iPod touch 2.0 firmware in June - get out your wallets

[jplan2008]

iPhone vs touch

RE. accounting: iPod Touch owners aren't being singled out. It's not that accounting for a product all at once when sold is the exception with Apple, it's that accounting for it over 24 months is. So it's the exception that iPhone users and Apple TV users get free significant updates, not the other way around. So the comparison with Tiger vs. Leopard, iLife 05 vs 06, etc. IS valid. Apple has ALWAYS charged for significant updates/new applications. It's just for these two products, they're not. PSP is made by a SONY subsidiary whose shares are not sold on a major exchange in the US, and their reporting is different. The Zune is such a small piece of Microsoft's business, I bet it would be hard to find it in their financials, but I would guess they DO account for it over 2 years. But if not, the only accurate comparisons for the expectations you should have, is how APPLE has historically accounted for their income, and how APPLE's attorneys/accountants are apparently advising them re. SOP 97-2 (not SOX).

When the iPhone was first announced/released, a lot of people, including me, wanted "an iPhone without a phone," but a lot of people paid $175 to change carriers to AT&T and bought an iPhone because there WASN'T an "iPhone without a phone." I got my iPhone after the Touch was released, but the Touch still didn't have mail, calendar, etc, and that went into my decision-making. So I switched to a carrier I don't like, that has worse coverage where I live, in large part because of what the Touch was missing. We could just as easily complain that we're now stuck in a position where the Touch might be better for us with all the updates, it costs less with more storage, BUT TO SWITCH BACK WE'D HAVE TO PAY $175 TO AT&T. But we're not complaining that the Touch has been updated, because that would be ridiculous. Just about as ridiculous as complaining that new Touch owners get new features. Except in this case, unlike most cases with Apple, the current/old owners AREN'T in the position of sticking with the old, or selling old on ebay to buy the new one, you have the option of paying $X to update your current machine. That is BETTER than any reasonable expectation you should have had. (the logic that third part apps were available via Jailbreak and therefore you had the expectation that they'd be available officially via Apple makes no sense. If you bought the Touch ONLY for that, why didn't you wait until that happened, knowing that Flash prices always go down?) And where exactly do you current Touch owners think the line should be drawn? Charging for an update three months after you bought your Touch is "unfair" and "greedy," but six months isn't? Or you should get free updates forever? I would guess that it's not only that Apple is receiving something from AT&T each month, but also that iPhone owners are LOCKED into a contract for two years (or a little less in Europe) that Apple accounted for iPhone income evenly for 24 months so updates are "free" for us. (don't know about Apple TV, my wild guess is that "Take 1" was always thought of as "Take 1," and they knew they'd be updating, but weren't exactly sure of when or how.)

 

[mavis]

How is asking a question missing the point? I didn't argue anything, I just asked something...

Because asking that question shows that you're not really understanding any of the points some of us are trying to make. More below ...

Who's forcing you to pay? Nobody is

Umm, how many times has it been explained that with the January update, Apple did force people to buy the update? Seriously, how many times does this need to be explained??

Touch owners who did not purchase the 1.1.3 upgrade were greeted with an upgrade advertisement every time they connected their iPods. At the bottom of the screen was a button that said 'Remind me later' or something to that effect, but clicking on the button resulted in an error which redirected people to the iTMS. There is/was no way to get back to the Touch's settings screen. That is what I call a forced upgrade. Unless people were technically proficient enough to go through the hassle of downgrading iTunes to version 7.5 (which I did, and can vouch for the fact that it was not an easy process), the only way to get rid of that advertisement (and gain access to Touch sync settings!!) was to purchase the app pack!!!! How can you NOT call that a forced upgrade??? Since Apple has already pulled that stunt once with a paid upgrade, and since they've already warned us that the next upgrade will also require fee, what makes you think they won't pull the same stunt again?

Yes, they get it without charge from iTunes. But they're forking over a crapload of money (some of which goes to Apple) for overpriced cell contracts. Why can't you understand this?

Again, how many times do I have to tell you that the only reason I bought this stupid iPod is because I can't buy the iPhone? Why can't you understand that??? I mean, all I ever wanted is an iPhone, but they're not sold in most countries. How is it my fault that the product I desperately want to buy is only available to a very small part of the world's population?

Anyway, my personal motivation for buying the Touch is beside the point. So how about this: why are you tyring to make it sound like those poor iPhone owners are only paying monthly fees to get free updates - do I have to remind you that they're paying for mobile phone service and unlimited EDGE data? What I would give to have access to an EDGE network here in Tokyo, so that I wasn't forced to wait until I get home to check my damn email, due to the lack of free wifi in this country! I digress - more on revenue sharing below!

Or due to the fact that Apple gets money from the monthly subscriptions for the iPhone while they don't for the iPod.

FOR THE UMPTEENTH TIME, they don't get money from monthly subscriptions for AppleTV either, but they still give AppleTV owners free software upgrades. Quit trying to confuse the issue by claiming that Apple's sweet revenue sharing deal with AT&T is the reason that iPhone owners get free software updates. That's not it, obviously, or else AppleTV owners would be paying for upgrades as well. They're not. It's not the subscription, the revenue sharing, it's the way Apple accounts for sales. And once again, why should I be treated like a second-class customer just because I bought a Touch instead of an iPhone (which is what I really wanted anyway)?

Seriously, this update could have every feature under the moon and you would still be complaining if it had a $.05 price tag...

If other, more important customers were getting it for free, you're absolutely, 100% correct. As I've said time and again in this thread and others, it's not about the dollar amount - it's the principle. I guess that is one point you might be starting to understand, this last comment of yours was actually right on.

 

[aethelbert]

Because asking that question shows that you're not really understanding any of the points some of us are trying to make. More below ...

Umm, how many times has it been explained that with the January update, Apple did force people to buy the update? Seriously, how many times does this need to be explained??

Touch owners who did not purchase the 1.1.3 upgrade were greeted with an upgrade advertisement every time they connected their iPods. At the bottom of the screen was a button that said 'Remind me later' or something to that effect, but clicking on the button resulted in an error which redirected people to the iTMS. There is/was no way to get back to the Touch's settings screen. That is what I call a forced upgrade. Unless people were technically proficient enough to go through the hassle of downgrading iTunes to version 7.5 (which I did, and can vouch for the fact that it was not an easy process), the only way to get rid of that advertisement (and gain access to Touch sync settings!!) was to purchase the app pack!!!! How can you NOT call that a forced upgrade??? Since Apple has already pulled that stunt once with a paid upgrade, and since they've already warned us that the next upgrade will also require fee, what makes you think they won't pull the same stunt again?

Again, how many times do I have to tell you that the only reason I bought this stupid iPod is because I can't buy the iPhone? Why can't you understand that??? I mean, all I ever wanted is an iPhone, but they're not sold in most countries. How is it my fault that the product I desperately want to buy is only available to a very small part of the world's population?

Anyway, my personal motivation for buying the Touch is beside the point. So how about this: why are you tyring to make it sound like those poor iPhone owners are only paying monthly fees to get free updates - do I have to remind you that they're paying for mobile phone service and unlimited EDGE data? What I would give to have access to an EDGE network here in Tokyo, so that I wasn't forced to wait until I get home to check my damn email, due to the lack of free wifi in this country! I digress - more on revenue sharing below!

FOR THE UMPTEENTH TIME, they don't get money from monthly subscriptions for AppleTV either, but they still give AppleTV owners free software upgrades. Quit trying to confuse the issue by claiming that Apple's sweet revenue sharing deal with AT&T is the reason that iPhone owners get free software updates. That's not it, obviously, or else AppleTV owners would be paying for upgrades as well. They're not. It's not the subscription, the revenue sharing, it's the way Apple accounts for sales. And once again, why should I be treated like a second-class customer just because I bought a Touch instead of an iPhone (which is what I really wanted anyway)?

If other, more important customers were getting it for free, you're absolutely, 100% correct. As I've said time and again in this thread and others, it's not about the dollar amount - it's the principle. I guess that is one point you might be starting to understand, this last comment of yours was actually right on.

1. No, asking that shows that I think your (or whoever made it) statement is crap.
2. That's not force, that's annoyance. Force would be armed men jumping out of the iTunes client holding guns to your head and telling you to buy the update.
3. That's irrelevent. Either way, you would end up paying somehow, which you are against.
4. I realize what's in the iPhone bill, dude. I pay it. And the rate is higher than usual just because it's the iPhone. There's a premium for having this phone, which goes to Apple. The plan is usually about $50, so ~$10 each month goes to them while about $50 goes to AT&T.
5. Go look at some of the tarrifs abroad. Do you seriously think that the plans in Ireland seriously cost O2 that much? No way, Apple gets a cut there. I never said that they get all of it, I said that they get ~$10 a month.
6. Saying that the goal of the Apple TV right now is to use for movie rentals (where available), they make profit there. And they've only got one free update, and all that did was change the interface and add a rental option... something that Apple will generate revenue from.
7. once again, iPhone users don't get it for free... If you don't understand that, something's wrong here.

 

[mavis]

1. No, asking that shows that I think your (or whoever made it) statement is crap.

Whatever you say, because in all honesty it came across like you had completely missed the point. In fact, it still comes across like that.

2. That's not force, that's annoyance. Force would be armed men jumping out of the iTunes client holding guns to your head and telling you to buy the update.

You call not being able to access sync setting for my iPod annoyance???? Well, it's no wonder you're not frustrated by Apple's treatment of its customers. Your expectations are so low, I think just being able to power the iPod on once and a while would be acceptable to you. Because not being able to access any settings to sync the iPod apparently doesn't strike you as the least bit odd ...

3. That's irrelevent. Either way, you would end up paying somehow, which you are against.

I'm against paying for what, exactly? Upgrades that other people get for free? Well then, yes - absolutely. Service for the most advanced mobile phone available? Well, no - as I keep telling you, that's all I really want. An iPhone. Need I say it again?

4. I realize what's in the iPhone bill, dude. I pay it. And the rate is higher than usual just because it's the iPhone. There's a premium for having this phone, which goes to Apple. The plan is usually about $50, so ~$10 each month goes to them while about $50 goes to AT&T.

Well I guess my perspective it different, because what you consider a "premium" for service, I consider cheap. What do you pay, $100, $150 /month? If only I were so lucky!!! It doesn't really matter to me how much Apple takes, at that price they're practically giving the service away (IMO) ...

5. Go look at some of the tarrifs abroad. Do you seriously think that the plans in Ireland seriously cost O2 that much? No way, Apple gets a cut there. I never said that they get all of it, I said that they get ~$10 a month.

Umm, I live abroad, mate. Kind of funny for you to be pointing out overseas tariffs to someone who doesn't live in the States.

6. Saying that the goal of the Apple TV right now is to use for movie rentals (where available), they make profit there. And they've only got one free update, and all that did was change the interface and add a rental option... something that Apple will generate revenue from.

And whaty exactly do you think the SDK is, other than a cash cow for Apple? We pay to get access to the AppStore, where we will pay to get apps. What's that you say, some of the apps will be free? Oh yeah, that's right - but Apple will still collect a minimum of $100 per year from developers who want to be able to distribute their apps, free or not. So your argument in defense of AppleTV's free upgrade is completely invalid, simply because the purpose of both the Touch's 2.0 upgrade and AppleTV's latest upgrade is the same: more revenue for Apple.

7. once again, iPhone users don't get it for free... If you don't understand that, something's wrong here.

Wait a minute, I don't remember SJ saying that iPhone users would have to pay for 2.0 firmware ... did he say that? Yeah, I didn't think so. And how much did you have to pay when you installed 1.1.3?

 

[Arisian]

so far I seem convinced that my 1.1.1 hacked ipod with the bug patches that the developers have provided to me is more stable than my coworkers 1.1.3 which pretty much bombs on him all the time. Im pretty happy with my ipod as it is and apple hasnt convinced me its worth it to come crawling back to them.

this entire convo. is only helping to nail down that theory in my head. Id also say there is a good change that by the END of June, somewhere, somehow you could probably get the 2.0 update for free

just my thoughts.

 

[aidanpendragon]

Touch owners who did not purchase the 1.1.3 upgrade were greeted with an upgrade advertisement every time they connected their iPods. At the bottom of the screen was a button that said 'Remind me later' or something to that effect, but clicking on the button resulted in an error which redirected people to the iTMS. There is/was no way to get back to the Touch's settings screen. That is what I call a forced upgrade. Unless people were technically proficient enough to go through the hassle of downgrading iTunes to version 7.5 (which I did, and can vouch for the fact that it was not an easy process), the only way to get rid of that advertisement (and gain access to Touch sync settings!!) was to purchase the app pack!!!! How can you NOT call that a forced upgrade??? Since Apple has already pulled that stunt once with a paid upgrade, and since they've already warned us that the next upgrade will also require fee, what makes you think they won't pull the same stunt again?

In fairness, I will say that - at least with 1.1.4 (I skipped 1.1.3) - this didn't happen to me. I got the nag screen, but the "remind me later" button worked. The thought that screen itself would recur was a problem, but after the first 2-3 times a "no thanks" button appeared, and I was able to dismiss it altogether.

It does sound like having to buy the apps or downgrade was a bug later corrected. I don't think Apple did it intentionally, and don't expect them to in the future. I don't buy their "let's charge Touch owners" argument, but I also want to focus on the deliberate vs. accidental.

(my sympathies for a BS situation though)

 

[Antimatter]

I don't mind paying. I would much rather pay for improvements than not get anything in the first place.

 

[Krevnik]

And whaty exactly do you think the SDK is, other than a cash cow for Apple? We pay to get access to the AppStore, where we will pay to get apps. What's that you say, some of the apps will be free? Oh yeah, that's right - but Apple will still collect a minimum of $100 per year from developers who want to be able to distribute their apps, free or not. So your argument in defense of AppleTV's free upgrade is completely invalid, simply because the purpose of both the Touch's 2.0 upgrade and AppleTV's latest upgrade is the same: more revenue for Apple.

Both of you have completely missed the point on why ATV has free enhancements, while the iPod Touch does not.

ATV = Revenue recognized over 2 years. Free major updates.
iPhone = Revenue recognized over 2 years. Free major updates.
iPod Touch = Revenue recognized immediately. Non-free major updates.
iPod Classic = Revenue recognized immediately. Non-free major updates (usually tied to hardware revisions, see 5.5g)

It doesn't matter if /you/ are paying into a subscription service, it matters how the revenue is recognized by the Apple accountants. Because the entire iPod line has the revenue recognized immediately, it is a 'product', and certain parts of SOX requires them to charge for major updates. Because revenue from the iPhone and ATV are recognized over 2 years, it is a 'service', and therefore SOX doesn't apply in the same way.

If you want to know why "other companies" don't charge, the Sarbanes-Oxley Act only applies to US companies. Small vendors can be from anywhere, including China, and as long as their HQ isn't in the US, Sarbanes-Oxley doesn't apply to them. A lot of huge corporations already report their HQ as being outside the US (even if they are a US company for all intents and purposes) to slip through tax loopholes, and are exempt from this regulation. Considering how many electronics manufacturers are Chinese or Japanese, it isn't surprising how few gadget makers this affects.

You can thank the reactionaries who wanted regulation after Enron crashed and burned for Sarbanes-Oxley, by the way.

EDIT: All this said, the amount Apple charges is still up to them.

 

[Tosser]

EDIT: All this said, the amount Apple charges is still up to them.

And here's the crux!

 

[Jack Flash]

I don't mind paying. I would much rather pay for improvements than not get anything in the first place.

The issue is that the updates affect applications that we already purchased.

 

[Trooperof3]

I feel like a 2nd rate citizen.


Having 2 pay. which doesn't really bother me, I just hate that they don't give love 2 the touch. it's just a wrap up... Oh ya you can do it on the touch also.

Just like i hate the fact that everything is Iphone Applications... we are like that bastard child that nobody cares about.

 

[Kan-O-Z]

I think what pisses us off is that new customers won't be charged any more for their iPods than we were (in fact, they'll likely pay less than we did, due to price cuts) but they'll get the new firmware for free. In that respect, it's almost as if Apple is penalizing early adopters, when in reality it's the early adopters they should be most concerned about pleasing.

So according to you, when apple comes out with new hardware, the early adopters are being screwed over since the people purchasing the new hardware are getting it for free? And in order of the 'early adopters' to get the new hardware, they have to pay which is completely screwing them over?

One thing I don't like is how people think that software should always be free. I understand software updates and bug fixes should be free. If it's a big software update however with a bunch of brand new features, why shouldn't they charge for it? From a companies point of view, there is no difference between software and hardware. They both cost a lot of research and development and money to produce. Just because software is easier to get or install doesn't mean it should be free all of a sudden. The idea is the same. The company spent a lot of $$$ to produce the software. There is no reason it should just be handed out for free or else they might as well just start throwing all the early adopters new iphones/ipod touches.

You guys need to start viewing hardware and software in the same light. I am a software developer and and I know the effort and difficulty involved to develop, test, and update software. Software can be just as expensive or even more expensive than hardware (measured by the number of man hours involved to create it). Why do you think Leopard or Vista is not just free for the 'early adopters'? Do you guys even know the type of money needed to develop something like Leapard or Vista? Yeah sure I know we're talking about 2.0 on the iphone/touch so it's not the same as Leopard....but it's most likely going to be $20, not $130

Kan-O-Z

 

[Jack Flash]

So according to you, when apple comes out with new hardware, the early adopters are being screwed over since the people purchasing the new hardware are getting it for free? And in order of the 'early adopters' to get the new hardware, they have to pay which is completely screwing them over?

One thing I don't like is how people think that software should always be free. I understand software updates and bug fixes should be free. If it's a big software update however with a bunch of brand new features, why shouldn't they charge for it? From a companies point of view, there is no difference between software and hardware. They both cost a lot of research and development and money to produce. Just because software is easier to get or install doesn't mean it should be free all of a sudden. The idea is the same. The company spent a lot of $$$ to produce the software. There is no reason it should just be handed out for free or else they might as well just start throwing all the early adopters new iphones/ipod touches.

Kan-O-Z

Again, they're adding some updates to Applications we just purchased a few months ago. This is a mobile platform; it is not a desktop. There are expectations and Apple is giving its most loyal customers the big middle finger.

 

[dops7107]

Skip the McDonald's for 4 days over the next three months and it will pay for itself and in he meantime you'll be enjoying a perfectly functioning iPod touch.

... and a perfectly functioning digestive system.

 

[Kan-O-Z]

Again, they're adding some updates to Applications we just purchased a few months ago. This is a mobile platform; it is not a desktop. There are expectations and Apple is giving its most loyal customers the big middle finger.

And again this is a major update. They are adding in enterprise and business and exchange support as well as opening the platform up to 3rd party applications and the online apps store. I'm sure they spent over a million $ on just this update. I don't think $20 is too much to ask for an ipod touch user for all this.

Yes this may not be a desktop but the iphone/touch is coming pretty darn close. It's got to be one of the most complex and advanced mobile platforms out there. Where do you draw the line. In the end if something costs tons of money to develop, they will charge for it. On the other hand if it's mostly bug fixes and small features then it'll be free. That's why Mac OS updates are free. They are mostly bug fixes, improved performance and sometimes small features.

Kan-O-Z

 

[Krevnik]

And here's the crux!

Agreed. But the catch is that I was responding to people wondering why it isn't free (as in beer). The iPod line has been a 'buy hardware to get new features' product. So they have accounted for it as such. The drawback is that the iPod Touch falls under the old accounting model by nature that it is an iPod.

So they have to charge something, and while I would rather see it at 2-5$ (since the big thing is the App Store, which can help pay for itself)... we don't know for sure if it will be closer to the 2-5$ figure (like the 802.11n driver), or closer to the 20$ figure (like the 'app pack' in January).

Of course, I am an iPhone-toting bastard.

 

[Tosser]

I'm sure they spent over a million $ on just this update. I don't think $20 is too much to ask for an ipod touch user for all this.

Are you serious? Let's say 200.000 people pay for this. That's 4 millions. Not to mention the extra sales of introducing said features. You seem to forget that last part, not to mention that these features weren't made for the Touch, they were made for the iPhone. All the sales from the Touch is pure bonus.
Also, all that talk of Sarb-Oxley is nonsense. They could give it for free or 20 cents if they so choose. And by doing so, they'd keep quite a few users in the fold longterm. They choose not to. Instead they're milking the cow for short term profits.

Fortunately, from the looks of it, with these recent moves, quite a lot of people are moving away from. The people that actually care about not taking it in the rear.
I know they sell, and sell well. But really. It's selling to the same people that fall for Myspace, Youtube and the latest fashion at the mall.

 

[Jack Flash]

And again this is a major update. They are adding in enterprise and business and exchange support as well as opening the platform up to 3rd party applications and the online apps store. I'm sure they spent over a million $ on just this update. I don't think $20 is too much to ask for an ipod touch user for all this.

Yes this may not be a desktop but the iphone/touch is coming pretty darn close. It's got to be one of the most complex and advanced mobile platforms out there. Where do you draw the line. In the end if something costs tons of money to develop, they will charge for it. On the other hand if it's mostly bug fixes and small features then it'll be free. That's why Mac OS updates are free. They are mostly bug fixes, improved performance and sometimes small features.

Kan-O-Z

This isn't the jump from Tiger to Leopard. Apple is putting in features that should have been included from the get-go.

 

[aethelbert]

Whatever you say, because in all honesty it came across like you had completely missed the point. In fact, it still comes across like that.
You call not being able to access sync setting for my iPod annoyance???? Well, it's no wonder you're not frustrated by Apple's treatment of its customers. Your expectations are so low, I think just being able to power the iPod on once and a while would be acceptable to you. Because not being able to access any settings to sync the iPod apparently doesn't strike you as the least bit odd ...
I'm against paying for what, exactly? Upgrades that other people get for free? Well then, yes - absolutely. Service for the most advanced mobile phone available? Well, no - as I keep telling you, that's all I really want. An iPhone. Need I say it again?
Well I guess my perspective it different, because what you consider a "premium" for service, I consider cheap. What do you pay, $100, $150 /month? If only I were so lucky!!! It doesn't really matter to me how much Apple takes, at that price they're practically giving the service away (IMO) ...
Umm, I live abroad, mate. Kind of funny for you to be pointing out overseas tariffs to someone who doesn't live in the States.
And whaty exactly do you think the SDK is, other than a cash cow for Apple? We pay to get access to the AppStore, where we will pay to get apps. What's that you say, some of the apps will be free? Oh yeah, that's right - but Apple will still collect a minimum of $100 per year from developers who want to be able to distribute their apps, free or not. So your argument in defense of AppleTV's free upgrade is completely invalid, simply because the purpose of both the Touch's 2.0 upgrade and AppleTV's latest upgrade is the same: more revenue for Apple.
Wait a minute, I don't remember SJ saying that iPhone users would have to pay for 2.0 firmware ... did he say that? Yeah, I didn't think so. And how much did you have to pay when you installed 1.1.3?

There's no point in arguing with you because you can't seem to recgonize that Apple gets money from every iPhone subscription every month. It's like preaching to deaf ears because you always just deny that fact...

And saying that I live 2/3 of my life in various countries, I sorta know about cell charges in other countries. It has nothing to do with where you live... just with what similar plans go for on other phones.

Again, they're adding some updates to Applications we just purchased a few months ago. This is a mobile platform; it is not a desktop. There are expectations and Apple is giving its most loyal customers the big middle finger.

They do just the same with their iPhone carriers, but nobody complains about that... You don't even know what's coming in 2.0... So why don't you start complaining once they actually announce that? Oh, wait! They said "fee." That's why you complain... Three letters of doom.

 

[Kan-O-Z]

This isn't the jump from Tiger to Leopard. Apple is putting in features that should have been included from the get-go.

Right and that's why I said it'll most likely be $20 and not $130. About the features from the get-go, you can make the same argument about 3G. 3G was available and should have been done from the getgo. It's not even a new feature! ... just a faster internet!

So once they come out with 3G, we should all get free upgrades. We should be able to send in our phones and they should be able to swap out the 2.5G chip for the 3G one. If they don't, I'll be pissed and start talking about how apple is giving it to me up the rear.

Products improve all the time. You can't say that we should have had this from the getgo or else there is no room for new features or improvement.

Think of Apple as you would an expensive car company like Porsche. Porsche sticks it to ya for an oil change! Apple is the Porsche of the computing world. If Apple is too expensive for you then you need to get another device. But I have a feeling that once you have experienced a Porsche or Apple you're just not going to like the other 3rd rate products out there

Kan-O-Z

 

[aidanpendragon]

Agreed. But the catch is that I was responding to people wondering why it isn't free (as in beer). The iPod line has been a 'buy hardware to get new features' product. So they have accounted for it as such. The drawback is that the iPod Touch falls under the old accounting model by nature that it is an iPod.

You've centered in on the key issue. As others have pointed out, maybe Apple regrets its accounting choice for the Touch...maybe not.

BUT - I'll maintain that the whole "device is a one-time revenue thus upgrades must have a cost" argument is spurious.

We talked about this at some length in another thread - well, I tried to - but it got lost in the back-and-forth: there are plenty of examples of upgrades to fixed-revenue devices that Apple doesn't charge for.

iTunes 7.6.1 for Macs is an excellent post-Sarbanes-Oxley example. I said more about it here, but suffice to say, I think "ability to rent movies from your computer" counts as a "significant new & unadvertised feature" for a fixed-rev. device. So why wasn't that a charged-for item?

Engadget pursued a similar line of reasoning for the Touch itself, and QT, etc.

The real issue is: what does Sarbanes-Oxley actually say you have to charge for? (smarter minds than me are welcome to pour through it) "Significant new & unadvertised" is the best popular interp. I've found. But again, if certain upgrades - Mail, Weather, etc. on the Touch - meet that standard, surely again "rent movies on your Mac" would as well.

I think Apple is either A. confused or B. intentionally hiding behind S-O to justify recurring charges on Touch owners. In either case, the law, or its invocation, is being very inconsistently applied.

I'd be happy to see further, non-acrimonious discussion on this issue. Maybe someone with S-O expertise can prove my analysis wrong.

This isn't the jump from Tiger to Leopard. Apple is putting in features that should have been included from the get-go.

Indeed, why wasn't the "sync-your-Calendar" feature of prior Touch firmware a charged feature, given Apple's logic?

 

[Krevnik]

You've centered in on the key issue. As others have pointed out, maybe Apple regrets its accounting choice for the Touch...maybe not.

BUT - I'll maintain that the whole "device is a one-time revenue thus upgrades must have a cost" argument is spurious.

We talked about this at some length in another thread - well, I tried to - but it got lost in the back-and-forth: there are plenty of examples of upgrades to fixed-revenue devices that Apple doesn't charge for.

iTunes 7.6.1 for Macs is an excellent post-Sarbanes-Oxley example. I said more about it here, but suffice to say, I think "ability to rent movies from your computer" counts as a "significant new & unadvertised feature" for a fixed-rev. device. So why wasn't that a charged-for item?

Engadget pursued a similar line of reasoning for the Touch itself, and QT, etc.

The real issue is: what does Sarbanes-Oxley actually say you have to charge for? (smarter minds than me are welcome to pour through it) "Significant new & unadvertised" is the best popular interp. I've found. But again, if certain upgrades - Mail, Weather, etc. on the Touch - meet that standard, surely again "rent movies on your Mac" would as well.

Aha, but to ensure that we have the right discussion, we have to make a couple things clear:

1) It isn't about how we pay for the product, it is how the revenue is accounted for on the product. We may pay once for a particular product, but that is irrelevant to the discussion in the end.

2) We need to be careful about our examples. If we aren't very specific and sure about the accounting behind the example, then we can't actually say how it applies.

The problem with iTunes as an example is that in terms of the iTMS, it is a service front-end. In terms of the iPod, it is a product feature. S-O doesn't stop me from enhancing my retail services to sell more products, because they are just that, a service.

That said, this is why I /hope/ the cost of the 2.0 update is low, as charging a high price for Exchange support is somewhat insulting, and the App Store should be getting accounted for on the service model (and thus not part of any fee for the 2.0 update).

 

[aidanpendragon]

Aha, but to ensure that we have the right discussion, we have to make a couple things clear:

1) It isn't about how we pay for the product, it is how the revenue is accounted for on the product. We may pay once for a particular product, but that is irrelevant to the discussion in the end.

2) We need to be careful about our examples. If we aren't very specific and sure about the accounting behind the example, then we can't actually say how it applies.

The problem with iTunes as an example is that in terms of the iTMS, it is a service front-end. In terms of the iPod, it is a product feature. S-O doesn't stop me from enhancing my retail services to sell more products, because they are just that, a service.

That said, this is why I /hope/ the cost of the 2.0 update is low, as charging a high price for Exchange support is somewhat insulting, and the App Store should be getting accounted for on the service model (and thus not part of any fee for the 2.0 update).

1. Sure. Hence the Apple TV vs. Touch argument from Apple.

2. I get your case that iTunes is now a service front end for the store. We can in theory draw the distinction that if the software itself is accounted for on a recurring basis (even if free) - e.g., if it generates revenue - then upgrades that add new features can be free.

Two problems: one, I haven't seen any of the (scant) statements from Apple getting that fine-grain. The most they seem to say is that it's all about how the hardware is accounted for. Thus, free upgrades for Apple TV but not for Touch.

Two: there are other problematic examples besides iTunes. 10.4.11 & Safari 3 is a good one - there's certainly much new functionality in that browser; it's not a service/sales front-end; and it meets the "new version number" hurdle so many here seem to invoke. Again, it's a software upgrade to a one-time revenue piece of hardware.

I was going to raise the "pay for the ability to buy apps" issue, but you got to it. Even so, it sounds like we will indeed will be charged for that ability. Low-fee or not, it wouldn't be justified under either of the iTunes scenarios we've raised.

 

[Boda2]

A few points on this discussion.

1. Sarbanes-Oxley does not set forth how any company should account for anything. Nor does it tell any company whether or not it should charge for upgrades. In fact, it does not set forth any accounting rules at all.

2. At the time it sells a product, whether it's the iphone, ipod touch, appletv or whatever, Apple must determine the appropriate method for recognizing revenue for the product under GAAP.

3. If Apple will be providing software upgrades (beyond bug fixes) free of charge, Apple must recognize all the revenue from the product ratably over a period of time. Since iphone upgrades are provided for free, Apple can't take the entire sales price as revenue when you buy the phone. (The fact that Apple also collects monthly income via AT&T is irrelevant. Even if AT&T kept every dollar of your monthly bill, Apple would still be forced to recognize iphone sales as revenue over time because of the free upgrades.)

4. If Apple will be providing either (a) no software updates of any kind or (b) software updates that are effectively bug fixes free of charge, but will be charging for software upgrades that include new features and functionality, then it can recognize the entire sales price for the product at the time of sale. It is important that the upgrade fee not be deminimis, however.

5. iTunes is a free software product that anyone can download even if they don't own a single Apple product. Upgrades to it (which are also free) are irrelevant to the accounting for sales of Apple devices.

With regard to the ipod touch, Apple wanted to take the entire sale price of the device as revenue up front. This is what it had always done with ipods, and to do differently would have really skewed their revenue trends. Given that accounting goal, the only choice was to charge for upgrades.

Since iphones were a new line of revenue, Apple was less resistant to the idea of spreading the revenue over time. Thus the free upgrades.

 

[Krevnik]

Two problems: one, I haven't seen any of the (scant) statements from Apple getting that fine-grain. The most they seem to say is that it's all about how the hardware is accounted for. Thus, free upgrades for Apple TV but not for Touch.

Because when they have had to invoke the 'S-O' argument, it has been about updates to a fairly closed product where the software and hardware were presented as a single entity. MacOS X, while tied to Apple hardware, does not actually fall neatly into this same category, as I'll get into in a second.

Two: there are other problematic examples besides iTunes. 10.4.11 & Safari 3 is a good one - there's certainly much new functionality in that browser; it's not a service/sales front-end; and it meets the "new version number" hurdle so many here seem to invoke. Again, it's a software upgrade to a one-time revenue piece of hardware.

Aha, another catch... MacOS X, iTunes, and Safari are all accounted for separately. And they are accounted for separately from the hardware. As for something like 10.4.11, it would be hard to claim that 10.4.11 adds major, unannounced functionality compared to Tiger itself.

I was going to raise the "pay for the ability to buy apps" issue, but you got to it. Even so, it sounds like we will indeed will be charged for that ability. Low-fee or not, it wouldn't be justified under either of the iTunes scenarios we've raised.

It gets /really/ tricky here, and I am not sure how far I want to delve here, as I am not a lawyer, and anything I say is really just a SWAG. If Apple bundles the store-front into the 2.0 update, which includes other 'major, unannounced features', you and I could argue all day. Without more specific information on Apple's accounting statements, we might as well flip a coin as it would be just as accurate as any conclusion we come up with.

And again, I don't hold Apple blameless, but I don't hold Apple as the sole source of evil in this scenario either.