May 122011

Apple’s 30% cut on in-app purchases is squeezing out resellers like iFlowReader and its development company, BeamItDown Software.

Today, an open letter to users published on the iFlow Reader website, announces that as of May 31, BeamItDown and iFlow Reader will no longer exist.

“Apple has made it completely impossible for anyone but Apple to make a profit selling contemporary e-books on any iOS device.” according to the letter

“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 letter continues.

A very sad development for the company and its employees.

But what value, if any, was iFlowReader adding? Clearly the platform provider (i.e. Apple) and the publisher are provide value by creating an attractive eBook reader and by bringing content to the market. It seems that iFlowReader did not have any competitive advantages other than being one of the first seller on Apple’s iPad tablet. Some may say it was doomed to failure from the start.

When it comes down to it, BeamItDown did not write the books, publish the books, or create the operating system for reading the books, and their business model may have been doomed to fail anyway, competing with the apps of larger retailers such as Apple’s iBooks and Amazon’s Kindle. It’s too early to tell if this is an ominous warning about what may come to other similar, small-company apps, or a lesson about the repercussions of inflexibility in an inevitably changing market.

This is a more efficient supply structure that should benefit the consumer. Also, stronger competition against the market leader, Amazon, is just what is needed to keep eBook prices down. Other resellers that add no value will surely follow suit. However, authors and other direct seller of original apps and content will continue to flourish and welcome the additional distribution channel that the Apple system brings.

In the longer term, the value added by publishers themselves is coming under pressure with the growth of self-publishing. Ultimately a more direct connection between the reader and author could be commonplace.

Anyone who uses iFlow Reader and has purchased books through the app, should visit the the company website before 31 May 2010, which provides details for how to transfer your e-book collection to Adobe Digital Editions.

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