Upgrade fee sees few iPod touch users updating to 3.0 software

Posted:
in iPod + iTunes + AppleTV edited January 2014
Nearly half of all iPhone users have already jumped at the opportunity to enhance the functionality of their handsets by installing the free iPhone Software 3.0 update, but the same can't be said for iPod touch users, who -- deterred by a $10 upgrade charge -- are adopting the new software at a snail's pace.



On Monday, Apple announced that 6 million customers have downloaded iPhone Software 3.0 since its release last week. That means that roughly 15% of the 40 million multi-touch devices sold thus far by the Cupertino-based company are now running the latest software.



However, AdMob, whose ad network has been adopted by a large number of iPhone developers looking to monetize their free apps, recently released a few interesting statistics. Since it's able to see the version of iPhone Software running on iPhones and iPod touches making each ad request, it can quantify to some extent what percentage of those devices are running the various iPhone software distributions to date.



For example, the firm noted in a report a few days ago that it's seen "rapid adoption" of the 3.0 software by iPhones accessing its network. Though there's some margin of error given that not all iPhone users are launching applications with ties to its network, 44 percent of those that are were already running iPhone Software 3.0 by Saturday.



The statistics for iPod touch users paint an entirely different picture, however. AdMob reported that just 1% of iPod touch users accessing its network on Saturday had upgraded to the new software, while a resounding 78% were still running the latest point release of iPhone Software 2.0 introduced last year.



"The additional $10 fee to upgrade is clearly limiting uptake," the firm said, noting that this threatens to put a kinkÂ*in Apple's App Store ecosystem. "Developers looking to sell applications utilizing the 3.0 features canÂ?t be happy with AppleÂ?s decision to charge for the upgrade as it limits their available market size for downloads."



Should adoption of iPhone Software 3.0 not pick up in the coming weeks and months, it will be interesting to see whether Apple makes a change to the way it positions and markets the iPod touch when new models hit the market early this fall. That's likely the first time to company would be in a position to offer iPod touches that could receive free software updates like the iPhone over their two-year life expectancy.







The reason iPhone (and Apple TV) customers receive free software updates stems from an announcement Apple made in April 27, 2007, shortly before the original iPhone hit the market. In an effort to make the handset more enticing and somewhat "future proof," the company said it would leverage its proven capability in the area of software development to gradually add new software features and applications to its iPhone (and Apple TV products) free of charge, thereby providing its customers with the "greatest possible experience."



Under GAAP accounting principles, Apple normally fully recognizes the revenue associated with the sale of a product, such as an iPod, once the device has reached the end user; or less commonly, when the device has shipped.Â* Yet, due to certain idiosyncrasies with Sarbanes-Oxley (SarbOx), Apple, in order to account for the new features it delivers, claims it's forced to use what is called the subscription method of accounting for recognizing revenue from products it plans to improve over time.Â*



Under this accounting method, Apple literally divides each iPhone sale by 730 -- or the number of days in two years, representing the economic life of the product -- and recognizes the portions from that particular iPhone sale each day for exactly two years or 730 days. Therefore, should Apple be compelled to treat iPod touches like iPhones and Apple TVs, it may need to make a similar disclosure to the one it made for the aforementioned two products back in 2007.



Such an announcement would be unlikely mid-product cycle and would be better made alongside new models.
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Comments

  • Reply 1 of 136
    bigmc6000bigmc6000 Posts: 767member
    Wait, why the heck have only half the iPhone users upgraded??? It's free and it makes your iPhone do everything noticeably faster - not to mention all the added features.
  • Reply 2 of 136
    crees!crees! Posts: 501member
    So users will pay $10 for an app but not to update their device. Makes no sense.
  • Reply 3 of 136
    aplnubaplnub Posts: 2,585member
    Quote:
    Originally Posted by AppleInsider View Post


    Yet, due to certain idiosyncrasies with Sarbanes-Oxley (SarbOx), Apple, in order to account for the new features it delivers, claims it's forced to use what is called the subscription method of accounting for recognizing revenue from products it plans to improve over time.*



    Do they do the same accounting for the computer line like the iPhones? I never understood Apple's or SarbOx's stance on this because it seems contradicting.
  • Reply 4 of 136
    kasperkasper Posts: 941member, administrator
    Quote:
    Originally Posted by aplnub View Post


    Do they do the same accounting for the computer line like the iPhones? I never understood Apple's or SarbOx's stance on this because it seems contradicting.



    This whole matter is very much an open debate, regarding whether Apple really needs to take the subscription accounting route. But no, Mac revenues are not amortized and are recorded in full when they ship.



    K
  • Reply 5 of 136
    mclokimcloki Posts: 86member
    At the heart of it there's something wrong with having to pay for Touch upgrades. I mean even if you have to pay for it Apple could charge .99 cents and be done with it. It just smacks too much as a money grab conveniently disguised as a "Oh it's the government." This is the Apple tax.
  • Reply 6 of 136
    merdheadmerdhead Posts: 587member
    Quote:
    Originally Posted by mcloki View Post


    At the heart of it there's something wrong with having to pay for Touch upgrades. I mean even if you have to pay for it Apple could charge .99 cents and be done with it. It just smacks too much as a money grab conveniently disguised as a "Oh it's the government." This is the Apple tax.



    Apple annoys users on purpose, profits, then blames the government, making a point about a law it doesn't like. Dead on.
  • Reply 7 of 136
    jupiteronejupiterone Posts: 1,564member
    Quote:
    Originally Posted by bigmc6000 View Post


    Wait, why the heck have only half the iPhone users upgraded??? It's free and it makes your iPhone do everything noticeably faster - not to mention all the added features.



    I upgraded my original iPhone to the 3.0 software and have not noticed anything being faster at all.
  • Reply 8 of 136
    mclokimcloki Posts: 86member
    Quote:

    So users will pay $10 for an app but not to update their device. Makes no sense.



    So having both a touch and an iPhone, one gets updated for free while the other is a $10 charge to satisfy some accounting rule. With exactly the same software. What if your desktop OS was updated for free but your laptop OS was a $10 charge due to some obscure accounting rule? It's the dual pricing strategy/scam that irks customers.



    Why aren't OS or App updates priced the same way, on both platforms?
  • Reply 9 of 136
    Even if I didn't know how to acquire the $10 for free,



    I still would've paid the $10 for an upgrade to the OS. Seriously...updating an app is not comparable to updating a whole OS and I think $10 is pretty reasonable for it.



    Seriously....in 2 years, I've had to pay another 10% to keep my ipod running with cool new features and OS updates? Doesn't seem unreasonable to me...especially compared to the lifetime cost of an iphone
  • Reply 10 of 136
    brucepbrucep Posts: 2,823member
    Quote:
    Originally Posted by crees! View Post


    So users will pay $10 for an app but not to update their device. Makes no sense.



    Why should touch pay when iphone does not pay ??
  • Reply 11 of 136
    Quote:
    Originally Posted by gregarious119 View Post


    Even if I didn't know how to acquire the $10 for free,



    I still would've paid the $10 for an upgrade to the OS. Seriously...updating an app is not comparable to updating a whole OS and I think $10 is pretty reasonable for it.



    Seriously....in 2 years, I've had to pay another 10% to keep my ipod running with cool new features and OS updates? Doesn't seem unreasonable to me...especially compared to the lifetime cost of an iphone



    I don't think it is worth it to pay $10 to upgrade your OS. I upgraded for free by going to http://www.felixbruns.de/iPod/firmware/ and downloading the firmware for my iPod, turning it off, holding home for ten seconds and then plugging it in to my computer and continuing to hold home until it went to restore mode. Then I shift clicked the restore button in iTunes and used the firmware I downloaded. I had to change the extention to .ipfw.



    I don't pay money to Apple to upgrade but I sure do use the benefits.
  • Reply 12 of 136
    bigmc6000bigmc6000 Posts: 767member
    Quote:
    Originally Posted by JupiterOne View Post


    I upgraded my original iPhone to the 3.0 software and have not noticed anything being faster at all.



    Really? My 2G iPhone does tons of things faster - loading the games sped up significantly just from the upgrade.
  • Reply 13 of 136
    caliminiuscaliminius Posts: 944member
    Quote:
    Originally Posted by aplnub View Post


    Do they do the same accounting for the computer line like the iPhones? I never understood Apple's or SarbOx's stance on this because it seems contradicting.



    Anyone not wearing blinders has already realized that Apple has no need to charge for these updates. It was originally an issue with Apple unlocking the Wireless N features in Macs. That, at least made some sense because it was unlocking additional hardware not previously advertised as being present. The Touch updates don't unlock new hardware not already present, they are just software updates. If SarbOx required payment for software updates, the updates to the AppleTV (like the one that was just put out this week), PS3, XBox 360, and numerous other devices would all require similar payments.
  • Reply 14 of 136
    Quote:
    Originally Posted by bigmc6000 View Post


    Wait, why the heck have only half the iPhone users upgraded??? It's free and it makes your iPhone do everything noticeably faster - not to mention all the added features.



    I am definitely reverting back to 2.2.1. 3.0 is not faster at all. I have had issues with accessing wireless as well as the 3G network on the phone. "Rebooting" the iPhone many times per day sucks. Some of the games/apps do not work as smoothly namely GalaxyOnFire 3D. The "touch" interface response seems "slower".



    My $.02,



    M
  • Reply 15 of 136
    msanttimsantti Posts: 1,377member
    This whole "accounting" thing is just a front for Apple to justify bilking Touch users an extra $10.00.



    If there is some "law" requiring them to do so, then give everyone that pays $10, a $10 iTunes card to balance it out. Apple can give a gift card at anytime.



    And why $10? How about $1.00? Where does the $10 number come from?



    I love Apple but sometimes they try to puch the envelope a bit to much.



    I think adoption of the 3.0 software is important.



    Maybe not THAT inportant to Apple.
  • Reply 16 of 136
    virgil-tb2virgil-tb2 Posts: 1,416member
    Quote:
    Originally Posted by aplnub View Post


    Do they do the same accounting for the computer line like the iPhones? I never understood Apple's or SarbOx's stance on this because it seems contradicting.



    The issue is that the subscription model of the iPhone is different from the rest of their computer line, so the updates can be free.



    While most sites, (this one included), always phrase the issue is "should they charge for the update," in fact charging for OS updates is the norm and the iPhone getting it for free is the abnormality.



    If they don't charge the user of an iPod touch *something* for a major update to the OS, not only do they have to roll the price of the updates into the hardware price, it would also eliminate the whole rationale for charging for OS's in the first place.



    There is no logical reason why an iMac on your desktop is any different than the iPod touch. If buying an iPod touch gives you free OS updates for the life of the device, it becomes somewhat unethical for them not to give you OS-X updates for life as well. It's a slippery slope and that proverbial "can of worms" as well.



    In any case, this update does one very major thing that isn't apparent to iPhone users but will be for iPod touch users, it increases 3D gaming performance by 3 times or more. The first time a game comes out that requires 3.0, we will see massive upgrading going on. All those little teenagers and twenty-somethings that don't blink at dropping a hundred bucks on a video game won't see $10 as a big barrier if there is something they want on the other side.
  • Reply 17 of 136
    hattighattig Posts: 830member
    Quote:
    Originally Posted by bigmc6000 View Post


    Wait, why the heck have only half the iPhone users upgraded??? It's free and it makes your iPhone do everything noticeably faster - not to mention all the added features.



    Some people don't sync very often. Not everyone reads online forums avidly.



    Some people might have got burned with a previous update and are waiting a couple of weeks to make sure it works.



    Certainly I think the update is well worth it for iPod Touch users, given the faster browsing at least.
  • Reply 18 of 136
    bigmc6000bigmc6000 Posts: 767member
    Quote:
    Originally Posted by brucep View Post


    Why should touch pay when iphone does not pay ??



    We've gone over this a ton of times - blame Enron for making the SEC care so much about GAAP.
  • Reply 19 of 136
    hattighattig Posts: 830member
    Quote:
    Originally Posted by brucep View Post


    Why should touch pay when iphone does not pay ??



    Did you read the article in any manner?
  • Reply 20 of 136
    chronsterchronster Posts: 1,894member
    Meh. If they don't want to update, it's their loss. Perhaps they simply don't understand what the update does.



    I think a lot of people view it as a maintenance type of thing, and they decide since it's working fine as it is, they won't need to shell out $10 for nothing.
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