Apple In-App Purchases Put iFlow Reader Out of Business

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.


Read More [via Fortune] [App]