Author Staff

Legal Copy

We had planned on including the transcript of the HD screen full of tiny disclaimer text in Apple’s new “Legal Copy” television ad, featuring Justin Long as “a Mac” and John Hodgman as “a PC,” in the next issue of MDJ. Honestly, though, once we got it entered, we realized it would take up close to two full pages. Since lots of people would like to see the text, and since we don’t really want to use that much virtual ink on something that many readers may skim, here it is—complete with inconsistent grammar and punctuation.

Although broken into paragraphs here, it’s presented in one long fully justified typographical nightmare on screen in four separate chunks. The first appears when Hodgman-as-PC says he’s “an incredibly easy to use PC:”

Please note that when you first receive your PC there is some suggested work that needs to be done before PCs can perform at their peak. These steps include, but are not limited to, downloading and installing necessary drivers for peripherals. These drivers may include printers, scanners, cameras, storage devices, music players, and other media devices. There may be more depending on your needs. It is also recommended that first time users remove all unneeded bloatware and remove all operational components.

When Hodgman-as-PC says that saying he’s as easy to use as a PC “requires a little explanation,” we get this addition:

To remove unneeded bloatware first open uninstaller, select applications to remove, and uninstall. To remove optional components, click start, go to all programs and open control panel, select remove components, select components you want to remove, select next, when done, select finish. Once initial prep is complete, PCs may then be easy to use under certain controlled conditions and when properly maintained. In order for PCs to achieve optimal performance on a regular basis and for long periods of time, routine maintenance should include (but is not limited to) the following: download and install updated anti-virus software, run anti-virus software, check for system updates, clean out registry, defragment hard drive, free up disk space, remove temporary Internet files, empty the recycle bin, remove unnecessary programs, run error check utility and fix file system errors.

Hodgman-as-PC next says, “I can’t just go out there and say that getting started with a PC is the easiest thing in the world,” and the alleged disclaimer grows to include this:

It is recommended that a maintenance schedule is developed and adhered to in order to make sure your PC is running safe and secure. Update your software, do a virus scan, and run error check utility once a week. Search for and download software and driver updates, free up disk space, and defragment hard drive at least once a month. Empty the recycle bin and remove unnecessary programs once every three months. Back up all your files once a year. Please see instruction manual for more details. Failure to perform these functions may result in the following: freezing, viruses, slow performance, and/or error messages. If problems persist after routine maintenance is performed, please contact your local IT professional who may or may not refer you to your software or hardware manufacturer depending on where the problem originated. Important information about easy to use PCs: PCs may become more difficult to use if the following occurs: sluggish operating system, viruses, and error messages, crashing and freezing. Unfortunately, freezing and/or crashing are sometimes unavoidable. To avoid sluggish operating systems, crashing and freezing, it is recommended that you clean up your system registry, defragment your hard drive, free up your disk space, and perform other routine maintenance tasks. To clean out your system registry, first backup your data, back up your registry, purchase, download, and install Registry Repair program, then quit all programs, scan registry, determine safe registry items to repair/delete/remove, select ok, and repeat if necessary. To defragment your hard drive, click start, and go to all programs > accessories > system tools > and open disk defragmenter, then select C: drive, select defragment and wait. To free up disk space on your PC, click start, go to all programs > accessories > system tools > and open disk cleanup. Scan will automatically start. From scan results, select files to be removed, select ok. Restarting your PC may then be necessary upon completion of system registry clean up, hard drive defragmentation, and disk space clean out.

Long-as-Mac says that’s a lot of legal copy, so Hodgman-as-PC decides to show off, telling Mac to watch as he says “PCs are now 100% trouble free:”

Please note: trying to remove registry items on your own is not recommended. It is often difficult to determine which items correspond to which applications, and by attempting to remove items yourself, you might accidentally remove a valid registry item, causing software crashes and errors. If a system registry becomes corrupt because you made a mistake when cleaning out the registry, follow these steps: back up data, back up registry, purchase, download, and install Registry Repair program, quit all programs, scan registry, determine safe registry items to repair/delete/remove, then select ok and repeat if necessary. Also, easy to use PCs can experience difficulty if malware, viruses, or spyware infect your PC’s system. There are 1.5 million signature-based malware detections with 20,000 new ones discovered everyday (based on 2008 reporting). Although some viruses are unavoidable, there are some preventative measures that you can take. When you first get your PC, configure your security settings (including things like Internet firewall, automatic updating, anti-virus, anti-spyware and other malware protection, other Internet security settings, and user account control). Eventually you may have to download and install security patches for your operating system and then as security updates become available download and install again. If your PC does get infected with malware talk to your IT professional first about the risks and benefits of treating the problem on your own. Do not try to remove a virus unless your IT professional has taught you and you understand everything. Ask them if you have any questions. Please see accompanying important information about virus protection on your hardware and software manufacturer’s website. Anyone can sit down and edit photos on their PC as long as their computer is running properly. Please note that proper maintenance, specifically disk defragmentation can take anywhere from minutes to hours to run depending on the size of your hard drive and how fragmented it is. Therefore, editing photos might be postponed if you chose to run maintenance on your computer prior to this act. Please note: your camera driver must be installed on your PC in order to review and edit your photos. Your camera will not work with your PC if the software/drivers are not downloaded first. Editing photos on a PC may be difficult for children under a certain age, or for people who are unfamiliar with how a PC works and how to download camera software and drivers. Also, no PC connected to the Internet is one hundred percent immune to viruses, spyware, adware, and other forms of malware. Once a year, PC users should back up a year’s worth of photos and files to a CD or DVD. Power PC users should start fresh and back up all their files and applications on an external hard drive, then use your original system installer disks to erase, rebuild, and reinstall your operating system from scratch. Therefore, if your PC is not one hundred percent trouble free at least you won’t lose all of your files. PC does not claim ownership of problems that occur from materials or software that you downloaded off the Internet. If your warranty has expired, and your PC is not one hundred percent trouble free, you are not eligible for a refund or replacement under the terms of the warranty. In addition, we cannot help you with software or hardware obtained without a warranty, such as software provided “as is “ or for free. Again, if problems continue, please contact your IT professional.

You can expect the PC side of the Internet to be absolutely furious with this today, and with reason. If you read through all that, think about how many of those procedures apply to all computers, whether running Windows, Mac OS X, or even Linux. Perhaps non-Windows operating systems don’t have registries, or need hard disk defragmentation so often, but freeing up disk space and emptying the trash are not “disclaimers.” And if Apple really thinks people should back up files once per year, it really ought to explain why it’s so proud of certain products.

It’s not like a television ad has to be completely flattering to your competition’s product, but when Microsoft ads poke at Apple in non-factual ways, half the Internet erupts. Apple should expect no less in return.

More in MDJ when we finish the massive analysis article that has occupied our last several days.

Is there any better example of how entitled Mac “news” sites feel?

AppleInsider, today:

The news vacuum that's followed Apple's Mac desktop refresh …

Apple announced the new desktop machines at 8:30 AM EST on Tuesday morning. AppleInsider bemoaned the “news vacuum” at 7:00 PM EST on Thursday.

Apple essentially makes three models of iPods, one model of iPhone, three models of desktop Macs, and two (arguably three) models of notebooks. That’s nine flagship products. And just 58½ hours after updating three of them, AppleInsider is bored.

What planet do these people live on?

The most important book of the past 20 years

Or, perhaps, the most important book of the past 20 years that you’ve never heard of.

“Age of Propaganda: The Everyday Use and Abuse of Persuasion” was written by two University of California-Santa Cruz social psychology professors, and was first published in 1992. I picked it up in a Northern California bookstore about that time, and found it quite revealing. However, upon re-reading it several years later, and again this year, I find myself wanting to post gigantic quotes from almost every page. I’ll start with the back cover material:

Americans consume 57% of the world’s advertising while representing only 6% of the population, and half of our waking hours are spent immersed in the mass media. Persuasion has always been integral to the democratic process, but increasingly, thoughtful discussion is being replaced with simplistic soundbites and manipulative messages.

Drawing on the history of propaganda as well as on contemporary research in social psychology, Age of Propaganda shows how the tactics used by political campaigners, sales agents, advertisers, televangelists, demagogues, and others often tak advantage of our emotions by appealing to our deepest fears and most irrational hopes, creating a distorted vision of the world we live in.

This revised and updated edition includes coverage of the Clinton/Lewinsky scanda., recent election campaigns, talk radio, teen suicide, U.F.O. abductions, the Columbine shootings, and novel propaganda techniques based on hypocrisy and false allegations.

That last paragraph points to the book’s biggest weakness: persuasion techniques morph so quickly that the book seems dated. I started re-reading the first edition recently, but since it didn’t even cover the Clinton impeachment, it just seemed out of touch. The second edition was published on 2001.03.14—six months before the September 11 attacks, and years before the Iraq war, “we don’t want the smoking gun to be a mushroom cloud,” or anything past the 2000 presidential election.

Nonetheless, Age of Propaganda is worth reading, and re-reading. If you have not read this book, you should get it and read it now. Plenty of books tell communicators how to subtly change their messages to make them more effective, but Age of Propaganda describes how communicators do this, why it works, and what you can do to evaluate such messages rationally instead of emotionally, analyzing the message instead of heuristics such as the credibility of the messenger.

For starters, take this section about “pre-persuasion,” or as modern political consultants call it, “framing the argument.” Pratkanis and Aronson describe it like this: “Through the labels we use to describe an object or event, we can define it in such a way that the recipient of our message accepts our definition of the situation and is this pre-persuaded even before we seriously begin to argue.” A few pages later, they talk about this in context of the first Gulf War (footnotes omitted):

There is another way to evaluate the validity of a communicator’s definition of the situation—by the sincerity of the comnmunicator. In other words, does the advocate of a given view of the world really believe that is the way things are, or has he or she merely adopted this viewpoint for expedient, propaganda purposes? For example, shortly before the onset of the Persian Gulf war on October 15, 1990, President [George Herbert Walker] Bush stated:

Every day now, new word filters out [of Kuwait] about the ghastly atrocities perpetrated by Saddam’s forces … of a systematic assault on the soul of a nation, summary executions, routine torture … newborn babies thrown out of incubators … dialysis patients ripped from their machines … Hitler revisited. But remember, when Hitler’s war ended there were the Nuremberg trials.

Was he serious? Perhaps so. But given the fact that, just a short time earlier, our government was staunchly supporting Saddam in his war against Iran, it is at least conceivable that Bush was exaggerating. In addition, reports of babies being thrown from incubators and similar atrocity stories were later found to be rumors started by pro-Kuwaiti sources and reported uncritically by the news media.

If the president was engaging in hyperbole, some poeple believe that is forgiveable. After all, he was intent on mobilizing the nation for what might have been a long and costly war and on gaining the approval of his fellow citizens for putting hundreds of thousands of young American men and women in harm’s way in order to come to the aid of a nondemocratic nation. And it worked; support for the war soared and George Bush’s popularity soon reached an all-time high. During and immediately after the war, Bush’s approval rating hovered around 90%.

But the use of such propaganda devices carries a price—for the communicator as well as the audience. In this case, once the American people recovered from their euphoria after the war came to a quick and (in terms of U.S. casualties) relatively bloodless end, a great many Americans began to wonder why, after having achieved such total military dominance, we had allowed Saddam to remain in power with a large part of his military force intact—a force that he promptly began to use with impunity against his own civilian population. Indeed, even the commander of the United Nations forces in the Persian Gulf, General Norman Schwarzkopf, was bold enough to wonder about this out loud on network television. Can you imagine the president of the United States in 1945, having won a smashing victory over Adolf Hitler, allowing Hitler to continue to govern the German people? Can you imagine the Allied forces stopping just inside the border of Germany and then turning back? Utterly impossible. If Hitler had survived he would have certainly been tried, convicted, and executed as a war criminal.

Why, then, did George Bush [Sr.] allow Saddam Hussein free rein in Iraq? It was confusing. In a Newsweek poll taken on May 1, 1991, 55% of those questioned did not view the Persian Gulf war as a victory because Saddam was still in power. President Bush’s popularity began to fade. Ironically, Bush’s use of the “Saddam is Hitler” metaphor was so successful that it contributed to his own decline as a weak leader who could not finish the job he started—an image that encouraged others in his party to challenge his leadership in the presidential primaries and helped set the state for his eventual defeat in the 1992 election. This is a common occurrence with the use of metaphor and analogy to pre-persuade; they often take on a life of their own, trapping the creator in the web of the creation.

[…] It is not our intention to sincle out George Bush for special criticism. Unfortunately, pulling the wool over the eyes of the people has been a common practice in the White House; from Lyndon Johnson’s false statements of optimism during the Vietnam war (“There is light at the end of the tunnel”) to Richard Nixon’s stonewalling of the Watergate affair (“I am not a crook”) to Ronald Reagan’s statements about the Iran-Contra scandal (“I think I don’t remember”) to Bill Clinton’s outright lies regarding his sexual improprieties (“I did not have sexual relations with that woman”), American presidents have been denying citizens the information necessary to properly analyze a situation and to act rationally. The truly unfortunate aspect of this is that most Americans have rather cynically come to take it for granted that they will be misled. Is it any wonder that in this country, the cradle of modern democracy, less than 50% of the people now bother to vote?

With active wars in progress, that jumped to 61% of eligible voters voting in both 2004 and 2008, but the point is still valid: two out of every five eligible voters didn’t bother going to the polls, even after the incredibly close finish in 2000.

That’s just a brief flip-through-the-book sample, but there are dozens, maybe hundreds more. Early on, Pratkanis and Aronson clearly describe cognitive dissonance, the phenomenon that when presented with fact that flatly contradict closely-held beliefs, people are motivated either to change their behaviors or beliefs to comport with the new facts, or to rationalize away the new facts as incorrect or irrelevant. If you click that Wikipedia link, you’ll notice that many of the footnotes on the subject are for articles by Eliot Aronson—one of the authors of Age of Propaganda.

Ten years ago, MWJ used Age of Propaganda‘s clear explanation of what makes a “cult” and what does not, when The Weekly Attitudinal pointed out that not only are Mac followers not cult-like (at a time when the mainstream press readily portrated all Mac followers as anti-Windows zombies), but also to point out that you could use the same tactics to portray Windows as a cult phenomenon. Except no one was doing that because it wasn’t useful—the majority of people using Macs didn’t need some way to rationalize away percieved factual benefits of using Windows. The reverse wasn’t always true.

One of my favorite parts of the first section of the book is the discussion of Abraham Lincoln’s Gettysburg Address, noting how Lincoln’s use of some (but not all) persuasion tactics changed an entire nation from a tiny speech (footnotes omitted):

Perhaps Lincoln’s most effective pre-persuasion technique, however, occurred in the first six words the address—the ones learned and often parodied by schoolchildren: “Four score and seven years ago.” How so? With these six words, Lincoln identified the birth of the United States with the signing of the Declaration of Indepdence in 1776, not the ratification of the U.S. Constiution in 1789. The fact that Americans now universally accept 1776 as the birth of the nation, not 1789 (witness the celebration of the bicentennial in 1976 compared to the near neglect of the Constitution’s bicentennial in 1989), is a testament to the power of Lincoln’s message. Such acceptance was not the case in 1863. The first government established by the colonists was based on the Articles of Confederation and, for the most part, it failed. The founders tried again with a new Constitution, adopted in 1789. Proponents of slavery argued for the primacy of the U.S. Constitution, which at the time did not outlaw slavery. On the other hand, those who opposed slavery took solace in the Declaration’s proposition “that all mean are created equal.” So without so much as mentioning the abolition of slavery, the Emancipation Proclamation, or the war, Lincoln justified them all with six little words that identified the birth of the nation with the Declaration of Independence and the guiding principle of equality. Interestingly, Lincoln’s sleight-of-hand was not accepted by everyone in the North at the time. An editorial in the Chicago Tribune expressed outrage that Lincoln would betray the Consitution (by giving priority to the Declaration) and defame those who wrote it and died for it at Gettysburg&mdash”men with too much self-respect to declare that Negroes were their equals.”

By establishing this principle, Lincoln could then use it to make people feel uncomfortable about not treating everyone as equal:

… He reminded his audience of their hypocrisy in his first line—a nation “dedicated to the proposition that all men are created equal.” How could there be government of the people, by the people, and for the people if some Americans could be excluded against their will? He offered his audience no choice but to confront their prejudice and decide whether a nation “so conceived and dedicated, can long endure.” Within seven years of the Gettysburg Address, the United States had adopted the Thirteenth, Fourteenth, and Fifteenth Amendments to the Constitution—amendments that forever secured the nation’s commitment to equality by outlawing slavery, ensuring equal protection under the law for all citizens, and guaranteeing the right to vote regardless of race or color.

The vast majority of communications we receive are from people who are trying to persuade us rather than inform us (and yes, that includes this article, because I’m clearly trying to persuade you to buy this book), but it remains of utmost importance that we find information and evaluate it rationally. This book is probably the best I’ve ever read on how to identify persuasion, see through tactics that might otherwise short-circuit your reasoning process, and counteract them to obtain a clearer view of underlying facts (if, in fact, any are present in the communication at all). As I said earlier, there’s not a chapter in this book that doesn’t contain a long passage I’d like to quote online because I read it and I think, “Everyone should read this! This is important in our world!”

Pratkanis and Aronson regularly cite fellow social psychologist Robert Cialdini in their book. Cialdini gets much more attention from the world because his books tell you how to use persuasion to your benefit. That’s unquestionably important, particularly when small changes to your message (that don’t make it any less true) can make more people receive and accept it. But I would argue that Age of Propaganda is even more important in helping us understand how both honest and dishonest persuasion works and what we, as recipients of the messages, can do to avoid being persuaded by dishonest and empty arguments.

If I could buy cases of this book to give away to all MDJ and MWJ subscribers, I would. But I can’t, so if you have never read Age of Propaganda, I strongly urge you to do so. (Click here to buy it from Amazon.) Why rely on other people to debunk each day’s propaganda when you can master the techniques to do it yourself? Even last updated in 2001, it’s an incredibly important book that everyone should read.

A quick way to save a lot of time reading Mac news

Ignore any story whose headline ends with a question mark, or attributes the information to a “report.”

The former means the author is just making up stuff about a rumor; the latter means the author is just repeating a rumor. In both cases, the story is extremely unlikely to contain any actual news, facts, or analysis based in reality.

We’re seriously considering concocting an AppleScript for NetNewsWire that simply marks all such articles as “read” just to get them out of the way. Try ignoring them—it makes reading news much faster, and you don’t lose any information!

A simple question

Philip Elmer-DeWitt, yesterday:

Forgive me if you’ve already seen this—and nearly a quarter million people already have, according to YouTube—but I just stumbled across this video and thought I’d share it on what’s shaping up as a slow day for Apple news.

If you live and work “outside the reality distortion field,” why do you need to find something to post when you freely admit there is no news that’s worthy of your readers’ time?

You’d think it would be impossible to run out of poorly sourced rumors to pontificate about over the cracker barrel, but there ya go.

Little known fact about Joe Nocera and Philip Elmer-DeWitt

Their houses contain absolutely no mirrors.

This is easily provable, because if either of them were capable of even the most basic self-reflection, Nocera could not publish this and Elmer-DeWitt could not publish this.

Read this blog entry for all the details, keeping in mind that Business 2.0 went under later that year.

The Weekly Attitudinal: Write Your Own Steve Jobs Story!

It’s easy to get plenty of media attention by writing your own speculative story about the health of Apple’s CEO. Just follow these simple steps.

  1. Imagine some horrible or painful medical condition, preferably one with a reasonably high mortality rate. If your imagination fails you, pick an organ and say that it’s failing.

  2. Call up a doctor or two and ask them if, given the publicly available information about Steve Jobs’s health, they could categorically rule out the condition you have imagined.

    If even one of them cannot, you have your story. If one cannot but others do, you have your story as “Some doctors say this, but others disagree.”

    Be sure, in your story, to conflate “Apple Inc.” with “Steve Jobs,” deliberately ignoring that federal and state privacy laws prevent Apple from disclosing medical information on any employee (including its CEO) without that employee’s permission. The more you spread the blame around, the harder it is for people to see through your story.

    Also, since the media has invested heavily in the fiction that Steve Jobs runs everything at Apple (because it sells copies of stories, which sells ads), be sure to emphasize that, too.

  3. Profit!

Still too difficult for you to cash in on this media bonanza? Fear not—the Attitudinal has you covered! Just use this handy-dandy Steve Jobs Health Story Template® and fill in the blanks as needed!

Apple CEO Steve Jobs May Have ______

Doctors familiar with medicine say that Apple CEO Steve Jobs, who began a six-month medical leave of absence this week, may be suffering from ______.

If true, the condition is far more serious than Apple has previously let on. It could sideline the “World’s Most Important” CEO for longer than he has indicated, or keep him from returning to the Apple helm at all.

Jobs was treated for pancreatic cancer in 2004, and told investors that he had made a full recovery. Nonetheless, his public appearances during 2008 made it clear Jobs was rapidly losing weight, spurring fears that his cancer had returned.

A letter Apple released on January 5 said that Jobs was suffering from a “hormone imbalance. Eight days later, the CEO said his problems were “more complex” and that he would leave the company until June to have them treated, sparking more speculation that Jobs is fatally ill.

”Given his history with pancreatic cancer, it’s impossible to rule out ______,” said Dr. ____, [insert doctor’s title here]. “Cancer can have side effects throughout the body, including in the ______ system. The information he’s provided is just too vague. Only his doctors know for sure.”

The painful surgery Jobs reportedly underwent in 2004 could also have side effects, according to Dr. ______, [insert second doctor’s title here]. “While these procedures are generally safe and well-understood, there’s always the possibility that the body will eventually have problems with such a radical change to the system. If he’s not producing the right hormones [or “enzymes” or “proteins”], it could put stress on the ______ and eventually lead to weight loss and, if not corrected, death.”

While Apple has a deep bench of talent to run the company in his absence, investors and analysts alike speculate that without Jobs at the helm, the company will [eventually/rapidly] decline into the same moribund state it was in before Jobs returned to the CEO’s seat in 1997. Under his watch, Apple released mega-hit products like the iMac, the iPod, and the iPhone, all of which Jobs personally invented while refusing to take credit.

”His long-term absence puts the company’s future in jeopardy,” said ______, an analyst for [insert name of analyst’s Wall Street firm]. “Apple’s in a great position now, and Steve will be involved in major decisions while on medical leave, but if he stays gone longer than six months, or doesn’t come back at all, it’s possible that Apple will again fade into irrelevance. The company really needs a leader that the media can fixate on, because they’ve proven they won’t pay attention to the products without a personality behind them.” [You might have to cut that last sentence for “space” reasons, being a media person yourself who knows that sometimes good quotes have to be cut.]

Jobs, an unnecessarily private man, refused to comment for this story or to release full medical records at our request.

If you can’t even get doctors or analysts to return your calls, or to play along with your speculation, don’t worry! Just say that “some doctors” and “some analysts” speculate these things. If worse comes to worst, just punt and use the passive voice: “There has been speculation that Jobs is suffering from ______ and may not return to Apple.” Easy peasy!

See? Just follow the Attitudinal’s simple rules, as so many huge media writers and outlets already have. Once you know the secrets, the article just writes itself!

The Attitudinal shall bill you later for a very reasonable percentage of your profits from this technique, so what are you waiting for? Go cash in on the biggest media fad of the new year!

Why Q3FY08 iPhone revenues won’t be up very much

This excerpt of material intended for MDJ and MWJ readers was sent to a subscribers-only mailing list last week, but we wanted to get it out in the public in the hopes of avoiding the kind of uninformed Apple-bashing cycle that seems to start with every quarterly release. Apple’s recognized hardware revenue for iPhone sales in the June 2008 quarter won’t be that much higher than in the March 2008 quarter, and it’s not because Apple didn’t sell many iPhones (well, people might have been waiting for iPhone 3G, but surely many thousands of people bought the original iPhone in the quarter anyway). What’s more, Apple explained three months ago why this would happen. Here’s the scoop.

From Peter Oppenheimer’s statement

Among many other things in his prepared statement during Apple’s financial conference call of 2008.04.23, chief financial officer Peter Oppenheimer revealed this news concerning Apple’s accounting for iPhone revenue:

Because we announced the specific new features to be included in the iPhone 2.0 release, and plan to provide them to iPhone customers as a free upgrade in late June, we will delay the start of revenue recognition for all iPhones sold on or after our March 6th announcement date until the iPhone 2.0 software is delivered. The revenue and cost of sales associated with these iPhones will be recognized ratably over the remaining terms of their respective 24-month estimated lives. Revenue recognition of handsets sold prior to March 6th and payments from carriers has not changed as a result of our announcements.

The analysts inquire

Naturally, during the conference call, analysts wanted to know much more about this concept. Keep in mind that at this time, Apple had said the new software would arrive in June. As you know unless you’ve been on another planet, the iPhone 2.0 software shipped simultaneously with iPhone 3G on 2008.07.11.

Mike Abramsky of RBC Capital Markets asked for more information about why Apple would delay revenue recognition of iPhone units until the 2.0 release, and how analysts should think of that. Peter Oppenheimer responded by repeating most of the material on this subject from his prepared remarks, and emphasized (twice) that he was repeating it, so we’re not going to repeat it here. We will note one sentence, though: “Once we deliver the [iPhone 2.0] software, we will resume … revenue recognition of the phones on what we sold between March 6th and that date, and begin to recognize, as we had in the past, iPhone revenue on a go-forward basis.” When Oppenheimer finished repeating his prepared material, Abramsky asked for confirmation that “really, what we are looking at it just the exclusion of hardware revenue next quarter … from iPhone.” Oppenheimer confirmed: “Until the [2.0] software is delivered.”

This is slightly tricky, but a later question by Piper Jaffray’s perpetual Apple bull Gene Munster helped clarify it. Munster asked if Apple would be recognizing the costs and expenses related to iPhone sales between 2008.03.06 and the date that iPhone 2.0 appears, even if it would not be recognizing revenue from handset sales during that period. In this context, recognize is an accounting term meaning “we’re now listing this on our books as revenue.” If you purchase a five-year magazine subscription, the publisher can record your entire payment as “sales” in the month when it received the money, or it can put the money in the bank and only list 1⁄60 of it as “sales” each month for the next five years. In the first situation, the publisher “recognizes” all the revenue upon receipt. In the second one, the publisher “recognizes” the revenue ratably defined here to mean “in equal portions for the term of the subscription.”

Apple could recognize the cost of iPhones sold (the materials used to make the handsets, the packaging, the shipping) and the administrative cost of getting them sold (product development, advertising, licensing fees for light and airy guitar music) at the time the phones were sold instead of ratably over a 24-month period. Doing so would mean Apple’s expenses would stay high while iPhone revenues went down during the June quarter, and Munster wanted to know if that was the plan.

Peter Oppenheimer said, “No, Gene. We will delay recognition of both the revenue and the product costs on the iPhone from — beginning on March 6th until we release the [iPhone 2.0] software, but we will continue to expense our operating expenses around selling and advertising and engineering as period costs, as we always have.”

Munster then asked if Apple would be charging customers who owned iPhones before 2008.03.06 for the upgrade. Same answer from Oppenheimer: “No. As I said in my prepared remarks, we will be providing that software to the then-current iPhone customers for free.”

With all other possibilities ruled out, that led Munster to the real question: “If everybody is going to get it for free, why are you deferring [revenue for iPhones sold] after March 6?” Oppenheimer replied, “Because the customers that purchased the phone on or after March 6th presumably were aware of the software that we told them that we were going to come out with, and that they were going to get it for free. And as a result of our announcement, the way you properly account for that is to defer the revenue, and that’s what we’re going to do.”

This argument goes back to early 2007 when Apple revealed (as take-apart fans had already discovered) that late 2006-model iMacs were capable of draft 802.11n wireless networking, not just the 802.11b/g networking the company had promised in the specifications. All you needed to turn on the faster networking was new software — and Apple charged US$2 for it, or made it free with the company’s own 802.11n AirPort Extreme Base Station hardware. You may remember the outcry.

Why the charge? Apple had just spent much of 2006 refuting charges of shady bookkeeping in the options backdating matter that’s still the subject of civil litigation today. Now eager to avoid even the appearance of impropriety, it turned out Apple had another lawsuit magnet on its hands with previously undisclosed features. If the customers knew the hardware was supposed to provide 802.11n networking but Apple didn’t implement it until later, then foes could argue that Apple should not have recognized revenue for however much the 802.11n networking feature was “worth” until the enabling software shipped. If the feature was worth US$10, then Apple should have taken out US$10 from each iMac sold before releasing the AirPort 802.11n Enabler, and recognized that chunk only when the software was delivered.

Failure to do so is arguably “fraud” — accepting money from customers for “promised” features that weren’t implemented. The argument can then be extended to say that if Apple knew about features it intended to implement, it should similarly delay recognizing that revenue. This, of course, is an accounting nightmare, one Apple chose to avoid by charging an extremely small fee to deliver the software (and by building it into Leopard), eliminating any basis for a claim that Apple had “pocketed” money from non-existing features. Technically speaking, this is not a “rule” of corporate accounting, but failure to cover tracks like this in the 21st century just invites class-action lawsuits, and no company wants that. It’s why Apple’s thinking on Mac OS X updates seems to have shifted to “no new marketable features, only bug fixes and very minor improvements.” If Mac OS X 10.2.2 had been released in the current climate, it’s not at all clear that Apple would have included Journaled HFS Plus — the company might have waited to ship it in Panther to avoid accusations of shenanigans.

But now we come to products like Apple TV and iPhone, products that Apple always intended to upgrade for free with new features during the product’s useful life. That opens the same can of worms from the other end: how much of a US$399 iPhone sale can you “recognize” if you know you’re going to add an iTunes Wi-Fi Store and better geolocation and, eventually, third-party software — someday? Apple punted: it treats both products as “subscriptions” over the estimated useful life of 24 months, recognizing revenue ratably over that period.

Note that Apple does not do this with the iPod Touch, which is in the same technological and accounting situation. That’s why this January’s iPod Touch software upgrade cost US$20, but was included free on new units, even though iPhone owners got the same new features for free. Apple probably treats the iPod Touch differently because to treat it as a subscription product, the company might have to separate and announce iPod Touch unit sales numbers, and it does not want to provide that kind of information to its competitors.

And now, Apple finds that having closed the accounting can of worms, it’s open again. Even though the iPhone is already booked as a subscription, the company announced major new features coming for free in June. That’s exactly the same problem as before — selling a product today that doesn’t provide all the features that Apple has said it will have. Rather than try to determine “how much” of a current iPhone’s value is tied up in expectations of iPhone 2.0 software, Apple is not recognizing any iPhone revenue (or costs of sales) between the date of the iPhone 2.0 announcement on 2008.03.06 and that magical future date when the software ships.

Since the schedule slipped, and iPhone 2.0 software did not ship until after the end of the June quarter, then Apple therefore booked no new iPhone hardware sales revenue during the June quarter, since 2008.03.06 was in the March quarter. It also means that while Apple listed the unit sales of iPhones in the last 23 days of the quarter (2008.03.06 through 2008.03.29), it did not recognize any revenue from those sales. If you assume (for simplicity) that iPhone sales were linear throughout the quarter, that’s right at 25% of iPhone sales “revenues” that don’t appear on Apple’s data summary or financial statements for the March quarter.

Because of this, Apple’s iPhone hardware revenue for the June quarter will be just slightly higher than it was for the March quarter. The number of iPhones that Apple was using for its daily hardware revenue calculation increased every day (because Apple sold more iPhones every day) until 2008.03.06, when Apple froze the number for the above reasons. The number stayed frozen between 2008.03.06 and 2008.07.11 when iPhone 2.0 and iPhone 3G shipped. Since that frozen number of iPhones used in the daily calculation is higher than on any day before 2008.03.06, the overall recognized June quarter revenue will be slightly higher than March quarter revenue — but nowhere near what it would have been had all this not happened.

What happens now? On 2008.07.11, Apple started recognizing all that suspended revenue ratably — divided evenly over the remaining 24 months of the handset’s expected useful (for accounting purposes) life. If, for some bizarre reason, you purchased an iPhone on 2008.07.01, then Apple will recognize your phone’s revenue on a daily basis over 720 days: two non-leap years (730 days) minus the 10 days of limbo. If you purchased an iPhone before 2008.03.06, Apple’s still recognizing your handset revenue on the same basis as it was before.

Presumably, although no one asked, Apple did the same thing with Apple TV sales between Steve Jobs’s announcement of Apple TV “Take 2” at Macworld Expo on 2008.01.15, and the software’s release on 2008.02.12. Isn’t accounting fun?

Input Managers are not ‘plug-ins’

A while back, John Gruber asked us to reprint a section about Input Managers from MDJ and MWJ 2007.12.03 on this site so that more people could read it. We present it here, slightly updated for today’s circumstances.

The discussion at the time was David Watanabe’s Inquisitor 3, the free Input Manager that patches Safari so that the search field returns results instantly in a Spotlight-style dark window as you type. Its release was new at the time, and the product was mostly unchanged but “repackaged” for Mac OS X 10.5 since Input Managers need to have specific root permissions to work under the new OS for security reasons.

With yesterday’s release of Safari 3.1, and yet another round of broken Input Managers, there’s once again an opportunity to point out a real problem in how the Mac press is covering programs like Inquisitor that work by patching the system or other applications. Traditionally, the name for code that runs without support in another process’s address space is a hack, or if you’re being nice, a patch. The purpose of such code is to intercept either an application or the system as it tries to perform a specified task, so the patch code can supplement or replace that task with its own action, and then return control to the original code.

Such code obviously entails security risks, and it’s not necessarily easy to create. Unsanity created a well-documented system for patching applications under Mac OS X, called Application Enhancer, but they call APE and its modules “haxies,” which makes most of the Mac press drip with disdain. Inquisitor, on the other hand, uses the Input Manager facility in Cocoa that was originally part of NEXTSTEP to allow third-party modules to intercept keyboard input and transform it as necessary to support complex languages. Long ago, developers figured out that since all Cocoa applications load Input Managers, they’re a great way to load patches into any Cocoa application. That’s what Inquisitor does.

(Input Managers also load into any application that uses the Cocoa text system, including Carbon applications that use the Font Panel, WebKit, or any other AppKit-provided view with text input options. Increasingly, especially since there’s no 64-bit version of Carbon, Input Managers load in every application.)

What’s the problem? Sites like The Unofficial Apple Weblog, in its coverage of Inquisitor 3, insist on calling these Input Manager hacks “plug-ins,” implying a level of architectural and technical support that simply does not exist. This has become nearly standard usage on the Mac web: this Mac OS X Hints instruction for using Inquisitor on Leopard calls it “David Watanabe’s great auto-complete Web search plug-in.” Christina Warren of TUAW wrote an entire article about Input Manager hacks for Safari and a utility to load them under Leopard while calling them “plug-ins” every single time, never once noting that the entire “architecture” of these things is not a supported method for patching Safari. Warren equated them to Firefox plug-ins, which are designed expressly to load in that browser, and Input Managers are no such thing. They are hacks.

This is hardly limited to TUAW, although it seems that other authors on the site are determined to call Input Managers “plug-ins” when they’re aimed at Safari. On the MacUser blog, Derik DeLong called Input Managers “plug-ins” as well, saying they “enhanced” browsers to “usable states,” and applauded Apple for keeping them in Leopard because they’re “such a powerful API.” (DeLong also cheered undocumented and unsupported ways to make Mail load unsupported bundles in Leopard, calling those patches “plug-ins” as well.) The developer of PlugSuit, mentioned in Warren’s TUAW article, says his program “allows Input Manager and SIMBL plug-ins under Leopard and Tiger.” This is ridiculous on its face: SIMBL is Mike Solomon’s Input Manager that handles the tricky work of being an Input Manager so that programs like PithHelmet can more directly patch applications without having to implement the overhead of the actual Input Manager code. (It was recently updated to version 0.8.2 to add Leopard compatibility.) The name is an acronym for “Smart Input Manager Bundle Loader.” These are not plug-ins.

Tuesday’s release of Safari 3.1, and yet another round of broken Input Managers, has not changed TUAW’s positioning in the slightest, as you can read for yourself:

Whenever a new browser version rolls out, the engineers responsible for plugins and enhancements turn on the espresso machines for the coming all-nighters as they rejigger their products for the latest and greatest.

One site, in a reference we can’t locate right now, even lamented that Safari “doesn’t have a plug-in architecture.” This is surely news to developers like Adobe, Real Networks, Flip4Mac, and Apple, whose code can all be found in your “/Library/Internet Plug-Ins/” folder. Those plug-ins are for browser content, though, not browser behavior. Most applications don’t support generic plug-in architectures to let third-party modules completely customize the human interface. Firefox doesn’t come nearly as close as the hacks Input Managers can apply to Safari.

The problem is that the Mac press has decided, by unwritten fiat, to call Input Manager hacks “plug-ins” and confer an aura of legitimacy on them, while continuing to call other forms of patches “hacks” and caution you against installing them. That’s both misleading and unfair. The fact that Input Managers work through a Cocoa method does not make them better or worse than APE “haxies” that load through low-level Mach messages, or than any other way that third-party code loads without support into any application’s address space.

You can’t call the hacks you like “plug-ins” and the ones you don’t like “hacks” and simultaneously pretend you’re actually informing readers. This is not to say that you can’t choose to install whatever patches you want, as long as you’re aware of the risks in security, the dangers in updating, and the general facts behind putting someone else’s code in an application’s address space. You just shouldn’t be misled by the press into thinking one kind of hack is implicitly “better” than another kind.

RSS feed changes

Among the many, many, many upgrades we’ve suffered through in the past few weeks (including the production machine, production software, hard drives, machine repairs, even light fixtures and internet access hardware) have been server changes. While we’re shuffling some things around, we figured it was time to make the changes announced last year permanent.

So, effective as of now, the original RSS feeds for MDJ and MWJ subscribers now get HTTP redirects to the newer feeds introduced last July, and those feeds are no longer “beta.” (Ironically, we may need to rewrite the software that makes those feeds, since it turns out the database behind them is really quite stupendously horribly designed [our fault]), but the URLs will remain the same.)

Your newsreader should easily and permanently replace your old URLs with the new ones the next time you refresh. If it doesn’t, we heartily recommend the now-free NetNewsWire 3.1, which handles this with aplomb and is, as mentioned, now free. Hence the adjective.

We had no idea how much stuff needed maintenance until we started fixing a few of the more broken things. It was kind of like fixing a broken drawer and discovering that the entire cabinet was riddled with termites, and then that the carpet needed repair, and on and on. We had about a 10-day stretch in February where something new, but minor, broke every single day. They were all manageable and fixed in a few hours, but when they come 10-15 per week for 2-3 weeks in a row, it makes you want to do something self-destructive, like enter politics or speculate about iPhone carrier agreements.

Almost everything is upgraded and fixed, including a few things MDJ and MWJ readers have wanted for nearly two years, with testing to resume this week (cross your fingers). Almost every single thing between the editors and the internet that we use to produce MDJ and MWJ has been upgraded or replaced since the last issue, and that almost included the very Ethernet cables connecting the machines. It still may—LAN transfers are slower than they ought to be in some cases but not others—but it’s been quite the makeover. We’re just glad it’s done. Hauling G5/Mac Pro cases around and copying 300GB hard drives over and over is something we’re happy to leave for special occasions. We’ll have more upgrading to do in the second half of 2008, but we’re just about done for now.