The Danger of Playing in Apple’s Walled Garden

Every so often a news item comes along that reinforces the downside of building your business on someone else’s platform, and this week’s poster child is iFlowReader, an e-book app for the iPhone and iPad.

The company behind the app announced Wednesday that it’s shutting its doors for good, and it puts the blame for its demise squarely on Apple and its new 30-percent levy on in-app sales. The benefits of getting into bed with Apple are obvious: access to a huge universe of motivated users and built-in payment handling. But the downsides for those who play inside Apple’s walled garden should be just as obvious — namely, you lose control over some fundamental aspects of your business. The bitterness that iFlowReader feels about Apple suddenly changing the rules of the app game spills out of every line in the company’s blog post, in which the company advises users that it will be “going out of business” as of May 31, and that this is a “sad day for innovation.”

The company notes that one of the other culprits in its financial demise was the “agency model” that many book publishers have adopted for sales, which gives the publisher the right to set the price for their e-books, and gives any seller (such as iFlowReader) a flat, 30-percent commission. The rise of the agency model is also primarily Apple’s doing, since offering that model to publishers was a competitive move against Amazon and the dominant position it had in the e-book market. The combination of the agency model and Apple’s 30-percent fee on in-app transactions made it financially impossible for iFlowReader to survive, the company says, since the 30-percent charge “is all of our gross [profit] margin and then some.”