Apple has been pivoting its marketing plan methodically over the past few years away from having you to upgrade your iPhone as much as possible. Rather, it maximizes the money that it generates in a different way: selling subscription services and accessories that work with the iPhone to you.
A prime example of the latest strategy in practice is the newly updated iPhone SE.
The iPhone SE, launched earlier this month, is starting at $399 for the 64 GB edition. That is extremely inexpensive compared to the iPhone XR and XS, which launch at $749 and $999, respectively. But the services that you are going to want to connect through the phone are not.
Slowly, Apple has come up with new ways to bring people into its ecosystem. The business also launched Apple Arcade, a game subscription service, for $4.99 a month in the past year alone; Apple TV+, its premium TV streaming service, also $4.99 a month; and News+, at $9.99 a month.
That’s in addition to the services already provided by the company, such as iCloud storage, which ranges from $0.99 to $9.99 a month for an extra 1 TB of cloud storage; Apple Music, $9.99 a month; and AppleCare protection, which comes in at $7.99 a month for iPhone SE.
Those smaller expenses equate to one fairly substantial monthly bill — subscribe to them all and you’ll pay at least $39. Apple has also encouraged people to use its iPhone upgrade program which promises the new and biggest iPhone every year in exchange for a monthly fee, starting at an oddly specific $35.33 per month. The SE is not included in the upgrade program, but it is part of the same strategy to bring in new incentives to invest outside the iPhone rather than in it.
Selling a cheap phone like the iPhone SE gives more people the chance to spend their money on those services every month. It is the engine that prints more money: before you purchase your next computer, Apple gets you in the door to its ecosystem and has guaranteed unfettered access to your attention (and wallet). During that time, you’re likely to subscribe to at least one, if not more, of these utilities.
And if you aren’t sold on subscriptions by Apple, the company will probably upsell you on an addon. Like other recent iPhones from Apple, the new iPhone SE does not have a headphone jack, meaning consumers should at least consider purchasing a pair of AirPods ($159) or AirPods Pro ($250) to listen to music and take calls. Or perhaps they’ll buy an Apple Watch instead, which only works with iOS and starts at $499 for the latest model.
Apple’s recent bet on subscription services is in several respects beneficial for consumers. The phones are more affordable and the incentive to constantly update is lower.
But the shift in Apple’s approach has also put some cracks in the previously almost smooth iOS experience. Often the upsell strategies are subtle, like placing the front and middle of Apple TV and Music icons on new home screens for your iPhone. Yet other methods of upselling are more violent. For example, in the settings of a new iphone, you’ll see a countdown reminding you how many days AppleCare has left to purchase. Apple Music sends notifications of push to give free trials. You’ll find after a couple of days that the free iCloud capacity — a measly 5 GB — has already run out. When you use Apple Wallet, a giant advertisement for Apple Card hovers at the bottom of your screen.
Yet Apple’s insistence on services is partially a response to customers refusing to update their phones for longer. And so far it seems to be working: Last year, for the first time in years, the iPhone accounted for less than half of the company’s sales, and that was well before Apple’s Television, sports, and news subscription services were available. With an estimated 1.5 billion iPhone users today, Apple has the ability to touch more eyeballs than any other company with a single software update or push notification.
The iPhone SE is the ideal appeal at such a low price: Compared to the iPhone XS, it’s inexpensive enough to tempt someone who wants to upgrade their phone and locks Apple in years of future cash, even if you buy just a single service or accessory after purchasing the phone. But the bet is simple: You’re all but certain to spend more money, and Apple wins regardless of what that is.
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