Apple's $0.99 FaceTime Charge Due to Accounting Requirements

[Stuipdboy1000]

I can see why some people are getting annoyed at Apple for charging for what was free. However, I don't recall Apple ever stating it would be free when it exited beta so I don't see why people are getting in a tizzy.

I use FaceTime multiple times a week to keep in contact with family. For £0.59, the upgrade was a no-brainer. It also means I'll get updates (new features, bug fixes) for the app whereas folk who stick with the beta won't. It's up to them whether they upgrade or not though.

 

[lfhdez]

So how about the Mac App Store? Not part of the original OS, touted as "New Feature" by Apple them selves for Lion, BUT still makes it on to Snow Leopard without a $0.99 charge.

(And for the Billionth time on this thread, it's not about the frikkin' cost of the app. It is is the precedent that is being set (or tested) by Apple.)

In anycase, this seems to be a pretty black and white affair... some people are seeing black, and others white

Didn't the Mac App store get released with 10.6.6 - a Mac OS Update?

Anyway... yes... pointless to argue, I know. I think what you mean is Some people see black , others see Red

 

[217833]

Spid: you should really educate yourself. It really is an accounting issue.

Do you think Apple wants to piss off their loyal customers over a measly 99¢?

Then dude I really feel sorry for you, 'cause you should really stop to drink the kool-aid and get your education somewhere else than CNN and FOX News if you can't read the news between lines.

As much I do love Apple and Apple Products (I bought a 8 Core Mac Pro, an iMac 27", Macbook 13", MacBook Pro 15", iPhone, iPhone 3GS, iPhone 4, 2x iPod Nano, iPod Touch and waiting for iPad 2 and spent over $4000 in iTunes Store the last 3 years... so I guess I'm not a hater after all), but I can also see clearly their manipulations which have always been pretty clear.

I even share some of them, but in this case, on top of the $100M potential market, the hidden goal for the 99¢ FaceTime isn't about accounting (beta was free)... It's all about to get people ready to use the App Store... It's their way to "educate" people to use the App Store and have an account ready for "on-click buying"...

If you can't see that clearly, I really feel sorry for you to be that blind...

Spid

 

[Mal]

So how about the Mac App Store? Not part of the original OS, touted as "New Feature" by Apple them selves for Lion, BUT still makes it on to Snow Leopard without a $0.99 charge.

(And for the Billionth time on this thread, it's not about the frikkin' cost of the app. It is is the precedent that is being set (or tested) by Apple.)

In anycase, this seems to be a pretty black and white affair... some people are seeing black, and others white

The Mac App Store is a service, not a feature. It's revenues are reported as the apps are bought and Apple gets it's cut.

Also, why the heck did anyone just assume that Facetime would forever be free? No one charges for beta's, but even iWork.com is still supposed to be a paid service once it comes out of beta, and it's gotten far less use probably than Facetime has by now.

jW

 

[217833]

PS: Anyway, we can use Skype (Tango) over 3G and cross-platform and the app doesn't cost a dime, so who cares about FaceTime?

I surely don't...

Spid

 

[BaldiMac]

So how about the Mac App Store? Not part of the original OS, touted as "New Feature" by Apple them selves for Lion, BUT still makes it on to Snow Leopard without a $0.99 charge.

And paid for with revenue from the store.

(And for the Billionth time on this thread, it's not about the frikkin' cost of the app. It is is the precedent that is being set (or tested) by Apple.)

In anycase, this seems to be a pretty black and white affair... some people are seeing black, and others white

What's the precedent? That Apple is charging for software that it provides free on new Macs? Seems that precedent was pretty well established by iLife.

 

[Surely]

Then dude I really feel sorry for you, 'cause you should really stop to drink the kool-aid and get your education somewhere else than CNN and FOX News if you can't read the news between lines.

As much I do love Apple and Apple Products (I bought a 8 Core Mac Pro, an iMac 27", Macbook 13", MacBook Pro 15", iPhone, iPhone 3GS, iPhone 4, 2x iPod Nano, iPod Touch and waiting for iPad 2 and spent over $4000 in iTunes Store the last 3 years... so I guess I'm not a hater after all), but I can also see clearly their manipulations which have always been pretty clear.

I even share some of them, but in this case, on top of the $100M potential market, the hidden goal for the 99¢ FaceTime isn't about accounting (beta was free)... It's all about to get people ready to use the App Store... It's their way to "educate" people to use the App Store and have an account ready for "on-click buying"...

If you can't see that clearly, I really feel sorry for you to be that blind...

Spid

Wowzers.

Clearly you are a lost cause. You decided that it was a huge conspiracy, and even when others have pointed you towards the real reason (GAAP, revenue recognition, etc.) for the 99¢ charge, you've decided to ignore it.

I don't get my education from news channels. And even if I did, I don't think any of them covered this story.

I studied accounting and am in the process of becoming a CPA. This is why I know wtf I'm talking about.

If you want to blame something, blame our complicated accounting rules.

Here, I made you something:

 

[lfhdez]

... It's all about to get people ready to use the App Store... It's their way to "educate" people to use the App Store and have an account ready for "on-click buying"...

If you can't see that clearly, I really feel sorry for you to be that blind...

Spid

Free apps do that, paid ones- not so much.

 

[Mattie Num Nums]

To me the issue at hand is, this is another way for Apple to squeeze money out of its clients. Everyone is like "oh its just 99 cents!" Well if 15 million people buy it, Apple just made 15 million dollars. The whats next question needs to be asked. Is this just a quick way for Apple to continue stashing cash in foreign bank accounts?

 

[jctune]

Let's not forget that Apple tried to say that iPod software updates were paid updates because of "accounting" then Apple "fought" to have that "rule" changed and won, so they offered the last iPod software update for free.

Now, if they had that rule changed, why does it only apply for the iPod and not Macs? If "accounting" is the reason, why weren't us iPad owners charged for 4.2?

Also, look at everything else in the world. Are you telling me that Microsoft and Sony go back and restate the earnings for every PS3 and Xbox 360 ever sold when they release software updates with new features? Of course not. Microsoft certainly isn't going to go back and re-state the earnings for Xbox 360s sold in 2005.

This is Apple being typical Apple. Shafting the customer while lying about it and seeing how far they can push people before they break and finally realize that they're being ripped off.

I'm going to attempt (and most likely fail) to post this only one more time. My belief is that the original post / tweet is incorrect - this is not related to an accounting issue.

Why? Because Apple never recognized revenue (since they didn't charge for the beta) on FaceTime. Since they've never recognized revenue, they most likely aren't in the scenario where they "have" to charge for this.

Most likely they have decided that FaceTime, like many other software products Apple produces, should have a cost and not be free. Whether the beta was free or not has no bearing on the matter - Apple has decided that new users (since the beta apparently doesn't expire) need to pay for FaceTime.

That's it - no accounting issue.

If however you want a definitive guide on software revenue recognition - take a look at the Deloitte roadmap I posted a link to a few pages back.

Also - ignore the whole "restatement" discussion. The issue is how revenue was initially recognized. It's not that the companies you mention would have to restate - its that they choose to account for the revenue differently. Both methods are valid.

To me the issue at hand is, this is another way for Apple to squeeze money out of its clients. Everyone is like "oh its just 99 cents!" Well if 15 million people buy it, Apple just made 15 million dollars. The whats next question needs to be asked. Is this just a quick way for Apple to continue stashing cash in foreign bank accounts?

Oh the horror!! A for-profit company actually trying to make money. How dare they?!?! I thought we lived in a capitalist society? If you don't want to pay for software - go install Linux or FreeBSD.

 

[Mattie Num Nums]

Oh the horror!! A for-profit company actually trying to make money. How dare they?!?! I thought we lived in a capitalist society? If you don't want to pay for software - go install Linux or FreeBSD.

If M$ did this you'd be crying like a baby.

Capitalism doesn't always equate to stupidity.

 

[StruckANerve]

Why would anyone pay for or even use Facetime when Skype is free and mutliplatform? Skype can call anyone on any network or anyone on a landline for next to nothing. And it's free as long as the other person has Skype.

 

[Surely]

@jctune: It's being restated because it wasn't stated properly in the first place.

 

[Mattie Num Nums]

Why would anyone pay for or even use Facetime when Skype is free and mutliplatform? Skype can call anyone on any network or anyone on a landline for next to nothing. And it's free as long as the other person has Skype.

Because Facetime is gorgeous, brilliant, magical, and we really think you're going to love it. Oh and one more thing... it's only .99 cents. SUCKERS!

 

[jctune]

If M$ did this you'd be crying like a baby.

Capitalism doesn't always equate to stupidity.

Sorry - you have me confused with an anti-MS fanboy. As someone who, until recently, ran both Windows and Macs in my home, I'm looking for the best product that fits my needs. Unfortunately Windows Home Server doesn't anymore - so off to FreeBSD for my server needs. OSX Server doesn't do what I need - so no OSX Server.

And I still don't understand how wanting to get paid for a product equates to stupidity?

On that note - I'm going to voluntarily withdraw from the discussion as it relates to whether charging is right or wrong - as that seems to be like debating religion (no one is going to be convinced no matter what is said). Feel free to respond to my points if you would like however.

I'll happily respond to any further accounting questions though, such as...

It's being restated because it wasn't stated properly in the first place.

The reason I say to ignore the restatement topics is because it honestly clutters up the overall discussion. Generally - when people bring up restatement they bring it up like its an absolute statement "Apple would have to restate". The reality is that isn't true.
1) This wouldn't be an issue if they hadn't chosen this method of accounting in the first place
2) It assumes that the revenue we're talking about reaches a level of materiality that would require a restatement. In none of these past discussions, this one, 802.11n, ipod touch, etc. are we talking about revenues that would even put this issue on an auditor's radar.
3) Auditors hate restatements as much as the company does. I know factually that at 2 of the big 4 firms (don't know about the other 2) that if there's a restatement the partner's quality rating goes down (which of course impacts compensation).

Sure - it is possible that a restatement could occur - but that's not why they are charging for it. They are charging for it because they picked the accounting treatment (and they want to get paid of course). Potential restatement isn't a cause, its a result.

 

[pmjoe]

As we suspected and has now been confirmed by Macworld's Dan Moren, the charge is due to an accounting requirement that has affected similar updates in the past.

[...]

While it is not clear exactly what types of updates trigger such accounting requirements [...]

Then STOP PERPETUATING THIS LIE MacRumors!

There is absolutely no "accounting requirement" that requires Apple to charge $0.99 for FaceTime.

 

[Cougarcat]

FaceTime 1.1 is included in Lion. So if you don't want to pay .99 now, wait four months. The beta should work fine until then anyway.

 

[BaldiMac]

Then STOP PERPETUATING THIS LIE MacRumors!

There is absolutely no "accounting requirement" that requires Apple to charge $0.99 for FaceTime.

Your lack of understanding does not make it a lie.

https://forums.macrumors.com/posts/11981358/
https://forums.macrumors.com/posts/11981498/

 

[dethmaShine]

Then STOP PERPETUATING THIS LIE MacRumors!

There is absolutely no "accounting requirement" that requires Apple to charge $0.99 for FaceTime.

What lie are you referring to?

 

[Surely]

Your lack of understanding does not make it a lie.

https://forums.macrumors.com/posts/11981358/
https://forums.macrumors.com/posts/11981498/

Great posts! Nice find.

 

[HELO server]

... It's all about to get people ready to use the App Store... It's their way to "educate" people to use the App Store and have an account ready for "on-click buying"...

If you can't see that clearly, I really feel sorry for you to be that blind...

Spid

Free apps do that, paid ones- not so much.

If Apple could make people do the necessary steps to pay, and then pay, the change in behavior for this group is worth quite a lot. Enough that it probably would be feasible to pay subjects a few dollars to use one dollar at the App Store.


There is significant opportunity for Apple to view their assets the any way they want, to force their own hands to force the customer. The "my way or the high way" often piss people off even if succumbing to the "my way" is succulent.


Apple might consider the upside to be worth the risk, but this can backfire badly.

 

[vintageapple]

Anyone know if they are going to shut down the beta?

 

[Stuipdboy1000]

Anyone know if they are going to shut down the beta?

Nobody really knows. They may remove it through a future update. I don't know how feasible it would be to put a kill switch in 10.6.7.

 

[ColdZero]

I still don't get it even after reading those posts. If apple can release Safari, iTunes, the remote app for iOS etc etc whats different about facetime? The remote app certainly adds features to iOS and to OS X which were not there when they were first released. I'm not complaining about the 99 cents, but I don't understand what makes Facetime different than it can't be just another piece of free software.

 

[HELO server]

... what makes Facetime different...

If Ernst & Young believe FaceTime adds significant value to an existing product, then prior predictions of the value of that product may have been to low. Apple can be forced to change what they believed in the past to be the future (value.) This is a significant hassle. And stupid.

The $.99 is avoiding the problem of adding value to something, as Apple is charging for FT on Mac.

As Apple may choose what a "product" is, choose what the market have to pay, choose to view iOS and Mac as separate ... it should be possible to solve it differently if they really want.


The reason Apple had to do something does not have anything to do with reality. It is related to audit procedures, inflexibility and independence.

If the auditors belief and reality differ, either the earnings have to be restated (incorrectly) or some trick have to be invoked. That that is possible also shows that the ordeal is a little pointless. It also suggest that to relate earnings to intangibles isn't "accurate", but is there an alternative?

For some reason audits fail to detect even massive economic bubbles, even on a national scale. They fail to detect massive stupidity like the recent Nokia situation, it even seams like nobody knows that it has already happened, with Sendo, and Novell, and ohters (with MS smiling at and slaughtering the company). They fail to detect blatant fraud like The SCO group, that have yet to show ANY evidence, a fraud that drained money from Novell prior to the slaughter. Audits and certifications may provide some common rules, some standardized way to value everything, and be a motivation for management to think. I just have a doubt that it is able to more than nit picking. I hope I'm wrong.


I believe that this trick harm Apple.
I assume they have considered other alternatives.