Apple In-App Purchases Put iFlow Reader Out of Business

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Posted May 11, 2011 at 10:11am by iClarified

Apple's new requirement that all content be sold via in-app purchases has forced BeamItDown Software and the iFlow Reader out of business.

Thank you for being one of our valued customers. We are writing to you today to make a very sad announcement. BeamItDown Software and the iFlow Reader will cease operations as of May 31, 2011. We absolutely do not want to do this, but Apple has made it completely impossible for anyone but Apple to make a profit selling contemporary ebooks on any iOS device. We cannot survive selling books at a loss and so we are forced to go out of business. We bet everything on Apple and iOS and then Apple killed us by changing the rules in the middle of the game. This is a very sad day for innovation on iOS in this important application category. We are a small company that thought we could build a better product. We think that we did but we are powerless against Apple’s absolute control of the iOS platform.

Small ebook resellers such as BeamItDown make less than a 30% profit on units sold. Now that Apple is forcing BeamItDown to give them a 30% cut via in-app purchases that leaves less than 0% profit for the company.

The crux of the matter is that Apple is now requiring us, as well as all other ebook sellers, to give them 30% of the selling price of any ebook that we sell from our iOS app. Unfortunately, because of the "agency model" that has been adopted by the largest publishers, our gross margin on ebooks after paying the wholesaler is less than 30%, which means that we would have to take a loss on all ebooks sold. This is not a sustainable business model.

Unfortunately, companies in this situation can't even remove sale of their content from the iOS app and just sell online. Apple Review Guidelines state that if the content is sold online it must also be sold in the app via In-App Purchase.

"11.13 Apps can read or play approved content (magazines, newspapers, books, audio, music, video) that is sold outside of the app, for which Apple will not receive any portion of the revenues, provided that the same content is also offered in the app using IAP at the same price or less than it is offered outside the app. This applies to both purchased content and subscriptions."

As Apple's June 30th deadline for implementing these new rules draw near, we are likely to see more apps get pulled and possibly more business built on around iOS get closed down. With Sony's app rejected by Apple, it's hard to imagine any small-time apps getting a break.

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Apple In-App Purchases Put iFlow Reader Out of Business

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SunLizard - May 12, 2011 at 2:26am

Well that letter is a bit lop-sided. Lets take a different perspective (and I'll avoid trying sound like a 'drone') Suppose I made a gizmo, lets call it an iGizmo for arguments sake, and a whole bunch of people liked it. They liked it because it worked and the quality control for products released on iGizmo ensured that at the very least, applications weren't overly bug-ridden and tended not to crash or hog resources. Suppose I said, hey developers for iGizmo. He'res a great resource kit for you to develop apps with. You can use it for next to nothing the only gig is: 1) We approve your release is in accordance with some (read "our") rules. 2) it gets released through the App Store and 3) IF you make money, you get to to share with us (since we built the SDK and the device.) It takes developers only a few months to figure out that in-app purchases are where they make money free of including me on any money they are making. In fact, the developers can pitch a whole business model on giving away a free app (that I host and distribute on my dime) and charge in-app content without giving me a thing. That sucks. I put energy into ensuring products work and I get diddly? Okay. I can change. Guess what: I get 30% of in App purchases and we only do it in-App. Call it Development Kit and Hosting charges. You don't like that? Google has a nice platform for you to develop for.... And while that's a really heartfelt letter from a small business owner: Suck it up, buttercup. We're a capitalist business model here. iFlow doesn't innovate it copies. AND you RE-sell other people's work and then whine about how you're getting scammed over distribution costs? Sorry about that 30% thing... You could try charging for your free app.... but wait... people might not buy that if it has to compete with others right (or with iGizmos' free product offering)? Lets make this transparent: THAT MEANS IT ADDS NO VALUE WORTH HAVING. (or at least paying for.) I'll concede this in the interest of fairness: 30% is, in my opinion, a bit excessive, but your options are dance with the devil or, as has been said before, go talk to Jay Freeman about your alternatives. You might be surprised! Peas & Capitalism... S_L

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dancj - May 12, 2011 at 2:42am

That's a well considered response and you do make a good point. I think the problems are 1 - as you say, 30% is excessive and 2 - companies have built their business model around the old rules and then Apple changed them. It's harsh, but I'm sure Apple see it more as closing a loophole than changing the rules.

Drkztan - May 13, 2011 at 6:00pm

Not only that, but every dev knows that they can change the contract anytime. Plus, they saw it coming, selling for free and then getting 100% from in app? HA! No way that'd happen. 30% seems a little too much though :/

shurman - May 11, 2011 at 2:29pm

Apple is terrible, they are controlling absolutely everything and want a piece of everything! They are not supporting the small developers at all and make it extremely difficult for anyone to build a good business. Other than this they are also killing off thousands of small developers who introduced pay per install marketing within the app store. This is also putting thousands of people out of business and work! I have not seen a more irresponsible and greedy company... This is very unfortunate and I am sorry to hear this...

Drkztan - May 13, 2011 at 6:05pm

WHAT THE HELL??? They where selling a goddam ebook store. I'm sure, I KNOW it wasn't the best, not even for free on the AppStore, and they where only profiting from reselling ebooks.... The good devs are still in ;)

Trev - May 11, 2011 at 1:04pm

Android is going to destroy the apple app store. it's going to be......wait for it...........legendary

Trev - May 11, 2011 at 1:00pm

Of course Apple wants it this way. they get a piece of every sale this way. Remember one very important thing Apple: your market share and success story has very little to do with Apple directly, it's all the 3rd party app developers that made you product worth the exorbitant price of your phone and tablet. Don't shit on the ones that made you famous.

smartypants - May 11, 2011 at 12:07pm

2 words " cydia store " stop crying !