iPod touch 3.1 only $4.95 - includes 3.0!

[goosnarrggh]

This is absolutely false. Do you have proof of any of this? The comparison to the iPhone doesn't pan out either because they can (and do) sell iPhones without a contract (for a higher price). Those iPhones still have access to the free updates.

Apparently you didn't actually read my entire post. If you had you would have known that I already addressed that.

(In reality, only the original iPhone 2G involved a real ongoing flow of revenue form the carrier to Apple over the course of the iPhone's contract. But apparently there is some accounting magic they can play with subsequent models of iPhones to have the same effect on the books, even if there is no real flow of dollars. They didn't use similar accounting magic with the iPod touch.)

To reiterate, with the original iPhone, Apple had an ongoing flow of revenue-sharing dollars from AT&T for every iPhone sold. But with the iPhone 3G and 3GS, that flow of real dollars simply doesn't exist at all - regardless of any factors such as whether or not it was bought without a contract.

The only real dollars Apple ever sees for those sales is the one-time payment it receives on the initial date of purchase. The crux of the matter, apparently, is what Apple chooses to do with that one-time payment: Will it put the whole thing on the books all at once (like it does with the iPod touch) or will it set some of it aside and only put it on the books a few years later (like it does with the iPhone and the Apple TV).

It apparently has nothing to do with whether the customer is actually paying any ongoing flow of money into Apple, or whether or not any real flow of money is reaching Apple's coffers through any other means. It apparently has everything to do with how quickly Apple recognizes the income it has received on its financial statements.

If, like the iPod touch, it recognizes the money from the initial sale all at once, then the product must be finished and can only be improved in the future if more revenue is provided at that future time.

If, like the iPhone and the Apple TV, it doesn't recognize all of the money at once (eg. if it sets some of the money from the initial sale aside and puts off registering it on the books until some point in the future) then the product is incomplete and can still be improved in the future.

In the end there are no laws to at prohibit a company from providing free updates, even major revisions, to a product. It happens every day.

Apple claims are that it has to do with the Sarbanes-Oxley Act of 2002, in combination with "Generally Accepted Accounting Principles" (not really a piece of law, but rather a guide for companies to help them be transparent when reporting their performance to regulators and investors). Whether or not the law (Sarbanes-Oxley) and GAAP are really intended to be interpreted the way Apple apparently does is a secondary point. Apple has used this position repeatedly over the past few years, most notably when they claimed that they were required to charge for the 802.11n software activation patch for the fist batch of Core 2 Duo Macs.

This issue reached the front page of this website a few days ago with the news of a reduction in the percentage of initial revenue that Apple will need to set aside for future features and still comply with GAAP.
Article link

 

[Kadman]

Apparently you didn't actually read my entire post. If you had you would have known that I already addressed that.



To reiterate, with the original iPhone, Apple had an ongoing flow of revenue-sharing dollars from AT&T for every iPhone sold. But with the iPhone 3G and 3GS, that flow of real dollars simply doesn't exist at all - regardless of any factors such as whether or not it was bought without a contract.

The only real dollars Apple ever sees for those sales is the one-time payment it receives on the initial date of purchase. The crux of the matter, apparently, is what Apple chooses to do with that one-time payment: Will it put the whole thing on the books all at once (like it does with the iPod touch) or will it set some of it aside and only put it on the books a few years later (like it does with the iPhone and the Apple TV).

It apparently has nothing to do with whether the customer is actually paying any ongoing flow of money into Apple, or whether or not any real flow of money is reaching Apple's coffers through any other means. It apparently has everything to do with how quickly Apple recognizes the income it has received on its financial statements.

If, like the iPod touch, it recognizes the money from the initial sale all at once, then the product must be finished and can only be improved in the future if more revenue is provided at that future time.

If, like the iPhone and the Apple TV, it doesn't recognize all of the money at once (eg. if it sets some of the money from the initial sale aside and puts off registering it on the books until some point in the future) then the product is incomplete and can still be improved in the future.



Apple claims are that it has to do with the Sarbanes-Oxley Act of 2002, in combination with "Generally Accepted Accounting Principles" (not really a piece of law, but rather a guide for companies to help them be transparent when reporting their performance to regulators and investors). Whether or not the law (Sarbanes-Oxley) and GAAP are really intended to be interpreted the way Apple apparently does is a secondary point. Apple has used this position repeatedly over the past few years, most notably when they claimed that they were required to charge for the 802.11n software activation patch for the fist batch of Core 2 Duo Macs.

This issue reached the front page of this website a few days ago with the news of a reduction in the percentage of initial revenue that Apple will need to set aside for future features and still comply with GAAP.
Article link

I did read your entire post, I simply didn't accept "magic" as an acceptable answer as crazy as that sounds.

I deal with GAAP compliance (and SOX for that matter) on a regular basis. Any claims that they are required to change are simply false and more a matter of interpretation driven by how they choose to implement their compliance strategy. I state it as such because that's exactly what happens with SOX and GAAP is that they involve verbiage that can (and does) get interpreted differently by various companies.

At the end of the day you need to look outside of Apple (hard to do for some around here) to see that many, many other companies have similar types of products and they do not charge for upgrades and/or feature enhancements. Some do, but that's more of a revenue stream decision vs a compliance issue.

 

[goosnarrggh]

I did read your entire post, I simply didn't accept "magic" as an acceptable answer as crazy as that sounds.

I deal with GAAP compliance (and SOX for that matter) on a regular basis. Any claims that they are required to change are simply false and more a matter of interpretation driven by how they choose to implement their compliance strategy. I state it as such because that's exactly what happens with SOX and GAAP is that they involve verbiage that can (and does) get interpreted differently by various companies.

At the end of the day you need to look outside of Apple (hard to do for some around here) to see that many, many other companies have similar types of products and they do not charge for upgrades and/or feature enhancements. Some do, but that's more of a revenue stream decision vs a compliance issue.

I wholeheartedly agree that the whole problem boils down to a choice that Apple made. Indeed, you don't need to look outside Apple to find examples of devices that get free upgrades despite not having any ongoing stream of income. The examples I've cited are the Apple TV and the post-2G iPhone.

My position is that the decision was made way back when they approved their current conformance policies, and then sold their very first iPod touch and put all the revenue on the books right away instead of holding some over to account for future firmware updates.

But now that those decisions have been made, and several years of financial statements have been filed, and their conformance policies have been established, how much effort would it take for them to retroactively amend their accounting of all those original iPod touches to allow them to account for future updates without charging for them? Would there be other business impacts resulting from such amendments?

 

[Duffinator]

I've read many posts with people having problems with 3.1. I'm still on 2.0x, are there any reason to wait for bug fixes? I already have iTunes 9.0 downloaded.

Thanks

 

[mzd]

there are a few specific bugs in 3.1, specifically dealing with the new feature regarding live updating on the iPod of smart playlists. it sounded like a great feature, but it doesn't work very well. it basically screws up any smart playlists that rely on usage statistics (Recently Added, Top 25 Most Played, etc). my Recently Added playlist is now just a list of the first 100 songs on my ipod in alpha order by artist. nothing to do with date added. the Top 25 seems random, but def is not the top 25 based on play count.
that is really the biggest bug i've found so far. there is also a lot of talk about podcasts not ordering correctly. check a few threads down, and in the iPhone forum.
i skipped 3.0 so i'm not sure how buggy it was.