How do you update a network option value in the DB via a hook

Well, “update_wpmu_options” is certainly the wrong hook. It doesn’t send the blog_id as a parameter, so your code won’t ever work with that hook and use of the blog_id parameter.

If you just wanted to update the value on each site, then I would just put update_option('uploads_use_yearmonth_folders', 0); on the init hook, and wait for each site to be visited once.

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