iFlow Reader developer rages at Apple (Q&A)

CNET ran a story yesterday about BeamItDown Software, the start-up behind the iFlow Reader app for iOS, offering harsh words for Apple as it felt forced to shut down. In a note to customers, the Irvine, Calif.-based company said its demise was due to Apple's "mid-game rule changes that make it impossible for anyone but Apple to sell e-books at a profit on iOS."

I was struck by the candidness of the remarks and decided to track down BeamItDown's co-founder Dennis Morin for a follow-up interview. Morin has been an entrepreneur for a number of years and founded a very successful company called Wonderware, which made industrial automation and information software products and is now part of Invensys. Even though Morin says he was a Mac guy, he started Wonderware in the early '90s as a Windows app, which "people thought was crazy at the time."

Morin said he's had flops before but is surprised that iFlow didn't end up with a better fate because it's a high-quality product that had improved with time and had a lot going for it. After BeamItDown posted a note on the iFlow Web site announcing the end of the app, the company has received hundreds of e-mails from customers with support for iFlow and irritation at Apple.

Here's what Morin had to say. Excuse the length, but the interview offers some rare insight into the world of iOS developers who mostly remain very tight-lipped about their dealings with Apple, which is rumored to hold grudges.

Q: Did you guys figure you'd go out with a bang? That was some of the strongest language we've seen publicly criticizing Apple.
Morin: We're basically pissed off. You know, we went onto this Apple platform led on by all the Apple PR talking about being a developer, making money, etc...We go onto this platform expecting the game to be fair. OK, Apple wants to sell books, fine. But, then they go and change the rules so nobody but Apple can make a profit on a particular category. I mean, this stuff is unprecedented. For all practical purposes you have a totalitarian country here. And I think Apple will ultimately lose from this strategy. But let's face it, in the short term Apple needs to make more and more revenue for its stockholders. They're doing sales of $300 million a day. But they've got to make that $400 million or $500 million and so on.

You didn't do an Android app? Couldn't you have continued on with that?
Morin: No, we had it in the works but it's become financially impossible. An app like this is a big deal. We spent 15 months working on it, the design of the graphics and user interface, all the coding. It's a lot of frigging work. And to move to Android, you have to learn a new platform. We planned to do that and we planned to do an OS X version and a PC version. We were in the process of raising money to fund those developments and do some marketing. We'd basically done no marketing and we were doing about 2,000-3,000 downloads a day, a quarter million total, and we had some folks very interested in putting money in. We had some OEM deals in the works because we were one of the few soup-to-nuts solutions. But when it became apparent we couldn't continue on iOS, it became a tougher sell.

Apple's only forcing developers to change their apps by June 30, why did you make your announcement now instead of just waiting to see how everything played out on June 30? Maybe there would be some changes to their system as they go to release OS5.
Morin: Well, I was basically funding the operation out of my own pocket. It was costing me $30,000 a month. We had people working at cut rates in exchange for equity. Or just working for equity for a chance to get in on a home run. All that's fine if there's a light at the end of the tunnel. But when that light went out, it just didn't seem worth it to keep going. We would have closed even earlier but wanted to give our customers a chance to save their e-book purchases. We wanted to give them some time to do that.

Everyone's a little confused about what Apple's going to do on June 30. The whole in-app/out-of-app purchase discussion seems to have left people wondering what's allowed and what isn't.
Morin: There's no ambiguity at all. There are two rules--11.13 and 11.14 (PDF)--that are quite clear in what they say. It's really fascinating. Nowhere in the history of application development has there been rules associated with it, let alone hundreds of rules like there are now. I mean, this extends their [Apple's] control-freak nature to a whole new level. So yeah I can sell an app on my Web site, that's fine. But if I have something for sale on my Web site, I have to have a button in the app that allows a user to purchase that item through Apple's In-App Purchase system for the same price that I sell it at on my Web site.

Now if I'm selling a book for $10 and someone clicks on that button in the app, I lose $1.15 on the sale and Apple makes $3. Let's face it, the user doesn't give a s---. They're going to purchase it from wherever's easiest to purchase it.

I think that's where the confusion is because people think there will be two buttons.
Morin: Let's go to 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." There's no ambiguity there. You can't have two buy buttons. The bottom line is that if you buy a book through iBooks, Apple makes 30 percent on the sale. And if you buy a book through iFlow, Apple makes 30 percent on the sale. And I lose money.

Can Amazon live with that?
Morin: I don't see how. I don't think Amazon is going to be willing to give Apple all its customer information. With the new rules, every time someone buys a book through Amazon, Apple gets that customer information and can then market to them.

Has Apple contacted you at all after you put out your closing statement?
Morin: We have sent Apple so many e-mails trying to get clarification on issues. For instance, the In-App Purchase [IAP] mechanism. All you have to do is put the book in In-App Purchase. Sounds so reasonable, doesn't it? But do you know how you do that? You go onto iTunes Connect, OK? And then you press some buttons and you get to a page that lets you create a new In-App Purchase item. You sit there and type in all the information, this description of the product and whatnot so Apple can presumably use that description to decide whether to approve it or not. There is no way to bulk load this. You can't just copy your database in there. You have to do this all manually. We have access to 250,000 titles, not counting public-domain titles. We're supposed to enter them all in manually?

There's no API for that?
Morin: No, there's no API. No. 2: The word is there's a 5,000-something limit on the number of items it will let you put in the system. I don't know that for sure because we haven't tested it, but that's what we've heard. Key "product limit In-App Purchase system" into Google and see what you get. [You get this]. It's completely impractical. No 3. The pricing system. The In-App Purchase system uses something called tiers. There's 99 cents, $1.99, and so on. There's something like 80 different tiers going all the way up to hundreds of dollars [BarMax is $999.99]. The "agency model" contract requires that you sell the book at exactly the price the publisher specifies. Not a penny more or a penny less, which is why the price is the same on every vendor's site. You are also required to update the price within 24 hours of a publisher making a price change--or update any information about the book within 24 hours. The In-App Purchase mechanism requires that Apple review and approve every submission. So the In-App Purchase model makes it impossible to comply with the requirements of the agency model, which was created by Apple. It cannot be done using Apple's In-App Purchase system due to the granularity of publisher's pricing [which doesn't match Apple's tiered system] and the timing.

It's complete bulls---. The whole purpose of this is not to get people to use In-App. It's to get them the hell off iOS.

So the In-App Purchase system was designed for a limited number of products more suitable to something like magazine subscriptions?
Morin: It was originally designed to add functionality to an app, like to add new levels to a game. Interestingly, when the In-App Purchase mechanism came out, you were not allowed to use it with free apps. And...back then, I wrote a letter to [Apple senior vice president] Phil Schiller trying to clear up a lot of ambiguities about what we were doing, and I went through a whole lot discussions about these problems I saw.

What people don't understand is that if you're selling an app on iOS, Apple hosts that app on their server. You upload it, the customer downloads it, it gets downloaded from their servers. OK. With In-App Purchase it doesn't work that way. You host everything. You ship it directly to the customer. All Apple does in the process is collect the money and basically give you a token that says it was collected and you do everything else. It's essentially doing exactly the same thing as a credit-card processing company for this 30 percent. Nothing more.

But Apple hasn't contacted you?
Morin: Remember ScrollMotion? They had that Iceberg Reader and they were the darling of Apple and Apple was touting them at WWDC [Apple Worldwide Developers Conference] in 2009 and they had them up on stage. They got royally screwed by Apple.

How so?
Morin: Well, they went on and put all their books into the In-App Purchase system and had their books at 30 percent higher than everybody else and then Apple came along and preempted them. They no longer have the right to sell their books at a mark-up. Back when you could buy books from publishers for 50 percent off [list price], giving Apple a 30 percent cut wasn't pretty, but it wasn't a money loser.

You think there's any way Apple will change its stance and and take a lower cut?
Morin: As I've said before, this is an eviction notice. Apple has been brilliant with the PR, you know Steve Jobs saying that if they [e-booksellers] sell a book on their own, we don't want anything. But if we bring in the customer, that's different. What's the way they bring the customer in? By someone running an app on an iPad? Does Microsoft bring a customer to Amazon by letting Amazon show up on the browser? It's an absurd notion. We could have our app in the App Store all day long and unless you do something to market it, you're not bringing in any new customers.

But after your recent public criticisms Apple hasn't contacted you, right?
Morin: No. We've sent them countless e-mails on this In-App Purchase thing. How can we bulk upload, how we can we meet the pricing tier requirements, how can we meet the update requirements? We get robo answers or we get answers that tell us to refer to the rules. We get nothing. I mean, it's amazing. Apple is the worst company in the world to do business with. It's breathtaking.

We're both surprised and not so surprised that so few companies have commented on the situation. Neither Amazon nor Barnes & Noble has said anything.
Morin: Look, Amazon has access to Apple. They can try to work on a backroom deal. We had nothing. Silence. There's no legal action. No new technology changes. So there was no future for us.

Which is why I suppose you don't fear any reprisals from Apple?
Morin: We have nothing to lose. What, is Apple going to hurt our business?

Ironically, I guess, with some of these statements, you're getting the kind of attention that those missing marketing dollars could have given you.
Morin: Yeah. Traffic to our Web site has increased 100x. Nothing like going out of business to give you some PR.

Note: I e-mailed Apple asking for comments on some of Morin's assertions but have yet to see a response.