Apple's 30% vig for ebooks just killed the iFlow Reader app
iflowreader.com
iflowreader.com
I'm very interested in seeing how Netflix and the Kindle play out on the iPad though. If Apple gets too agressive in trying to lock down revenues, they may just end up driving people off their platform on to Google's.
Thank goodness for competition - can you imagine if the iPad was the only tablet option for the next couple years. At least this way, Apple will have to exercise some restraint.
I'm not sure if this covers normal eBooks or only subscription-based periodicals, though.
I love my Apple products, but this particular rule is making me reconsider how committed I plan on staying.
11.13 Apps can read or play approved content (magazines, newspapers, books, audio, music, video) that is sold outside of the app, for which Apple will not receive any portion of the revenues, provided that the same content is also offered in the app using IAP at the same price or less than it is offered outside the app. This applies to both purchased content and subscriptions.
11.14 Apps that link to external mechanisms for purchasing content to be used in the app, such as a “buy" button that goes to a web site to purchase a digital book, will be rejected
[1] https://developer.apple.com/appstore/resources/approval/guid...
only needs to be available as an in app purchase if the app itself has a way of enabling you to purchase same content from outside the app (for example, a "subscribe now" button that links directly to a purchase page in Safari). I'm not sure where just a "you can subscribe from our website", sans link, would fall, but I'd hope that would be ok.
Here are the choices: 1) Pull out of IOS completely 2) Lose money on all in-app purchases and hope that you make enough in direct sales to stay in business 3) Raise prices everywhere so the 30% fee doesn't hurt so much
Option #2 is just not realistic. It could be a very tough call between #1 and #3. The IOS store probably has enough critical mass that a business could lose substantial sales by ignoring it. The bigger risk is allowing an opening for a new entrant to come in, build a business in an untapped market and eventually be a tough competitor. Option #3 basically screws all your customers- even if they've never even heard of the IOS stores- so Apple can line their pockets.
It's a really crummy policy. It's either going to hurt businesses, who stand to lose sales or even go under, or it's going to hurt customers who will have to pay higher prices as a result.
(4) negotiate a deal where they get more then 30%.
(5) negotiate to remove DRM and operate as a Web App.
(6) change business models to subscription.
(7) license the app part of the business model to another company not involved with your store. That company can then pursue anti-trust claims against Apple if disallowed since they have no ability to offer the items for sale.
(8) add more value with your product i.e. get a better business model then "I'm gonna get rich being an additional middleman of ebooks"
Meaning: More money.
Reality: Impossible.
Downvotes accepted as retribution for me going meta on this conversation.
I'll admit to having edited it half a dozen times to appropriately capture the nuances. As a Silicon Valley professional (Started at Netscape in 1996), and a huge fan of Apple Products (I'm typing this on an MacBook Air in a Redwood City Coffee Shop, I tracked my workout this morning using GymBuddy on my iPhone4, and I read Practical Programing for strength training last night on my iPad2), yet at the same time not unaware of how much damage a Monopolist can do (I believe that they eventually stifle innovation) I wanted to toe the fine line between being a hater, a realist, and, because we are on YC, effectively communicate the market realities of building on someone else's platform.
I also always keep grellas, patio11, and tptacek in mind when reviewing tone to keep out snark or discourtesy, and maximizing content.
How's that for Meta. :-)
It's anti-competitive when you're talking about an essential service. The case against Microsoft was about Windows since at the time 95% of all computers used some form of Windows and they had a virtual lock on the market. Generally you need to be in a monopoly position to be considered anti-competitive. See also: Standard Oil, IBM, AT&T.
There is only one fundamental requirement: that the company's actions be anti-competitive. It is not necessary for the company to have a monopoly or even a majority share of a market (though these are factors). Furthermore, ownership of the platform is a significant antitrust factor because it drastically ups the risk and concern for anticompetitive behavior. (The Disneyworld analogy brought up below does not apply. Not only does it mix up antitrust law with property law, it ignores the crucial distinction between Apple and Disney: Apple openly invites others to participate in commercial activity on their platform, whereas Disney does not.)
Standard Oil, AT&T, and Microsoft may be the marquee cases, but they're not representative cases of the extent of antitrust law.
Third party payments are a great example. Say I sell an app that lets you pay for movie rentals at a RedBox kiosk that does so by letting you select and purchase on your phone/tablet and sending the right instructions to the RedBox servers so that your rental is prepaid when you arrive at the box.
Do I owe 30% of what was paid to RedBox even if I as the app developer am not RedBox?
Then let's talk declining balance accounts, a subcategory of the above. For example, your lunch money account at college. Your mom might put $500 on that account at the beginning of the school year from her home computer. You then use your phone in the food areas on campus to pay from your lunch account.
Is this considered a virtual currency and therefore Apple gets 30% every time you pay for lunch? It definitely is based on how I read Apple's agreement.
-Jeff
Since Redbox is NOT actually providing content to your device, there wouldn't be a problem there.
Still, the 3rd party seller argument is a mystery in cases where these rules would normally apply.
When you read a paper book, you can be certain that the content in it is the same as when it was printed, and hasn't been edited or censored since you bought it. It can't be taken away from you by the publisher, except by physical force. You can resell it at will. Publishers and retailers who wants to try different pricing strategies can do so without facing the powerful control of Apple or Amazon.
I plan to keep on reading ebooks, but I'll buy the books I actually care about in physical form.
a) accessible and buyable by me (Linux, .nl based) b) at least as easy to find and get as pirated material
I will immediately buy. In all other situations: I am not going to fiddle with drm-ripping python scripts, convertors, virtual-machines, geo-ip-faking-proxies and so on, just to be able to pay for stuff that I can get without all that hassle for free.
I even track down authors for books I like and wire them the money personally, if for some reason their publishers hide behind all this DRM nonsense.
In general I'm with you though (Germany, mostly on Linux as well) and I try to do something similar whenever possible.
Now that's cutting out the middleman!
I have a Nook and I do not buy any books through B&N.com, only direct from technical publishers that are DRM-free and then load the epub file via USB. In fact I only turn my network connectivity on about once a month to update the clock on the device.
So monetizing the middlemen part won't work, but aren't there any number of ways to monetize the reading app part? I, for one, wouldn't mind a flow-based reader. I've bought eBooks from a few places now, but also hate the page-turning interface.
This comes across as a stunt to try to change the agency model for book selling. Good luck on that, though, because now you need to convince both Apple and all the publishers to give them 20% again. But why would they do that? Extra middlemen are not going to offer 20% of value in a digital distribution chain.
Customer --> Apple --> Reseller --> Publisher
as opposed to:
Customer --> Reseller's website --> Publisher.
iFlow says in the linked article this second model is unworkable for them because iFlow can't get by on 30% of the transaction. iFlow wants 50% like they were getting before the agency model.
Subtract from the %0 net margin the costs of doing business and you are in a lot of trouble.
Sounds like they need to move to a premium app model and stop trying to make money from book sales.
Their complaint here is the agency model of pricing itself.
You may not have intended this, but that sentence reads as though iFlow is merely making less money than it wold like. The problem's worse than that. iFlow would be losing money with each book sold.
iFlow doesn't have the clout to negotiate contracts with individual major publishers: books are made available through a wholesaler. The wholesaler distributes the publisher's cut, takes its own, and gives iFlow itself a cut of _less than_ 30% of the sale price. Since Apple suddenly wants an entire 30% of the sale price, iFlow would literally be losing money with each transaction to make up Apple's "cut".
As part of the agency model, all books must be sold at the same retail price, so iFlow can't simply bump up the price of its books to compensate, either.
iFlow doesn't need any clout when negotiating a cut, everybody gets the same deal:
>All sales agents get a 30% commission on the sale of a book. No one gets a different deal. Prior to the agency model, publishers typically offered retailers a 50% discount.
Apple only gets a cut if they handle the processing, i.e. sold on iOS. Books are not a subscription, they can be sold on a website outside of iOS without restriction.
Am I wrong on any of this? I got downvoted but I'm not sure why.
Yes.
If you sell digital goods for use on an iOS device then you must also offer them via in-app sales, for the same price as you do elsewhere.
Since their app is only an iOS app, everyone will continue to buy via the in app purchases even if they did offer it online, and for each of those purchases they have to pay the Apple tax.
http://www.apple.com/pr/library/2011/02/15appstore.html
But this policy only applies to subscriptions, not to purchases. In particular:
>Publishers set the price and length of subscription (weekly, monthly, bi-monthly, quarterly, bi-yearly or yearly).
does not sound like it is in any way compatible with the book world's agency model.
Edit: found an Ars Technica article here:
http://arstechnica.com/apple/news/2011/02/apple-responds-to-...
but it seems that this policy was unclear even at the time according to the terms, and it's certainly not enforced with the Kindle app, so it's unclear what's going on here.
That's pretty much the problem in a nutshell - the policy's unclear, and it's always unclear until Apple brings the hammer down. Not a good environment in which to try to build a business.
Books are explicitly included in that document.
I'd think there'd be an opp or two for someone to get in to publishing and selling just ebooks not owned by the big 6, but that market may be too small to try to nurture at this point.
I mean if I start selling ebooks in the corner at Starbucks they may tolerate that but when Starbucks gets into the ebook business there should be a huge red flag going off telling you that the rules will eventually change: either they'll disallow my ebook sales or demand a cut.
Another huge red flag is a business model based on buying egoods from a wholesaler and reselling them in another vendors shop.
Another question: why couldn't they continue as a reader app and a web app store run by a separate company? (the store licenses the DRM to the reader company) If the answer is that the business doesn't work without the legion of customers the app store brings to the door that's another red flag.
Luck for Apple they aren't dominant in ebooks. If they do the same thing to iTunes competitors (and it looks like they might), they could be in real trouble with regulators.
Now iFlowReader claims to offer a more compelling interface, so pivot and find a way to sell the reader software either to end-users who can import their already-purchased ebooks or license it to the publishers. Offer branded versions of the software to the publishers if it's that good and charge the publishers based on a percentage of the gross purchased through the software, which should be quite easy to track.
The author attributes the agency model to Apple, which I think is understating the role of the publishers, who would have rejected it if it hadn't been very much in their own interests. Expecting the publishers to keep giving you outsized discounts[1] for no reason but inertia was a mistake. Even Amazon couldn't keep that gravy train rolling. The market was begging for a shaking and Apple shook.
[1]:Does this sound stable? "There is no comparison between the retailers’ costs and risks associated with physical books and those associated with ebooks. There is no economic justification to providing the same level of discounts. But that’s where we are." That's from April 2009. -- http://www.idealog.com/blog/ideas-triggered-by-amazon-buying...
This is because it was Apple that devised the Agency Model and was the first to propose it to the Big Six publishers as a way of getting them on iOS. This led to Macmillan battling with Amazon one infamous weekend and had Amazon retaliate by removing all Buy buttons from Macmillan books. Amazon soon capitualted, other publishers -- except for Random -- piled on, moving to the Agency Model. When Random finally joined, all their books went up anywhere from $2 to over $7 in price.
"....which I think is understating the role of the publishers, who would have rejected it if it hadn't been very much in their own interests."
Apple just gave them a better deal than the one Amazon was willing to fight dirty to maintain.
People in these parts honestly believe Android is a hospitable business environment, but if your business involves selling things, you have to content yourself with a tiny fraction of iOS's revenue potential. That's why these guys aren't pivoting. Their business wouldn't have existed in 2011 without iOS.
A large portion of what Apple does that's specifically targeted at developers these days is negative. The NDA, rules so broken they were never consistently enforced, arbitrary rejections, retroactively rejecting apps when they decide to come out with a competitor, etc.
Also, I dispute the claim that this rule change was "entirely predictable." Can you show me somewhere that you or anybody else predicted this rule change before it came to light?
I guess your target market is the tech savvy crowd who are often put off by the iOS closed platform.
edit: i've had a couple minutes to try using it.
You may want to consider overhauling the application's user experience. It doesn't look or 'feel' like a proper iOS app, and I'm guessing that's why the Android version is outselling the iOS one.
* the icons really need @2x variants.
* The user workflow is brittle, especially given how few view controllers there are, here. I shouldn't be able to choose to look at the 'Web' or 'Social' tabs until I've selected a domain.
* The domain entry experience feels cumbersome. Why is it capitalizing my domain name?
* Why do I delete a domain from the 'Web' and 'Social' tabs, and why isn't there an alert prompt?
Add Domain:
* The navigation bar tint color shouldn't change.
* This should be a modal view controller.
* The text shadow behind the label looks weird.
* The label's text should be something more like: "Domain name:", especially since you already give an example in the text field with its placeholder.
* You should call -becomeFirstResponder on the text field when this view controller appears.
Anyway, I know you didn't ask for any of this, but hopefully it proves helpful in driving up your sales.
Good luck!
I am aware it doesn't have the best design/UI right now, but that will soon be corrected in the next release - at least most of your suggestions anyways.
On webOS (myself, wife, daughter) I had the option of requiring a password every time an app was purchased or just letting my 13 year old daughter rack up whatever credit card charges she felt like on her phone. I don't consider it a PITA to enter a password, I consider it a security feature. I am shocked that you imply that android does not have such a requirement and I feel further vindicated in choosing webOS over android.
Theres plenty of ebook stores that do well on Android.. Kindle, Aldiko, & Nook all do well and I use all of them when there are deals, just like I use the Amazon and Google marketplace. When deals appear on apps/books I like, I buy. The content is more valuable than the actual reader.
However, if you insist on developing commercial apps on the IOS platform than you have to realize that sooner or later Apple will want a cut. In business their is no free lunch, people/companies always want something in return.
Google is no different, see: http://www.theregister.co.uk/2011/05/05/google_skyhook_case_...
A Massachusetts court has denied Google's efforts to dismiss a hot-button lawsuit that accuses the company of unfairly using its Android operating system to strong-arm mobile handset makers into using Google location services rather than those of rival Skyhook.
The suit specifically claims that Andy Rubin, who oversees Google's Android project, told Motorola co-CEO Sanjay Jha that if Motorola didn't drop Skyhook from its phones, Google would remove official Android support from the devices. This would mean the devices could not use proprietary Google apps or the Android name. The suit says that whereas Google paints Android as open source, Google still maintains exclusive oversight of the OS.
This may be even worse if entirely factual, because Google doing the exact opposite of what it claims to be.
Why would anyone who has paid any attention to Apple, depend on their goodwill?
They knew the risk when the appstore was launched, the only exit strategy was acquisition by a established publisher or seller, which did not materialize.
Apple is a thought leader, Android and others just copy their policies, so expecting the margins on other platform is not viable on longer term.
If I was CEO of iFlowReader I would retune the business models for current realities, tying up with self book publisher like lulu, xlibris, who can offer 50% margins on ebook sales.
Why aren't these service companies switching to a HTML5 web app though? Wouldn't that allow them to continue their business untouched by Apple?
You're talking about a company that named itself using Apple's product naming convention. They went all-in on the iOS model. They probably hired strictly ObjC programmers, they probably have no business experience with the web either. I'm not saying they couldn't switch, it just doesn't sound like this is the company with the chops to easily do so.
As for Netflix.. if you're talking about their HTML5 player that was in the news a few days ago to be on Chrome OS, that requires a plugin. <video> doesn't support DRM -- and never will/can. I think Netflix may be the one company that is given an exception due to their influence over Apple TV sales.
As a consumer I want less people between me and the actual producer of the work so another intermediary going out of business bothers me not at all.
My ideal world is that I buy a novel direct from an author, perhaps paying a small commission to a single intermediary. Author to publisher to iFlow to Apple to me isn't efficient.
Yes there is an issue here with how Apple and the publishers behave but there is also a significant issue with how much value iFlow were adding in exchange for their cut. A slightly different (maybe better) reader simply isn't worth the 30% they seem to be planning on.
I really don't see where 'efficiency' comes into it?
In essence the iFlow USP seems to be their reader app - everything else was being done by someone else either the same or better. How is that seriously going to a warrant 30% cut (which is what they were getting from the publishers) in the face of greater choice and likely better prices from Amazon and Apple?
Selling books from large scale conventional publishers is a bulk market right now and if you can't answer the question "how do I compete with Amazon?" you're in trouble and "a nice reader app" simply isn't a good answer.
Because the Agency price-fixing model has led to eBooks not being priced by market forces but by a cartel that supplies over 90% of the existing market.
In addition, publishers may no longer provide links in their apps (to a web site, for example) which allow the customer to purchase content or subscriptions outside of the app.
Where can I read more about this?
Isn't this what racketeering and monopoly laws are supposed to prevent? If any lawyers are on this thread, it would be great to hear their input on this.
Should Wal-Mart be forced to carry my self-published book because they carry some Random House best sellers?
It's like jews cheering for the nazis. I don't understand?
So far their greed has been tolerated due to an early iOS lead on app-profitability. Now that the iPhone is getting (severely) dated with next to no advantages to bolster, and with Android overtaking iOS in every way (including the one which counts: marketshare) I can't see this holding up for very long.
Soon enough enough people will say "Fuck Apple" and just head to Android, leaving iOS as a niché market. Why develop for 10% of the world's smartphones when you could be doing 80%? Even if Android customers were 400% less willing to buy apps (and no, no current market trends indicate that is the case), Android would still be more profitable to developers.
Apple is doing some serious gambling here, and I honestly don't think it will play out to their advantage.
Don't get me wrong, I'd love to see more Android developers. I just don't think it's very likely until and unless Android picks up more steam...and that probably won't happen until the Android App store is as saturated in iOS's.
You shouldn't build your foundations on ground that can move at any time.
iDevices are pretty neat pieces of kit. I was going to dev for iOS, once. I'm glad I didn't make THAT mistake.
I'm sorry for iFlow's people but if your business requires to be approved by a potential competitor to exist you are going to be in trouble.
My friend bought a building. 50 apartments. He got investment money from family to put a down payment on the loan. Fix it up. Have tenents pay rent and cover the loans while looking for a seller. Sell it for a proffit.
This was great. Except that he had ABSOLUTELY no risk-mitigation. He could not afford to keep the house on the market for 3 yrs to ensure that no matter what, he does not lose all the invested money.
Guess what? Problems arose trying to sell the house. Took 3 months longer than expected (9mo total vs expected 6). Money ran out. Boom foreclosure. Lost 800k.
The lesson I learned is that take what you are assuming will happen, and make at least SOME risk mitigation. How can you get out? If you can't what will you lose? Etc. Don't make long term risky goals based on hopes that everything will be alright. Assume the worst, can we still come out even if that happens?
I'm not going to get all sanctimonious about it, but it's slowly beginning to weigh on my decision making process. I love my iOS devices, I really do, but when I look at Apple's approach, it appears that their bottom line comes first. Period. It's already hurting innovation in limited ways, as we can see here. What happens as they continue this approach and it affects more types of software?
In my view, Android looks more attractive all the time, and I'm not exaclty happy to say that.
http://www.paulgraham.com/identity.html
People seek validation for their purchasing decisions and identify themselves by what brand of cell phone they carry around.
a) I use sprint and am happy with it.
b) I don't support Apple's control on a moral level. So I will not support Apple by buying the iPhone.
c) I won't develop for iPhone except as an after-thought or short-term project. This way I make money, and get out. I won't make any long-term plans for it. In fact that is true of EVERY mobile platform. Never bind a single long-term plan with one platform. Tomorrow Android can fail and WebOS rises to beat everyone in one swoop. You can't build a company on hopes and luck alone.
That every developer simultaneously develops for iPhone, Android, Windows Phone, WebOS, Blackberry, Meego?
Developers aren't so cavalier as you about suggesting that you port your code to multiple platforms because we do know how much time, effort and platform-specific knowledge it takes to build a decent app.
Many iPhone, Android, Windows Phone apps are written by single developers that can't take 6 months per platform to learn how to code for it.
For most of us making a bet on single platform is the only viable strategy.
Bad strategy? Maybe. The only one possible? Unfortunately.
You would be pissed off too if your business failed not because the owner of the platform you bet on built a better product than you (and with their money, teams of programmers, marketing and ability to advertise to users of that platform they do have a huge advantage) but because they just used their monopolistic control over their platform to set business terms that are unheard of on other similar platforms and kill your business without them needing to lift a competitive finger.
I'm sure you'll tell me that Apple has the right to screw everyone on their platform and if I don't like it, I should just use another platform.
And that's exactly what I'm hoping people will do once they realize that Apple not only has the power to screw their developers and their users but is actually screwing them, as this on-going saga of 30% monopoly tax on content sales shows.
if they were serious about the risking all their eggs in same basket, they could have used consultants/outside developers to port their app to other platforms with less than 10% of the said investment
Between five people and 1.5 years, a million dollars in sweat equity for developers is probably understated. They invest the time & skills (that they could have been using to freelance or consult for others) into their own company. Some people would consider this 'free' - but it's not free, the opportunity cost is still there. When you're closing shop without a gain, you are going to start looking back and counting all those lost opportunities in terms of dollars.
a) A game has no issues. It's life cycle is short.
a.a) A long-term product/service strategy can't rely on one platform as they are under the whim of the owner.
b) Don't build exclusively for one platform. Thats right, develop for android, webos, etc. The point is that one choice is to be fucked in the ass by a company at their discretization, the other choice is to have protection vs that.
You can't complain "waa waa waa apple chaned their rules" too bad. It's apple's proprietary tightly controlled market. You want to make money? Bend over backwards for them. Otherwise piss off. It happened to twitter clients, its happening to facebook clients, its happening to apple clients. Learn from history.
Windows applications have been lucky. MS has been pretty nice over the years with what they allow. However if MS says "30% surcharge on any application selling something running on windows" then guess what, same cries will happen. Boo freakety hoo. This is what people were saying about being careful with apple's tight control. This is why I support android. But some didn't listen so they get fucked in the end.
Sure, it's best to have many legs to stand on, but that is simply not the case for most early startups.