There have been calls for Apple to jump on the gravy train known as recurring revenue for quite some time, and the company has to a very small degree with the iPhone upgrade plan and Apple Music subscriptions. However, analysts at Goldman Sachs are calling for the company to intensify its recurring revenue plan by launching a subscription-based service that would take out Amazon Prime. Their idea is almost identical to a plan suggested by another firm earlier this year and a twist on a plan they offered nearly a year ago.
Goldman goes to work for Apple
Analyst Simona Jankowski suggested in a research note this week that Apple launch a “subscription bundle as a way to reinforce iPhone loyalty and leverage it into content.” She and her team then drafted a plan that the company could use to charge customers around $50 a month—on top of paying for the iPhone upgrade plan the company already has in place. They referred to their plan as “Apple Prime.” In addition to iPhone upgrades every year, it includes a new Apple TV every three years, subsidizes for the iTunes library and new original content and an Apple Music subscription:
Helping Apple wade into streaming TV, music
The Goldman team explained that the subscription-based plan is about more than just getting customers to buy new iPhones or other products. After all, they’re already doing that. They said a subscription-based plan as the one they’re calling Apple Prime would also distinguish Apple’s products from those by its number one competitor, Samsung.
Further, it would enable the company to expand into the highly profitable streaming market. Amazon started its subscription-based Prime service by offering free shipping, but it has raised the price of the annual subscription as it expanded the products included with Prime over the years. Streaming for some movies and TV shows is now included with Amazon Prime, which is where the Goldman team got the idea to add this service to their Apple Prime plan.
Live sports the main focus
Of course the streaming TV service Apple is supposedly working on is still a rumor, but Jankowski and team believes the company should create some original content for that rumored service, just like Amazon and Netflix are doing. However, they emphasize that live sports should be the top priority for Apple, which makes sense because no other streaming platform has had much success getting streaming rights to live sports. Twitter did manage to strike live-streaming deals with the NFL for Thursday night football games and Wimbledon, but this live sports is an area in which streaming availability is sorely lacking.
Jankowski argues that Apple could partner with major TV sports networks and offer a sports package as an optional part of the bundle, although clearly this would be a tough sell. If it were easy to secure streaming rights to live sports, a company such as Netflix could have already done it. It would be a highly profitable venture because for many would-be cord-cutters, live sports is the only thing keeping them connected to traditional pay-TV.
A spin on previous subscription Apple plans?
You may recall that in May, Bernstein analysts floated a plan they called Apple-as-a-Service, which they said could be just what the company needs to boost its market capitalization to $1 trillion. Their idea was that customers could buy subscriptions linked to the company’s products, meaning that they would pay a monthly subscription in order to be able to regularly upgrade their devices.
It was similar to what Apple is doing with the iPhone upgrade plan, but customers would be able to purchase various bundles with different mixes of devices, including iPhones and iPads. They suggested that consumers would pay a subscription that’s less than what they pay for cable TV for the right to upgrade their devices regularly. I was and still am skeptical that people would want to add yet another sizable monthly bill into their budgets, but Apple gets away with many things other companies can’t because of consumers’ devotion to its i-Devices.
In November 2015, Jankowski herself touted what she also termed “Apple-as-a-Service,” which was similar to Bernstein’s plan and to her current plan. In last year’s plan, she suggested that the company could eventually rake in an average of $153 per customer per month.
Shares of Apple edged lower by as much as 0.38% to $117.18.