Movie rentals

At 6:16 AM -0800 1/23/08, Kevin van Haaren wrote:
>Apple has traditionally not back ported new features (i.e. my iPod Video
>has no cover flow) simply to drive new sales of iPods. iPods are still
>where the money is at. You'll notice that iPod Touch users have to pay for
>their new features (the features aren't new on the iPhone so the free
>upgrade there makes more sense. and ipod touch users can get the firmware
>upgrade for free, just not the new apps) In fact I was surprised the Apple
>TV update is free. Probably because us early adopters would be really,
>really pissed if asked to buy new units (I was expecting a $20 fee like
>iPod users).

I doubt it is even that simple. There was the outcry about the 'n'
firmware update on a recent computer, and Apple responded that it was
for accounting reasons, specifically that they had not booked part of
the revenue as deferred revenue, since it is considered a "new"
feature. Adding functionality to the iTouch without charging for it
would probably cause some accounting spasm. In the case of the Apple
TV, its a "software upgrade" Fine hairs to split I'm sure. (And I
have no clue if I've gotten them divided correctly.)

~Nick
http://www.inmff.net

--On 1/23/2008 6:16 AM -0800 Kevin van Haaren wrote:

[...]
> You'll notice that iPod Touch users have to pay for
> their new features (the features aren't new on the iPhone so the free
> upgrade there makes more sense. and ipod touch users can get the firmware
> upgrade for free, just not the new apps) In fact I was surprised the Apple
> TV update is free. Probably because us early adopters would be really,
> really pissed if asked to buy new units (I was expecting a $20 fee like
> iPod users).

This actually has to do with accounting--like the 802.11n upgrade fee of
some months back. See the Macalope:

http://blogs.cnet.com/8301-13509_1-9850999-20.html

http://www.macalope.com/2007/02/13/must-the-macalope-do-everything/

Because iPhone and Apple TV revenues are handled on an ongoing/subscription
basis, Apple can provide new features/enhancements "for free".

Because iPod Touch is NOT accounted for this way, Apple has to either
charge for upgrades or re-state the books for past quarters.

Dave Scocca

Speaking strictly as a stockholder I'm very happy to see AAPL migrate
to a recurring revenue model for a significant portion of its
offerings.

By mixing up their traditional markets of hardware, software, and now
several offerings which are high-margin and can derive revenue over
and over from the same asset, I suspect that no one in their right
mind would ever consider Apple Inc to be in any sort of financial
risk.

While John C. Dvorak may not be in the grave, he should be spinning anyway.


--chuck goolsbee
http://chuck.goolsbee.org

--

_____________________________________________________________
"On any given day, there's always something broken somewhere.
In DNS, there's always something broken everywhere."
                   --Paul Vixie 4:20 PM 3/31/07, on NANOG

On 23/1/08 18:52, David Ross wrote:
> This is really a mess created by all the accounting reforms over the
> last few years as a fall out from Enron and the like. It is complicated
> but it boils down to if you give away a free upgrade you either take a
> profit hit (bad for stock price) or defer income (bad for stock price)
> and with the deferral you get to explain why which is bad if you're not
> sure of the details and don't want people holding off buying now.

This has come up before, but I wish someone would explain it to me. I mean, I
get the principle, and I understand that this is why Apple charged $1 (or
whatever it was) for the upgrade that unlocked 802.11n recently. Everytime
someone explains it, it all seems internally consistent - but how come it
doesn't apply to software?

And if it does apply to software, how come Apple's Software Update regularly
updates the operating system, the paid for applications, and the 'free'
applications that could therefore be considered part of the paid for operating
systems; all without asking for payment? And similarly many other (US-based)
vendors of commercial products, who frequently offer free updates, adding
features as well as squashing bugs, in between major for-pay upgrades?

Obviously my understanding of this issue is very shallow. Could someone
kindly take it to the next level, so that I can understand why it doesn't seem
to be a problem to upgrade some things, but it is for others?

Thank you!

- Ben

--On January 23, 2008 10:52:44 AM -0800 David Ross
<drdavidrossconsultant.com> wrote:

> OK. Here's a question. It came up on our local user group discussion.
>
> Would you rather pay $4 for a download movie that has a 24 hour viewing
> window?

It's a 30-day to start viewing window, a 24-hour once started viewing (the
first is fine, the 2nd should be extended to 48-hours.)

> You can sort through the DVDs CURRENTLY inside the box, pick as many as
> you want, swipe a CC, enter an email address, and the movies pop out the
> opening. You have until 9 PM
> the next day to return any of them. You get charged $1 per day. Receipts
> are emailed both at checkout time and return time and have always gotten
> to my inbox before I get home. And I live 5 minutes from the store. Keep
> the movie for 2 or 3 weeks and they just convert it to a sale.

For online rentals: Downloads auto-delete so the e-mail confirmations are
cut in half automatically (i actually consider this a somewhat big plus).
I'm typically in a store with a redbox (in Kansas City that's pretty much
just McDonald's) once a week. No need to remember to return.

10pm Friday night I can decide I want to rent something and not have go
through the effort of making myself legal to leave the house (yes, I'm
pretty lazy). Depending on bandwidth speed I should be able to start
watching pretty quickly.

For Unbox, not iTunes, I can decide I want to rent something while at work
and have it downloaded to the tivo by the time I get home.

Too many rental movies are in less than perfect condition. Usually dirty or
small scratches that cause dropouts and hangs. I've yet to have a download
that had either problem.

I like the redbox price better. Hopefully it drives down the price of
online rentals.

--On January 23, 2008 10:52:44 AM -0800 Dave Scocca <davescocca.org> wrote:

> Because iPhone and Apple TV revenues are handled on an
> ongoing/subscription
> basis, Apple can provide new features/enhancements "for free".

There is no ongoing subscription fee for Apple TV. You pay once. And I'm
pretty sure the iPhone upgrade was free because they were upgrades to
existing apps already on the phone. For the iTouch they were new
functionality and hence required a fee.

I think they decided to eat the cost on the Apple TV upgrade just because
when they intro'd it as a "hobby" they pretty much admitted it was beta (or
even pre-beta). I expect additional functionality going foward either to
not be made available or to have a charge associated with it.

On Jan 23, 2008, at 10:07 PM, Ben Rubinstein wrote:

> I mean, I
> get the principle, and I understand that this is why Apple charged
> $1 (or
> whatever it was) for the upgrade that unlocked 802.11n recently.
> Everytime
> someone explains it, it all seems internally consistent - but how
> come it
> doesn't apply to software?

It does apply to software, but Apple's free software updates are
generally about fixing bugs, not adding features, and bug fixes
aren't considered to be adding value.

> And similarly many other (US-based)
> vendors of commercial products, who frequently offer free updates,
> adding
> features as well as squashing bugs, in between major for-pay upgrades?

My guess is that those vendors aren't publicly traded companies or
they don't mind the accounting implications of offering the updates
for free.

--Michael

--On 1/23/08 7:07 PM -0800 Kevin van Haaren wrote:

> --On January 23, 2008 10:52:44 AM -0800 Dave Scocca <davescocca.org> wrote:
>
>> Because iPhone and Apple TV revenues are handled on an
>> ongoing/subscription
>> basis, Apple can provide new features/enhancements "for free".
>
> There is no ongoing subscription fee for Apple TV. You pay once.

While there is no ongoing fee, they did defer some of the revenue and treat it
as if it were a subscription. Apple has stated that the revenue was handled
this way:

http://www.macnn.com/articles/07/04/25/iphone.recurring.revenue/

(The URL includes "iPhone", but the article refers to both the iPhone and the
Apple TV.)

> And I'm
> pretty sure the iPhone upgrade was free because they were upgrades to
> existing apps already on the phone. For the iTouch they were new
> functionality and hence required a fee.

AND because of the accounting issues. For the iPhone Apple's expenses could be
charged against the ongoing revenue stream. For the iPod Touch, they had to be
either paid for or retroactively charged against the quarter in which the
revenues had been recorded.

> I think they decided to eat the cost on the Apple TV upgrade just because
> when they intro'd it as a "hobby" they pretty much admitted it was beta (or
> even pre-beta). I expect additional functionality going foward either to
> not be made available or to have a charge associated with it.

I suspect that the "beta-like" nature of the Apple TV may be why they deferred
the revenue--to allow for free upgrades downstream. Effectively, they
recognized that putting out a product which would require effort to upgrade was
incurring a liability, and so they incorporated this liability into the
accounting.

In fact, Apple specifically said that they use of subscription-based accounting
was to allow them to add features:

<http://www.ilounge.com/index.php/news/comments/apple-to-add-free-iphone-apple-tv-features-over-time/>


Assume you bought an iPod touch for Christmas, for $300, and that it cost Apple
$250 to produce. Apple reports a profit for the fourth quarter of 2007 that
includes $50 from your iPod touch purchase.

Now if Apple spends $20 in the first quarter of 2008 to make an upgrade for
your iPod touch, and if they give that to you for free, they have to go back to
the accounts for the previous quarter and deduct that $20 from the reported
profit--they have only made $30 on that sale, not $50. Otherwise, their fourth
quarter statement is misleading because it hides the true cost of the iPod
Touch.

Because some of the revenue from the Apple TV is deferred, they can count
additional expenses against that revenue and not have to revisit earlier
financials.

Dave Scocca

At 7:07 PM -0800 1/23/08, Kevin van Haaren wrote:
>I think they decided to eat the cost on the Apple TV upgrade just because
>when they intro'd it as a "hobby" they pretty much admitted it was beta (or
>even pre-beta). I expect additional functionality going foward either to
>not be made available or to have a charge associated with it.

I wouldn't be surprised if, since the update is all about renting
movies, the software side of AppleTV is funded by iTunes.

Or perhaps they are amortizing the AppleTV hardware revenue across
multiple years in order to charge development against it. Being a
"hobby", the deferred revenue (presumably) wouldn't be missed much.

-Andrew

On 23-Jan-2008, at 20:07, Ben Rubinstein wrote:
> On 23/1/08 18:52, David Ross wrote:
>> This is really a mess created by all the accounting reforms over the
>> last few years as a fall out from Enron and the like. It is
>> complicated
>> but it boils down to if you give away a free upgrade you either
>> take a
>> profit hit (bad for stock price) or defer income (bad for stock
>> price)
>> and with the deferral you get to explain why which is bad if you're
>> not
>> sure of the details and don't want people holding off buying now.
>
> This has come up before, but I wish someone would explain it to me.
> I mean, I
> get the principle, and I understand that this is why Apple charged
> $1 (or
> whatever it was) for the upgrade that unlocked 802.11n recently.
> Everytime
> someone explains it, it all seems internally consistent - but how
> come it
> doesn't apply to software?

It doesn't generally apply to software. It applies when completely
new functionality is created. So the 802.11n would qualify. So would
the new email program on the touch, as well as the triangulation
location in google maps.

However, none of this would apply to the iPhone because it is a
continuing revenue stream. This update, more than anything else,
should serve as proof that Apple is in fact getting revenue from the
mobile carriers on a continuing basis.

I don't pretend to be an accountant, or to understand all this, but
there was a LOT of discussion about the 802.11n update.

On Jan 23, 2008, at 1:52 PM, David Ross wrote:

> OK. Here's a question. It came up on our local user group discussion.
>
> Would you rather pay $4 for a download movie that has a 24 hour
> viewing window?

What's the fixation on the viewing window? Is this a parent thing? If
I'm watching a movie, I'm watching it in one sitting. As someone else
pointed out, you have 30 days after the time of rental to *start*
watching. When I need more than one day it's because a physical disc
has multiple episodes of a TV show that I'm not going watch all at
once or I'll watch the movie one night and the bonus material another
night. Presumably neither of those are issues for a download.

> Or visit your local grocer and rent a DVD for $1 a day. Redbox is
> in all stores of a major chain here and as of last summer had made
> a few 1000 machines and was having trouble keeping up with demand.

Neither, Netflix. Last year I got a 6-month subscription as a gift
and I've been kicking myself for not signing up years ago. I'm on the
3 discs at a time plan and use it pretty heavily, it works out to
about $2/disc. I like not having to worry about getting the disc back
to a store by a specific time but the most important feature of
Netflix is selection. They have *everything* and while in very rare
cases I have to wait for a particular disc to be available, I'll just
get something else in my queue that is immediately available. I have
cable (though a weird set of channels, no premium ones) and Comcast-
on-demand for immediate gratification.

BTW, the application Netflix Freak is great, totally worth it for
anyone who keeps more than a handful of discs in their queue.

I'm glad Redbox exists, they provide cheap, convenient access to
popular titles but it's not for me.

Curtis Wilcox wrote:
> On Jan 23, 2008, at 1:52 PM, David Ross wrote:
>
>> OK. Here's a question. It came up on our local user group discussion.
>>
>> Would you rather pay $4 for a download movie that has a 24 hour
>> viewing window?
>
> What's the fixation on the viewing window? Is this a parent thing? If
> I'm watching a movie, I'm watching it in one sitting. As someone else
> pointed out, you have 30 days after the time of rental to *start*
> watching. When I need more than one day it's because a physical disc
> has multiple episodes of a TV show that I'm not going watch all at
> once or I'll watch the movie one night and the bonus material another
> night. Presumably neither of those are issues for a download.

Well it is sort of a parent thing with some (many?) of us.

With very small kids nothing like them returning a meal to you from the same opening they ate it with to change your plans for a while.

As they get older you get to deal with homework headaches, a multitude of "I forgot to tell you but I have to be at ...", and just life.

People without kids have no idea how much TiVo and DVD rentals make life easier.

And I'm from the school of thought that you should NOT organize your life around the kids.

David Ross

At 8:06 AM -0800 1/25/08, Curtis Wilcox wrote:
>What's the fixation on the viewing window? Is this a parent thing?

Yes. In my house, 6:30-8:30 is a fixed, immutable blur of
dinner/foolingaround/"all right that's enough fooling
around"/potty/bath/jammies/toothbrushing/stories/bedtime. Then the
kitchen needs to be cleared, the dishwasher un/loaded/started, put
the cat out, a load of laundry put in, return a couple phone calls,
let the cat in, "just a little bit" of work on the laptop to finish
up a couple things I didn't get to at work, take out the trash, put
the laundry in the dryer, put the cat out... and then I can sit down
and perhaps watch something on TV. By then it's 10:30 and there's no
way I can watch a complete feature film between that and my own
bedtime.

Why? Because then there's the "I'm going to bed now" list.

Fold the laundry, put the laptop away, empty the dishwasher, load the
dishwasher with the stragglers that didn't fit the first time (oh for
the days of only running the dishwasher once every two or three days!
now it runs twice a day, minimum), let the cat in, feed the cat, oh
crap I forgot to send that one email...

It's nigh impossible to watch a feature film within the span of one
evening. There's a reason my TiVo is loaded with half-hour shows,
and anything longer floats the the bottom, unwatched for eons.
Actually, two reasons and their names are David and Rachel.

--
Andrew Laurence
atlaurenuci.edu

On Jan 25, 2008, at 8:06 AM, Curtis Wilcox wrote:

> What's the fixation on the viewing window? Is this a parent thing? If
> I'm watching a movie, I'm watching it in one sitting.

I also (or me too).

It's very much a parent thing, so I'm immune. You get the kids down
say at nine, and start the movie. But you choose not to watch the
whole thing and thus get to bed late enough to make the morning
problematic. Next day at 9 when the kids are taken care of...oops,
movie time over.

I don't know how common it is, but it's certainly a plausible use case.

   --John

Andrew Laurence wrote:
> It's nigh impossible to watch a feature film within the span of one
> evening. There's a reason my TiVo is loaded with half-hour shows,
> and anything longer floats the the bottom, unwatched for eons.
> Actually, two reasons and their names are David and Rachel.

Actually there are times where you just watch the movie and let things pile up. (Well except for some personality types.) You just watch the movie before your brain fries. Or you watch it while folding laundry or with the laptop in your lap as you take care of mundane emails and such. (If you have kids in school email is almost more required than pencils and paper.)

I started to bring up this issue of kids here a year or so ago but got sick and never got the discussion started. But this discussion here reminds me of it. It centered around the great way a Prius ran but just pushing the start button if you had your key anywhere near the dash. (Not sure how far near is here.) Just how do you load a car with multiple under 10 year olds if the car goes "active" anytime your pocket or purse is near by? And this is NOT as easy as it seems to folks who've never had to do it multiple times a day. Think of "Snakes on a Plane". Kids have the ability to move with the speed of light or faster at times and wind up in places that seem to transcend space and time.

My point is that folks who do have not or do not plan to raise kids have no idea how they live in a different universe from the rest of us. And it impacts what seems reasonable or good in so many ways that I think it is fracturing the society.

David Ross

On Jan 25, 2008, at 11:21 PM, Andrew Laurence wrote:

> By then it's 10:30 and there's no
> way I can watch a complete feature film between that and my own
> bedtime.

Add to this the factor of "173 minutes duration - What's that? 2 hours
and 53 minutes!" Then calculating the bedtime,etc. Sometimes you don't
know how long are these new movies. In the old days there were
intermissions, popcorn dancing, get up and get a drink ,etc. It still
happens in the home theatre for long movies.

Ray

> At 8:06 AM -0800 1/25/08, Curtis Wilcox wrote:
> >What's the fixation on the viewing window? Is this a parent thing?
>
> Yes. In my house, 6:30-8:30 is a fixed, immutable blur of
> dinner/foolingaround/"all right that's enough fooling
> around"/potty/bath/jammies/toothbrushing/stories/bedtime. Then the
> kitchen needs to be cleared, the dishwasher un/loaded/started, put
> the cat out, a load of laundry put in <snip> ... and then I can sit down
> and perhaps watch something on TV. By then it's 10:30 and there's no
> way I can watch a complete feature film between that and my own
> bedtime.

That's it precisely. Then lather, rinse, repeat for 18 years.

A 24 hour viewing window simply Will.Not.Work in a home like that. Like mine.

Thank goodness Netflix lets you keep DVDs out for a long long time, or else we would think that no movie ever resolved.

James

 On Jan 25, 2008, at 11:21 PM, Andrew Laurence wrote:

> By then it's 10:30 and there's no
> way I can watch a complete feature film between that and my own
> bedtime.

There is one trick that works at least from iPods and probably Apple TV
after update. Christopher Breen at Macworld found that if you pause the
movie, if you start playing after expiration time it will still work. If
you try to back out of the movie to something else you'll be prompted to
either resume the movie (even though expired) or delete the movie.

<http://www.macworld.com/article/131790/2008/01/longerrentals.html>

Still not a fully acceptable solution to me (even with no kids I find I
start a movie on a Friday and decide not to finish it until Sunday.)

Kevin

Personally, I would be more interested in an Apple TV that could be hooked up to an 'older' TV and which included an integrated eyeTV hybrid type device. I would buy that immediately, with the larger drive, for €329 (=US$ 399 + VAT).

Oh, I would also prefer it to be black (without the price premium!).

James Atkinson wrote:

>> ... In my house, 6:30-8:30 is a fixed, immutable blur of
>> dinner/foolingaround/"all right that's enough fooling
>> around"/potty/bath/jammies/toothbrushing/stories/bedtime. .....

> Thank goodness Netflix lets you keep DVDs out for a long long time,
> or else we would think that no movie ever resolved.

I just noticed that Redbox will let you reserve movies. This is a very big deal for those of us with a Redbox nearby.

For those that don't know, Redbox is slightly over sized vending machine with a touch screen display that lets you rent movies for $1 a day. Selection isn't as big as Blockbuster but it's not bad. Just to try and get the hot movie Friday night at 7PM. These are in grocery stores around here and apparently they have a deal with McDonalds. A year ago the company has placed 3000 or 4000 units and was having trouble keeping up with demand. When you swipe your credit card and they haven't seen the card before they also ask for an email address. Receipts for the rental and return are emailed and usually waiting for you before you get home.

Anyway, for $1 a day and I can reserve it, well I can now browse for a movie, head down to the local Harris Teeter (5 blocks for me) and pick up my movie and the snacks for when we do have a down evening with the kids. Ours are not 15 and 18 so we CAN ignore them for a while now. But for folks without kids, when or if you do get them you just get to learn that without a live in nanny or at least a sitter for the evening, planning your life to a level of detail that allows you to watch a movie in the 24 hour window, well it good luck.

David