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Businesses Iphone The Almighty Buck Apple

Why Apple's iPhone Upgrade Program Is a Bad Deal For Most 279

Mark Wilson writes: You may have heard that Apple had a little get together today. There were lots of big launches — the iPhone 6S, the iPhone 6S Plus, and the iPad Pro. Those waiting for an iPhone fix were given quite a lot of get excited about, but like your friendly local drug dealer, Apple has a 'sweetener' to help ensure its customers just keep on coming back for more: the iPhone Upgrade Program which lets you upgrade to a new iPhone every year as long as you keep paying each month. On the face of it, it might seem like a good deal — particularly as the price includes Apple Care — but is that really the case? What Apple's actually doing is feeding the habit of iPhone junkies, keeping their addiction going a little bit longer, and a little bit longer, and a little bit longer. In reality, Apple would like you to perma-rent your iPhone and keep paying through the nose for it. Ideally forever.
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Why Apple's iPhone Upgrade Program Is a Bad Deal For Most

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  • by Aboroth ( 1841308 ) on Thursday September 10, 2015 @08:21AM (#50493575)
    Monthly payments for everything you use and pretend to own! From your music you listen to, to the movies you watch, to the software you use, to the storage space on the cloud where you keep all your data, and the physical hardware you pretend like you own. Pay for everything in your life, for the rest of your life! What a deal! Fall on hard times for a few months and miss a few payments, and watch your whole life disappear! Weeee!
    • Or put away a little money every month so when you fall on hard times? Although if I could really turn off and turn on the more expensive parts of my life at no penalty when I needed extra dough that would be kinda sweet.
    • by phantomfive ( 622387 ) on Thursday September 10, 2015 @08:28AM (#50493601) Journal
      What we really need is a payment program that will pay for payments.
      • by mccalli ( 323026 )
        That is called 'insurance'.
        • Insurance only pays for payments when things go wrong.
      • What we really need is a payment program that will pay for payments.

        That's called "income" and for most people, it's shrinking.

    • by LaurenCates ( 3410445 ) on Thursday September 10, 2015 @08:33AM (#50493625)

      I can't imagine why this has suddenly become a thing. Outside of Netflix, which I understand, since movies are a way different beast than software and music.

      If there's one damn thing right my parents taught me, it's about owning my own shit. Get things paid off as quickly as possible so that it's yours, and you don't end up dependent on anyone or anything for the thing you've paid for, especially if it's something you need on a moment's notice.

      I've had to explain to more than one person that "the cloud" is a cute as hell idea, until "the cloud" is down for a few hours, or gets hacked.

      • by thedonger ( 1317951 ) on Thursday September 10, 2015 @08:53AM (#50493713)

        I can't imagine why this has suddenly become a thing.

        It isn't sudden. Gyms have been on this train for years. New car salesman want you to "buy" a new car every three years. Make the monthly payment part of life, and people forget it is there -- it becomes the baseline. And it allows them to make more accurate revenue projections.

        • I can't understand what the "author" is babbling about. iPhone's have the best LTS from any other mobile OS. Devices get upgrades for a long time (compared to many "open" Android phones like the relatively recent Galaxy Nexus which has no official support for the latest version of it's OS), and even after they don't receive upgrades, they do not stop working. I see people with iPhone 4 phones still using them. But if your lifestyle demands having the latest and greatest iPhone, Apple will offer you a servic
        • In fairness to gyms, it isn't like there are no maintenance costs.

          Even if there isn't towel service, someone still needs to mop up all the sweat and dirty floors. And machines go down and need repair. And some of the smaller freeweights tend to wander off. And resistance bands get damaged and broken.

          Am I saying that there are no maintenance costs with other services? Of course not. But to say a gym has no need for a consistent inflow of revenue is to tell me you've never actually been to one.

          (I will le

      • by CastrTroy ( 595695 ) on Thursday September 10, 2015 @09:03AM (#50493763) Homepage

        Personally I'm OK with paying for a music subscription. There's so much music out there, that I couldn't hope to own even a tiny fraction of the good stuff if I was buying everything by the album. Music services cost about $10 a month. For that I'd be lucky if I could buy a single album every month. After 10 years of buying 1 album a month, I would still only have 120 albums. That's a pretty small selection of music as far as I'm concerned. Esepcially when you consider that you wouldn't always select the best option 100% of the time. After 10 years, probably only 80% (96) of the albums would be worth listening to. And that's being generous as far as how good I am at picking up albums. Then there's the problem of multiple good albums coming out in the same month. Do you buy 3 albums one month, and spend a lot of money, leaving you with no new albums for the next 2 months? Or you could just pay $10 and have access to just about everything.

        Right now, my only complaint is that they don't have absolutely everything. I think there would be a decent market for a service that cost $20 and had absolutely everything, but the music labels won't let that happen. It would probably even be a good deal at $30. Same goes for Netflix. I would probably pay many more times the current rate if they had everything. $40 or $50. Most people were/are paying more than that for cable already, and they still weren't getting everything.

        I think that all media bought on subscription is a pretty good deal, provided it makes it cheaper to access more. Personally I don't ever tend to read a book more than once, because it takes so much more time than any other kind of media, and there's just so much good content out there. I really don't see any value in owning a book.

        • by qwijibo ( 101731 )
          Netflix pays royalties based on what movies get watched. The more people who watch something, the more the producer gets paid.

          I'd definitely agree that a monthly entertainment expense would be popular if a similar model was used across content providers. If Amazon has content that Netflix doesn't, it would be nice to not have to pay two subscriptions to switch between them.

          Likewise, if both have the same content but one has a better content delivery, the one that serves the customers best should get paid
        • The problem with your analysis is that there *aren't* any good albums coming out every month. All the good music came out in the 60s through 80s; everything coming out now is corporate-produced, Autotuned shit, except perhaps for a handful of bands which started back in the 70s or 80s and somehow are still alive and kicking and touring and making music.

      • by ceoyoyo ( 59147 ) on Thursday September 10, 2015 @09:50AM (#50494091)

        It hasn't suddenly become a thing. People have been leasing cars forever. This is the same thing. I know people who get a new car every two years. They like having new cars, and lease programs are designed for them. There are some people who want the latest shiny at all times. If you're one of them, this phone lease program will make it a bit cheaper for you to do that. If you don't replace your phone every year then this isn't for you.

        The insidious thing is the cell provider model of obscuring the fact that you're leasing a phone by bundling it with the connectivity itself. Kind of like if the only price a car dealer would ever advertise was the downpayment, and your actual lease payment was bundled with the cost of gas.

      • If there's one damn thing right my parents taught me, it's about owning my own shit.

        My family taught me that owning a house is a total and major drag.

        My father was forced to relocate on his job to a different office, about a three hour drive away from home. The job market was not good at the time and he was an older man, it was not possible for him to resign and take another position. He had recently purchased a new home and there was no possibility of selling it and moving in the required time frame. His only choice was to get a studio apartment in the new town and live there on the we

    • by njnnja ( 2833511 )

      Although I dislike the "rent everything" future as much as you, it makes sense, even if you don't assume that these companies are blood sucking greedy vampires. The basic problem is that economies of scale are tremendously high for most modern goods. Once you create the master track (at great expense), distributing music to millions has never been cheaper. Once you invent the iPhone 23 (at great expense), slave labor in the far East builds them for $100 each. This is different from even highly capital inten

    • by torkus ( 1133985 ) on Thursday September 10, 2015 @09:22AM (#50493875)

      So you're actually *complaining* that the carriers finally separated out the cost of the phone from the cost of their service?

    • Buying something for a one-time payment vs. paying a monthly fee *feels* like a smarter financial decision. But it isn't necessarily. Most things that you buy are very non-liquid (hard to sell) and depreciate quickly to zero. If you go out and spend $500 on a phone, you *feel* like you didn't really spend that much money. You used to have $500 in cash and now you have a $500 item, so you really just traded one asset for another of equal value. But this is just a psychological effect. Unless it's a pie
      • by ibwolf ( 126465 )

        You are forgetting about the cost of leasing/renting. Yes, if you can either pay 500 dollars now or pay 50 dollars a month for 10 months, you are better off with the latter. But that is almost never the case. It is more likely to be 50 dollars a month for a year (600 dollars total). You pay more to pay later.

        Of course, in some cases, as with American cell phone contract (at least until recently,) the two options are rigged so that the monthly plan is equally cheap or even cheaper. This is usually done by co

        • I'm not forgetting it. I'm just saying that renting vs. buying you should figure out the net present value of the (negative) cash flows that you will have over the lifetime of use. The fact that you "own" it (whatever that means) doesn't figure into the calculation. On that part we seem to agree. The one area where I agree with the OP is that if you are using the rental as a means of financial leverage in order to acquire something you can't actually afford, it's probably a terrible idea. If there is a
      • Most things that you buy are very non-liquid (hard to sell) and depreciate quickly to zero. If you go out and spend $500 on a phone, you *feel* like you didn't really spend that much money.

        Phones, at least good ones, do not depreciate to zero quickly. Now, you're probably not going to get 90% of the retail value when you resell one, but they do hold their value to an extent, much like cars. Go try to buy a Samsung Galaxy S5 (which is supposedly "obsolete" because of the S6): the prices are about $350 rig

        • If these were capital equipment purchased for business purposes (Perhaps you run a business that tests Android apps for a fee), this would be a reasonable accounting method. Assume three year linear depreciation or something along those lines. That's not my point, though. In your example, I buy the device for $730 knowing that a year later I could sell it for $365. Or I could rent it for $1/day for a year. Both are the same from a financial perspective. In the first scenario somebody will say "ut I ow
    • by ruir ( 2709173 )
      This goes deeper than this. With the subscription model they can finally sell the same music multiples times to the same extended family, and make you pay multiples times for the same media content every time the technology changes. And create a far more efficient artificial scarcity model than you have nowadays.
    • Sounds good to me. After all, people seem to actually like this "ownership" model, and even though it's great for corporate profits, consumers seemingly agree that it's a great deal and are lining up to sign their names on the dotted line.

      PT Barnum would be proud.

  • You are needed in here, stat!

  • by hsmith ( 818216 ) on Thursday September 10, 2015 @08:28AM (#50493597)
    Carriers are moving away from subsidized phones due to changes they are making to make more money off of you. Due to this, it puts sales of shiny new phones at risk.

    With Apple's leasing you the phone plan, it completely makes this irrelevant. Not many people want to shell out $700 for a new phone, but $30 a month they don't have to realize they are paying $200 in interest. It is silly human psychology.

    They had to do it to keep things going.
    • > they don't have to realize they are paying $200 in interest

      Opportunity cost on that is what, $150? Seems like a perfectly reasonable decision to me, at least financially.

      My problem is the vendor lock-in, which is amusing considering its an unlocked phone. That part I need to read more carefully.

    • by jandrese ( 485 ) <> on Thursday September 10, 2015 @08:53AM (#50493711) Homepage Journal
      The cost is pretty much exactly new phone and Applecare + for the year. Apple is offering what is effectively a 0% interest loan. It's a bad deal if you don't want to upgrade every year, but for people who absolutely must have the new shiny and spring for the insurance it is break even.
      • Except there is ZERO equity being put into the phone. Meaning, it's a trade-up, you can't sell the phone. Effectively, you're leasing the phone like a car as I understand it.

        • by Anonymous Coward

          Only if you trade it in each year. Keep it for two years and you own the phone.

          Zero opportunity cost...

  • by Maury Markowitz ( 452832 ) on Thursday September 10, 2015 @08:30AM (#50493615) Homepage

    Let's see, Apple does *exactly* what everyone else is already doing, for a slightly lower cost, with clearly defined terms and nothing hidden in the price, and slightly improved conditions (AC+).

    Apple is evil. ::rolleyes::

    • the thing is, as apple is the most profitable company in the world and sells a metric shit-ton of devices. everything evil they do is automatically more evil than when everybody else does it. comes with economy of scale. we used to look at microsoft for that, but it's google and apple right now - ms has become the underdog (besides of them selling billions of windows-copies - OSs are not very hot right now)
    • With a difference.

      Carrier based plans will lease out the phone until the payments are complete. Apple on the other hand is a subscription service.

      What's this mean in practice? Well you only come out ahead, and it's only cheaper if you were one of those psycho iAddicts who absolutely had to have a new phone every year. Most people don't break out of a contract to upgrade to the latest phone but instead hold it for the 24 months.

      Personally I don't see the conditions and price all that favorable for most peopl

  • by xtal ( 49134 ) on Thursday September 10, 2015 @08:34AM (#50493637)

    I sell my phone every 18 months. Technology is moving fast.

    It's closer to break even (with AppleCare) than you might suspect; the variance will be on the policies around damage, wear, replacement, etc.

    Also consider the out of pocket on taxes - my 128GB phone cost me around $1000 out the door here in Canada. (15%)

    I think it's ~$20/mo depreciation over a 2 year period vs. $34/mo they're taking, but my time is worth something, and if they make it headache free - it's not as crazy as it might seem at first when you run the numbers. I'm already paying $120/mo all in for service - yay Canada.

    Over 4 years? The depreciation is very high - it's stupid to keep the phone this long if you want a new one.

    If things get so grim $14/mo is a problem, no, this service isn't for you - but it's not as crazy as you might first think. I'll probably take them up if the price differential isn't too crazy here over the US.

    • You're ignoring cash flow, why?
    • I feel pretty lucky then. I've had my Samsung Galaxy s3 for a few years now and technologically it works just fine.
      • Android phones definitely outlast iPhones. My S2 lasted me a good 3 years. When I finally ditched it, it was still very capable, and running Kitkat thanks to the Slimkat ROM.

        Apple is way too locked-down and restricted. They last as long as Apple lets them last.
  • It's what carries do anyway with subsidized phone. You get the phone for cheaper, but pay the carrier in the long run for well over the cost of the subsidy. But lets just take a look at who this is targeting - people who want the latest iPhone every year. For ~$35 for 12 months is $420. So you save a couple hundred dollars if you were to buy it every year if you just have to have the latest and greatest. This isn't for the people on the 2 year cycle who would end up paying more in the long run.

    What it com

  • by Thruen ( 753567 ) on Thursday September 10, 2015 @08:39AM (#50493649)

    For someone who knows that -- without a doubt -- they will upgrade to whatever new iPhone comes out in a year's time, and they're confident that they'd definitely take out Apple Care, it amounts to a saving of a few dollars over two years.

    This is just another pointless article by a hater, he doesn't even agree with himself. It's bait, and not even good bait, he throws a few numbers out there but doesn't show us any actual cost comparison between using the upgrade program Apple offers and, say, paying full retail or taking advantage of other upgrade programs offered by the service providers. Indeed, he even states that you can save money using the program while complaining that you're just sending more to Apple. There's no substance to the article, no facts to back up all of his complaining about the bad upgrade deal. He's probably just sour he's already in a contract and can't dump his outdated phone to take advantage of the new program. This article is just one of the many new additions to the pointless Apple hate on the internet we'll be seeing now that they've announced another upgrade to their mobile product line.

    Just a quick disclaimer, since a bunch of you will no doubt label me a fanboy, I use Apple AND Android products, they both have different advantages and disadvantages. I find myself defending Apple products most often though because for some reason there's this strange hate towards them from people who don't use them, as if we should all be that worried about what phone other people are using...

  • by WD ( 96061 ) on Thursday September 10, 2015 @08:39AM (#50493653)

    Phones are different than computers, yet people still try to apply the computer mentality to it. You don't just buy a smartphone and sit back and use it until it breaks. Unlike Windows XP, your smartphone OS has a very limited window in which it will receive security and other software updates. For iPhones, it seems to be a few years. For Android, it is worse and generally always less than two years. For some of the discount Android phones on discount carriers, the phone may have been abandoned before you even made the purchase!

    In what world do you buy a smartphone and use it for the rest of your life? An upgrade plan that includes Apple Care "bad for most"? Hint to the author: You can't extrapolate your personal opinion to apply to the rest of the world.

    • By now I believe even non technical people are realizing the phones are computers. Some PC computers became very tabletish (the ultrathin with rotating stand and keyboard, the outright tablets) and the phones computer-like, even the old and bad ones : it gets common to use external speakers on them, and perhaps known by some people that you can use an external monitor (usually TV).

      But what I want to point out is they're becoming somewhat mature, and the specs are plateauing (display res maxed out, need to w

    • by Alumoi ( 1321661 )

      I buy a phone in order to be able to reach people when I need, be it by voice, sms, mail, whatever. I might use it for web browsing when I really need some info in a hurry and I don't have my tablet/laptop with me. For anything else a phone is just inconvenient.

    • I use mine until its broken or needs a new battery.

      I'm also super frugal and live a lifestyle that most people would prefer not to in order to gain capital for business ventures.

      I don't "need" flashy and shiny new things all the time nor do I use apps on my smartphones other than included ones.

    • . For iPhones, it seems to be a few years. For Android, it is worse and generally always less than two years

      You're ignoring the trends. A couple of Apple devices I have from 2011 are still going strong and are supposed to be supported through the next major OS update. Android devices go out of support lifetimes like every year.

      It's almost like Apple thinks they can make people want to update, and Google thinks they need to force someone to with an insecure device.

      In what world do you buy a smartphone and

  • 6S (Score:3, Interesting)

    by iTrawl ( 4142459 ) on Thursday September 10, 2015 @08:40AM (#50493659)

    Nothing spells "success" like 6S. Others might say that spells "sucks ass", but to each their own.

  • by Marginal Coward ( 3557951 ) on Thursday September 10, 2015 @08:45AM (#50493673)

    If this catches on, I bet the car companies will be doing it soon. Imagine a scheme in which you pay a monthly fee for the use of a car, though you never actually own the car. If they put their minds to it, I bet the car folks could even get people to pay some sort of large, up-front fee for the car they'll never own. (Sweet!) And as an inducement, the deal might include all maintenance, for free. Not only would you save a lot of money that way, you'd never have to worry about replacing the battery. Best part: you never have to buy a car again!

  • People are surprised that the most valuable company in the world got there by not being a charity? They are JUST now figuring this out?

    Despite all the marketing, at its core, Apple is a profit-maximizing, shareholder-serving corporation that makes money by selling hardware and services. They are quite good at it, as well, with cash on hand that's larger than the GDP of some countries. They got here by figuring out ways to have people give them money.

    And here's another little secret: any company with a signi

  • by thedbp ( 443047 ) on Thursday September 10, 2015 @09:01AM (#50493747)

    OK, so $27.45 * 24 months is $658.80, that's $109.80 more expensive than the unlocked iPhone by itself. AppleCare+ is included, that's $99, so that brings the leasing premium down to $10.80 over the course of two years in Apple's pocket for financing the hardware. And then, halfway through the 24-month financing period, you get an upgrade to the latest device. Sounds legit to me, and a much better deal than carriers are offering.

    If you purchased outright each year, you'd spend $648 the first year, $648 the second year, but get back approx. $300 for selling your previous-gen iPhone, bringing the total hardware cost over 2 years to $996.

    This program also puts a whole lot more power into the hands of the consumer, as they are unlocked and can be used on any network. If more and more people are using unlocked phones, we might actually see some real competition in the wireless industry when it comes to things like customer service.

  • Let's get that out there.

    I think the drive to replace your phone at least once a year is shallow and an example of what's wrong with people in general.

    That being said, if they develop a program to support the minority of people who must have the latest Hipster Phone when it comes out, by all means let it thrive. I'm not going to sign on, I see the problems with the program the built in expense, the money drain, etc... I would be tempted by a similar program, if one existed, for the latest HTC hardware wi

    • Let's get that out there.

      I think the drive to replace your phone at least once a year is shallow and an example of what's wrong with people in general.

      That's what YOU think.

      I think there are a lot of corporations and working people out there who feel that the current generation of phones is holding them back. They don't have enough storage capacity, they are too slow, they don't have the required features for their work.

      But now a new phone comes along, it's quicker and does more. Remember these are working people who are making lots of money. Their phone is just a tool for them to use in their money-making tasks. The price of the phone is really quit

  • It depends. (Score:4, Insightful)

    by halivar ( 535827 ) <> on Thursday September 10, 2015 @09:06AM (#50493777)

    I have a mostly iOS household, but we do not upgrade every cycle. In fact, we usually skip two or three upgrades per device. And for the most part, I prefer to do so. The upgrade plan offers me nothing. Now, my friends who insist on upgrading every chance they get, this may be a better value proposition for them.

  • ....just make sure the marketing message suggests that only the hippest, coolest, trendiest people join that program, and the Apple-ddicts will line up to sign up.

  • by hughbar ( 579555 ) on Thursday September 10, 2015 @09:23AM (#50493887) Homepage
    I don't have a iPhone and hardly ever change my phone anyway. This is pure consumer fetish behaviour. However, these accelerated product cycles put a lot of toxic stuff into landfill, waste a lot of energy and don't provide any extra utility. Listen carefully for the sound of 'maximising shareholder value' by supplying a great deal of negative ecological externality.
    • I have an iPhone 5s, but have decided to skip the 6s and go to the 7, when available. Only reason I'm even considering that - so that I can use Apple Pay, but not before I've done the max on this phone. I have an iPad Mini 3, and don't plan to replace it, unless I need to go from 16GB to 64 GB.
  • After so many comments, and people have not realised this is not about consumer loyalty or helping or deceiving the customer...this is about killing a very active 2nd hand market.
    • After so many comments, and people have not realised this is not about consumer loyalty or helping or deceiving the customer...this is about killing a very active 2nd hand market.

      Bullshit. This will affect, what, 10, 20, 30% of the iPhone sales? It's never going to be the dominant way to get an iPhone. The advantages really fit only a fairly small demographic - people with disposable income AND some deep seated desire to have the latest iPhone. While one could argue that the money would be better spent on psychotherapy or Cialis, people do what they will.

      But there will be lots of extra iPhones for the refurb market. And if there isn't? Again, who the hell cares? There will be

  • ...if you are the type who gets the new iPhone every year regardless?

    This program is not for everybody, although it will likely suck in more people on the yearly phone upg train.

  • I don't own any Apple products.
  • by bidule ( 173941 ) on Thursday September 10, 2015 @10:04AM (#50494199) Homepage

    I know independent contractors in Canada who'd rather rent their car and computer because the cost is 100% deductible on the first year. Buying thing means dealing with depreciation and getting your tax break later.

  • As far as I can tell, it's the first rule of business - Figure out a way to generate recurring revenue. What business owner wants to get $500.00 from you one time and then take their hands out of you pockets? Most of these greedy bastards would take everything you have and leave you homeless if they got the chance. I worked for a major cell phone provider and it was miserable under the regime I was working for.

    First of all, they hope that there are lots of "features" on your phone that you pay for and
    • Another first rule of business is "don't sweat the small stuff". If you lease a phone then have so much less to worry about. You don't have to worry about repairs or loss or an obsolete old phone. When you are making lots of money there is really no time to screw around with these things. Why do you think that companies lease cars and trucks? It's because they don't want to deal with upkeep and maintenance. They can write a fixed check every month for a fixed service and they can rely on it.

  • that you have to replace it after 12 months, maybe it wasn't a good phone to begin with. Such crap must sell for less than $100, isn't it? Oh wait...

  • Here is the normal total cost of ownership calculation for comparison.:

    iPhone 6 64GB in 2014: $750
    Decent eBay price in 2015 : -$450 (plus shipping)
    Minus eBay fees: -$54
    TCO: $246 or $21/mo

    iPhone 5s 32GB in 2013: $750
    Decent eBay price in 2015: -$275 (plus shipping)
    Minus eBay fees: -$33
    TCO: $442 or $18/mo

  • I read an article about this in Thursday's WSJ. The article said that it's about shifting control of the customer from the carrier to Apple. I'm sure that's true but I wonder if goes a little deeper. What if part of the goal is to prevent the carriers, who don't work for Apple, from convincing a customer to go with Android. Maybe the carriers are getting more profit margin by pushing a non-Apple product. If you set the way-back clock to the mid 90s, Apple was really struggling to sell their products in

  • Suck them dry, they like it. And Apple needs money more than they do.

Real programmers don't write in BASIC. Actually, no programmers write in BASIC after reaching puberty.