How annual upgrade programs could change the game
This article may contain personal views and opinion from the author.
Now, Apple has become the first manufacturer to offer an annual upgrade plan directly to customers and this is where things really get interesting, because suddenly we're not only talking about a shift in the average upgrade cycle for consumers, but there is also a shift away from carriers as gatekeepers to new devices. Both of these changes can potentially have a major impact on the mobile ecosystem as a whole.
The first change is in how users view their relationship to their mobile carrier, because two-year contracts for wireless service are quickly becoming a thing of the past. Sure, there are still two-year contracts for device payment plans, but ending that early just means you finish paying off your device. Then, you can up and move to any carrier you want. And, we're finally to the point where that statement can be used without caveats.
There may be trouble with LTE band support, especially if you're dealing with Sprint or US Cellular, but ultimately it has never been easier to leave your current carrier. And, it's even easier because of all the deals available for users who want to switch: Verizon and AT&T both offer up to $300 on device trade-in plus $100 for switching to them; and, T-Mobile or Sprint will cover the remainder of your device payment plan and your early termination fee.
People will always have to look at issues of pricing and local performance for each carrier, but at this point, lock-in with a carrier has a lot more to due with human nature and the psychology of change than ever before. The last strands of carrier lock-in are with device payment plans (although those are thin because of the carrier switch deals mentioned), but manufacturers are poised to break that as well.
At least, there is a chance that manufacturers can break that last lock. For better or worse, Apple is in the best position to start the push both because of Apple's loyal fan base, but more importantly because of its footprint of Apple retail stores and prominent displays in other stores, like Best Buy. This gives customers better access directly to Apple devices and lessens the need to deal with carriers at all in the device purchase process. Add in Apple's new annual upgrade plan and the easiest path for carrier freedom now comes from Apple.
It seems likely that Android manufacturers will follow suit, especially since some already have the setup to directly sell to users in place. Motorola has the easiest path and just needs to add an annual upgrade plan to MotoMaker, but Motorola doesn't sell many phones, so that wouldn't move the needle much. The same would go for Google, which could easily offer a Nexus annual upgrade plan very similar to Apple's plan, although Nexus phones never sell too much compared to titans like Apple and Samsung. (Still, full disclosure, my order for a Nexus 6P is pending, and I'm honestly annoyed that I can't do a monthly payment plan and trade-in for a new Nexus next year. The only Nexus phone I haven't owned was the Nexus S, and I'm a bit tired of having to sell my old phone to subsidize the new one.)
Most Android manufacturers, including the reigning leader Samsung, don't have that direct sell infrastructure in place and would need to work with stores like Best Buy to offer such plans. Some may argue that dealing with Best Buy for a device purchase plan isn't much better than dealing with a carrier, but it's not hard to imagine Amazon getting in on this game. Amazon doesn't sell many phones in general, but it has solid customer service and if direct annual upgrade phone sales pick up steam, there is an audience that trusts Amazon for that purchase. And, any company that is going to offer such a plan would need to have the ability to resell the devices that were traded in. Amazon could quite easily handle that as well.
Expectations change design
But, there is another, possibly unintended, consequence coming for manufacturers that get into any annual upgrade system - customer expectations are going to change. Customers have traditionally been upgrading every two years and are used to a certain level of change when moving from one device to a new one. Similarly, manufacturers have taken advantage of that cycle. Apple is the most blatant example of this with its so-called "tick-tock" upgrade cycle, which had the overall design of the iPhone staying the same for two years, while the "S" versions of iPhones have been more about refinement and performance upgrades than major feature additions. Apple seems to have already taken on the challenge of a new yearly upgrade cycle with the iPhone 6s, which was more of a substantial update than most "S" year devices.
It could be that users will learn to deal with more incremental upgrades on a yearly cycle rather than the level of change over a two-year cycle, but it could also happen that the mobile ecosystem, which has felt a bit stagnant, could see a bump in creativity. There's not a ton of room for making processors or cameras much better on a yearly cycle, so we may end up seeing more interesting changes in design, like the curved screens Samsung has been experimenting with, or software features.
This doesn't just affect manufacturers, and could put more pressure on Apple and Google to make sure that each year's upgrade of iOS and Android feels more substantive. Having an upgrade like iOS 8 or Android Marshmallow, which is more about under-the-hood refinements than outward features, might not be enough to keep users interested. Of course, a yearly upgrade cycle would also be a boon for Android, because it would greatly reduce troubles with slow manufacturer and carrier updates of the OS, and get more people on the newest version of Android faster, so that may mitigate some of these issues.
No matter how you look at it, we're in the middle of a very interesting time for the mobile ecosystem. Power is shifting away from carriers. Customers have more freedom and choice than before. And, manufacturers and retail stores have an opportunity to benefit from these changes. It could well cause ripple effects that we don't expect, but it is exciting to see what is coming.
It will be good for manufacturers and retail stores because anyone who isn't trading in regularly is giving money for no reason, and it's a more consistent revenue stream. And, it can actually be good for customers as well. Sure, you won't really own a device ever again, but it's your choice to go to an annual upgrade plan. If you value a constant warranty and a new phone every year, then not owning the device probably won't matter to you. But, if you want to actually own your device and not be constantly paying, that option will still exist. It's not an either/or scenario. It's just a new option to make faster upgrades easier for everyone.