Millennials are the target of the iPhone Upgrade Program
I’ve seen a number of negative takes on Apple’s new iPhone Upgrade Program by the tech commentariat since it was announced alongside the iPhone 6S on 9 September. They’ve said it’s too expensive, not much different from a carrier contract, and wouldn’t be of much interest to people, as they’d want to own such a big purchase. As you might guess, I disagree with all of these points.
I’m the kind of person who usually buys a new iPhone every year at full price, and sells it after 12 months to get the new one (and help recoup part of that cost). I don’t bother with contracts and carrier subsidies. However, I never buy AppleCare+ because I’m not hard on my iPhones, and I’ve never once needed to get a replacement. I’ve saved money by not paying $99 (now $129) for the warranty every year.
If we consider the 64GB iPhone 6S, which is really the minimum storage size anyone should be buying who really wants to enjoy their experience, it costs $749, or $878 with AppleCare+. If it’s bought on the Upgrade Program, it costs $36.58/mo and lets the user get a new phone after 12 months. So, a year of iPhone use costs $438.96. By my calculations, that’s a fair price. If the user was planning to get a new iPhone after 12 months anyway, which I would argue is more common among millennials as I suspect they’re more likely to be early adopters, it would only be a little more than the amount the iPhone has depreciated over those 12 months (essentially the difference between the initial purchase price, and the price it could be sold for after 12 months of use). The Upgrade Program saves the user the hassle of having to resell the old iPhone, and gives them piece of mind if anything happens to it during the 12 months they use it, as they have AppleCare+ coverage. When the new iPhone is announced, they just hand in their old one, choose their new one, and sign a new contract; and if anything happens within the 12 months, they just pay the replacement fee. Simple!
As someone who travels frequently, the idea of being tied to a carrier is unimaginable. In the past 12 months, my iPhone has had 5 SIM cards. But I would imagine even a millennial who’s more stationary doesn’t want to be tied to a particular carrier for any amount of time. They want to be able to switch to get a better deal if one comes up, which they can’t do if they got their iPhone through a carrier subsidy (without paying a large buyout). The Upgrade Program frees the user from being tied to a carrier, allowing them to move between carriers as they wish. This is bad for carriers, but good for customers, as it could force carriers to offer more competitive rates if fewer of their customers are stuck in contracts.
The argument that people want to own their iPhones, instead of paying to use them, is flawed, at least for a growing number of (particularly young) people. I lead my life in a way that places access over ownership. I’d much rather have Spotify and Netflix than to buy music or movies. My ideal lifestyle would see me with a small flat in a big urban centre, gaining access to bigger spaces or vehicles or whatever else I might need as I need it, instead of feeling weighed down by possessions big and small. The Upgrade Program appeals to my desire for access over ownership.
If I can pay a fair monthly fee to use an iPhone, and know I can get a new one every year as they’re announced, that’s a program I’ll pursue. It doesn’t feel as restrictive as a carrier contract, and saves me from having to make a huge purchase every September. It reduces the friction of annual upgrades and of owning such an expensive device. Some boomer tech writers might not understand this appeal, as the iPhone Upgrade Program seems designed for young people, and could help the iPhone become even more popular among the millennial generation.
The big question: Will Samsung follow suit? If history is any indication, we’ll have an announcement in short order.
