5G iPod movie rental limitation could be due to DRM, SarbOx

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By David Chartier

To the dismay of 5G and even 5.5G iPod owners, iTunes Store movie rentals won't be coming to a pocket near them anytime soon. Accusations were quickly lobbed at Apple after the Macworld keynote for forcing users to buy a new iPod just to experience a feature many might expect as a free upgrade. Indeed, this line in the proverbial sand between models and features may turn out to be good for the iPod upgrade business in the long run, but the reasoning behind Apple's decision is likely much more than skin deep. A number of explanations for Apple's exclusion of 5G iPods from the movie rental party have been elaborated by TUAW's Christina Warren and Wired's Bryan Gardiner. In all likelihood, Apple's hands may actually be tied when it comes to movie rentals and previous generation iPods.

Easy access to video stream = bad!

While movie rentals on 5G iPods are almost definitely a technical possibility as far as software and firmware upgrades are concerned, the prohibiting factors are likely political and financial in nature. The political theory is that the movie studios are concerned over the 5G iPod's analog hole, which allows video to be played out of the headphone jack. Offering more or less unmediated output via this analog jack would allow users to load up a 5G iPod with $2.99 and $3.99 movies, then plug into something like a video camera or a capture card in a computer to rip and share all these movies. They don't invest all that money in DRM for nothin', you know.

With the latest generation of iPods and the iPhone, Apple plugged the analog hole by requiring a new A/V cable that contains an authentication chip for playing video out via the dock connector. Because of the analog hole in 5G iPods and their lack of support for this authenticated cable, the studios most likely wouldn't allow Apple to update older iPods for iTunes Store movie rentals.

Or, it could be SarbOx

Not that Apple's accounting department wouldn't be happy over issuing what would probably be a costly update for those iPods, either. If you remember, Jobs announced major software upgrades for both the iPhone and Apple TV at Macworld that are completely free of charge to current owners. Even if you bought your Apple TV a year ago, or your iPhone at 6:01 pm on June 29 last year, you're still be able to grab the new software for free. iPod touch owners, on the other hand, were a different story—they had to pay $20 to gain five of the iPhone's core applications.

As much as we'd love to believe that Apple is a big, bad, icky corporation that would gobble up our mothers if they turned their backs for long enough, the reason for the iPod touch's software upgrade fee and the 5G getting left out in the movie rental cold probably has Sarbanes-Oxley to thank. Long story short, Apple says that "SarbOx," as it's often called, would require it to restate earnings for previously purchased products if it were to offer any major feature enhancements.

These "generally accepted accounting principles for revenue recognition" are why Apple stated at Macworld '07 that the Apple TV and iPhone would be accounted for by a subscription revenue model. This way, Apple could issue software updates for these products without needing to charge for them. Unfortunately, iPod revenue has never been accounted for in this way, so aside from the aforementioned political and technical issues, Apple could run into all the constraints of Sarbox if it attempted to bring rentals to 5G iPods.

We know the situation isn't pretty, but there likely isn't much Apple can do about it. But hey, look on the bright side: there's always eBay or an iPod trade-in program you can use.

Source: Ars Technica