be ridiculously difficult and expensive to upgrade yearly. Now, THANKS TO AT&T NEXT and similar plans, it is now cheaper and easier.

    And [email protected] your "Unlimited" data plan. I'm having a much better and cheaper experience than you on AT&T by using their newer plans. You're obviously completely unaware of the cost structure today, and don't realize you are being taken.
    icoco3
  • Reply 12 of 50
    volcanvolcan Posts: 1,789member
    sog35 said:

    The majority of the world NEVER HAD SUBSIDES. EVER. 

    Whatever, don't let facts get in the way of your narrative.

       

    http://www.tech-thoughts.net/2012/05/proof-of-iphones-dependence-on-carrier.html

    These are figures from 2012 which contradicts your claim of NEVER.
    jackansicrowleymike1baconstang
  • Reply 13 of 50
    tzeshantzeshan Posts: 1,975member
    The article missed the ATT unlimited plan.
  • Reply 14 of 50
    icoco3icoco3 Posts: 1,459member
    Come on ATT and the likes. This is a direct result of your stupid ATT Next style plans. I want a discount on a phone and I want to keep my unlimited data. Not interested in paying monthly for the phone on top of the my service with a limited data usage. I used to upgrade every year... 
    Whether or not your phone was paid off, you still paid the subsidy that was rolled into your monthly fees.  Now it is separate.  Once the phone is paid off, your bill goes down.  I have 5 iPhones out of contract and pay close to $150 less per month because of it.  I like that.  I used to have to have $300-$400 to pay toward a new phone, now I pay nothing but the tax to get a new one plus the monthly fee.  Basically the same as before.
  • Reply 15 of 50
    larryalarrya Posts: 548member

    In the past, iPhone owners upgraded roughly every two years, thanks to typical two-year service contract subsidies. 

    In the past, carriers encouraged customers to upgrade their phones every two years by offering subsidies and discounts on new phones. Now, however, the plans reward customers who hold on to their phones and have paid them off in full.

    "This motivator appears to outweigh the impact of any early upgrade options that carriers offer with the new financing plans, and the increased availability of trade-in programs and used phone purchase websites," the study reads.

    The Apple iPhone Upgrade Program offers a better deal than AT&T subsidies ever did.   Lower initial cost, interest-free loan, lower monthly cost, AppleCare included -- and the ability to upgrade after 12 months.

    In our household of 5 (2 adults, 3 children) we had 1 iPhone under subsidy when the Apple upgrade program was announces (the 4 other iPhones were old enough that their subsidies had finished).  We bought 5 new iPhone 6s under the iPhone upgrade program, so we all have the latest iPhones -- and we will, likely, all upgrade again to the next iPhone ...   No brainer, really!


    It depends on which subsidy program you had. Maybe for you this better, but you are incorrect to say the new program is better than subsidies "ever were".   I pay less today for my grandfathered unlimited plan (2 iPhones, 1 flip phone) than I would for any modern mobile share plan with at least 5GB per iPhone (AT&T or Verizon).  After that sinks in, imagine next that I used to get $1,350 in subsidies every two years (I could move the flip phone upgrade eligibility to either iPhone).   So, clearly I am out an extra $1,350 without subsidies, and if I switch to a modern plan, there is no financing plan, which adds a monthly cost on top of a higher mobile share plan cost, that can possibly come out ahead. And, to get back on topic, I am changing my upgrade pattern directly as a result of the loss of subsidies. 
    edited June 2016 mike1
  • Reply 16 of 50
    dick applebaumdick applebaum Posts: 12,517member
    volcan said:
    sog35 said:

    While in past years the majority of iPhone buyers were hardcore Apple fans and very rich people. Now 10 year old kids are getting brand new iPhones. People in China making $5000 a year are getting iPhones. People on food stamps are buying iPhones. 
    Your post is full of contradictions. So these 10 year old kids are buying an iPhone with their paper route money? I think it is probably the rich parent who is buying it.  I'd really like to see a citation on the iPhone customers who are also food stamps recipients. Perhaps they might get a used iPhone but that doesn't factor into slower Apple iPhone sales figures. Sure it is a wider market now but the US still accounts for the most sales, 19% whereas China 12% so the subsidy is a measurable factor in my opinion.

    We live in the San Francisco East Bay, and there are 2 teen-age boys in the family.

    There are literally no traditional ways for them to make money -- nobody gets a paper delivered, pays someone to wash their car or mow their lawn.  They literally rely on earning an allowance for household chores (cleaning, polishing, sweeping, dusting, vacuuming, mowing/weeding/edging our lawn, etc.)

    When I was a kid, I didn't get an allowance, but I did all those activities as my responsibility of living in the family home.   For cash, I mowed lawns, washed cars, had a paper route -- and had several part-time jobs:  furniture store maintenance;  install seat covers; work on Rose Bowl Floats, etc.

    The combination of affluence, and [California] state laws and regulations make it very difficult for a kid to earn enough money to buy an iPhone.

    To compensate, so the kids get an education on making, saving and spending money -- we provide them with extra make-work jobs, such as painting their rooms, cleaning the garage and tool shed, etc.  We recently replaced our redwood fence and saved most of the old fencing -- it has a beautiful weathered gray old-barnwood-like look.  We are using it to make indoor and outdoor furniture, and one of the kids made several hundred dollars removing nails, power-washing and stacking and stickering the wood.

    But opportunities like that are pretty rare.

  • Reply 17 of 50
    lkrupplkrupp Posts: 7,098member
    Nonsense. There are so many iPhone users now that even if people held onto their phones for 3 years Apple could still sell 200 million a year just to the upgraders (let alone the people who always want the latest or new iPhone users).

    How long a phone lasts has nothing to do with how many you sell. Eventually those people are going to upgrade. And I would think having a phone that lasts longer would further cause people to buy an iPhone since they know they'll get more use out of it before wanting/needing to upgrade (unlike your Android flagships where support disappears less than 2 years after you buy it).
    I totally agree but Wall Street is all about constant, accelerating growth and short term profits. If you are not growing at double digit rates on a yearly basis Wall Street declares you dead and buried. Slowed growth also gets you declared dead and ready to be buried. If your margins drop you are soon a penny stock and delisted. We are starting to hear about AAPL becoming a “value” stock, whatever that means, but if Apple stabilizes growth, margins, and profits to become a reliable money maker then all we’ll hear is that they are a has-been like Microsoft.
    baconstang
  • Reply 18 of 50
    toddzrxtoddzrx Posts: 195member
    FWIW:

    I'm actually pretty surprised that the majority of iPhone customers have historically upgraded that quickly.  In my case, as well as the several other extended family members who all share in an AT&T shared data plan, the husband or wife buys a brand new iPhone and hands off their (now) old one to their spouse.  In my case, I'm using my wife's old 5S while we bought her the 6S last fall.  iPhones last plenty long if you can avoid dropping it, with the only possible problem being the battery going south.  This way, we're only ever paying off the loan on one phone; the one I'm using is only costing me $30 per month for cell service so it becomes pretty cost effective if you don't need the latest and greatest phone and can get in on a shared data plan.
    argonautbaconstang
  • Reply 19 of 50
    foggyhillfoggyhill Posts: 4,767member
    The Iphone is built like a tank, people need to buy 2-3 Android phones to cover the time an Iphone is used!
    Apple's ecosystem is huge because people keep piling in.
    icoco3macky the mackyargonautbaconstang
  • Reply 20 of 50
    foggyhillfoggyhill Posts: 4,767member
    It doesn't help that the new iPhones looks exactly like last year's and 3-4 years ago. Not a lot compelling reasons to upgrade.
    Huh, the Iphone 6 came out 1.8 years ago. WTF are you talking about?  (and the 5s didn't look AT ALL like it).

     Do you know what your saying or just like inane crap?

     The S6 and S7 look just about the same. In fact most company's high end phone look the same 2 years running these days.
    latifbpargonautmike1baconstang
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