The Cooling of Upgrade Fever

December 28th, 2016

Not so many years ago, there was good reason to upgrade your tech gear fairly often. Each year brought major performance and feature improvements. If you had the cash, you could revel in the glory of all those enhancements. If you hung onto a device for even a few years, you may have felt you had an obsolete product.

This was especially true in the early years of a product’s lifecycle. So you could depend on every iPhone being substantially better than its predecessor. The traditional two-year upgrade cycle was based on the standard cellular contract, where you’d pay a small amount of money — or no money — and take your device home. The phone was usually locked, so you couldn’t just switch to another carrier until the agreement was complete. If you broke it before then, you’d pay a hefty early termination fee that was usually on a sliding scale.

So this encouraged you to seek something new after the contract was up, especially since the monthly price seldom changed after the initial down payment. Of course, you could buy the handset outright and be free of such restrictions.

More recently, carriers in the U.S. require that you buy the smartphone up front, or agree to some sort of time payment plan where you essentially lease the device for a given period. Again it’s usually two years, and many plans let you upgrade free every 12, 18 or 24 months. Of course, if you upgrade before the unit is paid for, you have to return it, usually within a short period of time after its replacement arrives. Otherwise, you’ll be billed for the balance due.

Even though smartphone sales have cooled, that’s more a function of a saturated market in most developed countries. But it’s also true that up-to-date hardware, unless it’s strictly low-end, is good enough for most people. True, there are plenty of differences between the 2014 iPhone 6 and the 2016 iPhone 7, but both perform well enough with iOS 10, and the new features are not really essential for many people.

That doesn’t mean that the iPhone 7 isn’t selling so well. Indeed, demand appears to be high, and the “Plus” version was back ordered until recently. A published report indicates that Apple saw twice as many activations of iPhones and iPads as Samsung, its nearest competitor, during the holiday sales period.

But when it comes to the iPad, upgrade fever cooled long ago, as people decided that the device they had was good enough and there was (with few exceptions) no cellular contract or upgrade program to entice them to order something new. In the September quarter, the sales drop was in the single digits, better than it has been in recent quarters, which may indicate sales are starting to flatten. Perhaps as more people decide to upgrade, sales will increase again. Or maybe many iPad users aren’t quite as convinced of the benefits of the tablet form factor.

So is there anything that Apple can do to make you want to replace your iPad, assuming it still works well enough for your needs? Other than the usual speed bumps, they haven’t changed all that much. The exception is the “Pro” lineup, which has a Smart Connector for a compatible keyboard. The 9.7-inch version also includes the wider color gamut that Apple added to the iPhone 7 and to last year’s iMac.

Indeed, that the average sale price of iPads has increased may indicate that the Pro models are taking an increasing share of sales. We might know a lot more when the December quarter financials are released in late January 2017.

As to Macs, upgrade fever cooled long ago. It appears that more and more people are hanging onto their Macs for longer periods. The fact that annual refreshes are generally very modest also fuels contentment with the one you already have. Why spend a bundle of money on a new computer when it hasn’t changed all that much?

As I wrote yesterday, the Late 2016 MacBook Pro — absent the Touch Bar and the battery life controversy — is only slightly faster in many respects than its predecessor. Graphics are a sweet spot, and the SSD is a lot faster too. But unless you’re concerned about decent gaming, and having every drive-based function sped up as much as possible, perhaps it won’t matter. Indeed, even if Apple, as predicted, refreshes the iMac in 2017, it probably won’t be sufficient to tempt many owners of the 2014 and 2015 models. The same may be true for the Mac mini.

A key exception is apt to be the Mac Pro, if it ever earns another upgrade. After more than three years, it’s clear that Intel’s Xeon processor and graphics hardware from AMD and NVIDIA run noticeably faster and would thus yield the sort of improvement professional users expect from a high-end workstation. Apple will no doubt add support for USB-C and Thunderbolt 3, which will also speed up peripherals that support the new technologies. That is, if a new Mac Pro ever comes.

Overall, however, selling upgrades to existing customers has become more of a hard sell. The lack of significant improvements year-to-year, and the usually superb reliability of Apple’s gadgets, means that customers are apt to keep what they have for longer periods.

Unless there is some spectacular development that advances there state of the art in such products in a way that makes the new hardware must-haves, this is the new normal.

It doesn’t help that the ragged nature of the world economy has made it more difficult for people to invest in upgrades for their tech gear before its time.

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2 Responses to “The Cooling of Upgrade Fever”

  1. dfs says:

    Your post today and its predecessor about Mac upgrades add up to the same thing. Apple is becoming the victim of its own success. As each iteration of at least some of its products (the iMac, the iPhone, maybe the iPad) are already so ultra-refined that the owners’ urge to replace it diminishes, since that urge depends on some kind of dissatisfaction with the product one already has. Traditional assumptions about the length of replacement cycles lose their validity. In my case, for ex., I own a current-model 27″ iMac with all its options maxed out thanks out to the generosity of my late beloved uncle, and I intend to hang onto it for the entirety of its useful service life, assuming I don’t crap out before it does.

    Notice what’s happening here. I’m applying to my Mac a different pattern of ownership. When I say I’m prepared to use it until it dies I’m saying I’m transferring my Mac (and my iPhone and my iPad, for that matter) to the same category as my car or my refrigerator, and that I do not find the kind of minor improvements Apple is likely to make in the near future compelling enough to replace it. If it is not perfect, it is close enough to perfection to keep me happy, just as I’m quite happy driving a thirteen year old Sedan Deville with only slightly over 50,000 miles on the clock. I know that current cars have certain improvements, but with the possible exception of side air bags I feel no especially envy for not having them.

    I’m not talking about my case because I’m such an egomaniac as to think that anybody finds it particularly interesting. But multiply me by all the other Mac owners who feel the same way I do and you’ll see that Apple has a huge problem on its hands. Gene wrote a piece the other day in which he speculated about the possibility that Apple’s senior management has lost interest in desktop computers. I think he has it wrong. The driving force is not that they have lost interest, but that they appreciate that there is a huge number of people who feel the same way as I do. In the same way, I doubt very much that declining sales figures indicate that the desktop computer is somehow becoming obsolete. Rather, it shows that many desktop owners are happy as clams with their present gear and propose hanging onto it for the foreseeable future.

    So, I suspect, Apple’s leaders have concluded that if the company is to keep thriving at its traditional level it is going to have to move into new areas. So they are fooling around with the idea of making cars, and are probably also investigating such technologies as virtual reality and making its own home management system controlled by an iPhone. There may very well be a series of false starts and dead ends, but eventually Apple is going to have to find a Next New Thing.

    • gene says:

      Just so we’re clear on this: I didn’t say Apple isn’t interested in Macs. Bloomberg did and Cook denied it. I just think Apple could have communicated this commitment a bit better, assuming it’s true.


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