Apple as a service could yield $5k/year from some customers

Happy customers. Not such a complex business plan. Hard to achieve.

The most committed ‘power users’ of Apple products may potentially generate as much as $4,800 in annual revenue if Apple extends subscription services to hardware, estimates Counterpoint Research.

To the $400 moon and back

The researchers say Apple’s services accounted for c.15.7% of its Q4 revenue but argue that a shift to offer all of Apple as a service would generate more cash per customer per year – up to $400/month from its most hardcore users.

They also make an interesting observation that the refurbished smartphone market is currently dominated by Apple.

By offering devices for rent, the company would be able to extract more value from those it sells, potentially even putting devices back out for subs.

Both Morgan Stanley and CIRP have already said they think this plan would work.

“We are confident that the average Apple user’s willingness to pay for access to their Apple devices and services is meaningfully higher than $1/day or $30/month,” said Morgan Stanley research analyst Katy Huberty.

We’ll get back to that dollar later.

Deepening relationships for profit

“A subscription model will establish a stronger relationship with premium iOS users with more frequent transactions compared to the existing one-time purchase transaction. This will have a multifold impact across Apple’s existing and future products, driving a much higher dollar value relationship with its user base,” writes senior analyst, Hanish Bhatia.

Not only this, but also Apple could make its offer even more attractive by bundling its existing services into the deal. You might be renting an iPhone, Mac, iPad, and AppleCare, but you’d get Fitness+ for free.

You may even get 3% back if you pay with an Apple Card, which opens additional opportunities in payment processing, credit checks and other financial services.

You might maintain your current bank account, for example, but make all your payments using that virtual Apple Card, giving Cupertino a small slice of every transaction.

What a transaction fee might be worth

Thinking on this, I could not help but consider what a small slice of every transaction made by a billion Apple users might be worth.

It’s a lot. Even if all those users spent just a dollar a day.

Given that UK payment processing costs on a debit card starts at 0.25% per transaction, that dollar per day becomes a potential near billion dollar ($912m) business over a year. Payment processing costs may vary in different nations, of course, and I also think that in aggregate we, as in Apple’s users, probably spend over a dollar a day — not just with Apple.

On the basis that customers are spending a dollar on anything they like to build you a billion dollar business, you sure can see why CEO Tim Cook sees that “great runway” for Apple Card and Apple Pay.

That’s a digression from Apple as a Service, but it’s a useful one, given that within the currently speculated model for this plan, Apple has an opportunity of boost use of its financial services as well.

All these moves together accomplish some big results. Not only do they make its hardware more accessible to more people, but they also help make the company richer as well.

How can it refuse a deal like that?

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