Early Adopter Tax Resurfaces with the iPod Touch January Software Upgrade

There has been a lot of debate over Apple’s recent announcement of five “new” applications for the iPod touch, available for a price of $19.99. I recently wrote about it, urging people to sign an online petition asking Apple to strike the price tag off the upgrade and as usual, there were two different groups of people with conflicting opinions on either side of the fence. Some people think that this decision is justifiable and that Apple is right in charging for these applications. Others think that it is completely unreasonable and that Apple is becoming an untrustworthy corporation, randomly penalizing their customers for trusting in them, out to make a quick buck by whatever means possible.

First and foremost, I would like to clarify that labeling anyone as “cheap” or a “whiner” just because it is $20, a payment which sounds meager to you, is not quite the ethical way to go about having a discussion. Different people have different budgets and a person who feels that having to spend $20 on a music player after having bought it already isn’t being cheap, it’s just being logical and trying to save some money for the more important things in life. In any case, even if you have an overflowing bank account and the capability to dole out tiny amounts such as $20 to large corporations whenever they ask for it, it doesn’t mean that you shouldn’t think before you spend. Therefore, those people that are being labeled “cheap” are actually the sensible ones who know the value of money, no matter how little the amount may be.

So now that we have that little personal peeve out of the way, let’s get on with it, shall we? The most common defense people offer when Apple is charged with the accusation of levying an unfair price on the five applications for iPod touch is that since the sales of the device are not accounted for on a subscription basis, the Sarbanes-Oakley Act does not allow them to add any significant features to it without charging for them.

We’ve been witness to this scenario only recently, when Apple charged $2 for activating the built-in 802.11n wireless capabilities of Macs after they’d been shipped. Though you can never be sure about the ulterior motives of corporations, I believe that Apple was right at that time. If anything, I think it was extremely generous of them to have bundled in support for 802.11n with existing Macs without even advertising it and then activating it for a minimal fee of $2. I trusted in them when they said that they had to charge that nominal amount to comply with Sarbanes-Oakley.

They haven’t, however, cited that as the reason this time around and I think I know why. It isn’t the reason at all. The Macalope and everyone else who thinks that Apple is charging $20 for those applications to comply with the Sarbanes-Oakley act is just plain wrong, in my humble opinion. There are several reasons why it cannot be the case.

Why it wasn’t about compliance

First of all, how did Apple manage to give iPod touch users the ability to watch rented movies on their device through the v1.1.3 software update? Isn’t that an important feature added after the device has been shipped? The reason Apple gave that feature for free is because it serves as an income generator for them. Giving existing iPod touch users the ability to view their email and maps does not make Apple any money, but allowing them to watch movies rented from the iTunes Store on their iPod does, so the latter is free while the former has to be paid for.

Secondly, if it wasn’t their choice to sell these applications but the result of a legal restriction, they could just as well have given them away for $2 and hardly anyone would have been complaining. There would still have been a few people around who are anti-Apple to the core and can see only evil in the company’s moves, but I and most of the other people who are complaining right now don’t belong to that camp. We would’ve just paid up and enjoyed our applications.

Thirdly, if all you have to do to comply with the aforementioned Act is account for the device on a subscription basis, like Apple does for the iPhone and Apple TV, then why not do so? Why not account for the iPod touch on a subscription basis too? It just does not make any sense. Though the concept of Sarbanes-Oakley is a nebulous one for me, it is quite clear that Apple had intended to charge for these applications the day they’d conceived the idea of the device itself. Just like the iPhone price drop, it was a planned move to rake in more money from those who chose to get their foot inside the door as soon as it had cracked open.

So why did they do it?

Now that we are, hopefully, convinced of the fact that it was an intentional move on Apple’s part and not a legal restriction that made them attach a price tag to these applications, let us discuss why it is unethical. It is the company’s hardware and they’ve sold it to the customer. So why can’t they charge for it when they have new applications to sell? Isn’t it exactly like selling iWork or Final Cut Pro for a Mac?

No, it isn’t. When you buy a Mac, you know that if new software or major upgrades to software already bought are released in the future, you will have to pay for them. You know that even if you’re being given iLife ‘08 for free, iLife ‘09 will cost you money. You are prepared to part with the money when you buy the Mac. However, for all intents and purposes, it was assumed by everyone I know that all free upgrades for the iPhone would be free for the iPod touch too.

When Apple released the iPhone, they assured us that they would keep improving it over time by releasing free software upgrades that added major new features. Then they released the iPod touch a few months later, a somewhat stripped down version of the same product that we’d seen the introduction of a few months ago. Jobs kept reminding us that it was extremely similar to the iPhone, to help the iPod touch ride the wave of the iPhone’s popularity to success. Not many people would’ve been willing to pay $399 for a 16GB iPod, but they did because it was an iPhone without the phone and the AT&T contract. It was assumed that it was the only point of difference between the two products.

I agree that Apple never so much as mentioned that upgrades for the iPod touch would be free as for the iPhone, but they made sure that people assumed that they would be so they bought those iPod touches. And now they’ve exploited the loophole. No one can point a finger at them because they didn’t make any promises, but if a company is making sure it leaves loopholes in what it promises its customers so that it can use them to make more money later, they surely deserve the criticism that is being heaped upon them. Trust and integrity are the main factors in any relationship, even one as vague as the one between the seller and the buyer, and Apple is losing our trust as they let go of their integrity.

The Mac is supposed to be different from the iPod. Jobs himself insists on that whenever he’s asked why Apple does not release a public SDK for the iPods and yet, when people want to justify Apple charging this unfair price for the iPod touch upgrade, they are prompt to point out that when it works for the Mac, why should it be a problem for the iPod. An iPod is not a computer. Name me one other company that charges for software in the field of consumer electronics, when they are selling the hardware. Microsoft, which is essentially a software company, gave Zune v1.0 buyers the complete operating system of the next Zune free of cost. Sure, Apple does not need to be that generous given that they are the dominant player in the market, but misusing their dominance to cheat their customers is just plain evil.

Even Apple, to date, had never put a paid upgrade for the iPods in practice since its inception. I guess there is a first time for everything, but this is something we’d rather not have witnessed the first time of. This sets a dangerous precedent for what they intend to do in the future. If people accept this without question, like Apple cultists are wont to, Apple will only increase the frequency and price of these paid upgrades. They are just testing the waters right now. If it is warm enough for them to jump in, expect to see paid upgrades for the iPhone, Apple TV, and all other Apple devices in future. I’m not too sure I want to be paying Apple more than once if I buy something from them, especially if they purposely crippled it in the first place to extort the money out of me.

This brings me to my final point. It would’ve been acceptable had these been revolutionary new applications that redefined the way we used our devices and unprecedentedly increased their functionality. But these were applications that we knew the touch was capable of running. Jailbroken iPod touches had been running Google Maps and Mail applications for quite some time now. We knew it was an artificial differentiation created to distance the iPod touches from the iPhones. The applications were there for the taking if Apple was willing to give them away.

What they did instead was withhold the applications from iPod touch users, telling them that they weren’t of much use on the iPod touch. Now, after they’ve sold truckloads of them over the Christmas holidays to thousands and thousands of trusting customers, they simply released those applications that have been there all along and required no additional development at all for a price. To add insult to injury, they released a similar update to the iPhone and a huge one for the Apple TV, and both were absolutely free of cost. While all the other customers of the same company are enjoying their free upgrades right now, Christmas gifts from Apple, iPod touch users are ruing the day they decided to trust the company, envying those who are buying the device now that comes at the same price but with that update pre-loaded.

I agree that early adopters do not deserve any special treatment, but they do deserve to know what they’re agreeing to. They deserve not to be fooled into paying for software upgrades for products already bought. And don’t even get me started on those who keep harping about how it is an optional upgrade. There is no way Apple could have made it compulsory. No company can force you to pay for anything you didn’t agree to pay for. But to almost every iPod touch user, those are essential applications that many were probably missing and several had attained by jailbreaking their iPods. To them, it is almost a compulsion because it is the only legal way to get them and they deserve to be loaded on the iPod touch. Those applications belonged to that home screen all along.

I would like to finish with a message for Apple. You have had a lousy 2007 in terms of your customers’ trust towards you (though not in terms of sales or profits) and you’ve already started 2008 on a bitter note. In Jobs’ own terms, we’re just two weeks into 2008 and you’ve already managed to receive so much criticism for your unscrupulous actions. You have fifty more weeks to go. You are a great company and have some of the best products in the industry in your line-up. You are flying high right now and those products are selling like they deserve to. The last thing we want to see is history repeating itself.

I know it was a long rant but there were a lot of points to counter and I’m not exactly a whiz when it comes to summarizing myself. I hope I’ve made my point clear. Any and all intellectual criticism is welcome.