BeamItDown Claims Apple Wants all Profits, Pulls iFlow Reader

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iFlow Reader HDBeamItDown Software announced Thursday that it will be pulling iFlow Reader and iFlow Reader HD from Apple’s App Store on May 31st. iFlow Reader is an ebook reader and store that competes with Apple’s iBooks, Amazon’s Kindle, and other, smaller competitors. The company said that Apple’s demand for 30% off the top from any and all in-app purchases exceeds the gross margins supported by the industry.

“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,” the company said in its announcement. “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.”

“Apple has made it completely impossible for anyone but Apple to make a profit selling contemporary ebooks on any iOS device,” the announcement attributed to company staff added. “They now want 30% of the sale price of any books, which they know full well, is all of our profits and more.”

There has been some concern and even more confusion on how Apple’s policy on in-app purchases and the company’s subscription rules would affect third party services such as Pandora and ebook sellers such as Amazon, BeamItDown, and others.

The print magazine industry appears to be coming to terms with the benefits of and restrictions imposed by being on Apple’s iPad, but it’s a different issue for third party ebook stores. Magazines are being offered to iPad customers directly by the publishers that produce them. Ebook sellers are acting as third party “agents,” according to Apple’s rules, and thus only make a profit on the difference in wholesale price established by the publisher — prices that must be uniform according to Apple’s rules — and the retail price (the definition of gross margin, in this case).

According to BeamItDown, those gross margins are less than the 30% Apple is demanding off the top, and barring a radical restructuring of the publishing model, no company other than Apple will be able to sustainably sell ebooks on iOS devices.

The Mac Observer has asked Apple for comment on BeamItDown’s announcement, as well as for clarification on how Apple’s policies affect third party apps offering products such as ebooks. We also contacted Amazon and BeamItDown for comment. None of the above-mentioned parties has yet responded to our requests.

In the meanwhile, BeamItDown has posted instructions for its customers to download the books they have purchased so that they can keep them after the app is pulled. iFlow Reader may or may not continue to work on iOS devices going forward, and the company said it can’t guarantee that it will do so.

Comments

BurmaYank
mactoid

I will admit, if Apple screws up Amazon’s Kindle app, they will force me to buy a Kindle device. The iBooks store pales in comparison to Amazon’s selection.

dhp

BeamItDown may not be able to guarantee it, but I will stand up and personally guarantee that iFlow Reader “may or may not continue to work” for as long as you own your iOS device. wink

John Molloy

BeamItDown may not be able to guarantee it, but I will stand up and personally guarantee that iFlow Reader ?may or may not continue to work? for as long as you own your iOS device.

This seemed a bit off. Yes, it is sad that a small company has to close but I am not entirely sure that they are closing for the reasons that have been stated. If you have purchased something from BiD and it stops working after June 1st, would this not imply that say something like the DRM method that BiD chose to go with - Adobe’s solution - hasn’t been renewed?

It feels like a Plays for Sure failure being wrapped in a “we hate Apple” rant.

The company built a reader but also decided to make a book store so they were trying to do an Amazon Kindle, but on a much lower level. There are a lot of other book readers on the App Store - I think I have around 10 at least and iFlow’s unique single scrolling display may not have been enough to take it any further than say, Stanza or Kindle or GoodReader or any one of many others.

Here’s the thing. If we see some headlines in the next couple of weeks that this thing is going to Android or WP7 then it is more likely just the first stage of a marketing plan. If the product dies completely and books people have purchased from BiD stop working then I would blame the DRM rather than Apple’s onerous rules. It should be interesting to see what happens.

John C. Welch

The hilarious thing about this is iFlow and the company. They ONLY support Adobe Digital Editions with DRM, and their FAQ is a masterwork of doubletalk and hypocrisy. Here, some more choice ones:

Why do I need an Adobe ID to buy books?

Adobe supplies a DRM (Digital Rights Management) technology that is used for books purchased from the iFlow Bookstore. This same DRM technology is also used by a number of other major booksellers. An Adobe ID is required to read any books protected with Adobe DRM.”

Oh goody, I have to create an account with ADOBE to use iFlow.

Can I read books I bought on iBooks on the iFlowReader?

No. Apple uses a proprietary variation of the epub format that is only compatible with their iBooks Reader. Apple has decided to do this to explicitly lock you into their ecosystem.”

This is opposed to iFlow which is anti-lockin, as evidenced by their requirement to use only Adobe Digital Editions files which lock you into Adobe’s ecosystem. Doctor, my head!

Can I read books I bought for a Kindle on iFlowReader?

No. Amazon uses a proprietary format that is only compatible with their Kindle reader. Amazon has decided to do this to explicitly lock you into their ecosystem.

Seriously doc, my head feels like it’s about to explode.

Can I read books I purchase from iFlowBooks on iBooks?

No. iBooks does not support industry standard ePub format with Adobe DRM.”

THANK GOD iFlow IS HERE TO RESCUE US FROM APPLE BY BINDING US TO ADOBE!!!

Can I read books I purchase from iFlowBooks on Kindle?

No. Kindle does not support industry standard ePub format with Adobe DRM.

I think they actually believe they’re on the side of right here. This was a bunch of clowns who based their entire business model on Adobe Digital Editions being the winner in the eBook market. The KINDLE killed their application long before Apple did.

Well, that and their complete lack of marketing and PR. Evidently, the App Store is magical.

Dave Hamilton

Evidently, the App Store is magical.

And therein lies the problem. SO many people believe this because it winds up being (or looks like it is) for so very few. Yes, there are those who have done well getting the right placement in the App Store at the right time, but the reasonable man knows that this is not a model on which to base your entire business. One needs good PR, plentiful advertising, happy customers, and it doesn’t hurt if you have a semi-decent product, too (though that last one, unfortunately, often seems to be the least important in the list!).

jfbiii

It’s not so much that Apple is killing business…they’re killing middle-men who don’t really produce anything being bought and sold.

though that last one, unfortunately, often seems to be the least important in the list

And yet, without a good product (never mind semi-decent), good PR, plentiful advertising, and happy customers are difficult to come by. The volume of the complaints from vendors seems to roughly correlate to the amount of exploitation people find themselves unable to perpetrate on App Store customers.

jimothy

I posted this elsewhere. I think it deserves repeating.


The fact is, iFlow Reader was unlikely to be a business success regardless of Apple’s policy. Sure, this policy doesn’t make their job any easier, and Apple is a convenient and perhaps deserving scapegoat, but there’s a larger business reality.
That reality is that digital distribution of goods will tend towards a small number of very large retailers and away from small, independent sellers. This has already been underway for “brick-and-mortar” retailers, but it is even more true for digital distribution.
While a physical independent bookseller can establish a presence and charm that the larger booksellers have a hard time replicating with a combination of location, customer service, atmosphere, and selection that is outside of the mainstream (and even then, this is no easy task, as the decline of independent booksellers demonstrates), this is much more difficult, and at times impossible, to do in a digital store. A web site or app can only partially, at best, recreate “atmosphere,” and since their is basically no warehousing cost, mainstream online booksellers can stock the “quirky” titles that independent booksellers have found success with. Location, obviously, is irrelevant. Nor can independent booksellers likely compete on price. Marginal costs, aside from the cost of goods sold, are near zero in digital distribution, so economies of scale are much more a factor in online stores than physical stores.
Several people have suggested the iFlow Reader move to Android. I’m sure they, and their investors, have considered this option as well. They probably rejected it because they realize that they’re not likely to succeed their, either. They’re up against Amazon, Barnes & Noble, and yes, even Google. For better or for worse, this is probably not a successful business model for small operations like iFlow Reader. But it’s easier for them to blame Apple than to admit their own failings, and clearly, as the response to their letter indicates, they’ve struck a popular nerve here.
If Amazon, B&N, etc. sold books without DRM, then perhaps, iFlow could find success selling a better eBook client. Competing against free is never easier, but it has been done. iOS can display PDFs natively, but Good Reader, as one example, sells for $4.99 on the App Store with, presumably, enough success that they’ve maintained the product for around three years.
In short, the failure of iFlow Reader cannot be blamed entirely, or even predominantly, on Apple, regardless of how tempting a target of scorn, from both these developers and the community, Apple may be

wab95

The hilarious thing about this is iFlow and the company. They ONLY support Adobe Digital Editions with DRM, and their FAQ is a masterwork of doubletalk and hypocrisy. Here, some more choice ones


Agree that this smells a bit of hypocrisy. Also agree with Ratty’s assessment above. This story made its rounds yesterday on the Twitterverse. By my read, most post were sympathetic towards iFlow.

I am sympathetic to any struggling business, particularly when it’s being hampered by levies. My antenna always goes up, however, when a company very publicly points the finger of blame for its failure away from itself, rather than, at the very least, accepting ultimate responsibility. There are always exceptions, but assuming no responsibility goes over about as smoothly as scraping one’s fingernails across a blackboard.

As for Apple’s 30% policy, market forces, and not popular opinion, will ultimately decide whether it lives or dies.

ethan

What it comes down to is that iOS is not a free market nor even a fair market. It’s Apple’s market and they decide who wins and who loses by their policy of the week attitude. Apple does not want any ebook app on there other than their own. So you’ll see them apply their “market forces” to eventually get Amazon off there as well.

It just underlines the importance of diversification and by extension cross compiled/platform neutral code base processes so you are not tied to the mast of the Apple ship.

wab95

What it comes down to is that iOS is not a free market nor even a fair market. It?s Apple?s market and they decide who wins and who loses by their policy of the week attitude

Ethan, that’s precisely the power of a free and open market. A company can set any price it wants, but the real price is determined by the market. A company can set any policy it wants, but the efficacious policy is the one that prospers in the market. However large, prestigious or profitable a company, it still must ultimately yield to market forces.

Despite this being a very basic macroeconomics principle, many a company have failed to appreciate it, in timely fashion.

Whether or not Apple’s 30% take is ‘fair’ or ‘unfair’ is fundamentally a market question. You can argue all you want that the price of BMWs and houses and/or real estate brokers’ fees are unfair. The real question is what does the market assign as ‘fair market value’. If the market says the price or fee is too high, then it will come down, otherwise it won’t.

Apple have priced their tablet to reflect market value, as their competition have discovered. Whether they have done it for their iBookstore and general levy policy is less clear, but if it does not reflect market value, it will not be sustainable; at which point Apple will either have to modify the policy, operate the business at a loss, or shut it down altogether.

As with any successful company, I’m betting that they will take the course of practical profitability.

ethan

Your talking about the market external to iOS - iPhone vs Android etc when a user is in a verizon store. I’m speaking internal to the iOS eco system-the app market. Within that eco system Apple IS the “market forces”.  Now if they lose market share because developers flee and that in turn reduces the number of users buying their stuff: then in that way Apple’s internal ecosystem choices cause the outside market forces to hurt them.

But in no way within the policies of how their iOS ecosystem, are other market forces involved. Apple does what it wants when it wants. Period. No one pushes them around, there is no level playing field to compete app to app. Apple decides the winners and losers in their playground. What apps can be installed, what plugins are allowed, how you use ads, pricing for services sold within the apps, and for a while how you actually programmed. Devs are at their mercy and competition has no power to improve the user experince.

wab95

Your talking about the market external to iOS - iPhone vs Android etc when a user is in a verizon store. I?m speaking internal to the iOS eco system-the app market

I take your point, Ethan; however, no business operates in a vacuum. Whatever policies a business sets, whether it’s the pricing of its products and services, or the policies that govern its employees, or its MOUs and contracts with partners; every aspect of its business operates, at the end of the day, within the context of the market. While this may be opaque to some, to a savvy CEO this is as plain as day, and he/she will adjust said policies to minimise drag and optimise forward momentum, meaning growth and profitability.

What you describe as ‘internal to the iOS…’ could only remain relatively impervious to market forces in the context of a monopoly. So long as there is a competitive market (meaning alternative solutions and no price-fixing among would-be competitors), developers, partners, and customers can go elsewhere. If they do, and it affects the company’s bottom line, those policies and practices (internal or otherwise) will change, so long as the business is alert and responsive. If not, the business dies and the market is the better for it.

As Jimothy’s thoughtful piece above points out, there are some business models that simply are foredoomed to failure, if for no other reason than that they were not optimised (a euphemism) for the current market.

Jim Bowers

Instead of whining that the market changed or explaining the external reason for BID’s problem maybe BiD should defend it’s business model. If the business model is the reason for BiD’s failure then it is BiD’s responsibility and they should change their model. Apparently, the market changed. (They do that all the time, you know.) Companies must adapt to the market or perish.

Ethan

“Companies must adapt to the market or perish.” Well when Apple basically wants you gone (ie: they don’t want third party ebook sellers, just the publishers) there is not a lot you can do. THAT is the weakness of iOS for developers - you can’t defend your business model if Apple has deemed you unworthy. They just get rid of you. Your basically in a zoo hoping that the alphs predator does not decide you look yummy.

“the market changed. (They do that all the time, you know.)” Actually it was the single controlling entity of this “market” (iOS app platform) who changed. You guys act like there was this swell of sales to other ebook sellers from individual users. There wasn’t - there was Apple wanting fewer players AND wanting 30% AND wanting more iBook sales where they get 100%.  Changing the financials of the platform to better suit them. Why do you think Random House pulled their books from BiD overnight and they showed up in the iBook store the next day? BiD was a casualty ground up and spit out at the foot of the Apple alter. Apple really only has interest in 3rd party devs to fill the void until they can get around to consuming a given niche.

Stop with the silly “this was the free market pruning the weak via competition”, there was no competition-just a policy change to allow for a money grab on Apple’s part. Pretty sad…

John Dingler, artist

Market forces determines the predator’s failed fate, yet it does not blame market forces, but goes on to whine about another company’s use of market forces as being unfair competition.

I feel no sympathy for this unskilled predator who offers little of value being eaten up by a skilled predator who offers a lot of value.

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