Filed under: Hardware, Software, Apple Financial, Apple, iPod touch
iPod touch fee could go bye-bye
Chris Foresman over at Ars Technica has an interesting pronouncement: A rule governed by the Financial Accounting Standards Board, that's been heavily lobbied for by Apple and other electronics companies, may be enough to lift the charge that iPod touch owners have had to pay for updates of significant features to their devices. It's complicated, but it all has to do with "subscription accounting" -- devices that gain "significant new functionality" after their sale, like the iPhone, have to be reported over a series of years rather than all at the same time (presumably because the revenues associated with the product were the result of a series of updates, not just one lump sum).For the iPhone, it's fine -- they have subscription charges associated with them over two years anyway. But the iPod touch is different -- because Apple doesn't want to report the sales of those devices over a period of time, they've had to charge minimum fees for updates -- the $10 (and more recently, $5) that iPod touch owners have paid for the firmware updates. But if the new rule goes in (it still requires FASB approval), then Apple would be able to report sales of the iPod touch all together without having to worry about charging for updates, as well as the dual GAAP and non-GAAP reporting we've heard on their conference calls.
Plus, as Foresman says, it would help Apple's stock price (seeing all of the iPhone's sales at once would boost investor confidence), and it would help developers who are asking all users of both the iPhone and iPod touch to update right away -- they wouldn't have to wait for iPod touch owners to find a few bucks in their couch. With the weight of Apple behind this one, we can probably expect to see the rule approved (even if they have to make some concessions). And so while iPod touch owners will probably have to still keep waiting for a camera, they at least won't have to pay for more software updates.
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Reader Comments (Page 1 of 2)
Macintologist said 10:57AM on 9-15-2009
If this is so why doesn't Apple have to charge for 10.6.x updates?
Reply
Phil Gilder said 11:03AM on 9-15-2009
because 10.1/2/3/4/5/6.x updates generally don't bring in a whole new slew of features
look at what 10.6.1 brought:
Improves compatibility with some Sierra Wireless 3G modems
Addresses an issue in which some printer compatibility drivers might not appear properly in the Add Printer browser
Addresses an issue that might cause DVD playback to stop unexpectedly
Addresses an issue that might make it difficult to remove an item from the Dock
Resolves an issue in which the Command-Option-T keyboard shortcut would sometimes bring up the special characters menu in applications such as Mail and TextEdit
Addresses instances in which auto account setup in Mail might not work
Resolves issues when sending mail with certain SMTP servers
Addresses an issue in which Motion 4 could become unresponsive
Includes an update to Adobe Flash Player plug-in version 10.0.32.18
Improve, resolve, address - all bug fixes, not new features
Jordan said 11:45AM on 9-15-2009
So then why don't iPhone users have to pay, they keep getting new features.
falcon5768 said 11:49AM on 9-15-2009
@ Jordan: If you are not going to read the article, you should just STFU.
Jordan said 1:18PM on 9-15-2009
Subscription charges don't go to Apple though, they go to AT&T. Still doesn't make sense.
"Bob" said 2:14PM on 9-15-2009
Yes, but Apple recognizes the revenue from iPhone sales over a 2 year period. That's why it's called "subscription accounting" regardless of wether or not there's any subscription at all. Apple uses subscription accounting for the AppleTV as well, but you don't pay AT&T for that, do you?
Macintologist said 11:11AM on 9-15-2009
What's the rationale behind these rules? Why can't Apple or any other company just give their customers software updates that add features for free? What's the rationale for making them charge for updates if they want to account for the sales all at once?
Reply
Brian Yamabe said 11:58AM on 9-15-2009
The rationale is that you can't recognize the revenue for a product that you haven't fully delivered. In order to recognize the revenue for the sale of an iPod Touch, the full functionality must be delivered. If you offer an upgrade for free, you technically didnt deliver all the functionality of that device and have violated some accounting standards. By charging for the upgrade you are charging for new functionality, thus the original purchase delivered all the functionality and you are not in violation of said accounting rules. I remember Apple had to charge to enable 802.11n (?) or something related to wireless in the iMacs or MacBooks, it was for the same reason.
istarman said 11:24AM on 9-15-2009
http://en.wikipedia.org/wiki/Sarbanes-Oxley_Act
Reply
Jordan said 11:46AM on 9-15-2009
Too little too late, Zune HD is here.
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Nicole said 12:07PM on 9-15-2009
Troll much?
Quinn Taylor said 12:27PM on 9-15-2009
So instead of paying for a software update, you can just buy an entirely different device with single-digit marketshare (to be incredibly generous to ~1%). That's a real winner... Have you considered that Microsoft is bound by the same rules?
Jordan said 1:17PM on 9-15-2009
I've considered it, but then I also noticed how every zune in existence has been given free software updates over the years with new functionality and features. Makes me again wonder whey Apple has to charge.
Nicole said 1:40PM on 9-15-2009
Microsoft rarely does things in accordance with law.
Jordan said 2:53PM on 9-15-2009
Yeah that's really the reason....
Fanboi much?
Nicole said 3:36PM on 9-15-2009
You can dig up the court documents yourself if you have the time, but just for an idea: http://en.wikipedia.org/wiki/Microsoft_litigation.
Microsoft does some things very well, namely server os's and visual studio are personal favorites. However, Microsoft has never been a real competitor in the media market; their approach to it has always been too hap-hazard.
Neil Anderson said 11:53PM on 9-15-2009
Go Nicole!
MRCUR said 12:22PM on 9-15-2009
I have a feeling Apple will still continue charging for iPod Touch OS updates - especially since they add a lot of new features. Apple is clearly keeping a gap between the iTouch and iPhone lines with the camera, so why not continue that difference through the OS updates?
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veggiedude said 12:23PM on 9-15-2009
"Too little too late, Zune HD is here."
Actually, it isn't. Only the hardware is. If you want Facebook and Twitter, wait until the end of the year, same with games. If you want an app store, it could be a year away. Who in their right mind would buy a device only half done?
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John Benoit said 4:47PM on 9-15-2009
"Who in their right mind would buy a device only half done?"
hmm, I seem to remember buying my iPod touch 1st gen at launch with even less features than the zune HD. Granted, I now have a 3GS that does a whole lot more, but shouldn't we give Microsoft the same chance to improve their device? The hardware is there, so let's give them the same patience we've showed apple for the past few years.