If Apple Inc. (AAPL) fails to make a fundamental change to its business, it could see iPhone sales decline by 17%, according to one team of analysts on the Street who want to see the tech giant employ a monthly subscription model much like Netflix Inc. (NFLX).

In a recent research note, Bernstein analyst Toni Sacconaghi wrote that Apple faces the same problem with its smartphones as it did with its iPad. As more customers hang onto their old models for a longer period of time, Apple risks iPhone sales following the same trend as its struggling iPad business.

Freezing Replacement Cycles

In the third quarter, even when Apple finally managed to grow its iPad sales numbers, revenue from tablets only gained 2% as consumers bought cheaper versions. If consumers treat the iPhone the same way, as Sacconaghi thinks they will, annual iPhone sales could tank 17%, a major issue as the smartphones accounted for a whopping 62% of the company’s revenue and profits this year. As the smartphone market becomes more saturated and successive generations of iPhones likely become less differentiated, the Bernstein analyst expects the replacement cycle to grow even longer.

To hedge against this trend, Bernstein wants Apple to build off of its iPhone Upgrade Program and turn into more of a subscription business. This should be easy for Apple as consumers become increasingly accustomed to paying monthly subscriptions, “especially for key ‘tech utilities’ (e.g. Netflix, Spotify, Microsoft Office 365),” wrote Sacconaghi.

“Customers could lease iPhones, iPads, Macs, and services such as iCloud and Apple Music for one 'low' monthly fee. By moving to a subscription model, Apple would be able to lock in recurring revenue streams and freeze the length of replacement cycles, likely leading to a material re-rating of its stock's multiple.” (See also: Apple, Ireland in Deal Over $15B in Unpaid Taxes.)

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