So that monthly fee you're paying is basically the cost
of the phone broken down either 12 24 30 months
, depending on what type of installment plan you're on
or you might be using the Apple card, which
has its own monthly installment plan that lets you break
down the cost of an iphone basically, let's say
it's$1000 you're paying$1000 divided by 12. And
then when that's done, you own the phone and
you can do whatever you want with it. This
new program that Apple is working on is a true
subscription service. So you would be paying a monthly
fee for the phone. And that monthly fee is
not$1,000 divided by 12 or 24. That's just
a monthly fee to have access to the device.
It's no different than a car lease, a car
lease prices, not the price of the car divided
by, you know, how many, how many
years your leases for? Right? It's a monthly
fee no different than paying for icons or apple music
or netflix basically renting the device and presumably there's an
option to buy it later with the amount that you
paid deducted from the actual price. What kinds of
customers is apple looking to entice with a subscription plan
that it doesn't already attract with the different plans that
you had already outlined for us? Yeah, it's
basically anyone, any iphone buyer right? Like I
might use this for my next iphone to instead of
having to pay that$1000 1500 what have you with
tax upfront, You'd be paying a monthly fee.
Right? And that's a lot more digestible. Right
now people are paying on installment plans between$30 and
I think$60 a month For an iPhone. And
for this process it would probably be a little bit
less than that. Maybe$20 or$30 per month
. Right? But who knows at this point a
little too early to find out how much they're actually
going to charge. But I mean the iPhone is
a big deal for Apple. As you know,
very intimately markets. It's a big portion of their
sales, generating nearly$192 billion dollars last year alone
. Why change up the formula then? Why make
it easier to swap out for a better model when
right now, you know us millennials can ask our
parents to help us get the new, latest iphone
model and then apples making double for each iphone user
. Yeah, well I'm very jealous of your parents
ever. Anyone whose parents by the hypothetical hypothetically,
but this is about, this is about long term
revenue, right? Let's say someone buys an iphone
and they don't buy another iphone for, I don't
know, four or five years, three years,
right? This way they're creating more recurring revenue.
They're keeping people locked in the ecosystem and this is
going to add up maybe you're paying 30 bucks a
month for an iphone, then another 30 bucks a
month for an ipad, maybe$50 100 dollars a
month for a Mac and a display and airpods generating
more recurring revenue revenue is very good business. It
means that income does not stop for apple. This
is likely going to increase revenue over time. Now
you've seen peloton, they're trying this now 6200 bucks
a month for appellate on bike and I think that's
going to be hugely successful. So it makes a
lot of sense that Apple is doing this and they're
gonna make a ton of more money because of it
. Yeah, but Peloton and Apple are in very
different situations, aren't they? I mean Apple has
a runway and it certainly has market share. Peloton
is kind of hanging on for dear life. My
question to you, Mark is you compared this to
a car leasing program for automakers who lease cars.
They have a finance unit or finance business that takes
care of the financing. Is apple going to have
its own financing unit or is it going to continue
to work with banks like citizens one which works with
right now for the iphone upgrade program or Goldman Sachs
because they have the apple card together and you can
also buy your iphone through the Apple card and have
the payment split up. So this will use your
Apple ID or your app store account. Right?
So this will be charging you monthly to the credit
card you already have on file or the debit card
or checking account or paypal account you already have on
file, it's going to be no different than paying
for apple music or iCloud in terms of the financing
more to come on that. Okay. And another
question here when you wrote the story headline crossed and
we saw the stock pop immediately on the news and
it's actually held onto the games and it's now the
stock is up for nine straight days. What is
it specifically about news of this plan that investors seem
to like seem to respond to investors like recurring revenue
right today. If I walk into an apple store
and I pay$1000 for an iphone, the relationship
with me and Apple for all intensive purposes is over
. Instead I can pay 30 bucks a month for
the next five years and that would generate more guaranteed
income for Apple. That's what investors like. They
like more revenue. They like higher multiples. So
and they like that predictable revenue to as opposed to
a predictable. Exactly right. Like it's a guarantee
that I'm going to get a new iphone every year
. If I'm subscribing, it's locked and loaded.
I wonder if Apple is looking to create even more
of a bundle. You mentioned a little bit about
that mark. But You know, could we see
a situation where I get to pay maybe let's say
$50 a month and with that I get to pick
and choose what I get out of that. Right
? I get my phone maybe I get apple tv
and apple music. But I opt out of the
iCloud or you're talking about a bundle a bundle but
can I pick and choose my bundle moving forward.
Is that a possibility? So right now they have
apple one and you do have three different options depending
if you want fitness plus depending on how much I
closed or do you want? Depending if you want
gaming Apple arcade. This comes with apple music and
apple Tv plus at the core of course and a
little bit of iCloud storage at the baseline. They
have their normal Apple one package. They have the
Apple one family package. They have the Apple one
premier package. So that's their services bundles. This
would likely integrate with that for an all in one
package in addition to apple care as part of apple
one for the first time as well. So many
more payments to Apple. I already have too many
to to go on as long as we're still funding
ted lasso. I don't really care what else Apple
does. I know that's music to my ears Mark
as the apple reporter. How many how many recurring
payments do you have to Apple Mark? I mean
I think at any given time we all have multiple
ones. Right. I mean I don't have apple
one. I don't subscribe to that. I'm still
on my apple tv plus free trial. I do
the annual plan for apple music. So that's$100
a month instead of the 10 times 12. So
if you pay one year in advance, you save
$20 a year and then I pay for, I
believe it's 200 gigabytes a month of iCloud storage.
So that's$3 on average, probably under$15 a
month for my apple services. But I don't have
Apple Arcade on a monthly. I've tried them all
and use them all intermittently as needed to understand what's
going on. And I actually have been paying for
my phones outright. So I haven't been using the
installment plans because me personally up until this point,
I found it easier to buy the phone out.
Right. And then when the new phone comes out
, actually trade in the phone for the new one
because they do have pretty good value on those.