More Thoughts on Gadget Subscriptions

Jeff Jarvis just wrote a blog entry over on Buzz Machine that sparked my fancy.  He mentions that he would love to be able to subscribe to new gadgets like the iPhone and then receive new models as they come out without waiting in lines and possibly receiving them before non-subscribers.

I think this is a fabulous idea and an idea that’s pretty much inevitable for a few reasons:

  • The cost of gadget components (processors, wi-fi antennae, gps receivers, etc etc) continues to fall at the same time that we can cram more of said components into small, sexy packages.
  • The rate at which new gadgets are coming out is increasing every day because of point number one.
  • There’s incredible demand for the hottest of these gadgets.
  • We’re all used to buying new iterations of our favorite gadgets every year or two.
  • Companies are dependent on our dependence of their items.  They gotta sell ‘em and we gotta have ‘em.

My first thought after reading Jeff’s article was, “Woah - I can’t imagine paying $500 for the latest iPhone every year, that’s crazy.”  But that’s not how the subscription model will work.  To subscribe to the iPhone, I’d have to pony up $500 to begin with, but as each new model comes out, my subsequent payments will be lower.

Why?  Because there will be tiers of subscriptions for the iPhone.  Us early adopters will all want the newest, coolest toys, and we’ll be willing to pay a premium for that.  But there’s legions of other customers who either can’t or won’t pay that premium, but who still want to get in on the fun.

So, as version 2.0 comes out, all of us version 1.0 owners will exchange our original iPhones for the new models and the next tier subscription begins.  Another customer, who wouldn’t pay $500 for the new iPhone will pay $250 for his tier 2 subscription and receive my iPhone, and I’ll be credited some portion of that towards my new tier 1 iPhone, lowering its cost from $500 to $300 maybe.

This is all doable right now, via eBay or CraigsList, but a more formal plan would streamline the process and remove the risks inherit in those alternatives. I’m not sure that gadget manufacturers like Apple will offer this form of subscription model, but I think it’s a great business opportunity for someone else to develop.  Hello, Amazon?  New idea for ya!

Gadget technology is accelerating along a near-exponential curve.  Newer, cheaper, better models of just about everything are coming out quicker and quicker.  Eventually this curve will result in a commiditization of gadgets.  I expect one day we’ll be able to walk into 7-Eleven, toss last week’s iPhone into a recycling bin
and pay $20 for this week’s model.