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Can't quite work this out...
It seems fairly straightforward as a hypothesis. The idea seems to hinge around the fact that services & other (than the iPhone) revenue lines are growing well (with high enough margin), and so increasing the overall customer base adds to total profitability via adding circa 70M new customers per year (or say another 175M additional customers in total using a 2.5 year replacement cycle.) While the average iPhone unit revenue would drop, adding another Apple customer can be so valuable over time that the math (as estimated by Forbes) would work out. It also makes sense that this is potentially a better outcome currently as in the past - there are far more 'add-ons' to the iPhone that can be exploited today - Apple Music, the HomePod, the Watch , AirPods, the Apple TV etc. some of which are only really 'hitting their stride' now. Of course Apple may have different numbers - and so reach a different conclusion - but the idea seems worthy of exploration.

I would say, before cheaper phones, Apple should invest heavily in original content...
I expect this to be a failure outside music (at the very least financially.) It's one thing for Netflix - which is essentially available everywhere on all devices including on almost every TV - to offer exclusive content, or say Amazon with the Kindle store, because maintaining exclusivity doesn't 'shut out' any consumers. Apple would be a different matter - exclusive content would shut out say 50% of the US market & something like 80% worldwide. One can see this with iMessage, which has been surpassed by WhatsApp & WeChat (and others) throughout most the world & appears to have declining influence in the US. And so that content is less valuable with Apple exclusivity than without, and so Apple would need to pay more than the content is worth (to Apple) to secure the rights. And I'm skeptical that given the overall availability of quality content (books, movies, TV shows etc.) that a buyer would 'switch' their device purchase decision based on a single or few pieces of content.

Of course Apple - to make content exclusive to it's services work - could offer services on other devices - much like offering Apple Music on Android (which hasn't been especially well received compare Spotify & Apple Music on Google Play - reviews & downloads.) I'm not sure that approach would work for Apple either - can one expect Samsung to pre-load Apple TV software on all those Samsung TVs, or LG? And frankly the software development effort wouldn't be worthwhile.
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