Digital River was a popular eCommerce service, used by thousands of developers and software companies worldwide to distribute their software. oP group Germany, developers of the Zorro platform, also sold their licenses and subscriptions through Digital River. They have large clients, such as nVidia and Adobe. The first hint that something strange was going on with Digital River was an email in July to their clients.
They told that they will now charge hefty fees for using their store, for asking support questions, and for paying out. Mentioning the payout, they also told that they will from now on hold back payments for 2 months. Aside from the fact that they cannot legally change conditions in this way without their client’s consent, emails like that are normally business suicide. Since all competitors offer much better conditions, Digital River would clearly sooner or later lose all their clients in this way. This email was a mystery. It made only sense under the assumption that Digital River intended to go out of business, but keep as much as their currernt client’s money as possible by offsetting them with insane fees.
But Digital River did not hold back payments for 2 months. In November they stopped paying altogether. They did not give explanations. Reminders were answered with meaningless text blocks like this:
Please know that we are fully aware of the situation and are working diligently to resolve these issues as quickly as possible. Our team is investigating the cause of these delays to ensure they address them effectively and prevent such occurrences. We understand how important these payments are for you and your business. We are committed to ensuring that all outstanding payments are processed and that our communication with you is clear and timely moving forward. We appreciate your long-standing partnership and your trust in us over the years. Rest assured we are taking your concerns very seriously and trying to rectify this situation.“
There is a lot of speculation about what is behind it. Some believe that Digital River ran in liquidity problems, and originally intended to still pay, although later and fewer. The legality of this is disputable, but it does not yet constitute obvious fraud. However, most clients now assume that they prepared an exit fraud with the intention to keep all their client’s sales. In that case the mysterious email had just the purpose to delay legal action.
On their website, Digital River gives no hint of any trouble, and continues to run the stores and charge the customer’s credit cards as if nothing happened. The only thing certain is that clients are now hurrying to switch to other eCommerce providers, such as PayPro or Paddle, and that their last three months earnings are possibly gone. Unless some part of if can be recovered by lawsuits or criminal proceedings.
Since most Zorro S license subscribers run their subscriptions through Digital River, oP group has activated a fallback server for verifying subscription tokens. So all subscriptions will remain valid. In case of a Digital River collapse, subscriptions will continue for free until oP group has established a new eCommerce provider. If you have purchased a product from Digital River, you may be tempted to cancel the charge on your credit card and request a refund. At least in many cases, refunds are indeed paid.
More details: Digital_river_runs_dry
