In a scathingly bitter letter released today, the iFlow staff explains to users why at the end of the month their company and app will be gone for good. Also, the letter goes details the one-sided war Apple is waging on digital book sellers on iOS devices.
The letter can be viewed in its entiretyhere and opens as follows:
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.
The Agency Model means that the Publisher is the retailer of record, and sets the prices of books, which cannot be changed. Book sellers then become "agents" of this retailer and receive a 30% commission for books sold. This coupled with the Apple's 30% fee means booksellers, like iFlow, would break even at best. Before the Agency Model publishers would often give retailers a 50% discount on books allowing them to make a profit based on markups. Now, no one gets a different deal.
Random House books up until February 28, were iFlow's most profitable items because the publisher still instituted the 50% discount on their books. When it adopted the Agency Model, that well dried up, and so did nearly all of iFlow's profits.
The letter makes it clear that iFlow had an ongoing relationship with Apple communicating their business model. Apple approved their app in November of 2010. After investing heavily in licensing fees, integration fees and server fees iFlow opened their ebook store on December 2, 2010.
Two months later, Apple changed the rules and put us out of business. They now want 30% of the sale price of any books, which they know full well, is all of our profits and more. What sounds like a reasonable demand when packaged by Apple's extraordinary public relations department is essentially an eviction notice to all ebook sellers on iOS. After over three years of developing products for iOS during which we had over six million downloads of our BeamItDown iFlowReader products, Apple is giving us the boot by making it financially impossible for us to survive. They want all of the eBook business on iOS and since they have the unilateral power to get it, we are out of business and the iFlow Reader is dead.
We put our faith in Apple and they screwed us. This happened even though we went to great lengths to clear our plans with Apple because we did not want to make this substantial investment of time and money blindly. Apple's response to our detailed inquiries was to tell us that our plans did not infringe their rules in any way, which was true at the time, but there is one little catch. Apple can change the rules at any time and they did. Sadly they must have known full well that they were going to do this. Apple's iBooks was already in development when we talked to them and they certainly must have known that their future plans would doom us to failure no matter how good our product was. We never really had a chance.
Its a sad day when a competent developer with a very solid and well liked app has to shut its doors. Odds are Apple wont change its policy regarding ebooks, but you can voice your opinion on the matter by emailing Steve Jobs, Philip Schiller, and Developer Programs at Apple here, here, and here.