Apple iPod touch upgrade fee

From today’s WWDC keynote, Apple referred again to the fee that will be charged to iPod touch users for features iPhone users receive for free, which reminds me of the post I wrote up in January a year ago about the same issue with the Apple TV. If you’re curious about why this practice is followed, please go here for the relevant background.


Quiet car artillery

Twittered by NPR‘s Scott Simon this morning, via the trendy iPhone/iPod touch app Birdhouse:

I am very surprised how many people refer to the Quiet Car on Twitter. Google Reader tells me the most activity is between 3 and 7 pm, corresponding (I assume) to people’s end of day train ride home, which makes sense. Friday and Saturday are the two most active days of the week for this topic, suggesting that people value their quiet at the end of a work week. In other news, dog bites man.

Prior coverage here.

WWDC raises iPod touch accounting issue

From today’s WWDC keynote, Steve Jobs just referred again to the fee that will be charged to iPod touch users for features iPhone users receive for free, which reminds me of the post I wrote up in January about the same issue with the Apple TV. If you’re curious about why this practice is followed, please go here for the relevant background.

iPod touch/Apple TV upgrade fees and accounting

In today’s Macworld keynote address, Steve Jobs indicated that the new features that were being offered to iPod touch users would cost $20 as an upgrade, whereas the new Apple TV features were being offered free. Now I own neither of these gizmos, but if I did, I’d be very excited about the free upgrade to one and I’d be annoyed about the fee for the other. So why is this?

A year ago, when Apple enabled 802.11n functionality in its Macintosh computers that had been sold as 802.11g machines, Apple charged $1.99 for the ‘enabler.’ The explanation at the time was that this was to satisfy some accounting rules under GAAP. One article covering the issue is Cnet’s Apple’s 802.11n accounting conundrum. From that article, we learn:

…because the company has already recognized all the revenue from the sales of those computers, it has to now charge customers at least a nominal fee in order to establish the value of its software upgrade and satisfy an obscure accounting regulation known as SOP 97-2, said Fox.

More recently, Cnet has discussed Apple’s accounting as it relates to the Apple TV and the iPhone in the article Accounting for iPhone, Apple TV’s future. The idea there is that Apple will sell those using a subscription model to account for the associated revenue, enabling them to roll out upgrades for free with no need for fees like the 802.11n enablers.

I can only conclude from this that the iPod touch is not handled via subscription modeling, making a fee necessary. That much makes sense to me, but why Apple feels compelled to charge $20 for something that they could have just as easily charged $1.99 puzzles me. From the short-term, obviously they want the revenue of the higher fee. From a longer term point of view, high fees remind Apple’s potential customers that early adopters are not appreciated at Apple. If you create in your customers the doubt that you will treat them fairly, at the very least you postpone sales and possibly you lose some of them altogether.

[For some older thoughts of the whole ridiculous kerfluffle and whining associated with Apple’s early iPhone price reduction, see here.]

Update: via this post on TUAW, I see that DF’s Gruber speculated about this in October.

Quickie: Apple sells millionth iPhone

iphoneIn 74 days, from 6/29 to 9/9, Apple sold one million iPhones.

That’s 13,513 per day. 563 per hour. 9.4 per minute. Or an iPhone sold every 6.4 seconds.

Gruber’s post about iPhone skepticism reminded me of the fact that 270,000 of the million iPhones sold on the first weekend the gizmo was available. Hence, after three days when Apple sold about 90,000 iPhones per day (more than one per second), they then sold them at a pace of 10,429 phones per day, or one every 8.3 seconds.

That’s still a lot of iPhones.

Source: Apple PR.

The iPhone price drop

It’s easy to forget, sometimes, how myopic people can be, how short their memories are, and how selectively they recall the little bits of the the past that they do. The willful idiocy of consumers was driven home again as portions of the net erupted in outrage over Apple’s price drop of their hot iPhone. Why would anyone be upset over a price drop you say? Cheaper is better, you say? Foolish person, you overlook those who bought before the price drop.

This tempest in a teacup reached such a fury yesterday that Apple’s Steve Jobs posted a letter of apology and offered all of the initial iPhone buyers a $100 credit. As kind as that is, I hate to see whining rewarded, and I think Jobs’s response is exceedingly generous. As he notes:

…being in technology for 30+ years I can attest to the fact that the technology road is bumpy. There is always change and improvement, and there is always someone who bought a product before a particular cutoff date and misses the new price or the new operating system or the new whatever. This is life in the technology lane. If you always wait for the next price cut or to buy the new improved model, you’ll never buy any technology product because there is always something better and less expensive on the horizon. The good news is that if you buy products from companies that support them well, like Apple tries to do, you will receive years of useful and satisfying service from them even as newer models are introduced.

I admire Mr. Jobs’s contrition, but I agree more with his comment in USA Today, before this frenzy reached a head:

Q: What do you say to customers who just bought a new iPhone for $599? Sorry?
A: That’s technology. If they bought it this morning, they should go back to where they bought it and talk to them. If they bought it a month ago, well, that’s what happens in technology.

The New York Times had a series of pieces on the brouhaha, as did many other news outlets, and I was amazed at their patience with those who bought early and then felt gouged. Did these people imagine the early price was the final price? That this product was unlike every other electronic gadget that improves over time while costing less? That the iPhone was immune from basic laws of supply and demand or that Apple wouldn’t rightfully maximize its revenue on the early phones by raking off as much premium as the market would bear? I bought a Palm III in 1998 – perhaps Palm owes me money back now that the same cash I paid then for a 2MB black and white device will now garner me a 64MB, color web browsing smart phone? The logic is the same, as far as I’m concerned, and it is of course bunk. When you buy something, you demonstrate you think the price is merited and once you have the product you get the value of ownership. If you didn’t think the iPhone was worth what they were asking, you wouldn’t have bought it, right?

Outrage of this scale usually hinges on fraud or delusion, but Apple has never suggested its initial pricing of the iPhone was carved in stone. How adults could spend several hundred dollars and then act like such spoiled children is appalling to me. Why are the iPhone buyers entitled to special treatment? When my father’s flashy new MacBook Pro is eclipsed by the next new laptop from Apple, will Apple offer him a credit for his disillusionment over no longer having the newest shiniest toy? Of course not.

I will stop sputtering now, but I will also link to Gruber on this, as he has some other useful thoughts. Gartenberg also makes a valuable point about the perhaps unusual cross section of buyers that make up the early iPhone customers. I am glad to see ol’ FSJ apologize as well.

UPDATE: Hysterical – Jobs Offers Apple Lisa Early Adopters Store Credit

Michael Gartenberg’s “iPhone Bottom Line”

Lest there be any doubt about Mr. Gartenberg’s take on Apple’s iPhone, as a follow up to the many posts that linked to his “what’s missing” post, including mine, we have the following from him today:

…let’s be clear, the innovation and design outweigh any issues by an order of magnitude, perhaps several. I look forward to leaving my carrier of more than a decade in June to pick one of these up.

Bottom Line. Home Run. Period.

Pretty glowing.