Speaking of "Impressive" - Apple Servers Down

[SCCutler]

Tommy went to update the software on his brand-new iPod Touch to 2.2; *after* paying the $9.95 for the update in the iTunes store (and why are they charging for that?), it gives a message that he "...doesn't have the required permission..." for the update.

My first thought was that Tommy had done something wrong, but I was full of it (and owe Tommy an apology). It appears Apple's update servers are either down, or severely overloaded (which could amount to the same thing).

To be fair, who could have expected that the iTunes Store servers would have a lot of activity on and immediately after Christmas...

...oh, wait: ANY THINKING PERSON!

Way to drop the ball, Apple.

 

[TangoWhiskey]

They charge for FIRMWARE updates? That's just wrong.

 

[jmaynard]

They charge for FIRMWARE updates? That's just wrong.

They haven't yet charged for a firmware update to my iPhone. Dunno why they charge for the iPod Touch.

 

[ReverendSlappy]

Buy a Mac! Oh... uh... Wait a minute...

 

[jason]

They haven't yet charged for a firmware update to my iPhone. Dunno why they charge for the iPod Touch.

They do. I don't know why...but they do. It's especially wrong, to me, when the device is brand new. New should come with the latest...period.

Luckily they don't charge for iPhone updates.

 

[mantakos]

Apple charges for the 2.X upgrade, but only to ipod touch users, not to iphone users. They have a very cockamamie story about how they're "required" to charge you, as a result of accounting rules.

What version of the software did the ipod touch ship with? If it's already 2.0 or later (which I would really expect it to), then Apple says you get the 2.2 upgrade for free, they're just charging for the 1.X -> 2.X jump.

By the way, "charging for firmware" sounds unconventional, but "charging for new version of OS" sounds pretty typical. The ipod touch software seems a bit complex to be described as "firmware", but a bit simple to be considered a new OS.

In any case, there's a fair amount of new functionality provided in a 1.x->2.x jump, and I didn't whine too much about paying $9.95 for it (but I did whine a little).

It also doesn't surprise me too much if their servers fall-down-go-boom on the day after Christmas, as they've been known to do on the day of a new iphone release. The short answer is "wait a day or two to do the upgrade".
-harry

 

[CJones]

It also doesn't surprise me too much if their servers fall-down-go-boom on the day after Christmas, as they've been known to do on the day of a new iphone release. The short answer is "wait a day or two to do the upgrade".
-harry

If I were in charge of designing the infrastructure for the uploads, I definitely wouldn't want to be the one that tries to push the idea of buying capacity for the day after Christmas. Sure the servers are overloaded today, but the load will decrease exponentially within the next several hours. And they aren't going to lose (much) business due to the loss of connectivity for a few hours.

The iPhone, on the other hand... If it loses connectivity to updating, they WILL lose customers because of it. Two totally different markets and marketing strategy behind them, but being implemented by the same company.

I don't buy the b.s. about 'accounting rules requiring us charging for the upgrade'. That sounds like side-speak for 'we have cut our markup to get devices out the door, so we need to charge for upgrades to make up the difference in profitability'.

 

[flyingcheesehead]

To be fair, who could have expected that the iTunes Store servers would have a lot of activity on and immediately after Christmas...

...oh, wait: ANY THINKING PERSON!

Way to drop the ball, Apple.

Spike - First of all, if you just bought the iPod Touch, you should not have had to pay for an update. My advice? Take it to the Apple store, tell them you paid for an update despite the fact that the unit is brand new, and that it didn't work anyway. They'll take good care of you, and you know that first-hand.

As far as Apple's "not thinking" - Apple has sold somewhere in the neighborhood of 20 million iPhones and iPod Touches. Multiply that by the 260 or so megs PER UNIT for the update, and you're talking 5 exabytes of data. And add in the 100+ million iPods which keep a steady amount of traffic going at the store, plus the fact that a lot of them were probably opened yesterday and they're getting on today for the first time and going nuts... Oh, and don't forget all of the apps they're selling for the iPhone/iPod Touch in the app store today too.

Frankly, you're right that any thinking person would realize they'd have a ton of traffic today, and I'm sure Apple realizes that too - I think that they're simply getting to the point where the architectures that make up this beast we call "The Internet" are already being stretched to their limits. They're already using the #1 distributed server system there is, Akamai. I'm not sure what else they can do.

So, like others have said - I don't update my iPhone the first day of a new OS update. In fact, I'm still on 2.1.

 

[flyingcheesehead]

Apple charges for the 2.X upgrade, but only to ipod touch users, not to iphone users. They have a very cockamamie story about how they're "required" to charge you, as a result of accounting rules.

They're not kidding. It's called Sarbanes-Oxley. It was the post-Enron act. I'm not sure WHY they put in these silly requirements, but they (as in the congresscritters) did. The reason the iPhone users don't get charged is that iPhone users pay a monthly subscription rate, which gets around the SarbOx requirement to pay for product upgrades.

 

[flyingcheesehead]

They charge for FIRMWARE updates? That's just wrong.

Troy,

These are OS updates with new functionality.

And it is legally required for them to charge for the upgrade, as I noted above, due to SarbOx.

 

[KennyFlys]

Troy,

These are OS updates with new functionality.

And it is legally required for them to charge for the upgrade, as I noted above, due to SarbOx.

Could you point to the specific clause in that sad piece of legislation that requires a fee for an updated version of something in a licensed product already bought and paid for? I don't get that one.

I looked but nothing sticks out in your reference.

 

[AWACSEng]

I got an iTouch yesterday and the upgrade to 2.2 was free. I had no issues with the download, except it took a while just because of the size of the file.

 

[mantakos]

They're not kidding. It's called Sarbanes-Oxley.

And $9.95 is what Sarbanes-Oxley requires them to charge?
-harry

 

[KennyFlys]

Just how does Microsoft get around the numerous updates to Windows along with every other software provider selling a license for a fee?

 

[flyingcheesehead]

Could you point to the specific clause in that sad piece of legislation that requires a fee for an updated version of something in a licensed product already bought and paid for? I don't get that one.

I looked but nothing sticks out in your reference.

It's not obvious, and I can't quote chapter and verse, and it's frankly somewhat over my head. As I understand it, it has something to do with the reporting of income. Products that have no subscription fees and are reported as income on a one-time basis ("We sold 1 million iPods at $299 each for $299 in revenue this quarter") cannot then be upgraded in functionality in a later quarter without having income in that quarter or some such thing. Because the iPhone has subscription fees that are continuous, they're still reporting income from iPhones sold in previous quarters so it's OK to upgrade them for "free" as you're still paying for them now, and Apple is still reporting income on those previously sold iPhones.

Pretty obscure and F'ed up, but that's how I heard it explained by someone who hates Apple and actually defended them on this one.

And $9.95 is what Sarbanes-Oxley requires them to charge?

No, but it's funny you should mention that. I'm pretty sure it'd be legal if they charged a penny, but... The first thing that I recall Apple having that was subject to this SarbOx nonsense was an early MacBook or iMac model that was shipped prior to the consensus standards for 802.11n (extra-fast WiFi). They were able to make these machines capable of 802.11n after the fact via a simple firmware upgrade.

However, since it upgraded the functionality of the product, SarbOx applied and they had to charge for the upgrade. It was either $1 or $2 that they charged for that upgrade, basically only enough to cover the transaction fees. People bitched up a storm! "If you can sell it that cheap, you should just make it free!" Now, they've sold a lot more iPod touches than they did of whichever Mac model that was back then, but I've heard a lot less bitching about the $9.95 than I did about the $2.

Funny how people work...

 

[flyingcheesehead]

Just how does Microsoft get around the numerous updates to Windows along with every other software provider selling a license for a fee?

"Updates" as in bug fixes are OK. I think it has to be significant new features. Also, MS has been trying to switch to a subscription-based model for many years, and I think they've gotten to a kind of pseudo-subscription model at least, where somehow the way they account for payments from OEM's may allow them to get around this.

It's accounting voodoo moreso than anything else.

 

[john smith]

Tommy went to update the software on his brand-new iPod Touch to 2.2; *after* paying the $9.95 for the update in the iTunes store (and why are they charging for that?), it gives a message that he "...doesn't have the required permission..." for the update.

Which generation Touch?
Refurbished or new?

[There have not yet been any refurbished 2G available... but there should be in about two months after the Christmas returns! ) ]

Also, Kent correctly answered the SarBOx question.

 

[SCCutler]

Sky- the problem is Apple's servers, confirmed w/ Apple. And it certainly would not be a problem, except Tommy really wanted to use Apps during the 10-hour bus ride to Colorado he's now on.

It is an iPod Touch 1st Gen, brand-spankin' new (not refurb), and it was in no way "cheap."

And I don't buy that SarbOx crap.

 

[mantakos]

It is an iPod Touch 1st Gen, brand-spankin' new (not refurb), and it was in no way "cheap."

Does it have volume buttons along the side? If so, it's a second-gen unit. If there are no buttons on the side (just the "one button" on the front), then it's definitely a first-gen.

The second-gen ipod touch is reputedly noticeably faster on CPU and graphics intensive apps. I'm not sure why you can still buy a first-gen ipod touch, but if it's still an option, I'd consider returning it, and getting one that you know is second-gen.
-harry

 

[TangoWhiskey]

And I don't buy that SarbOx crap.

Me neither. I haven't had enough time to wade through all this, but apparently Kent's not the only one who has heard this:

http://www.google.com/search?source...pdates+sarbanes-oxley&btnG=Google+Search&aq=f

Still would like to see chapter/verse or an official statement from Apple quoting such. Here's some folks discussing the very same issue. Sounds like Apple made a statement at some event, and that's the source of all this.

http://discussions.apple.com/message.jspa?messageID=6772241

 

[john smith]

One explanation

http://techdirt.com/articles/20070115/163130.shtml

 

[KennyFlys]

One explanation

http://techdirt.com/articles/20070115/163130.shtml

Is this related to Enron's capitalization of value before it has a chance to exist?

 

[john smith]

Is this related to Enron's capitalization of value before it has a chance to exist?

I think that's the gist of it.
You cannot report income as received until it is actally posted.

 

[KennyFlys]

I think that's the gist of it.
You cannot report income as received until it is actually posted.

But, if future updates are part of the licensing agreement that provides for no additional cost? That makes no sense.

 

[flyingcheesehead]

But, if future updates are part of the licensing agreement that provides for no additional cost? That makes no sense.

Well, frankly, SarbOx makes no sense!

The thing that made it clearest for me yet was the part of the article John linked to that said "The thinking, basically is that they would be unfairly recognizing the revenue early, since they hadn't completely delivered the product."

Ugh. I hate government.

 

[mantakos]

..."The thinking, basically is that they would be unfairly recognizing the revenue early, since they hadn't completely delivered the product."...

This seems to make the assumption that the new functionality was paid for by the revenue collected at purchase time, and delivered later, and thus some portion of that revenue was delivered early.

But what I don't understand is why it's not possible for either:
A) the user paid X dollars for the functionality provided in release 1.0 . The vendor then provides additional functionality for free. Vendors are no longer allowed to give stuff away for free?
or
B ) the user paid X dollars for the functionality provided in release 1.0, and for a "license" for some finite level of continued ongoing support that includes both bug fixes and new features. This is a subscription model based on a single flat fee up front.
-harry

 

[EdFred]

I haven't paid for my upgrade from 1.x to 2.x or 3.x on my Zune - software on the PC or firmware on the device. They were definitely not a bug fix. Everything changed, I even got games with the latest firmware releases, so I'm not buying - so to speak - the SarbOx excuse crapple is spewing.

And Spike...how dare you ever question Apple, EVER!!

 

[flyingcheesehead]

B ) the user paid X dollars for the functionality provided in release 1.0, and for a "license" for some finite level of continued ongoing support that includes both bug fixes and new features. This is a subscription model based on a single flat fee up front.
-harry

I haven't paid for my upgrade from 1.x to 2.x or 3.x on my Zune - software on the PC or firmware on the device. They were definitely not a bug fix. Everything changed, I even got games with the latest firmware releases, so I'm not buying - so to speak - the SarbOx excuse crapple is spewing.

Harry,

There's some accounting trickery that can be done, as long as it's done beforehand. Not exactly how you state, but I think it works more like "Even though we sold $100 million worth of iWidgets this quarter, we're reporting it as $10 million this quarter, and $10 million per quarter for the next 9 quarters" or some crap like that.

And to think, SarbOx was supposed to get rid of accounting trickery.

I think there's a way around it, using said trickery, but that causes two problems: First, Apple would have to go back and re-state their earnings for all of the quarters back to the introduction, which would incur significant administrative costs. If they went and said "OK, we made $90 million less than we said we did in Q1, and $80 million less in Q2, and $70 million less in Q3" what do you think Wall Street would do to them? We'd have 1996 all over again. (1996 is when Apple, with $1.9 billion in cash on hand, had a quarter where they lost $69 million. The press and Wall Street made such a big deal about it that people were afraid to buy Macs - I know, I was selling them at the time - And it became a self-fulfilling prophecy, with sales dropping drastically and Apple losing $700 million in each of the next two quarters, weakening them to the point where they had to buy NeXT to get Steve Jobs back - At least that turned out well!)

What I do know is that if Apple was doing this for revenue, they'd be charging for the update on the iPhone too. I don't have the numbers right on the top of my head, but I'm pretty sure the iPhone has outsold the iPod Touch by a significant amount, possibly even an order of magnitude. If Apple was charging for these updates solely to generate revenue, they'd make a helluva lot more charging everyone.

 

[mantakos]

If Apple was charging for these updates solely to generate revenue, they'd make a helluva lot more charging everyone.

Okay, but couldn't you just as easily say "if Apple wasn't interested in the revenue, and was charging for these solely to accommodate some peculiar accounting regs, they could charge $4.95 for it instead of $9.95"?
-harry

 

[nddons]

I'm a CPA, but a tax guy, not an audit guy, but I think Apple is full of feces, and is using this as a lame excuse to charge. I haven't researched Apple's claim, but these are my thoughts.

First, Sarbox generally has to do with internal controls, and does not promulgate generally accepted accounting methods. Second, revenue recognition cannot possibly compel a company to charge something that they otherwise wouldn't charge. Revenue recognition simply defines when the revenue is recognized. When you sell a product, you either recognize the income when the product is sold, or in some circumstances the revenue recognition is deferred, as when you sell an extended warranty or a subscription, for example.

Sarbanes Oxley is a CF, but it by no means requires companies to charge customers more than they otherwise would have.

 

[mikea]

Apple needs to make better arrangements for the sudden loads post-Christmas. They had the same problem last year and after each iPhone intro. Maybe they can make a deal with such as Amazon to offload some of the work, although Amazon might also get a peak at the time.

 

[sba55]

Apple needs to make better arrangements for the sudden loads post-Christmas. They had the same problem last year and after each iPhone intro. Maybe they can make a deal with such as Amazon to offload some of the work, although might get a peak at the time.

But why would they?

I'm sure they've looked at the costs vs. benefits of adding capacity after Christmas. It seems like they've concluded that the cost outweigh the benefits to them...

-Felix

 

[mikea]

But why would they?

I'm sure they've looked at the costs vs. benefits of adding capacity after Christmas. It seems like they've concluded that the cost outweigh the benefits to them...

-Felix

All the justification required is for His Steveness to say he doesn't want it to happen again.

Apple will do things that aren't immediately profitable, e.g. at 99 cents per, Apple doesn't make a whole lot of money on iTunes music sales.

 

[sba55]

All the justification required is for His Steveness to say he doesn't want it to happen again.

Apple will do things that aren't immediately profitable, e.g. at 99 cents per, Apple doesn't make a whole lot of money on iTunes music sales.

Sure...but this case is different. It's customer satisfaction (because they had to wait a bit to download the software) vs. upgrade expense. I guess they've decided that the expense is too great for the reward.

 

[EdFred]

Felix.....

Do not ever question The Steve!!!

 

[flyingcheesehead]

Apple will do things that aren't immediately profitable, e.g. at 99 cents per, Apple doesn't make a whole lot of money on iTunes music sales.

IIRC Apple gets 1/3 of the 99 cents. 33 cents ain't a whole lot, until you multiply it by 6 billion songs sold!

 

[flyingcheesehead]

Ok, I've stayed out of the Apple threads for a good while, just because I was tired of the get nowhere fights, but Mike, seriously??

You make it sound like Steve Jobs gives two squats about his customers.

I think he was referring more to Steve's power within the company. You do NOT **** off Steve. He has killed product lines out of spite more than once. Example: John Sculley was the guy who fired him, and also the guy who came up with the idea of a "personal digital assistant" (and coined the term, too) and as soon as Steve was back, the Newton was killed. Then, there was the iPod that never happened: Toshiba announced that Apple was going to use their new 1.8" x-gig hard drive in their new iPod. Well, that iPod never came out, and I don't think Apple has used a Toshiba hard drive since.

Newsflash: No CEO/President/anyone cares about the customers, they care about their bottom line. And there's nothing wrong with that, its just the way it goes.

And the SarBox thing is a perfect example of "Apple Fever." How can y'all not question that logic? I can go buy a Zune right now and never pay for software updates, and they're not bugfixes. Unbelievable. Apple can do no wrong.

Nick - *Apple* never explained it that way. Like I said earlier, the person I learned this from HATES Apple.

As far as the Zune goes, Microsoft may well be doing the accounting voodoo to get around it, or maybe since they know the DoJ will give them a free pass to do anything, they don't give a crap and gave all three Zune owners a free update.

 

[mikea]

IIRC Apple gets 1/3 of the 99 cents. 33 cents ain't a whole lot, until you multiply it by 6 billion songs sold!

Apple may NET .33 cents - and I think the RIAA wants more of the cut - but out of that Apple has to pay for the iTunes infrastructure, support & maintenance and bandwidth. The word is that Apple ends up with a profit of a few cents per song on good days. It helps that it been a few cents x a few BILLION sales to now.

 

[mikea]

Ok, I've stayed out of the Apple threads for a good while, just because I was tired of the get nowhere fights, but Mike, seriously??

You make it sound like Steve Jobs gives two squats about his customers. Newsflash: No CEO/President/anyone cares about the customers, they care about their bottom line. And there's nothing wrong with that, its just the way it goes...

Steve Jobs cares A LOT about the user experience, He drives his people nuts to get the design right, which is why they do.

That pays off when the products sell and the profits follow.

Item: When the iPhone first shipped neither Apple nor AT&T made a huge profit on it. The cost per unit was pretty much the $499 they charged even when AT&T was subsidizing $200 a phone. They built a market, became the standard, and became #2 worldwide in year. (Need I mention again that Apple entered the phone business as a total neophyte and you have yet to hear that the version 1.0 things didn't work?)

Jobs is lucky that he's got good people who will take the pressure and occasional abuse. I wonder if that luck will fade with the stock price down and stock options gone.

He has also been known to step in and answer and fix a customer complaint emailed to him (as any CEO would do.)

 

[kevin47881]

Felix.....

Do not ever question The Steve!!!

It appears you are correct, Ed.