About that $20 upgrade...
The Macalope was certain that the whining would be swift and furious over Apple charging $20 for the same software features iPhone users get for free. As Adrian Kingsley-Hughes so brilliantly puts it:
Come on Steve, give your biggest fans a break.
Yeah!
$20 is awfully steep to add a little functionality to the iPod touch - functionality that already exists for the iPhone.
Yeah!
... I feel that this is going too far.
Yeah! Unlike all the other times Adrian writes about Apple!
Or not!
Whatever!
Well, dear reader, if you're experiencing a bit of deja vu over this, it's probably because we've seen this before. Which, not coincidentally, is what "deja vu" means in French.
Again, yes, Apple could give the update to iPod touch users for free just like their iPhone-using brethren, but they'd have to open past accounting periods and restate their financials. 802.11n? Any of this ringing a bell?
Not with Adrian, apparently.
The short story for those who got to class late is Apple must charge for substantial enhancements to products that do not have revenue recognized on a subscription basis or it has to restate prior earnings. The iPod touch does not have revenue recognized on a subscription basis. The iPhone does. As does the Apple TV. Hence, they get free updates and the iPod touch does not.
It's a somewhat complicated accounting convention and perhaps you can argue that the iPod touch revenue should also have been recognized on a subscription basis, but then it raises the question as to whether or not all iPods should have their revenue recognized that way and pretty soon it all devolves into communism and everyone's getting everything for free and even Randy Newman doesn't want that.
So you can't argue that Apple shouldn't charge for the update. It's too late.
You do have some recourse, however.
If you think $20 is too much, don't buy the upgrade.
Sure looks like it's worth it to the Macalope, though.
Mythical beast and rumormonger extraordinaire, the Macalope writes about all things Apple for the CNET Blog Network. Read more at The Macalope: An Apple blog. He is not an employee of CNET. Disclosure.
With the mobile iTunes store, surely the iPod touch should be treated as the special-case mobile-buying-platform exception to the iPod rules? Well, maybe in an ideal world. (I just bought the "January Upgrade" -- for the equivalent of ~$26 in the UK -- therefore securing my right to ***** ;) )
Second point: $20 is too much for a mere accounting problem, especially for software delivered online. Compare it to the 802.11n update, which was about four dollars IIRC. $20 isn't "we want to please accounting" money, it's "we want to make money" money. Of course, Apple is out there to make money, so it's hard to say that they don't have the right to do so. But it invalidates the accounting defense of Apple's action here, at least for me.
If you don't think the upgrade is worth $20, don't buy it. As far as the price being too high, I am sure that the sarbane oxley act requires that the cost be a reasonable one. It would probably cause Apple as much trouble to charge a token amount for the upgrade as to charge nothing. Even if it weren't the case $20 is not that much money these days. You can't fill your gas tank with $20. I don't think that Apple is gouging its customers.
Don't blame Apple, blame congress. If this really pisses you off, call your congressman.
If I charge $20 for an upgrade, I am saying rather clearly that the upgrade is WORTH $20. If I charge $1, then I am saying that the added funcationality is worth $19 less. Plus, if you charge $1 or even $5 people would be complaining that for that low low price it should have just been free. Also, all this nonsense about "it should've been there in the first place" is just that. If you think it should've been there in the first place, you shouldn't have bought a Touch.
So... in summary, it's all about perceived value. Apple wants to propagate the perception that the upgrade is worth $20 and it's their right to do that.
It's their code, and they have a right to charge for it, and set their own price, just like they can charge for OS upgrades.
Hiding behind Sarbanes-Oxley, though, is just cowardly.
It doesn't. Sure, you can buy stuff from iTunes. But you can do that on the iPod Touch, too.
So tell us again why they're different? Why the iPhone update is $20 and the Apple TV Take 2 update is free?
Contrast that to the iPod Touch. ITMS is not the only way to load new content. Well, maybe for video, but you could load it with music and never put vids on it (like I do with the iPhone). In fact, you could load the device with music and *never* purchase anything from ITMS. This is probably the primary reason it can't be considered a subscribed service.
Even worse... you need an iTunes account to pay... what if you live out of the countries that can create an account there? (Like me?? - I bought the iPod Touch with a local authorized reseller of Apple).
I'm disappointed...
BUT having thought for a little longer about this, and as much as I love the Macalope, I think that the idea that the AppleTV is being booked on a subscription basis is wrong. Firstly, the AppleTV doesn't bring in a regular income stream like the iPhone does. What about purchase through iTunes? They aren't guaranteed to be regular, but let's say that they're still enough to qualify it for subscription income status. Until today (or the point in the future when the software update is released) the AppleTV could not be used to make purchases via iTunes. And I don't think accounting laws will allow you the benefits of deferring income as subscriptions across multiple periods just because you may move to that business model at some point in the future. And if you could do that, surely the iPod Touch, which has featured the mobile iTunes store from day one should therefore fall under the same rules (and considering that all Apple computers ship with iTunes, surely they should, too... which is where the argument stops making sense...)
Phew.
Anyway, a better approach by Apple may have been to have waited until they had whatever solution for selling iPhone apps in place and then offered Mail etc. for sale through there. I'm sure that when we compare them to some of the offerings we're bound to be seeing soon (I'll guess about a dozen tip calculators appear in the first week) we would all have concluded that $20 was actually pretty reasonable.
(ps. the "January update", which is described as the five apps, actually also unlocks the moveable icon feature of the home page.)
Well, it *is* being booked that way. Why, the Macalope has no idea. It does seem odd. He's wondering if they were considering some kind of subscription plan for movies. It's also just a lot harder to key in information on an Apple TV. So updates would be better done automatically. Just not sure.
The "subscription" thing has to do with how (and when) revenue is recognized. Apple went on record last year that the Apple TV revenue would be recognized over a period of time exactly so they could shove out upgrades for "free." Ditto the iPhone, of course.
So the only real question is why they didn't also do this for the iPod touch. And I think the Macalope has a pretty good reason why
You're not paying the subscription, Apple is accounting for certain hardware "as if" it were a subscription.
If Apple sold $8 million worth of iPod touches last quarter, they can say they sold $8 million and report it as earnings. If you want to upgrade, Apple has to charge you.
If Apple sold $8 million worth of ?TVs last quarter, they can say they sold $8 million but can only report $1 million as earnings. The other $7 million is spread out over the next 7 quarters. Apple can give you upgrades for free.
Apple is realizing higher earnings each quarter with iPods, but have to charge for upgrades.
Apple is taking a hit in current earnings with the subscription accounting of ?TVs, but this let's them offer free upgrades.
Speculation: The stand-a-lone mp3 player market is reaching saturation. iPods integrated into other products, like the iPhone, is where we're headed and subscription accounting offers free updates as a marketing advantage.
Got some links or something to back it up?
The thing that irks me the most is not that they're selling the apps; it's that the $20 include the actual software update: you don't even get the customizable home screen or the song lyrics unless you pay. And the damn thing nags you to upgrade every single time you plug in the iPod.
I'd like to hear your opinions on this.
They are the same apps that they are providing for the iPhone, so there was no cost of development. They are charging $20 because they can; because enough customers will find value in paying $20 for those features that it will make up for the people pissed off about it.
It has absolutely nothing to do with Sarbanes-Oxley. Anybody who suggests otherwise is stretching.
Same sort of thing applies here.
Thanks guys
I find this resolution faulted. First, there never was any charge for the "note" fix that Steve said was coming and did (you can add notes and sync). There have been several patches (along with security fixes) and yet no compatibility with Flash sites (which means the safari software is not a complete browser). You also need an email account (Gmail, MSN & Yahoo are free) but dotMac accounts are subscription, so Apple could make that free incentive (not $20)...finally, anyone buying a 16GB iPod Touch NOW, does not have to pay $20 more (than someone that did 2 days ago).
I say complain. LOUD. iPhone peeps did and got a coupon in thediff.
And for Apple to hide behind the SOX, that is irony considering the last 12 months of SEC investigations, and previous legal folks leaving...cough.
But they had to charge something or open previous books. That's the simple truth.
And the reason they don't have to charge for very small updates is probably because they can expense small R&D costs rather than capitalize them.
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by fillmanoz
January 17, 2008 3:13 PM PST
- $20 or AUD24.99 is a no brainer charge to refresh and update my iPod Touch. It now gives me all of the features of the iPhone without the hassle of dealing with the telephone companies. The Nokia in my other pocket does all that stuff. Roll on the SDK and for all the new apps yet to come. (please make VPN one of the first). I'm happy.
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