Another sign the Kindle for iPhone party might be ending soon

This post on why iFlowReader are closing shop is fascinating.

It touches on four things that this post will cover -

  1. Kindle Tablet is absolutely necessary for Amazon if it wants to keep dominating eBooks. Amazon can depend on Apple iOS and Android as much as iFlowReader can, i.e. not at all.
  2. Nook is a hugely important counter-weight to the Kindle.
  3. It’s exceedingly careless to not realize what an app store fundamentally is, i.e. the app store company’s personal kingdom and a means to find out the most profitable products. Most app store companies will want to take over these profit streams (because they are for-profit companies), and usually will.
  4. Reciprocation means that every move like this has consequences. When an Ecosystem owner takes advantage of an Ecosystem participant – the owner is eventually well rewarded for its ruthlessness. If a mass destruction of eReading apps and eBook App companies happens – It might be Apple jumping the shark.

Let’s start with the first.

Kindle Tablet is absolutely necessary for Amazon to keep dominating eBooks

Let’s work through a bunch of assumptions and facts.

  1. Kindle Reading Apps are just software. Out of all the elements – books, software, hardware, ecosystem - they are the easiest to replace.
  2. The core books are the same no matter what delivery vehicle you use. It’d be exceedingly foolish to imagine that your software can’t be replaced. If physical books can be replaced, then a piece of software can definitely be replaced.
  3. There’s lots of money in selling eBooks. Whether you approach it from the perspective of selling bits in the ether, or whether you approach it from the perspective of huge volume, there’s little doubt that $23.5 billion a year in book sales might morph into $10 billion+ a year in ebook sales eventually. And that’s just in the US.
  4. It’s very easy for any ecosystem owner to take over ebook sales. All they have to do is either kick out other ebook sellers or put their own ebook store as the default.
  5. Companies with power never spurn the opportunity to capture the lion’s share of the profits. There’s no company in the world that says – We’re happy with 5% of the profits even though we totally dominate the supply chain and could take 90%.

All of that is a convoluted way to say – If Apple sees Amazon make lots of profit from ebook sales through iOS devices, it will take over that profit stream.

iFlowReader just demonstrated an App Ecosystem’s True Purpose (1 out of a few)

iFlowReader is just collateral damage. However, its experience points out a few interesting things -

  1. The Agency Model might have been the first step down the slippery slope of Apple taking over iDevice ebook sales. It seems a bit crazy but it’s worth considering.
  2. The Apple directive to hand over 30% of ebook sales means any apps selling ebooks will not only struggle to make a profit, they will probably run into significant losses.
  3. Apple might be asking for 30% of sales, but it’ll usually be 50% to 100% of profits.
  4. A lot of the companies selling ebooks will have to close down.
  5. Apple will, in effect, be left with all the ebook profit streams that other companies had created/found in the iOS system. Whether it’s individual book apps, eReaders like Kindle for iPhone, or some other means of selling books – everything will flow to Apple.

Lest we devolve into a pro-Apple, anti-Apple conversation - Nothing against Apple. It has just demonstrated how to take supreme advantage of other companies. Surely, the shareholders don’t care that some small app developer company is dying.

In fact, Apple has done every other company dependent on iOS a favor by demonstrating the precariousness of depending on someone else’s ecosystem and someone else’s customers.

 Let’s switch back to the Kindle Tablet.

Kindle Tablet is the only way Amazon can gain a direct channel to Casual Readers

Apple and Google have made very strong moves to eat up the profit streams Amazon and B&N spent so much money and effort to uncover -

  1. Google has opened an eBook Store that is the default eBook Store for Android.
  2. Apple has introduced this ’30% of revenue, 90% of profits’ tax levy.

Amazon should have done what B&N did - it should have released a Kindle Reading Tablet to appeal to casual readers. It’s mystifying that Amazon still doesn’t have a Kindle Tablet out. Everything that happened to iFlowReader, and the fact that it, quite rightly, laid all the blame on Apple, should be a stark reminder to Amazon.

All those glorious Kindle for iPhone ebook sales are about to be snapped up by Apple. Although Apple will settle for 90% of the profits and a Thank You!

Nook is a hugely important counter-weight to Kindle

If we look at the eBook and eReader landscape, this little iHoodwinked fiasco highlights the danger of a single company dominating one or both of eReaders and eBooks.

There is no guarantee that the dominating company won’t pull an Apple.

Give us all the profit streams. You can keep the struggle to survive.

A dominant ecosystem, one which controls eReaders and the flow of eBooks, has no reason to limit itself to only 10% of the profits. Why wouldn’t it take 90% of the profits?

Barnes and Noble, with Nook and Nook Color, is ensuring there’s some semblance of balance. A second eReader and a second eBook Store.

What is an App Store?

Here’s what an App Store is on the surface -

  1. Developers make apps and sell them and profit.
  2. Device owners get more features for their device, sell more devices, and profit.
  3. A share of sales revenue is kept for the Ecosystem’s maintenance.

This is perfect. On the surface we have a great win-win situation.

It is, of course, tilted a bit in the favor of the ecosystem because the ecosystem makes money from every app sold – whether or not the app developer makes an actual profit on total investment. However, that’s fine because the ecosystem company is providing a channel to customers of good intent.

So, it seems to be relatively well-balanced. But, it isn’t. In reality, the odds are stacked heavily in favor of the Ecosystem Company. The House Always Wins.

Here’s what an App Store is in reality -

  1. All of the things in the prior list.
  2. Totally dominated by the App Store owner, and by the App Store owner’s moral compass.
  3. A testing ground to weed out the most profitable sub-businesses in an ecosystem.

While some of the sub-businesses are roped off (for example, music in the iOS ecosystem) there are other profitable sub-businesses. Once these are found we get a very interesting situation – The App Developer found the vein of gold (Ex: Amazon finding ebook profit) but the App Store owner owns the mountain. It comes down to the Moral Compass of the Company and that Moral Compass is Profit.

That’s the point everyone seems to miss. It’s not immoral or right or wrong for an App Store owner to say -

How nice of you to invest heavily, take a huge risk, and discover this amazing stream of money.

Now, let us take it off your hands.

It’s just the nature of a company. It’s a bit strange to expect a for-profit company, that completely owns an ecosystem, to let another company make tons of money from that ecosystem without asking for a cut. It’s even stranger to expect the ecosystem company to not demand the largest possible cut.

That’s what’s happened. Apple has realized ebooks are a goldmine – and that it’s really easy to sell ebooks. It’s decided it wants the goldmine for itself.

There is no way an app developer can guard against this. None. All it can do is build its own channels to customers and invest in other ecosystems - make sure that it doesn’t depend 100% on a revenue stream that is totally out of its hands.

Reciprocation Works Both Ways

Here’s the thing Apple is missing – Reciprocation. If you don’t treat people well, they reciprocate by treating you badly.

Apple needs app developers more than app developers need it.

That might sound strange if you don’t look at things as they really are. But the truth is that the single biggest advantage Apple has over competing closed and pretend-open ecosystems is the range and quality of apps.

Think of each app as a value-add for some set of customers. With 300,000 apps you get a lot of extra value for nearly every owner. With 300,000 apps each individual app’s importance goes down.

However, app developers as a collective group are still the engine.

Apple’s move with the 30% ebook tax is rather interesting. There isn’t really a way to fathom it because 30% of revenue means that almost every single ebook app developer will have to close shop.

There are tens of thousands of ebooks being sold as individual book apps that will have to either give Apple 30% (which is nearly all the profit) or close down. There are big eReader apps like Kindle and Nook selling millions of ebooks every month that will either have to give Apple the entire 30% they get from ebook sales or close shop.

It’s a massive betrayal of developers. Developers who took a chance on the iOS ecosystem. Developers who helped sell iPhones and iPads and iPods.

Every other app developer will notice. It’s a clear message – Come in and make apps and help us sell devices. If you do really well, we’ll just take over your profit stream for ourselves.

It takes away the possibility of building up a big sustainable business in the iOS ecosystem.

It means that unless you are creating and selling your own product, without any partners or invested parties taking a share, you can’t really survive in the iPhone App Store. How many really big businesses (or, for that matter, companies) do we know where everything is done by one company?

It’s almost impossible. Yet, that’s what you would have to do if you want to build a viable business in the Apple App Store.

Apple keeps making stupid moves like this one – which helps the growth of Android and other competitors. Isn’t it making enough money from selling status indicators? Why try to rob developers out of profit streams they put a ton of effort and money into uncovering?

iFlowStream spent 1.5 years and close to a million dollars to build their business. Now, it’s been stripped away. The way Apple is treating iFlowStream means that other app developers will learn to choose other platforms, or will build direct channels to customers.

Whether it’s a closed ecosystem, an open ecosystem, or a pretend-open ecosystem – Someone else controls it. Sooner or later, they either want you to hand over the profits or to make less/no profit. It’s best to build your own site and your own store and your own channel to customers. That’s so much easier and so much purer.

21 Responses

  1. Thank you fro your daily Kindle emails
    I enjoy many of them.
    This question is not related to today’s email, but my kindle just stopped working – Amazon is replacing it for $70 (including shipping) but my problem is that when I transfer my purchased books to the new KIndle, they will not be separated into already read (archived) and still to read (on the kindle).
    Do you know how this might be done, or of someone who might ? Customer service couldn’t help (they did look it up) and since there are at least 300 books that I’ve read (archived) and another 200 waiting to be read, I am rather overwhelmed at the thought of having to go through each book to figure out if it is read or not read. With that many books, Tthe titles won’t help as many sound so similar or just ring a bell because I bought them.
    I am asking you because you seem to be a real expert on the kindle and I thought if anyone knew how this could be done, you would

    Thanks
    Ann

    • Ann, that’s a tough question. Did you have folders by any chance?

      Were most of the read books bought earlier or was it a mix?

      I’m trying to think of something but haven’t heard of a way to do this.

      Do you have the Kindle or do you have to send it back or is it already sent back?

      If you can plug it into USB, and still access Kindle, then you could see the documents folder and make a list of the files in there. Then download just those books.

    • Ann Semple comments:

      “my problem is that when I transfer my purchased books to the new KIndle, they will not be separated into already read (archived) and still to read (on the kindle). … Customer service couldn’t help (they did look it up) …”

      Fortunately (though it’s too late for you) I sent Kindle-feedback@amazon.com an e-mail on Jan. 12 titled “Let Users Flag ‘Books-I’ve-Read,’” so this will be a non-problem after the next software update.
      [/sarc]

      =====
      FWIW, here’s what I said:

      “I suggest that you allow users to “dim” books they’ve read, or to flag them in some other way, such as with an asterisk.

      “This can be superior to putting them into a “Read” collection because:
      [paragraph follows]

      “And it’s superior to consulting the percentage of darkened dots below the title because:
      [five paragraphs follow]“

      • Roger, for some reason I don’t see the rest of your comments regarding read books. It just says “paragraph follows”. Was interesting in what they had to say.

      • Hi Pam. I didn’t want to hijack the thread with a tangent, so I gave an abbreviated version. Here it is in full:
        ========

        I suggest that you allow users to “dim” books they’ve read, or to flag them in some other way, such as with an asterisk.

        This can be superior to putting them into a “Read” collection because:

        Some readers would prefer to keep books in their appropriate collections after being read, where one can reread them if moved to do so when browsing through that collection. Putting all the “read” books together into one collection means that in time it will turn into a big, messy jumble.

        And it’s superior to consulting the percentage of darkened dots below the title because:

        1. The blacked-out-dots method isn’t really “user-friendly.” The user has to shift his focus to a different line and peer, especially if his eyes are older. It’s not something a user, even with good eyes, can see “at a glance.”

        2. The darkened dots are not always a reliable indicator of whether the book has really been “read” (done with) as far as the user is concerned, because:

        • In non-fiction books, the dots won’t all be blackened unless he’s read to the last page of the Bibliography and Index, which is unlikely.

        • Or the reader may have looked at the end of the book before finishing it (checking the Bibliography or Index or other end-matter), which would blacken nearly all the dots.

        • Or the reader may feel the book is still “live” even though he’s “read” it–possibly because he’s discussing it with members of a book club, or because he wants to re-read portions of it.

        Just do it!

      • You do realise that books can be in multiple collections simultaneously right? My “_Read” Collection serves as a flag and isn’t used for the actual organisation. This in no way means those books move out of their _SF or _NonFiction or whatever collections. FWIW, I use _Read for the obvious and I’m using _Unread as more or less “not yet read, and not really planning to any time soon”

      • Jasper Janssen said: “You do realise that books can be in multiple collections simultaneously right?”

        It had slipped my mind when I wrote my e-mail. But it’s still not a fatal blow to what I was advocating. Here’s the context:

        A user was complaining on one of the Kindle sites about how she wanted to get her “Read” books out of her view and have her collections be clear of them, but that moving them to a Read collection wasn’t satisfactory, for the reason I mentioned above. The solution that occurred to me, and that I still like, is for Amazon to allow users to “Dim” such books. That gets them out-of-sight but keeps them organized (in their original collections).

        Now that I’m being forced to give additional thought to it (thanks JJ), it occurs to me that Amazon should or could also move such dimmed books down so they “sort” below all the undimmed books in a collection–or at least give the user the option to do so. That way they’ll be even more “out of the way.”

  2. I have an iPhone and the iPad and ipad2. I am appalled at what Apple is doing and the people losing money and jobs because of their greed. I just fired off an email to them as suggested in the article link. When is the greed in these companies going to end? When no one can buy anything anymore?

    • Pam, that’s great that you let Apple know.

      Apple shouldn’t forget that’s it’s all these companies that are providing value to iPad and iPhone owners and making them more attractive to potential customers.

  3. I think Amazon may settle for no longer selling books on the iPhone & iPad, but still displaying them on its reader app. Customers who want to keep buying from the Amazon store will then need to do so from their computers. (They’ll still be delivered wirelessly to their iPhones, etc.)

    Or they could buy a Kindle. With the trend toward an increasing number of “deals” available on the Kindle, the bottom-line cost of the “Kindeal” will soon go to less than zero–so why should anyone say Nay to it?

    The profit in the e-reader field will come from being the middleman in “deals” like those involving the Amazon subsidiaries W00t & Living (name=?–a Groupon competitor).

    Books in all forms will become “teasers” to entice customers into a position where Amazon can become their middleman for everything else. Bezos has indicated that this was his intent all along with physical books. I think he’s carried this subtle strategy forward into the e-book arena too. Apple can’t match him there. It doesn’t have the incredible multitude of deals, and loss-making book-tie-ins, that Amazon can offer.

    So if SJ & Co. do make a grab for e-book sales, by cutting off Amazon’s selling channel on the iPhone & iPad, they may wind up with a handful of dust. E-book prices (especially for fiction, especially genre fiction) are heading for the under-$3 level, leaving little profit for any middleman a couple of years downroad.

    This will be perceived as Bezos’s smoothest move yet, when people realize what he’s pulled off.

    So I don’t think it’s vital that Amazon win the battle of the Tablet. It’s got the war sewn up.

  4. “Customers who want to keep buying from the Amazon store will then need to do so from their computers. (They’ll still be delivered wirelessly to their iPhones, etc.)”

    That’s specifically what’s not allowed. Apple has stated that if you sell content that resides in an app, you have to offer the content for sale through their in-app purchasing system. You can have a storefront, but it must be in addition to, not instead of using their in-app system.

    PS: It’s not a grab for eBook share. It’s partially about user experience, partially about monetizing these existing transactions. This applies to everything, including magazine subscriptions, virtual whatevers for games, etc. The only reason it’s particularly affecting eBook vendors is the fact that 30% of the sale price equals 100% of what the publishers pay out.

    • Roger Knights said: “I think Amazon may settle for no longer selling books on the iPhone & iPad, but still displaying them on its reader app. Customers who want to keep buying from the Amazon store will then need to do so from their computers. (They’ll still be delivered wirelessly to their iPhones, etc.)”

      Scott G. Lewis said: “That’s specifically what’s not allowed. Apple has stated that if you sell content that resides in an app, you have to offer the content for sale through their in-app purchasing system. You can have a storefront, but it must be in addition to, not instead of using their in-app system.”

      Are you sure? I thought that if the storefront has to be accessed via a browser, instead of from within the app, or that if the vendor blocks sales from its storefront from going through the iPhone & iPad, then there is no requirement for the items offered there to be sold via Apple’s store as well.

      • Positive! :) “We have not changed our developer terms or guidelines,” company spokesperson Trudy Muller told me. “We are now requiring that if an app offers customers the ability to purchase books outside of the app, that the same option is also available to customers from within the app with in-app purchase.”

        You can see this quote, and a bit more over at http://digitaldaily.allthingsd.com/20110201/apple-on-sony-reader-we-have-not-changed-our-guidelines/

        This would prevent the “reading-only” app mentioned by Andrys below. I still suspect there will be a last minute deal, I don’t expect Nook, Kindle, Zinio and others to disappear. We’ve seen the same thing already with publishing companies, who balked not over the 30%, but over the release of personal information (they wanted it, Apple wanted it opt-in by the end user). A report found that 50% of magazine subscribers opted in, and they’ve started signing deals left and right.

      • John G. Lewis said: “Positive! :) “We have not changed our developer terms or guidelines,” company spokesperson Trudy Muller told me. ‘We are now requiring that if an app offers customers the ability to purchase books outside of the app, that the same option is also available to customers from within the app with in-app purchase.’

        “You can see this quote, and a bit more over at http://digitaldaily.allthingsd.com/20110201/apple-on-sony-reader-we-have-not-changed-our-guidelines/

        “This would prevent the “reading-only” app mentioned by Andrys below.”

        I’m not convinced, because I interpret Muller’s statement as presuming the following condition (boldfaced):

        ‘We are now requiring that if an app offers customers the ability to purchase books outside of the app [and from within the IOS device], that the same option is also available to customers from within the app with in-app purchase.’

        My interpretation is supported by the following extracts from the WSJ/Digital Daily article you linked to:

        “Some may well find the idea of paying Apple a percentage on sales made on iOS devices entirely untenable.
        ……………..
        “Amazon’s Kindle app for iOS currently allows users to purchase books by launching a store in Mobile Safari. Now that Apple is enforcing the guideline described above, it can no longer do that.

        ”Therefore it must either:
        “a. update the app to support in-app purchases through Apple.
        ”b. update the app to disable out-of-app purchases via a mobile safari store.
        “c. rethink its iOS device strategy, perhaps telling Kindle App users that they must make Kindle purchases on the Web or Kindle hardware. Remember, ‘Buy Once, Read Anywhere’”

  5. Amazon can just go into reading-only app, something suggested by Kindle owners from the start. We know where to find Amazon.

    Apple itself cannot afford to NOT have Kindle- and Nook apps on their device. Studies have shown a lot of people bought an iPad *because* they could read their Kindle books on it and also be able to do many other things. It was a huge factor.

    Take away the Kindle- and Nook-books reading and it becomes clear how devoid of non-Walmart-selection reading content the ipad is. The iBook store is extremely weak right now. And it’s not because the Kindle app is there. The emphasis has long been on hardware for Apple with little real interest in people who read, and the iPad loses value if Kindle and Nook apps aren’t available.

    Even worse, Apple would become the ONE piece of tablet hardware on which people would not be able to read their Kindle or Nook books. It would just be clear how limited it is, and how heavy the emphasis on the iPad as mainly a fun toy for people who’d rather not use their much more capable netbooks. Tbe iPad is less than ‘magical’ for many who want more out of their computer-type devices. That’s not to say it’s not beautifully designed.

    We know taht Amazon and Barnes & Noble have strong book stores and they can afford to stay on the iPad s reading-apps w/o specific sales-links to a book, but I wonder if iFlow can’t leverage the interest in it now from people who prefer to avoid the big stores.

    Someone mentioned their app reviews are only 50-50, so, maybe it’s already a weak app and just having a reading-version on the Apple store won’t allow it to survive. They’d be on an Apple device along with other store-apps that have no sales link, at least. Sometimes you do have to take the time to make a name when taking on some heavy-duty competitors, and people who feel bad for them might just patronize them instead if they agree to having a reading-only app on he iDevices.

    Antitrust agencies will probably be interested in this situation though, even if when they knew Apple had an iBook store, iFlowreader crew should not have invested 100% of their efforts into iOS.

    • “Apple itself cannot afford to NOT have Kindle- and Nook apps on their device.”

      Correct–and the main damage would be a tremendous intangible “hit” to its brand and image.

  6. I have not bought a single book through the iPhone Kindle Reader app. I simply use it for reading the books I’ve bought for my Kindle when I don’t have my Kindle with me. I suspect that there are many people like me and I DON’T suspect that sales of Kindle eBooks from within iApps has been a significant revenue stream for Amazon, but I’m just guessing and everyone else would be too, because Amazon doesn’t release numbers.

    I do agree with the main premise of the post though, that Amazon better be building a Tablet and they better get it out QUICK. The end of the summer or first part of fall is TOO LATE. There will be LOADS of Android tablets released between now and then, and while most will be schlocky garbage, some will be good and eat into Amazon’s potential customer base for a tablet.

    • Tony, I haven’t bought a book “in app” either – just through my browser. I guess I’m just used to doing it that way. As long as we have a choice, I’ll continue to do it that way – especially now!

  7. I don’t have anything to add, but wanted to say great post. I’m really enjoying having this site in my RSS reader to check out every day.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

Join 9,741 other followers