Apple TV (2nd generation): Upgrading from Apple TV software version 4.4 or 4.4.1
Apple TV devices with software version 4.4 and 4.4.1 have an issue with updating software to later versions.
The recommended way to resolve this is by going to Settings -> General -> Reset -> Reset All Settings, prior to updating. If you apply the software update without resetting all settings first, the updater will reset the settings for you. Once the Apple TV has been reset, you can then successfully update to the latest software by going to Settings -> General -> Update Software.
We recognize that this is an inconvenience and apologize.