iFlow Reader calls it quits, abandons App Store

Back in February, Apple began enforcing App Store rules regarding requiring in-app purchases of e-books in addition having options outside the app. Sadly, today that has caused the people behind iFlowReader to shutter their business because "Apple is giving us the boot by making it financially impossible for us to survive." Users of the e-book reader app are being warned to back up their data carefully, or they might lose access to the content they have purchased through it.

Previously, apps like iFlow Reader were able to sell content for the app only via non-App Store purchases. For example, with Amazon's Kindle app, you can use the Mobile Safari web browser to purchase books via your Amazon account. Apple doesn't take its usual 30% cut of these transactions. The new rules mean that developers wouldn't be allowed to do this. All such business would have to go via the in-app purchase API, using the user's iTunes account and with Apple taking 30% of the money. Existing apps apparently were given until the end of June to change how they work or face removal from the store.

UPDATE: Companies are not required to only offer in-app purchasing, but they are required to offer it as an option and, according to section 11.13 of the T&C, must price the in-app purchase the same as or lower than purchases made outside the app. In effect, this does mean that most purchases are likely to move to the in-app model and incur the 30% surcharge. Customers will presumably prefer to carry out the smallest number of steps to make the purchase, which is the in-app model.

I speculated in February that Apple's change could cause some popular apps to flee the store. We know that Sony's Reader app was rejected, that Readability had to shelve its native app (it later released a web app) and that TinyGrab also abandoned plans for an iOS app.

iFlow Reader is caught between two changes, both caused by Apple. The first is the enforced shift to in-app purchases and the 30% payment overhead. The second is the move in the e-book publishing industry towards "agency payment" models, which dates back to the introduction of iBooks. This means prices are set by the book's publishing house which is why books generally cost the same on iBooks and Kindle. The company handling the sale takes 30% of the cover price as a commission. Once Apple started offering large publishers the "agency payment" model, they quickly started insisting on it with all their other vendors, as it allows them to maintain greater control. Amazon snootily tags these books as "this price was set by the publisher" on its website.

Take these changes together and there's nothing left for the e-book vendor -- it takes 30% of the sale, then immediately has to kick that 30% back to Apple. After its own costs are taken into account, every sale loses money. iFlow Reader contends that "what sounds like a reasonable demand when packaged by Apple's extraordinary public relations department is essentially an eviction notice to all ebook (sic) sellers on iOS." They claim to have committed over a year and a half of development time from five staff members to release an app in December only to be put out of business by Apple's T&C adjustment in February. It's hard not to feel sorry for them.

Now, iFlow Reader was a fairly small app, though not without its fans. It had some unusual features such as scrolling rather than virtual pagination, and support for Adobe's e-book DRM, which allowed it to work with some early e-book lending library systems.

But what about the big players such as Amazon's Kindle app?

Amazon is subjected to the exact same economics that iFlow Reader is, and its huge scale merely multiplies the losses it could face on each sale. Unless it can somehow negotiate a concession from Apple or the book publishers (neither of which have a reputation as a pushover), it's possible we're going to see the Kindle app disappear from iOS at the end of June -- perhaps to be replaced by an Amazon-branded Android tablet.

As a keen user of Kindle across multiple platforms, I sincerely hope it doesn't come to that. Amazon might have the clout to prevail in this giant game of corporate chicken -- iFlow Reader, sadly, did not.

Many thanks to TUAW reader Bryan for the tip!