Apple cancels plan to sell iPhone as a subscription service
Apple has scrapped its plans to launch an iPhone hardware subscription service, according to Bloomberg's Mark Gurman. The team working on the project has been disbanded and reassigned to other projects at the company. The now-discontinued iPhone hardware subscription service was part of the company's broader strategy to redefine how consumers buy its flagship device. High-ranking executives at Apple had previously sent this project back for revisions.
Subscription service faced multiple setbacks
Apple wanted to make owning an iPhone like subscribing to an app, with customers paying monthly fees and getting new phones every year. This initiative was handled by the Apple Pay group, which also scrapped a "buy now, pay later" program earlier this year. The iPhone subscription service was first reported by Bloomberg in 2022, with a planned launch by the end of that year. However, the project encountered several setbacks, causing delays and ultimately leading to its shutdown.
Apple planned to boost iPhone sales
The hardware subscription service was a part of Apple's plan to boost iPhone sales and earn more recurring revenue. The iPhone is Apple's main source of revenue, accounting for more than half of its annual sales. With this service, instead of paying for an iPhone upfront or going for an installment plan, customers would be charged a monthly fee on their current Apple account used for app downloads and other subscriptions.
Subscription service could have disrupted existing programs
The proposed hardware subscription service would have relied on an in-house financial structure, based on loans provided by Apple itself. This could have disrupted existing installment programs and promotions offered by wireless carriers to sell iPhones and retain customers. It also had the potential to replace two long-standing programs offered by Apple: the iPhone Upgrade Program and Apple Card Monthly Installments.
Regulatory concerns influenced Apple's decision
Regulatory concerns were a major reason behind Apple's decision to kill the hardware subscription service. Earlier this year, stricter rules by the Consumer Financial Protection Bureau resulted in the cancelation of Apple Pay Later. The agency required pay-later-style services to follow the same regulations as credit card companies, something Apple preferred to avoid given its relatively small business size.
