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iPod touch Apple Lies About Why They Charge iPod Touch Owners For Updates

F

Full-Throttle

macrumors member
Original poster
Jun 22, 2007
37
9
USA
Ok, before I start on this let me first state that I really do like Apple and their products. I own a G4 PowerBook, a Macbook, and a 16GB iPod Touch. I have also convinced some of my friends and family to switch from PCs to Macs, so I am not an Apple hater or Microsoft fan boy by any stretch of the imagination.

When Apple released the first software upgrade/update to iPhone and iPod Touch owners in January, iPhone owners got it for free while iPod Touch owners had to pay $19.99. Their reason for this was iPhones are on a subscription accounting model, while iPods are not, so any new features must have a cost attached to them as supposedly required by law (Sarbanes-Oxley Act), and the cost must be relative to the new features "value". So Apple charged $4 per new app (Mail, Stocks, Weather, Notes, and Maps). I agree that this is a reasonably fair price for these apps, and I purchased it a few days after it came out.

Apple just released the the 2.0 software upgrade, and again iPhone owners get it for free and iPod Touch owners are required to pay. This is fine because of the supposed accounting laws that require it, but there is a problem. The cost of the upgrade is supposed to be relative to the value of the new features, yet the 2.0 upgrade costs $9.95 and includes not only new features like Microsoft Exchange support and a new Calculator, but it also contains the January App pack.

How is it possible that a new upgrade that has more features than the original can cost half, if the accounting laws require the price to coincide with the value of the new features? It is clearly not possible or logical that more features could cost less when the price is dictated by the value of the features. I think that Apple just uses this as an excuse to milk iPod Touch owners for extra cash.

What do you think?
 
The "value" is what the company places on it. SOX doesn't have rules on how to calculate it, only where it applies and how it must be accounted for. Apple didn't have to reduce the upgrade price by 50%. Would you be happier if they charged $19.95?

Hardly a lie, as that would get them in more trouble than not charging for it in the first place.
 
JohnNotBeatle said:
The "value" is what the company places on it. SOX doesn't have rules on how to calculate it, only where it applies and how it must be accounted for. Apple didn't have to reduce the upgrade price by 50%. Would you be happier if they charged $19.95?

Hardly a lie, as that would get them in more trouble than not charging for it in the first place.
Click to expand...
The way Steve Jobs said it in his January keynote, it was like he did not want to charge for the app pack, but the law required it and at that price of $19.99. He also said (at I believe WWDC) that they were not looking to make money off the 2.0 upgrade, but if that were the case, then why not charge $1 or $2, like they did with the 802.11n Macbook driver update? Also, why is the price the same for people that purchased the January App Pack as those that did not?

Finally, if Apple is free to set the price at what they want, then you just proved my point. If they were only charging because they were required to by law, then they would not have set the prices at 19.99 for the January App Pack and 9.95 for the 2.0 Firmware/App Pack combo.
 
Of course they're charging to make money, they are a company and by extension are driven by profit, they know people will pay for these updates so they are charging as much as they want for you to get them. It makes perfect economic sense!
 
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Apple charges us because we're idiots in love with Apple and therefore will pay any amount they throw at us for any new thing that's available.
 
The fact that the key feature is to enable users to purchase apps that they get a cut of is the part that troubles me the most about "feeling compelled to charge."
 
Christ

How much longer are people going to whine about this?

If you don't like it, don't pay the money. It's pretty simple.

No amount of conversation here is going to change a single damn thing. No amount of logic here is going to change anything. Either accept it and buy it or don't accept it and don't buy it.

I'm not real happy about the whole sun going down at a slightly different time every day, nor am I happy that Starbucks charges so much for their lattes, but complaining about either isn't going to change anything.
 
appleretailguy said:
How much longer are people going to whine about this?

If you don't like it, don't pay the money. It's pretty simple.

No amount of conversation here is going to change a single damn thing. No amount of logic here is going to change anything. Either accept it and buy it or don't accept it and don't buy it.

I'm not real happy about the whole sun going down at a slightly different time every day, nor am I happy that Starbucks charges so much for their lattes, but complaining about either isn't going to change anything.
Click to expand...

I don't think any (many?) of us are deluded enough to think we're going to change their mind.

although, actually, it worked in canada.
 
As imnotatfault noted, one of the biggest benefits of the new iPod Touch software to Apple is it allows iPod Touch users to now buy applications that Apple themselves gets a cut of. So it is in their interests to give it away for free, but SOX won't let them.

As to the value, the update may have the same $20 value to Apple as the first one did, but since the iPod Touch will now be generating additional revenues for Apple via application sales, they likely decided to give folks a "discount" with the hopes they would spend more then that $10 on applications when they first connect to the App Store.
 
I understand that Apple is a business and they are out to make money, and I don't have a problem with that.

What I do have a problem with is them claiming the reason they are charging for the update is solely because of a law. That is a half truth. Yes they may be required to charge something for updates, but not at the prices they are setting.

I'm fine with them making money; I just want them to be straight with us, an not put the blame on a law when the truth is they found another place to make money. Is honesty too much to ask for?

@appleretailguy

Pointing out that a company is not being entirely honest is not whining.
 
Full-Throttle said:
What I do have a problem with is them claiming the reason they are charging for the update is solely because of a law.
Click to expand...
When have they ever come out and stated that law to be the reason for charging? They've said that they "account for the iPod touch a little bit differently," but they've never blamed it on sox.
 
Full-Throttle said:
I understand that Apple is a business and they are out to make money, and I don't have a problem with that.

What I do have a problem with is them claiming the reason they are charging for the update is solely because of a law. That is a half truth. Yes they may be required to charge something for updates, but not at the prices they are setting.
Click to expand...
The only half truth is in them claiming they can't find a different way around SOX. Seriously, you think $10 is too much for the 5 apps and a major OS upgrade? What do you think of the $129 price on Leopard?

Pointing out that a company is not being entirely honest is not whining.
Click to expand...
Actually, the above statements come across very whiny.
 
Full-Throttle said:
Ok, before I start on this let me first state that I really do like Apple and their products. I own a G4 PowerBook, a Macbook, and a 16GB iPod Touch. I have also convinced some of my friends and family to switch from PCs to Macs, so I am not an Apple hater or Microsoft fan boy by any stretch of the imagination.

When Apple released the first software upgrade/update to iPhone and iPod Touch owners in January, iPhone owners got it for free while iPod Touch owners had to pay $19.99. Their reason for this was iPhones are on a subscription accounting model, while iPods are not, so any new features must have a cost attached to them as supposedly required by law (Sarbanes-Oxley Act), and the cost must be relative to the new features "value". So Apple charged $4 per new app (Mail, Stocks, Weather, Notes, and Maps). I agree that this is a reasonably fair price for these apps, and I purchased it a few days after it came out.

Apple just released the the 2.0 software upgrade, and again iPhone owners get it for free and iPod Touch owners are required to pay. This is fine because of the supposed accounting laws that require it, but there is a problem. The cost of the upgrade is supposed to be relative to the value of the new features, yet the 2.0 upgrade costs $9.95 and includes not only new features like Microsoft Exchange support and a new Calculator, but it also contains the January App pack.

How is it possible that a new upgrade that has more features than the original can cost half, if the accounting laws require the price to coincide with the value of the new features? It is clearly not possible or logical that more features could cost less when the price is dictated by the value of the features. I think that Apple just uses this as an excuse to milk iPod Touch owners for extra cash.

What do you think?
Click to expand...


You're one of a few people with brain out there. I absolutely agree with you.
 
ricardo.hudson said:
Of course they're charging to make money, they are a company and by extension are driven by profit, they know people will pay for these updates so they are charging as much as they want for you to get them. It makes perfect money-hungry sense!
Click to expand...

akonradi said:
When have they ever come out and stated that law to be the reason for charging? They've said that they "account for the iPod touch a little bit differently," but they've never blamed it on sox.
Click to expand...


The only way to reply to this thread is by quoting the best. post. evar. that addresses it correctly:
TPALTony said:
The accounting rule in question was brought in after the collapse of Enron because they stated revenue associated with certain initiatives in one quarter, and costs in a later quarter. Hence over-stating their profits. The SARBOX legislation came in as a direct result of this and companies have spent millions of dollars ensuring their compliance with it. Consulting firms have made a fortune out of helping people be compliant.

The side-effect of this is things like this. If the officially announced product did not include something, and then they want to add it, then according to SARBOX they have declared the profit in an earlier quarter and would have to declare a cost on their books in the quarter the update shipped. Do you seriously think Apple was just trying to charge us money with a $3 802.11n upgrade? Look at what that created in terms of rumor site bad press (and apple gets a lot of their free press from sites such as that so they do care.)

They likely made a loss on that initiative once they'd covered off the accounting side of it and making it available as a paid upgrade etc etc. A simple software update would have covered it.

As to why PSP upgrades are free. I don't know how they are recognized on Sony's books and frankly it might not matter since they are a Japanese company and not specifically subject to SARBOX (depending on how their corporate structure falls out.)

As for MSFT. X-box revenue is recognized over 2 years, which means they CAN give away free upgrades because they haven't recognized all the revenue. Note that accepted accounting convention around SARBOX allows the free upgrades to continue even past the two years. No idea why, but I think it's just deemed as having complied with the legislation.

Now, Apple recognizes iPhone revenue over 2 years, so iPhone users can get the upgrade for free. The iPod Touch is recognized IMMEDIATELY, in full. It is therefore subject to SARBOX.

Again, at $10 a pop, they aren't making money. They had to do EXTRA coding to make iTunes NOT just give you the upgrade for free. Build pages to sell it, figure out how to track if you've said "No" to the upgrade so as to not keep bothering you, adjust in channel inventory prices down by $10 so people can buy the upgrade and be "whole" once it's gone out etc etc etc. By the time they've done all of that it would be easier for them to just give it away for free. Your argument that they are just after money just makes no sense.

I like apple, but I am the first to admit when they screw up (mobileme was a farce, and the 3G launch was hardly a shining moment for them, compared to last year!) But in this case, they could have used the resources they put on making you pay for this upgrade in other areas which would have generated MORE revenue for apple. They don't think about specific isolated incidents of how to get $10 out of people. It's not worth it. That's not to say, when they are launching a new version of hardware, they don't stop and think and start taking out previously included items (Apple remote with computers used to be free, now isn't for example. This IS cheap in my opinion!) But the point is, they made that decision as part of the launch of a new product. They didn't just one day decide to stop including them on the same model, same revision, same everything, as a way of making a few more bucks. Large firms just don't think that way. It's counter-productive.

For sure, Apple wants to make lots of money, for sure they can get away with it because of their brand value, but they aren't doing it here just for fun. It's just not a good business decision. They're doing it because they have to.

When someone buys an iPod Touch, does it say, ANYWHERE, that you're entitled to free upgrades (other than bug fixes which restore functionality that you WERE supposed to have, if it isn't working properly)? No, it doesn't. For the iPhone, it's always been a major selling feature.

People just love to take an opportunity to knock apple for things like this. Truth be told, they probably think it's a great sign that they are doing the right thing. Because if THIS is what people are moaning about, then they're doing the really important parts of their job really well!
Click to expand...

I wish that what I quoted from tpaltony were stickied and mandatory reading for anyone who even thinks about posting lame threads about paying for iPod touch updates. I disagree with the SOX requirements as they apply to software updates like this, BUT just because I disagree with it doesn't make it less real.
 
I'm complaining. Why should you have to pay to have the latest copy of the firmware? You don't have to pay to update iTunes, most of the time you don't have to pay to update your iPod. And as has been pointed out this update makes it more convenient to buy more stuff so why charge? 10 bucks is not a small amount of money.
 
dellavoce said:
I'm complaining. Why should you have to pay to have the latest copy of the firmware? You don't have to pay to update iTunes, most of the time you don't have to pay to update your iPod. And as has been pointed out this update makes it more convenient to buy more stuff so why charge? 10 bucks is not a small amount of money.
Click to expand...

If you pay $300 for a new iPod then $10 is a relatively small amount of money.
 
imnotatfault said:
Well it's annoying to JUST have purchased something then find out that you're not even getting full functionality.
Click to expand...
But this is no ones fault but your own for not researching the product you're purchasing.

dellavoce said:
I'm complaining. Why should you have to pay to have the latest copy of the firmware? You don't have to pay to update iTunes, most of the time you don't have to pay to update your iPod. And as has been pointed out this update makes it more convenient to buy more stuff so why charge?
Click to expand...
Way to read the thread.
 
.Andy said:
But this is no ones fault but your own for not researching the product you're purchasing.
Click to expand...

Rock and hard place. Had to purchase computer when I did (7/1), had to get iPod with computer.

And it's not a matter of fault. I just disagree, from both a personal and a business standpoint, charging a recent purchaser, and if what the c. serv reps are saying, charging future purchasers as well.

I'm not naive enough to say I don't understand SOX and why it exists or why businesses seek to make money. However, no one here can argue the good faith Apple could have produced by charging a minimal amount (802.11n) for the upgrade, especially seeing as how they make money on our use of the App Store. No one can contend that point, simply because if in one day, Super Monkey Ball can generate $30k net (from when Macrumors posted the stats), Apple alone made $13k on an app that they spent NO MONEY developing themselves. They develop the SDK and developers program away. Yes, I understand the simplicity of the explanation, but it goes to show that there is an insane economic benefit and good faith goes a long way.
 
that is completely ridiculus. I think everyone who bought the jsu should get ten dollars back
 
dukebound85 said:
so if the iphone revenue is recognized after 2 years, will iphone owners have to pay for any additional features after those 2 years?
Click to expand...

Apparently not. It seems that simply by virtue of the fact that Apple recognized its revenue (for example) for the Apple TV over a certain non-instantaneous period of time, they are now free and clear to provide ongoing free feature enhancements for the Apple TV in perpetuity without ever running afoul of currently accepted accounting practice.

Because they chose to recognize the revenue for the sale of an iPod Touch as all arriving at a single instant, they are apparently obliged to charge for every feature enhancement. Pretty convenient obligation, eh?
 
Any SOX experts care to explain why they are not charging iPod touch owners for the remote app, then? That is certainly a feature enhancement.
 
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