iPhone Upgrade Program could eventually open up beyond Apple Stores, Tim Cook says
Apple would eventually like to expand its new iPhone Upgrade Program so that shoppers can sign up for it without having to come into an Apple Store, Chief Executive Tim Cook said this week.
"We actually solved that problem back in 2007. But then quickly had to change it in order to scale in a major way," Cook said during Tuesday's fourth fiscal quarter earnings call, making reference to the first-generation iPhone, which was sold unsubsidized.
As it turns out, Apple was actually ahead of the curve in 2007 by selling an unsubsidized phone. At the time, users could set up the handset entirely on their own at home after a purchase.
But the following year, with the launch of the iPhone 3G, purchases became largely subsidized through carrier AT&T in the U.S., making the process more complex. For several months, in fact, buyers had to activate their new iPhone 3G in-store, even if they bought it online.
If an iPhone 3G was purchased and not activated within a set period of time, the customer would pay an early termination fee to reimburse the cost of the subsidy --?a strategy intended to prevent users from buying, jailbreaking and unlocking the device, which was exclusive to AT&T for years.
Though Apple relented and opted for subsidized pricing starting with the iPhone 3G, in the years since carriers have since moved away from contract subsidies while offering lower monthly rates. Now, carriers prefer that the customer pay the full cost of the iPhone --?starting at $649 for an iPhone 6s.
To soften the blow, the cost of the device can be spread out over an extended period, without any interest, as some carrier plans have done.
Apple's new iPhone Upgrade Program takes it one step further, offering an unlocked, contract-free phone with AppleCare+, with an option to upgrade to a new handset after 12 months of interest-free payments. Most carrier installment plans are for locked phones.
The Apple iPhone Upgrade Program is currently accessible only in Apple Stores, presumably due to the financial arrangements involved. Purchasers have to sign up for a 24-month installment period, which is actually an interest-free loan that they must qualify for with a credit check.
Ultimately Apple would like to "have that automated and working with our partners, with service providers," Cook said Tuesday.
"We actually solved that problem back in 2007. But then quickly had to change it in order to scale in a major way," Cook said during Tuesday's fourth fiscal quarter earnings call, making reference to the first-generation iPhone, which was sold unsubsidized.
As it turns out, Apple was actually ahead of the curve in 2007 by selling an unsubsidized phone. At the time, users could set up the handset entirely on their own at home after a purchase.
But the following year, with the launch of the iPhone 3G, purchases became largely subsidized through carrier AT&T in the U.S., making the process more complex. For several months, in fact, buyers had to activate their new iPhone 3G in-store, even if they bought it online.
If an iPhone 3G was purchased and not activated within a set period of time, the customer would pay an early termination fee to reimburse the cost of the subsidy --?a strategy intended to prevent users from buying, jailbreaking and unlocking the device, which was exclusive to AT&T for years.
Though Apple relented and opted for subsidized pricing starting with the iPhone 3G, in the years since carriers have since moved away from contract subsidies while offering lower monthly rates. Now, carriers prefer that the customer pay the full cost of the iPhone --?starting at $649 for an iPhone 6s.
To soften the blow, the cost of the device can be spread out over an extended period, without any interest, as some carrier plans have done.
Apple's new iPhone Upgrade Program takes it one step further, offering an unlocked, contract-free phone with AppleCare+, with an option to upgrade to a new handset after 12 months of interest-free payments. Most carrier installment plans are for locked phones.
The Apple iPhone Upgrade Program is currently accessible only in Apple Stores, presumably due to the financial arrangements involved. Purchasers have to sign up for a 24-month installment period, which is actually an interest-free loan that they must qualify for with a credit check.
Ultimately Apple would like to "have that automated and working with our partners, with service providers," Cook said Tuesday.
Comments
I'm four hours round-trip from the nearest Apple store. My time and mileage are worth far more than the savings of a few dollars in interest I would earn had I kept my money.
Wonder how they handle multiple purchases... Will I get a credit inquiry for every phone? Mine, wife's, kids, etc
On the earnings call, Tim emphasized several times that the payment plans "begins to look like a subscription" from a revenue-tracking perspective.
I wonder if Apple (over time) will morph to a subscription model:
- Hardware subscriptions (Phone, Mac, Watch, Car)
- Software subscriptions (1st-party Apps)
- Service subscriptions (Music, TV content, Movie content)
Wall Street likes this model. In fact, one of the analysts yesterday asked Tim if he thought there was a way for Apple to increase its participation in the stock appreciation that other subscription-based providers (such as AWS) have recently experienced. Clearly Wall Street views such a revenue model as positive, and Apple has the right mix of products to shift in that direction if they'd so choose.
Then, extending something that sog suggested in an earlier post, Apple could simply report on these three subscription revenue streams and not actual device sales.
their system isnt perfect. i make a very good living and was denied by Barclay for some reason when trying to finance a new rMBP. never could get any clear answers.
their system isnt perfect. i make a very good living and was denied by Barclay for some reason when trying to finance a new rMBP. never could get any clear answers.
There are millionaires out there who wouldn't qualify to buy a refrigerator on credit. One's level of income and one's creditworthiness are two different things. There are wealthy people with bad credit and there are poor people with good credit. There are both wealthy and poor people who have utilized too much of their available credit and get denied for various loans or services despite having otherwise excellent credit histories. By law, anyone denying you credit must mail you a letter with the specific reasons on which they based that decision. This letter entitles you to a free credit report from the credit bureaus. If you truly have no idea why you were denied, then you have either buried your head in the sand or you know exactly why you were denied, but don't want to admit it.
I think we've all frolicked, and splashed the waters of the Nile at one point or another.
This is a very good plan that will ensure more people get the latest Apple products.
pull your head out of you....sand. im well aware of how it all works, ive written credit application systems for household-name banks. what im saying -- A) i have good credit.
there would be zero reason for me to lie to a bunch of random strangers about why i was denied. but thanks for playing psychologist.
next!
Yes. But it has been that way for quite some time. Not new with the 6s
I believe that the OP meant iPhones with both CDMA and GSM radios. That was first available on the iPhone 5.
On the earnings call, Tim emphasized several times that the payment plans "begins to look like a subscription" from a revenue-tracking perspective.
I wonder if Apple (over time) will morph to a subscription model:
- Hardware subscriptions (Phone, Mac, Watch, Car)
- Software subscriptions (1st-party Apps)
- Service subscriptions (Music, TV content, Movie content)
Wall Street likes this model. In fact, one of the analysts yesterday asked Tim if he thought there was a way for Apple to increase its participation in the stock appreciation that other subscription-based providers (such as AWS) have recently experienced. Clearly Wall Street views such a revenue model as positive, and Apple has the right mix of products to shift in that direction if they'd so choose.
Then, extending something that sog suggested in an earlier post, Apple could simply report on these three subscription revenue streams and not actual device sales.
That is exactly what i said in some earlier post. Except my model would be a single Apple subscription that includes Hardware & Software & Services. The numbers will properly breaks out in the Annual Conference, but I think it would be better to lump all together as an Apple Experience.
However I do not like the Hardware like Watch and Mac to be Subscription based. May be for the Enterprise ( since they like this model and its easier to put on Opex ) The iPhone works because the iPhone needs Mobile Connection, which is in itself a monthly fees.
The Mac and Watch has nothing to associate them to.
You're right that a subscription fee for Watch and Mac feels kinda forced & unnecessary. In general, it'll be interesting to watch whether Apple increases its move toward subscription-like payments.
It's interest free
Yes, I know the loan is interest-free. That's why I said what I did. If I kept that $1,000+ to myself and used the AIUP, my $1,000+ would earn a few dollars in interest while I paid about $40+ per month.