Would an “Apple Prime” Subscription Really Work, as Goldman Sachs Analysts Speculate?

Goldman Sachs analysts suggest Apple Prime service similar to Amazon Prime

As reported by Fortune, Goldman Sachs analysts Simona Jankowski and Drew Borst have prepared and today published an extensive report on how an “Apple Prime” service similar to Amazon Prime would be beneficial to the company. We’d like to look at why such an idea might or might not work from Apple’s perspective.

The idea is fairly simple. The analysts essentially suggest bundling of hardware and content into a single package for $50 a month. You’d get the latest iPhone and an Apple TV unit, and every time Apple upgrades the hardware you’ll get one of those for free. On the content side of things you’d get access to Apple Music, as well as to a limited selection of iTunes movies, TV shows and new content like sports that Apple might carry.

According to the analysts:

“We believe the shift to this model would drive increased consumption of hardware (iPhone and Apple TV) on increased customer loyalty, with increased monetization of services and content, and investors would have increased visibility on revenues.”

How Practical is the “Apple Prime” Idea?

From a logistics perspective, it’s easy enough for Apple to create such a bundle. Even if they had to rope in a carrier for the voice and data, it would still make sense. At $50 a month you’d be paying $600 a year with the benefit of getting a new iPhone whenever it releases. Of course, you’d be stuck on a contract for an unspecified amount of time, but it’s not that hard to come up with a termination clause would be fair to all partiers to the contract.

To make things even more attractive they can throw in a bunch of freebies like AppleCare+ and maybe even some cool accessories. They could also offer several other paid add-ons like bundled iTunes content or premium app bundles.

So the idea is sound, but will Apple fans go for such a subscription deal knowing they’re locked into the $50 a month deal?

Why Such an Idea Might Not Work for Apple

They could, but I seriously doubt that any comparison to Amazon Prime is even possible.

First of all, Amazon Prime is all about freebies. One survey shows that more than 70% of Amazon Prime members joined the program because of free two-day shipping. What can Apple possibly offer that compares with that?


Second, Amazon Prime has a ton of free stuff because as a company they are not worried about the bottom line. They never have been. Jeff Bezos said this very early on in his journey with Amazon. And it’s not just him.

A few years ago, two analysts wrote in the International Business Times that:

“The company barely ekes out a profit, spends a fortune on expansion and free shipping and is famously opaque about its business operations, yet investors continue to pour into the stock, pushing up the company’s share price to $388, a nearly 400 percent rise since the end of the company’s third quarter in September 2008.”

And things aren’t that different today. This year Amazon’s North American retail operations are finally showing some consistent profitability, but it’s in the range of other retailers like Wal-Mart – in the mid to low single digits.

Apple, on the other hand, is a completely different ball game. Essentially a product company, Apple regularly enjoys margins that are much higher.

For the fiscal 2015, Apple’s full-year revenue reached $233.7 billion, while annual profits were $53.4 billion. During the same year Amazon made $107 billion in revenues, while annual profit came in at $596 million – that’s a little more than half a billion.

Do you see where the problems would start to crop up if Apple went the Amazon Prime way? They’d start to lose profitability, they’d start losing their exclusive branding status and they’d be identified with a company that proudly sells products at the cheapest price possible.

For all these reasons – and others that Apple executives will definitely have considered – I don’t think an “Apple Prime” offering would be such a good idea. The bundling is good because that’s what companies like Microsoft do and it’s paying off big time. But for a brand like Apple, I’m not sure that’s the best way forward.

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