Apple Prime and the iPhone Pro
Indulge me on some wildly idle Apple speculation for a moment…
Two separate questions that are seemingly unrelated right now, but could be far more intertwined somewhere down the road:
- Will Apple release an ‘iPhone Pro’ product?
- Will Apple release an ‘Apple Prime’ product?
The first, comes by way of John Gruber, who yesterday wrote a post making the case for why Apple could release a new iPhone (the one often referred to in the media as the ‘iPhone 8’ but which will undoubtedly be called something else) at a higher price point than the current high-end models. His case makes a ton of sense in my book — to state it simply:
Rumors have Apple releasing three new iPhones this fall. Two will undoubtedly be the “S” iterations of the current iPhones 7. The third is likely to be the OLED edge-to-edge screen iPhone. The first two will likely take the place — and, importantly, the price points — of the current top-of-the-line iPhone 7 models. This new, third model will probably have a higher price point. Perhaps up to $1,300 or $1,400 at the high-end. This is because of Apple’s margin requirements and potentially simple supply and demand economics (and maybe not wanting to cannibalize iPhone 7S Plus sales).¹
One thing Gruber does not touch on, which could come into play here as well: the ‘iPhone Upgrade Program’. The uproar over Gruber’s post is mainly predicated around how no one will want to pay over $1,000 for a phone. Which is hogwash, of course. People will pay.
As Gruber notes, for many folks — myself included — the iPhone is the most important computer they own. If someone can afford to pay for an improved iPhone — and cost/price is something to be mindful of, but this is a typical question for Apple since, well, forever — they will. And for those people, it will be worth it.
For those more worried about any rising upfront costs, for the past couple of years, Apple has been touting their ‘iPhone Upgrade Program’ — including on-stage during iPhone unveilings. This is the program that basically allows you to defer the full cost of the iPhone over monthly installment payments. And, perhaps more importantly, it allows you to upgrade to the new iPhone each year. Because you’re basically paying Apple in perpetuity.
It’s like what the carriers used to do in order to offer “free” phones — they were anything but free, you were simply paying for them in your monthly bill — but powered by Apple. Well, sort of…
And here’s where you’ll allow me a slight tangent. The ‘iPhone Upgrade Program’ sucks. It’s perhaps the most un-Apple-like thing Apple has ever offered. That’s because it’s not actually Apple that runs it. And that’s because Apple is not a bank — at least not yet. Instead, they outsource the bank element to an actual bank, Citizens Bank.² And my god is dealing with them — because I’m one of the suckers who signed up for said program; more on that in a second — just a crap experience.
To be fair, it’s not much worse than dealing with many other banks. But it’s not at all an Apple-like experience, as it should be. Good luck trying to do basic things like logging into your Citizens account. Better luck trying to figure out how to upgrade to the new iPhone in real time when it goes on sale. I tried to do this last year and ended up just paying full price for a new one because it was such a clusterfuck.
I can’t say enough bad things about the experience. And I’d recommend staying away — except that it may save you some money, depending on how you play it (if you were going to upgrade to the new iPhone at full price every year anyway). But it’s not worth the hassle right now. Apple should absolutely re-think this entire program. And probably bring it in-house.
…Which leads directly to question two.
We all understand why Apple outsourced the ‘iPhone Upgrade Program’ to Citizens Bank — again, Apple is not a bank. But given Apple’s need to find new areas of growth for their business, it’s both insane and not insane to suggest that they may want to dip their toes more into the banking space… I know, I know. There are risks, regulations, balance sheet requirements — wait, have you seen Apple’s balance sheet?! — etc. But… Just saying.
Of course, even if they don’t fully go down that route, it leads to the notion of Apple offering some sort of premium service, perhaps akin to Amazon Prime. My guess is that this is in the works in some way already at Apple. But I imagine they’ll back into it via Apple Music/iTunes. That is, when you pay for a monthly Apple Music subscription, you start to get other things — like original video content. Land and expand, just as Amazon has done.
But not exactly as Amazon has done.
Apple doesn’t aspire to be the “Everything Store” as Amazon does. If anything, Apple aspires to be almost the opposite: the store that sells a handful of highly curated, highly valuable items. “A thousand no’s for every yes” and all that. But sells a shit ton of said items. Like the iPhone.
So how do you reconcile that mantra with the mother of all subscription services, which is what Amazon Prime is?
I think Apple can, and perhaps should take a step in this direction. If they start to bundle other subscription elements into such a package, we can have a true “Apple Prime” service. iCloud storage is an easy and obvious one to add. But what if something like Apple Care gets added? That might make sense too. More extreme: what if eventually the ‘iPhone Upgrade Program’ — fully managed by Apple — was a part of this too?
To be clear, I don’t think this will happen anytime soon — if at all. The ‘iPhone Upgrade Program’ is far too expensive right now to be bundled into a hypothetical Apple Prime offering. My current monthly iPhone payment (before the actual wireless service bill, of course) is around $45/month. That’s well north of $500 a year.
Right now, many of us are already paying $9.99 a month for Apple Music. That’s $119.88 a year. Amazon Prime is currently $99 a year — and offers music, and a lot more. But this is Apple. Any “Prime” service they offer is going to be — and likely can be — more expensive.
But not $500+ a year more expensive. That would be a bridge too far, right now. But it’s an interesting thing to consider — especially for Apple’s most loyal ecosystem citizens — down the road.
One easier and undoubtedly more palatable short-term opportunity for Apple: offer these hypothetical ‘Apple Prime’ members healthy discounts on the latest and greatest iPhones… Priming the hardware that feeds into subscription services and vice/versa (see also: Amazon Echo, Kindle, etc).
Given that “Services” is now the most important business Apple has outside of the iPhone itself, much of this feels inevitable (for all the major players, by the way). I don’t know if it will go down as described above, and I think it will be years before we know for sure. But I wouldn’t rule any of this out.
And I certainly wouldn’t rule out a higher-priced ‘iPhone Pro’ this year and going forward. In fact, I think I’d bet on it, for all the main reasons Gruber lays out in his post. And because Apple has put the groundwork in place — no matter how shitty the foundation may be — to obfuscate the cost of such a device through the ‘iPhone Upgrade Program’.
Before it’s all nicely packaged in an ‘Apple Prime’ bundle, one day, perhaps.
¹ And, not to get too far into the weeds here, but if there’s one fault in Gruber’s argument it’s trying to take on all three sides of this at once. If Apple is going to raise the price of the ‘iPhone Pro’ due to supply constraints, that implies they’re not doing it to maintain margins. (And, of course, Apple at least claims to never care about cannibalizing their own products.) As with most things, it’s probably in the gray zone: a mixture. But I would not bet against the margin being better on this new iPhone (if it comes to exist!) — well, certainly better once OLED (and other key component) supply improves, which, as has been widely noted, may not happen until next year.
² Though it is other banks in other countries, obviously.
