BeamItDown Software Closing Up Shop

BeamItDown Software, the creators of the iFlowReader eBook reader app for iOS, is closing up shop. Citing Apple’s in-app purchase requirement for developers, they state that after Apple takes a 30% cut, they would end up running in the red. From their press release:

[…] Apple is now requiring us, as well as all other ebook sellers, to give them 30% of the selling price of any ebook that we sell from our iOS app. Unfortunately, because of the “agency model” that has been adopted by the largest publishers, our gross margin on ebooks after paying the wholesaler is less than 30%, which means that we would have to take a loss on all ebooks sold. This is not a sustainable business model.

When Apple initially started enforcing their requirement that app developers must offer in-app purchases when out-of-app purchases were available, I felt it made sense as it provides a seamless experience for the user. That is, until I learned that Apple was also taking a 30% cut of the sale. How could Apple justify this requirement, considering they are not the provider or distributor of the additional content? They merely handle the financial transaction.

What is even more bizarre is BeamItDown Software’s reluctance to invest in alternative platforms like Android, WebOS or Windows Phone 7. Just because you cannot run a profitable business via the iOS platform doesn’t mean you couldn’t bring value to other platforms. BeamItDown Software’s Philip Huber stated in an article at Fortune:

Five of us spent nearly a year and a half of our lives and over a million dollars in cash and sweat equity developing the iFlowReader app with its unique AutoScrolling approach to reading that many of you really like. … We put our faith in Apple and they screwed us.

I cannot imagine that the app itself cost over a million dollars, and took a year and a half to develop. There had to have been infrastructure and publisher negotiations that also consumed time and money. Did they ever consider expanding to other platforms? How do you bet big on a single platform without any type of backup plan? Part of the problem appears to have been poor strategic planning.

I find it disturbing that Apple feels obligated to collect a 30% transaction fee on in-app purchases, but I also am shocked that BeamItDown Software bet exclusively on the iOS platform.