Hardware as a service means charging a recurring fee for a physical product instead of, or as well as, selling it outright. The fee can cover rental, maintenance, software, consumables or replacement cover. GoPro's subscriptions held at about $106 million in 2025 while camera sales fell. It works when you can finance the upfront cost, control service costs and reuse returned units.
Key takeaways
- GoPro's subscription and service revenue held at $106.3 million in 2025 while total revenue fell from $1,005 million in 2023 to $652 million.
- Subscription revenue cost GoPro about 30 cents per dollar to deliver, against about 73 cents for hardware.
- Renting hardware means you carry the asset, so cash flow goes negative before it turns positive. Plan the financing first.
- Car subscriptions largely stalled because providers carried depreciation and early-return risk. Model that before you rent anything big.
- The easiest wins are often consumables, service plans and software around a product you already sell.
When I wrote The Subscription Playbook, I opened the chapter on subscription models with a company most people thought couldn't possibly run one.
GoPro.
"Those are the guys who make the cameras, right? They sell one-off products." Kind of. In 2016 GoPro rolled out a subscription: unlimited cloud storage for $4.99 a month. By 2022 it had 1.74 million subscribers on a $49.99 annual plan that bundled storage, editing tools, discounts on new gear and, in some cases, camera replacement.
Here's what happened next, and it's the best argument I know for manufacturers adding subscriptions.
GoPro's hardware sales fell hard. Total revenue dropped from $1,005 million in 2023 to $801 million in 2024 and $652 million in 2025. But subscription and service revenue barely moved: $106.3 million in 2025 against $107.0 million in 2024. Subscriptions cost GoPro about $32 million to deliver in 2025. Every dollar of subscription revenue cost about 30 cents, against about 73 cents for every dollar of hardware.
When the product slowed, the subscription kept the lights on. The GoPro case study has the full story.
I saw a version of this early in my career, selling photocopiers. In that industry the machine is the sale everyone celebrates. The service agreement that comes with it is the money that keeps arriving after the salesperson has moved on.
What does hardware as a service look like in 2026?
Several of 2026's fastest-growing companies sell physical products on subscription. Their revenue figures are reported by ARR Club and the companies themselves, not audited.
- Raylo rents phones, laptops, consoles and wearables monthly in the UK: refurbished phones from £6.95 a month, an iPhone 17 Pro from £28.99, insurance from £5.99 a month, and a free upgrade at the end of the term. It reported more than 200,000 active subscriptions in July 2026 and ARR above $100 million in September.
- Pocket sells a $129 AI note-taking device, with an optional $200-a-year plan for unlimited AI summaries. That's a device as the entry ticket and software as the subscription.
- Tive sells shipment trackers plus a cloud platform, and proves value with a trial of up to five free trackers for 30 days for qualifying shippers.
And there's a warning. Car subscriptions largely stalled. Volvo suspended Care by Volvo in the US in August 2024, because the provider carries depreciation, insurance and the risk of the car coming back early. The car subscriptions case study explains why.
Which subscription models fit a manufacturer?
Almost all eight of the book's subscription models have a hardware version.
| Model | How it looks for a manufacturer | Capital needed |
|---|---|---|
| Consumables | Filters, cartridges, blades, parts that wear out, on auto-delivery | Low |
| Insurance | Extended cover, replacement, priority repair | Low, if you cap it |
| Bundled Services | Preventive maintenance plus parts and labor for a monthly fee | Low to medium |
| Software as a Service | Connected features, monitoring, analytics, apps | Medium |
| Minimum Commitment | Equipment rental with a 24 or 36-month term | High |
| Member Benefits | Owners' club: discounts on upgrades, training, early access | Low |
In the book I used LARQ to show the consumables model: buy the self-cleaning pitcher, then get replacement filters every two months on subscription. And Gillette's razor heads show why it's sticky. Customers can only replace them with Gillette's.
Start at the top of that table. The bottom rows tie up cash.
What does a 3-tier hardware subscription look like?
Here's an illustrative offer for an Australian manufacturer of commercial equipment, such as floor cleaning machines, coffee machines or water filtration units. Prices are per unit per month, including GST.
| Care | Rent | Fleet | |
|---|---|---|---|
| Monthly price (illustrative) | A$49 | A$189 | A$169 per unit (five or more) |
| Equipment | Customer owns it | Included, we own it | Included, we own it |
| Maintenance | Two preventive services a year | Two services a year, all parts and labor | Two services a year, all parts and labor |
| Repairs | Priority, 15% off parts | Included | Included, loan unit within 48 hours |
| Software | Basic app | Usage app | Remote monitoring and monthly utilization report |
| Term | 12 months | 36-month minimum | 36-month minimum |
| End of term | Renews | Upgrade, keep at a lower fee, or return | Upgrade to new models |
Compare selling with renting
Use the free Subscription vs One-off Profit Calculator to see how a rental or service plan changes revenue, cash flow and valuation compared with outright sales.
How do you know if renting hardware is profitable?
This is where hardware as a service differs from every other industry on this site. You're not just pricing a service. You're financing an asset.
Worked example: selling a machine versus renting it
Outright sale: price A$6,600 including GST (A$6,000 excluding). Cost to build: A$4,800. Margin: A$1,200, once.
Rent plan at A$189 a month: A$171.82 excluding GST. Less service and parts at A$25 a month and payment fees at about A$3.78. Net: A$143.04 a month.
- Payback on the A$4,800 unit: about 33.6 months. Nearly the whole first term.
- Over 36 months: A$5,149.44 net, less the A$4,800 unit and about A$576 in financing cost (8% on the average balance), plus a A$800 residual value. About A$573 profit, less than half the outright sale.
- Second term: instead of selling the returned unit for its residual value, refurbish it for A$600 and rent it for 24 months at A$149 (A$107.47 net a month). That earns about A$1,979, or about A$1,179 more than taking the A$800 residual.
Over five years: about A$1,753 from renting (plus whatever the unit is worth at the end), against A$1,200 from selling. But you were cash-negative for almost three years.
Hardware payback (months) = Unit cost ÷ (Monthly fee ÷ 1.1 − service cost − payment fees)
That's the honest picture. Hardware as a service usually earns more over the life of a unit, and creates a customer relationship that lasts. But it swaps an immediate margin for a stream of payments, and you have to fund the gap.
Model your own units in the Subscription vs One-off Profit Calculator, and set the monthly fee with the Subscription Price Calculator.
Subscription vs One-off Profit CalculatorSee how switching to subscription changes revenue, cash flow and valuation.Open the free tool →How do you launch hardware as a service?
- Start with the installed base. Offer a Care plan or consumables subscription to customers who already own your products. No new capital needed.
- Cost service properly: technician time, travel, parts and failure rates by product age.
- Model the cash flow for rental units before offering them. Know how many you can fund.
- Line up finance. Rental fleets are often funded with asset finance or a dedicated facility. Talk to your lender and accountant early.
- Design the end of term as an upgrade offer, the way Raylo does.
- Build refurbishment in. Returned units are your second, more profitable term.
- Track attach rate. GoPro's CFO credited "improving attach rates, retention rates and driving ARPU higher." The share of new buyers who take the subscription is the number to watch.
What are the pitfalls?
Carrying assets you can't fund. Grow the rental fleet too fast and you'll run out of cash while every contract looks profitable on paper.
Early returns. A customer who returns a unit after eight months leaves you with a used machine and an unrecovered cost. Use minimum terms and clear early-exit fees.
Uncapped cover. "We'll replace anything that breaks" is open-ended. Cap claims and exclude misuse.
Relying on sunk cost. Peloton's churn was 0.73% a month when I wrote the book, helped by customers who had spent $2,000 on a bike. By Q4 of fiscal 2026 it was 2.2%. Sunk cost wears off as equipment ages.
A subscription that can't outgrow its feeder. GoPro's subscribers slipped 3% year on year to 2.45 million in mid-2025, as fewer new cameras meant fewer sign-ups.
What do Australian manufacturers need to know?
As at October 2026, these are the main points. This is general information, so get advice on your structure.
Consumer guarantees. The Australian Consumer Law guarantees apply to goods and services supplied to consumers, including on hire. A service plan can't take those rights away, and you shouldn't sell cover that duplicates them without explaining the difference.
The 2027 subscription rules. The Unfair Trading Practices Act 2026 excludes leases and hire purchase from its subscription contract rules, but a bundled service, software or consumables subscription may still be caught. How your contract is structured matters. Small business customers on standard form contracts are also protected. See the subscription trap laws guide.
Protect your equipment. If you keep ownership of equipment at a customer's site, register your interest on the Personal Property Securities Register where required. Longer-term rentals can count as a PPS lease, and an unregistered interest can be lost if the customer becomes insolvent.
Tax and accounting. If you keep ownership, you generally keep the depreciation deductions, charge GST on each payment and account for the arrangement as a lessor. Revenue for bundled service and software components is recognized over time. The revenue recognition guide covers the basics.
The accountant's angle: lumpy cash now, a more valuable business later
Hardware businesses live and die by order books. A big quarter, then a quiet one. A buyer prices in that lumpiness.
Recurring service, software and rental revenue changes the picture. It's predictable, often higher margin, as GoPro's 30 cents versus 73 cents shows, and it's the kind of revenue buyers pay a multiple for. The valuation estimator shows how growth, retention and margin move that multiple.
The catch is the transition. Moving from sales to rental can cut reported profit and cash for two or three years. That needs planning, financing and a clear story for your bank.
Free Subscription Profit Review
Australian business owners can book a free 30-minute review with a BPAG Accountants adviser. An honest conversation about:
- whether a subscription model could work for your business
- how recurring revenue could cover your fixed costs each month
- how it could lift what your business is worth
No cost, no obligation. General information only until we understand your situation.
What to do next
List every product you've sold in the last five years and ask three questions. What wears out? What needs servicing? What could be connected?
Start with the answer that needs no new capital, and offer it to your existing customers this quarter. Only then model a rental fleet, unit by unit.
For more on the software side, see the SaaS model, the insurance model for cover and warranties, or browse all industry playbooks.
Frequently asked questions
What's the difference between hardware as a service and leasing?
A lease is mainly a way to finance an asset: the customer pays to use the equipment for a term. Hardware as a service bundles the equipment with things the manufacturer is best placed to provide, such as maintenance, software, monitoring, consumables and upgrades, for one recurring fee. The value is in the bundle, not just the finance. Legally and for tax, the structure still matters, so get advice.
How do I price a hardware subscription?
Start with the full cost of the unit, your cost of capital, the service and parts cost per month, the expected term and the value of the unit when it comes back. Then set a monthly fee that recovers the unit within the minimum term and leaves a margin. Check it against what customers would pay to buy, finance and maintain the product themselves.
Should a manufacturer sell direct or through dealers on subscription?
Either, but decide who owns the customer relationship and the asset. Many manufacturers keep the asset and billing in-house and pay dealers a commission on sign-ups and renewals. If dealers own the contracts, you lose the recurring revenue and the customer data. Agree how service is delivered and paid before launching.
What happens at the end of a hardware subscription term?
Make it an upgrade moment, not a cancellation point. Raylo, which rents phones and other devices, offers a free upgrade at the end of the term, or the option to keep or return the device. For business equipment, offer a newer model on a fresh term, or a lower monthly fee to keep the existing unit. Returned units can be refurbished and rented again.
Can a small manufacturer start without renting hardware?
Yes, and most should. Start with a service plan for products you've already sold, a consumables subscription for parts that wear out, or a software subscription for connected features. These need no extra capital and prove customers will pay monthly. Move to full rental only once you understand your service costs and can finance the units.
General information only, current as at October 2026. It isn't legal, tax or financial advice and doesn't consider your circumstances. Speak to a qualified adviser before acting.
Talk it through with a BPAG adviser
Free for Australian business owners: a 30-minute Subscription Profit Review on whether a subscription suits your business.
Robert Coorey, MBA
Robert is the author of The Subscription Playbook and Feed a Starving Crowd and a Director at BPAG Accountants in Sydney. More about Robert.
Sources
- GoPro: Q4 and full-year 2025 results (5 Mar 2026)
- GoPro: Q2 2025 results, 2.45 million subscribers
- Raylo: pricing and plans (accessed Oct 2026)
- ARR Club: Raylo ARR surpasses $100M with 60% YoY growth (Sep 2026)
- TechCrunch: Pocket raises $11M (29 Jun 2026)
- Kelley Blue Book: Volvo kills its car subscription (2024)
- Competition and Consumer Amendment (Unfair Trading Practices) Act 2026 (No. 64, 2026)
Facts and prices checked 27 October 2026. Spotted something out of date? Tell us.