Become a MacRumors Supporter for $25/year with no ads, private forums, and more!

MacRumors

macrumors bot
Original poster
Apr 12, 2001
54,972
17,352


Apple made some interesting comments today during their Q2 Financial Results regarding their plans with the iPhone and Apple TV in the coming months.

The webcast was opened with a prepared statement, where Apple describes how they are planning to use subscription based accounting to document the income from the iPhone as well as the Apple TV. This means that income from these devices will be spread over a 24 month period from an accounting perspective.

Their reasoning behind the shift was due to plans to continue to develop new software features and "entirely new applications" and incorporate them into the iPhone. "We want to provide many of these new features and applications at no additional charge to users."

Similarly, they stated that periodic updates and enhancements will be provided at no charge to Apple TV customers.

Again, this has no effect on customer prices or purchasing and simply reflects a shift in internal accounting at Apple, but the plan for future updates and "new applications" for the iPhone to be delivered as free updates was somewhat revealing.
 

05elstonc

macrumors regular
Sep 21, 2006
124
0
Miami
People need to realize this is a big deal. Apple got burned with the wireless N upgrade because of the accounting issues related to issuing new functionality on products whose revenue had already been fully realized. With this subscription model, it allows Apple to add new functionality without needing to charge for them. These will be "material" updates to iPhone. New Applications and new features over the life of the phone.

The other really cool part about all of this has to do with my solid belief that Apple has decided to keep the iPhone extremely tight. If you buy an iPhone at launch that phone will continue to be updated and will last more than 2 years since they are accounting for it over a 24 month period. This means you will not be screwed by buying an iPhone in the begining. The iPhone hardware is advanced enough to handle the new software apple will want to ship, and when 3G and more memory is added in new models the form factor will remain the same, and as new features are added the entire line will see the benefits. Unlike the iPod where 3g iPods cannot play the games or some of the other new iPod OS features.
 

neutrino23

macrumors 68000
Feb 14, 2003
1,852
345
SF Bay area
This reinforces the argument that you can't judge the iPhone simply based on the available information. Apple is always conservative and undersells new products. It is quite possible, and today there was confirmation, that new features will be added in the near future. It may even be possible to adopt third party apps. We'll just have to wait and see. Recall that in January's keynote Steve pointedly remarked that fixed button sets don't allow you to add new features while a touch screen allows you to add new features.
 

spotlight07

macrumors regular
Mar 28, 2007
166
102
This means you will not be screwed by buying an iPhone in the begining. The iPhone hardware is advanced enough to handle the new software apple will want to ship, and when 3G and more memory is added in new models the form factor will remain the same, and as new features are added the entire line will see the benefits. Unlike the iPod where 3g iPods cannot play the games or some of the other new iPod OS features.

So this means I get free updates to my iPhone and my aTV? If they did the accounting the other way they'd have to charge for it? How does this differ from free Mac OS X updates (like 10.4.x)? Sorry, I don't get it. I wasn't an accounting major in college. :D Debits and credits anyone? :eek:
 

05elstonc

macrumors regular
Sep 21, 2006
124
0
Miami
This reinforces the argument that you can't judge the iPhone simply based on the available information. Apple is always conservative and undersells new products. It is quite possible, and today there was confirmation, that new features will be added in the near future. It may even be possible to adopt third party apps. We'll just have to wait and see. Recall that in January's keynote Steve pointedly remarked that fixed button sets don't allow you to add new features while a touch screen allows you to add new features.

Yep. Apple wants the iPhone hardware to be a simple slab that does not need updating as often as iPods do.

So this means I get free updates to my iPhone and my aTV? If they did the accounting the other way they'd have to charge for it? How does this differ from free Mac OS X updates (like 10.4.x)? Sorry, I don't get it. I wasn't an accounting major in college. :D Debits and credits anyone? :eek:

Yes, without the change they would have to charge for the updates, just like new versions of iLife or OSX. The software updates improve the existing codebase, it does not materially change the functionality of the software, it simply updates code without adding new major features.
 

FreeState

macrumors 68000
Jun 24, 2004
1,730
112
San Diego, CA
iPhone as well as the Apple TV. This means that income from these devices will be spread over a 24 month period from an accounting perspective.

Interesting. So with todays earnings report only 1/24th of all :apple: TV's sold to date were included in the report. (The next report would have 3/24 - it was only out for 1 month in the current report.)
 

mrweirdo

macrumors 6502
Nov 21, 2005
370
0
So this means I get free updates to my iPhone and my aTV? If they did the accounting the other way they'd have to charge for it? How does this differ from free Mac OS X updates (like 10.4.x)? Sorry, I don't get it. I wasn't an accounting major in college. :D Debits and credits anyone? :eek:

I think it has something to do with more of a firmware update or something that improves the functionality of the hardware. Anyways thats my understanding. I'm sure someone will come along who's more knowledgeable on the matter.
 

lizhersh

macrumors newbie
Apr 25, 2007
1
0
It's cause they're running late ...

IMHO, AAPL has assigned every-hand-on-deck to this project, is working like crazy to meet the June deadlines, and has now decided that it will deliver the most basic product to customer, and update it as they go. This is becoming a common tactic with large, unending IT projects. The stratgey is, deliver a stable, but "half baked" product, meet the project deadline, start generating cash, and then complete the project as you go. Waiting for a "Perfect" iPhone, with all the pre-planned features would probably have taken APPL into October for iPhone too.

I bet the same will apply to Leopard. \
 

Dustinndiego

macrumors newbie
Jun 4, 2004
6
0
This was inevitable!

This was inevitable! Look at the "home" page of the iPhone there is a ton of unused and unbalanced free real-estate on the display you had to know Apple would be add more apps, let the guessing game begin again.
I think this also has a lot to do with leopard being delayed, look for a ton of interopability with the new OS, i.e. Word Processing App (Pages) and Spreadsheet App (?Charts?) that are "desktop quality". Also put my money on GPS of some type to interface with the Google Maps.
Plus EnGadget posted an "internal" AT&T Document that reads "... no subsidies are being offered on the phone at this time." HERE IS THE KEY!!! I don't know how it could be more clear, NO SUBSIDIES at this time, Steve Jobs said that this price point of $499 and $599 was with a 2 year contract thus subsidized. There is the conflict if AT&T now says the $499 and $599 price reflect NO SUBSIDIES. My two year contract with Cingular is up but I am waiting for the iPhone to re-up, if I don't get a subsidy for the iPhone, I will use my subsidy on a different phone and sell it, using the money to help offset the cost of (subsidizing) the iPhone. Keywords "AT THIS THIS TIME. Expect a big dog Steve Jobs announcement with some added features release date and subsidy info around June maybe the 11th or Apple's World Wide Developer Conference.
Remember this phone is "Magic" and "Revolutionary" and "5 years ahead of the competition". Apple has put more behind this product than any other in its history and Steve Jobs said last October “Looking forward, 2007 is likely to be one of the most exciting new product years in Apple’s history.”
Apple is taking no prisoners in this one, and I can wait to see Steve Ballmers video reaction to the next round of announcements.
Remember this is just one man's opinion ;) (sorry about the spelling and grammar, I'm excited)
 

longofest

Editor emeritus
Jul 10, 2003
2,880
1,538
Falls Church, VA
People need to realize this is a big deal. Apple got burned with the wireless N upgrade because of the accounting issues related to issuing new functionality on products whose revenue had already been fully realized. With this subscription model, it allows Apple to add new functionality without needing to charge for them. These will be "material" updates to iPhone. New Applications and new features over the life of the phone.

Apple didn't get "burned" with the 'N' upgrade in so far as they made it a PR fiasco. Even big accountants said that Apple's explanation didn't make any sense. However, if they want to change the way they report the sales of the iPhone and :apple: TV, I don't care.

The big news of the day is that it is confirmed that Apple is gonna be giving us free updates to the :apple: TV and the iPhone. Since I have an :apple: TV, I'm excited about that :D
 

05elstonc

macrumors regular
Sep 21, 2006
124
0
Miami
Might the accounting change be a sign that they are moving to subscription music?

It would also make sense if they were accounting for a share of income from iPhone service contracts.

No. This has nothing to due with subscription music.
 

05elstonc

macrumors regular
Sep 21, 2006
124
0
Miami
This was inevitable! Look at the "home" page of the iPhone there is a ton of unused and unbalanced free real-estate on the display you had to know Apple would be add more apps, let the guessing game begin again.
I think this also has a lot to do with leopard being delayed, look for a ton of interopability with the new OS, i.e. Word Processing App (Pages) and Spreadsheet App (?Charts?) that are "desktop quality". Also put my money on GPS of some type to interface with the Google Maps.
Plus EnGadget posted an "internal" AT&T Document that reads "... no subsidies are being offered on the phone at this time." HERE IS THE KEY!!! I don't know how it could be more clear, NO SUBSIDIES at this time, Steve Jobs said that this price point of $499 and $599 was with a 2 year contract thus subsidized. There is the conflict if AT&T now says the $499 and $599 price reflect NO SUBSIDIES. My two year contract with Cingular is up but I am waiting for the iPhone to re-up, if I don't get a subsidy for the iPhone, I will use my subsidy on a different phone and sell it, using the money to help offset the cost of (subsidizing) the iPhone. Keywords "AT THIS THIS TIME. Expect a big dog Steve Jobs announcement with some added features release date and subsidy info around June maybe the 11th or Apple's World Wide Developer Conference.
Remember this phone is "Magic" and "Revolutionary" and "5 years ahead of the competition". Apple has put more behind this product than any other in its history and Steve Jobs said last October “Looking forward, 2007 is likely to be one of the most exciting new product years in Apple’s history.”
Apple is taking no prisoners in this one, and I can wait to see Steve Ballmers video reaction to the next round of announcements.
Remember this is just one man's opinion ;) (sorry about the spelling and grammar, I'm excited)

Great post. I would disagree that there will be a subsidy on the iPhone.
 

Troyte83

macrumors regular
Apr 3, 2007
139
0
so doesthis mean there is going to be new features on the iPhone. if so then i just fell even more in love with it. is there also a possibility of storage capacity being upgraded. (8gb 16 gb)?
 

aftk2

macrumors regular
Nov 10, 2003
132
19
Pacific NW
New app on the iphone?

No-brainer: the business/people directory search dashboard widget, complete with one-touch dialing, add to address book, etc.. It's so simple, and so easy for them to do...and yet none have done it!

Say goodbye, 411!
 

mrthieme

macrumors regular
Nov 29, 2006
209
0
This to me is what is so great about the iPhone, it is completely soft and changes can be made at any time. New interfaces and apps whenever they come up can be implemented. I expect this will be an exciting product with Apple throwing so much in the way of resources behind it.

On a side note, today I had reason to use the calculator on my Razr, I believe it took 9 button presses to get to it. Everytime I catch a glimpse of that iPhone and envision osx on it my current phone grows more repulsive to look at and use. Come on June.
 

brianus

macrumors 6502
Jun 17, 2005
391
0
This is excellent news. Maybe iPhone will eventually have a shot at appealing to business types after all. So what if it doesn't support Office docs/Exchange now...

(and maybe, in a parallel universe, they'll update AppleTV and QuickTime to natively support *.avi and VIDEO_TS folders, too!)
 

spotlight07

macrumors regular
Mar 28, 2007
166
102
... Steve Jobs said that this price point of $499 and $599 was with a 2 year contract thus subsidized. There is the conflict if AT&T now says the $499 and $599 price reflect NO SUBSIDIES...

The way I understood it was the 2 year contract was there as part of the deal to get Cingular on board as a partner with Apple & to develop the special voicemail, etc. Cell phones are easily "unlocked" these days so I'm sure that's what Cingular was worried about (though the iPhone might be difficult to change to another provider without losing voicemail and possibly other functionality, but we'll have to see). Apple doesn't want to devalue their products with subsidies, though like you said people are used to them and will find ways around it.
 

mrthieme

macrumors regular
Nov 29, 2006
209
0
Apple is taking no prisoners in this one, and I can wait to see Steve Ballmers video reaction to the next round of announcements.
[/QUOTE]

Probably the same as last time, a halfhearted laugh, that nervous look in his eyes, some BS reasons why Apple doesn't matter. What a tool.
 

arn

macrumors god
Staff member
Apr 9, 2001
16,260
5,472
Plus EnGadget posted an "internal" AT&T Document that reads "... no subsidies are being offered on the phone at this time." HERE IS THE KEY!!! I don't know how it could be more clear, NO SUBSIDIES at this time, Steve Jobs said that this price point of $499 and $599 was with a 2 year contract thus subsidized. There is the conflict if AT&T now says the $499 and $599 price reflect NO SUBSIDIES.

Steve Jobs said $499 and $599 with 2 year contract. he never said that it was with subsidies. people just assumed.

arn
 
Register on MacRumors! This sidebar will go away, and you'll see fewer ads.