BeamItDown Claims Apple Wants all Profits, Pulls iFlow Reader

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.