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DOJ e-books trial: Steve Jobs didn't initally want iBooks, Eddy Cue 'didn't care' about...

post #1 of 52
Thread Starter 
Proceedings continued in the U.S. Department of Justice e-book antitrust suit against Apple on Thursday, with the company's SVP of Internet Software and Service Eddy Cue testifying that he "didn't care" what prices publishers set for content sold through the iBookstore.

DOJ


According to in-court reports from Reuters, Cue said it wasn't surprising to see book publishers raise rates for new content after Apple debuted iBooks, but maintained the deals the company made had nothing to do with a market-wide hike in e-book prices.

Cue has been made out by the Justice Department to be "the chief ringleader" of an alleged price fixing scheme in which Apple colluded with five of the largest book publishers in the world to falsely inflate the cost of e-books sold through the iBookstore.

"I didn't raise prices," Cue said.

The longtime Apple exec was at the center of Apple's business dealings with the five accused publishers, all of which have settled out of court, as he negotiated iBooks terms with the firms between December 2009 and January 2010. Apple cofounder Steve Jobs, who according to Cue didn't initially want the then-unreleased iPad to function as an e-reader, gave the go-ahead to put together the iBookstore in 2009 under the condition that it had to be ready for the iPad's announcement in January of 2010.

Cue noted that Apple originally looked to adopt the wholesale model used by market leader Amazon, which allows retailers to price e-books after buying the titles from content owners. After discussing the terms with publishers, however, the company decided to employ the agency model. In that strategy, content owners are free to set prices under a most-favored-nations clause, which precludes them from selling the same titles to another reseller for less without offering the same to Apple. "I didn't care what deals all the publishers got with Amazon, Barnes & Noble or anyone else." - Apple SVP of Internet Software and Services Eddy Cue

"I didn't care what deals all the publishers got with Amazon, Barnes & Noble or anyone else," Cue said, adding that he had no knowledge of external talks book publishers were reportedly conducting on their own.

Cue said he told those publishers which Apple was dealing with ? Penguin Group, HarperCollins Publishers Inc, Simon & Schuster Inc, Hachette Book Group Inc and Macmillan ? the company was discussing options with rivals, but was careful not to mention names.

Cue became somewhat emotional near the end of his testimony, recalling how important the project was in light of Jobs' condition.

"He was near the end of his life near the launch of the iPad," Cue said of Jobs. "I wanted to get it done in time for that as I wanted to get it done for him."

Over the course of this week's proceedings, U.S. District Court Judge Denise Cote saw what at first appeared to be a "smoking gun" in the form of an purported email from Jobs to Cue. Presented by the DOJ, it turned out that the letter was actually a draft which was never sent. Last week, testimony from book publishing executives appeared to align with with Apple's assertions of non-collusion.

The trial will enter its final week on Monday, when Cue is scheduled to retake the stand.
post #2 of 52
Quote:
Originally Posted by AppleInsider View Post

"He was near the end of his life near the launch of the iPad," Cue said of Jobs. "I wanted to get it done in time for that as I wanted to get it done for him."

*sigh*

Rush... Jobs.
post #3 of 52
"set prices under a most-favored-nations clause, which precludes them from selling the same titles to another reseller for less."

Can we get this correct at some point in the future? MFN does preclude the selling of content at another reseller for less. Publishers are still free to do whatever they want.

MFN just guarantees me that if a reseller strikes a better deal with the publishers, I have the right to lower my prices to match.
Disclaimer: The things I say are merely my own personal opinion and may or may not be based on facts. At certain points in any discussion, sarcasm may ensue.
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Disclaimer: The things I say are merely my own personal opinion and may or may not be based on facts. At certain points in any discussion, sarcasm may ensue.
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post #4 of 52
Proverb: the hand (Apple) points at the moon (Amazon monopoly), the fool (DOJ) looks at the finger.
A.k.a. AppleHead on other forums.
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post #5 of 52
When the DOJ wins, it means it did its homework, did its job. No accolades, that's what a pay cheque is for. When the DOJ loses, it means it didn't do its homework and therefore was hamstrung in doing the second part of its job because it failed at the first, to separate the wheat from the chaff. When the book publishers blinked, the DOJ figured it was on the right track, had won and got cocky. There are wins to take credit, there are wins that fall from the sky.
 
If the DOJ is looking for brownie points shooting for the stars, better make sure the homework is done, fast and strong.

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When I find time to rewrite the laws of Physics, there'll Finally be some changes made round here!

I am not crazy! Three out of five court appointed psychiatrists said so.

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post #6 of 52
Quote:
Originally Posted by mhikl View Post

When the DOJ wins, it means it did its homework, did its job. No accolades, that's what a pay cheque is for. When the DOJ loses, it means it didn't do its homework and therefore was hamstrung in doing the second part of its job because it failed at the first, to separate the wheat from the chaff. When the book publishers blinked, the DOJ figured it was on the right track, had won and got cocky. There are wins to take credit, there are wins that fall from the sky.
 
If the DOJ is looking for brownie points shooting for the stars, better make sure the homework is done, fast and strong.

What's the point of your post? Why do you think the DOJ is looking for brownie points? Their lawyers know that they rarely get any.

 

In some trials, it can be argued that a specific prosecutor is deliberately grandstanding to gain the spotlight. But this case has not developed like that.

post #7 of 52
Quote:
Originally Posted by mjtomlin View Post

"set prices under a most-favored-nations clause, which precludes them from selling the same titles to another reseller for less."

Can we get this correct at some point in the future? MFN does preclude the selling of content at another reseller for less. Publishers are still free to do whatever they want.

MFN just guarantees me that if a reseller strikes a better deal with the publishers, I have the right to lower my prices to match.

So which is it? Do the publishers set the price or does Apple? And if Apple just handles the transaction how are they a reseller? The MFN would be moot since they don't buy anything from the publishers.
Edited by dasanman69 - 6/13/13 at 5:59pm
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post #8 of 52
Quote:
Originally Posted by mjtomlin View Post

"set prices under a most-favored-nations clause, which precludes them from selling the same titles to another reseller for less."

Can we get this correct at some point in the future? MFN does preclude the selling of content at another reseller for less. Publishers are still free to do whatever they want.

MFN just guarantees me that if a reseller strikes a better deal with the publishers, I have the right to lower my prices to match.

 

If that was all there was to it, there likely would be no trial.  The problem is the MFN combined with Apple's 30% guarantee.  If competitive pricing drove the price to $9.99 on Amazon, Apple would be allowed to set their price at $9.99 *AND* be guaranteed to make $3 of that.  So if the publishers minimum price to make a profit was $9.99 they could not sell at that price.  They would be making no money at Amazon and losing their asses on Apple sales.

 

With the 'Apple plan' if those publishers broke even at $9.99 they would have to sell at $12.99 in order to make only the $9.99 needed (since Apple takes 30% guaranteed).  Voila the new price publishers have to set is now $12.99 across all resellers.

 

Have you actually read the DoJ's evidence?  It's pretty damning.  Apple is guilty as sin but I'm guessing they may have good enough lawyers to tap dance out of it.  With a jury they'd be off the hook for sure; with a judge that actually gets it- flip a coin.  As usual per Apple brilliance, I do believe Eddy Cue's statements are true.  If publishers wanted to set prices at $9.99 Eddy could care less.  Apple would make $3 per book and all the publishers would go out of business.  The system pretty much guaranteed they'd all have to raise prices and they all committed to doing that after Eddy got them all to sign up  ("Eddy we can't go with just 2 other publishers on board, you have to get at least 3 and then we'll sign on as the fourth",'double delete this message','you set the price, but if it is more than $12.99 we're not doing it and if it is less than that you will lose money....   You set the price, as long as it is $12.99'  blah blah blah

post #9 of 52
Quote:
Originally Posted by dasanman69 View Post

Quote:
Originally Posted by mjtomlin View Post

"set prices under a most-favored-nations clause, which precludes them from selling the same titles to another reseller for less."

Can we get this correct at some point in the future? MFN does preclude the selling of content at another reseller for less. Publishers are still free to do whatever they want.

MFN just guarantees me that if a reseller strikes a better deal with the publishers, I have the right to lower my prices to match.

So which is it? Do the publishers set the price or does Apple? And if Apple just handles the transaction how are they a reseller? The MFN would be moot since they don't buy anything from the publishers.
The publisher sets the price under the agency model.
The MFN clause adjusts the publisher's price to reflect the lowest price.
Independent of whatever the price is, the agent gets 30%.

So, if Amazon was on wholesale, they buy a $13 e-book for $10 and sell it for $10, making 0 profit.
When they do this, Apple's retail price is adjusted to $10, and they get $3 commission so the publisher only gets $7. Obviously, the publisher would prefer to get $10 from everybody, so they would want to shift Amazon to a agent model with the same MFN clause.
post #10 of 52
Quote:
Originally Posted by Frood View Post

Have you actually read the DoJ's evidence?  It's pretty damning. 

Not really, at least not in any sense of what I have seen and what I understand the law to be.

The problem with your argument is that the price was always $13. Amazon just engaged in illegal dumping and sold for $10. Initially, the publishers sold to Amazon at $10, expecting them to mark up the price to $13. When they didn't, the publishers increased prices to what they thought Retail should be, and Amazon decided to sell at an actual loss.

Effectively, the publishers used Apple as a tool in their fight against Amazon, much like the music industry did the reverse of with DRM-free tracks. The difference being that music was never sold at a loss.

The DOJ didn't go after Amazon because it isn't as good politics. Amazon lowered prices to the consumer (by taking a loss).
post #11 of 52
Quote:
Originally Posted by aaarrrgggh View Post

The publisher sets the price under the agency model.
The MFN clause adjusts the publisher's price to reflect the lowest price.
Independent of whatever the price is, the agent gets 30%.

So, if Amazon was on wholesale, they buy a $13 e-book for $10 and sell it for $10, making 0 profit.
When they do this, Apple's retail price is adjusted to $10, and they get $3 commission so the publisher only gets $7. Obviously, the publisher would prefer to get $10 from everybody, so they would want to shift Amazon to a agent model with the same MFN clause.

Yes but the publishers don't set the price with the wholesale model and do with the agency model, so how can they be forced to sell for the same price if they never set the price with Amazon?
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"Just because something is deemed the law doesn't make it just" - SolipsismX
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post #12 of 52
Quote:
Originally Posted by Frood View Post

 

If that was all there was to it, there likely would be no trial.  The problem is the MFN combined with Apple's 30% guarantee.  If competitive pricing drove the price to $9.99 on Amazon, Apple would be allowed to set their price at $9.99 *AND* be guaranteed to make $3 of that.  So if the publishers minimum price to make a profit was $9.99 they could not sell at that price.  They would be making no money at Amazon and losing their asses on Apple sales.

 

With the 'Apple plan' if those publishers broke even at $9.99 they would have to sell at $12.99 in order to make only the $9.99 needed (since Apple takes 30% guaranteed).  Voila the new price publishers have to set is now $12.99 across all resellers.

 

Have you actually read the DoJ's evidence?  It's pretty damning.  Apple is guilty as sin but I'm guessing they may have good enough lawyers to tap dance out of it.  With a jury they'd be off the hook for sure; with a judge that actually gets it- flip a coin.  As usual per Apple brilliance, I do believe Eddy Cue's statements are true.  If publishers wanted to set prices at $9.99 Eddy could care less.  Apple would make $3 per book and all the publishers would go out of business.  The system pretty much guaranteed they'd all have to raise prices and they all committed to doing that after Eddy got them all to sign up  ("Eddy we can't go with just 2 other publishers on board, you have to get at least 3 and then we'll sign on as the fourth",'double delete this message','you set the price, but if it is more than $12.99 we're not doing it and if it is less than that you will lose money....   You set the price, as long as it is $12.99'  blah blah blah

 

Did you even read what you wrote?  As you correctly point out "Apple didn't care what prices the publishers set."  So how do you get from there to Apple is "guilty as sin" of colluding to raise prices.  If I walk into a room and tell everyone "hey dudes here are the terms I'm willing to accept and here's why it makes sense for you" and everyone says "sounds good, sign me up" I am in no frickin' way guilty of collusion.  Further this whole thing points out what Apple would only accept the agency model.  Why would they want to be hire a boatload of people to be market experts, setting prices for books?  The agency model made perfect sense for them.  Apple is going to win this one, not because they have brilliant lawyers, but because they did nothing wrong.

post #13 of 52
Quote:
Originally Posted by Frood View Post

They would be making no money at Amazon and losing their asses on Apple sales.

Wrong, they would be making money with Amazon and losing their asses with Apple. The publishers are still getting $10 per ebook regardless of sales model.
"Few things are harder to put up with than the annoyance of a good example" Mark Twain
"Just because something is deemed the law doesn't make it just" - SolipsismX
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"Just because something is deemed the law doesn't make it just" - SolipsismX
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post #14 of 52
Quote:
Originally Posted by Frood View Post

 

If that was all there was to it, there likely would be no trial.  The problem is the MFN combined with Apple's 30% guarantee.  If competitive pricing drove the price to $9.99 on Amazon, Apple would be allowed to set their price at $9.99 *AND* be guaranteed to make $3 of that.  So if the publishers minimum price to make a profit was $9.99 they could not sell at that price.  They would be making no money at Amazon and losing their asses on Apple sales.

 

With the 'Apple plan' if those publishers broke even at $9.99 they would have to sell at $12.99 in order to make only the $9.99 needed (since Apple takes 30% guaranteed).  Voila the new price publishers have to set is now $12.99 across all resellers.

 

Have you actually read the DoJ's evidence?  It's pretty damning.  Apple is guilty as sin but I'm guessing they may have good enough lawyers to tap dance out of it.  With a jury they'd be off the hook for sure; with a judge that actually gets it- flip a coin.  As usual per Apple brilliance, I do believe Eddy Cue's statements are true.  If publishers wanted to set prices at $9.99 Eddy could care less.  Apple would make $3 per book and all the publishers would go out of business.  The system pretty much guaranteed they'd all have to raise prices and they all committed to doing that after Eddy got them all to sign up  ("Eddy we can't go with just 2 other publishers on board, you have to get at least 3 and then we'll sign on as the fourth",'double delete this message','you set the price, but if it is more than $12.99 we're not doing it and if it is less than that you will lose money....   You set the price, as long as it is $12.99'  blah blah blah

Apple uses the agency model for iOS apps. Nobody's complaining about collusion with apps, so what is the big deal with ebooks? The law should be the same. 

post #15 of 52
I hope this case blows up in the DOJ's face, but I doubt that will happen.
post #16 of 52
Quote:
Originally Posted by waldobushman View Post

Apple uses the agency model for iOS apps. Nobody's complaining about collusion with apps, so what is the big deal with ebooks? The law should be the same. 

Because you can't buy iOS apps from anywhere else but from the app store and devs cannot sell you apps for your iDevice without going through the app store. Yet you can buy eBooks from Amazon, B&N, and Apple. Apple couldn't compete on price nor could it provide a much better user experience to justify the price increase so it had to somehow get the playing field level which is what the MFN clause does.
"Few things are harder to put up with than the annoyance of a good example" Mark Twain
"Just because something is deemed the law doesn't make it just" - SolipsismX
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"Few things are harder to put up with than the annoyance of a good example" Mark Twain
"Just because something is deemed the law doesn't make it just" - SolipsismX
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post #17 of 52
The fact that Steve Jobs didn't initially want iBooks is most interesting. It almost makes this mess of a dispute worthwhile, that and learning what Apple believes its market share to be--an impressive 20%. No wonder Amazon is unhappy. No wonder it whistled for the DOJ to do its dirty work.

Of course, that's not really surprising. From the start, Apple hasn't had its heart in selling ebooks like it has in selling music. I spotted that early on, particularly as month after month passed with no Mac version of iBooks. Even now, I've yet to hear if iBooks for Macs will run on anything but Mavericks. That matters, particularly for school kids.

Perhaps that tilt was just Steve Jobs, I thought. More likely it's the 1970s generation that's running Apple now. No one who thinks of that era says, "Ah yes, that was an era when they knew how to write great books." Those who came of age then don't seem to be avid readers either. By that decade there were many other distractions for growing minds.

When I was growing up in the 1950s and 1960s, reading mattered, if for no other reason than to beat the boredom of being a kid. There were only three TV channels and they rarely carried children's programs. CDs and DVDs didn't exist, much less the Internet, and 8-tracks players only arrived late. Teen music meant listening to static-ridden AM radio. No video games either. When I got out of school, I often went to the public library and read scifi or boy's adventure tales until it was time to bike home for supper. Sadly, I suspect not many kids do that today. Like I said, too many distractions.

I certainly hope Apple has a change of heart. Music isn't everything. There are some things that only good books can do. And I despair when I try to push richly formatted ebooks with full-color photos through Amazon's Kindle plug-in for InDesign. They come out looking awful. I'm much happier with what InDesign's epub export looks like on my iPad. I want Apple to succeed, in part, to force Amazon to make their Kindle titles look better.

--Michael W. Perry, Hospital Gowns and Other Embarrassments
post #18 of 52
Quote:
Originally Posted by mhikl View Post

When the DOJ wins, it means it did its homework, did its job. No accolades, that's what a pay cheque is for. When the DOJ loses, it means it didn't do its homework and therefore was hamstrung in doing the second part of its job because it failed at the first, to separate the wheat from the chaff. When the book publishers blinked, the DOJ figured it was on the right track, had won and got cocky. There are wins to take credit, there are wins that fall from the sky.
 
If the DOJ is looking for brownie points shooting for the stars, better make sure the homework is done, fast and strong.

BS

As a lawyer, I can tell you judges have a built in bias favoring the government.

Apple should have elected a jury.
post #19 of 52
When is the DOJ going after the bankers who cause the global economic crash?

Oh wait, e-book pricing is more important. Right?!!!

Idiots.
post #20 of 52
Quote:
Originally Posted by dasanman69 View Post

Because you can't buy iOS apps from anywhere else but from the app store and devs cannot sell you apps for your iDevice without going through the app store. Yet you can buy eBooks from Amazon, B&N, and Apple. Apple couldn't compete on price nor could it provide a much better user experience to justify the price increase so it had to somehow get the playing field level which is what the MFN clause does.

Apart from developers selling the same Apps through Amazon, Play or wherever.

Unless you want to say that iOS has all the Apps, other platforms have nothing. 1wink.gif
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post #21 of 52
Quote:
Originally Posted by waldobushman View Post

Apple uses the agency model for iOS apps. Nobody's complaining about collusion with apps, so what is the big deal with ebooks? The law should be the same. 

 

iOS apps affect Apple and Apple users.  Nobody has a problem with that.  Apple wanted iBooks.  If they had set their price at $12.99 no one would have a problem with that either and there would be no lawsuit.

 

The problem is, unlike iOS apps which only work on Apple's system, books are the same everywhere.  Apple knew they would fail horribly if they priced their books at $12.99 while the same books were available everywhere else for $9.99.  So they came up with an amazing structure that would raise prices across all platforms to $12.99.  That is the problem.  I could care less if Apple wants to sell iBooks for $100.  If it comes up with a system that raises book prices to $100 in all stores I have problem.

 

Seriously, read the DoJ's evidence from start to finish.  It starts out with 'hahaha we can't set our prices to $12.99, no one will all buy our books'....  Apple "well, not if you were all to do it at the same time....."     "ooooohhhhhhhh....."   And from there it degrades to 'hey, double delete all these emails'     Steve Jobs asked about he is going to sell books at $12.99 while others at $9.99....    "They won't be"   To the publishers  'OMG I can't believe he said that'      You'd have to be pretty smitten with Apple to actually believe they weren't involved and all books doing a step price change from $9.99 to $12.99 overnight is an amazing coincidence that is somehow terrific for consumers.

 

Amazon was making money on books.  Incredibly low margins so they had to sell a ton of them, and they *were* selling top titles at a loss to get consumers in the door.  Because the DoJ stepped in prices are now actually lower.  I think the average e-book is around $7.50 now (which Apple fans actually credit to Apple lol).  More people have entered the market.  So if $9.99 is 'selling at a loss' and 'dumping' how are people making money at $7.50   Did the price of electrons drop?  Or are people entering the market because they all want to make huge losses?

post #22 of 52
Quote:
Originally Posted by Frood View Post

iOS apps affect Apple and Apple users.  Nobody has a problem with that.  Apple wanted iBooks.  If they had set their price at $12.99 no one would have a problem with that either and there would be no lawsuit.

The problem is, unlike iOS apps which only work on Apple's system, books are the same everywhere.....

Books are not the same everywhere. Ebooks might look to the naive like printed books but on a screen, but they are not. Ebooks are computer programs and the programs are different for Nook, Kindle, ePub, PDF, postscript, HTML, mathematica CDF and other formats. The respective readers are programming language interpreters that read the respective ebook programs and execute them, resulting in the display and behavior we see and experience.

Many iOS apps are also books using their own proprietary content programs, many such books/apps/programs are common in the education apps category.

Further, apps available on iOS may also be available on Nook, Kindle, and android devices. It's a matter of the particular technology used whether these apps are compiled into an intermediate interpreted language then fed to a back end to compile into a device/OS specific version.

The point is ebooks and apps are fundamentally the same; data and programs are the same and interchangeable. This is a fundamental truth of computer science, from Godel, to Church, to Turing, to von Neumann.
post #23 of 52
Quote:
Originally Posted by Frood View Post

iOS apps affect Apple and Apple users.  Nobody has a problem with that.  Apple wanted iBooks.  If they had set their price at $12.99 no one would have a problem with that either and there would be no lawsuit.

The problem is, unlike iOS apps which only work on Apple's system, books are the same everywhere.  Apple knew they would fail horribly if they priced their books at $12.99 while the same books were available everywhere else for $9.99.  So they came up with an amazing structure that would raise prices across all platforms to $12.99.  That is the problem.  I could care less if Apple wants to sell iBooks for $100.  If it comes up with a system that raises book prices to $100 in all stores I have problem.

Seriously, read the DoJ's evidence from start to finish.  It starts out with 'hahaha we can't set our prices to $12.99, no one will all buy our books'....  Apple "well, not if you were all to do it at the same time....."     "ooooohhhhhhhh....."   And from there it degrades to 'hey, double delete all these emails'     Steve Jobs asked about he is going to sell books at $12.99 while others at $9.99....    "They won't be"   To the publishers  'OMG I can't believe he said that'      You'd have to be pretty smitten with Apple to actually believe they weren't involved and all books doing a step price change from $9.99 to $12.99 overnight is an amazing coincidence that is somehow terrific for consumers.

Amazon was making money on books.  Incredibly low margins so they had to sell a ton of them, and they *were* selling top titles at a loss to get consumers in the door.  Because the DoJ stepped in prices are now actually lower.  I think the average e-book is around $7.50 now (which Apple fans actually credit to Apple lol).  More people have entered the market.  So if $9.99 is 'selling at a loss' and 'dumping' how are people making money at $7.50   Did the price of electrons drop?  Or are people entering the market because they all want to make huge losses?


You are likely missing the bigger picture. Like movie distributors, book publishers had a multitiered distribution model. Movie distributors hope to make all their money back when a movie is first released and excitement high with the higher priced ticket sales at the box office. After that profit from other distribution models is smaller. Book publishers hope to make the bulk of their money with new releases through hard cover sales. Traditionally it would be hard cover sales and then softcover six months to a year later. Amazon used its near monopoly position with hard cover sales to threaten publishers if they did not release eBooks at the same time as hard cover books, Amazon would not carry the higher profit making hard cover books. Amazon then sold the eBooks at slightly higher then cost and sometimes below cost. This caused hard cover sales to fall and allowed Amazon to take 90 percent of the eBook market.

Amazon used its power in hard cover sales to force publishers to release eBooks when Amazon wanted, not publishers. Ultimately, this harmed the publishers, and Amazons competitors like Borders and Barnes and Noble who 1) relied largely on hard cover sales, and 2) already was at a disadvantage because they had to charge sales tax. In the long run, it also harmed consumers.

I read the government's case and under traditional anti-trust law it is weak. Apple had no power to force any terms on publishers. It was not a player in the eBook market. Publishers were already set to go to the agency model with Barnes and Noble. The goal was to preserve new release hard cover sales.

The Apple MFN clause only applies to new releases. Moreover, publishers could, and did, get around the MFN clause simply by not offering a book on iBooks. Retailers could also buy exclusive new release rights, which Amazon frequently did. MFN clauses are also common.

Further typically collusion is between competitors. Apple did not compete with publishers, and it did not have power to force publishers to do anything they did not want.
post #24 of 52
Quote:
Originally Posted by dasanman69 View Post


Wrong, they would be making money with Amazon and losing their asses with Apple. The publishers are still getting $10 per ebook regardless of sales model.

But they loose every customer who doesn't use or want use Amazon. So their loss can be substantial. They also loose the opportunity to sell the books on their own or the authors websites because they are being undercut and their product devalued to benefit Amazon.

post #25 of 52
Quote:
Originally Posted by Frood View Post

 

With the 'Apple plan' if those publishers broke even at $9.99 they would have to sell at $12.99 in order to make only the $9.99 needed (since Apple takes 30% guaranteed).  Voila the new price publishers have to set is now $12.99 across all resellers.

 

 

The thing is digital downloads are a data only version. There are no material costs, no printing costs, no shipment costs etc to cover, so the price can be lowered easily & the same profit made. I think it was the publishers thinking they can make a fast buck by charging more, a premium you could say, as it would be on Apple products. That's the way I see it, & nothing to do with Apple themselves. The collusion between the publishers, all quite possibly unknown by Apple, could have been started of by a publisher mentioning to another that it was in talks with Apple & it grew from there.

 

Hell, you could even say Apple themselves, like us consumers, would then be a victim of this. With their money reserves, it seems almost everyone wants to take  a bite out of Apple if they can.

 

I could be wrong, but that's my take on this case.

post #26 of 52
Quote:
Originally Posted by TogetherWeStand View Post

 

The thing is digital downloads are a data only version. There are no material costs, no printing costs, no shipment costs etc to cover, so the price can be lowered easily & the same profit made. ...

 

What are, as an industry average, the exact percentages of the things you mention -- materials, printing, shipping -- of the overall cost of bringing a new fiction hardcover to market?

post #27 of 52
Quote:
Originally Posted by aaarrrgggh View Post


Not really, at least not in any sense of what I have seen and what I understand the law to be.

The problem with your argument is that the price was always $13. Amazon just engaged in illegal dumping and sold for $10. Initially, the publishers sold to Amazon at $10, expecting them to mark up the price to $13. When they didn't, the publishers increased prices to what they thought Retail should be, and Amazon decided to sell at an actual loss.

Effectively, the publishers used Apple as a tool in their fight against Amazon, much like the music industry did the reverse of with DRM-free tracks. The difference being that music was never sold at a loss.

The DOJ didn't go after Amazon because it isn't as good politics. Amazon lowered prices to the consumer (by taking a loss).

 

I meant the evidence was pretty damning as far as reality goes.  Everybody was pretty clearly on board and knew what the gig was.  They were obviously pretty good about avoiding legal pitfalls and because of that there's a pretty good chance they can wriggle out of it.  They made enough slip ups so its clear they all knew the goal and intent.

 

You have a 'no trespassing' sign on your property.  Your neighbor enters your property.  You shoot him.  Did you commit a crime?  Yes.  Would saying, "I shot him because he was breaking the law and I was just correcting that, so clearly I am innocent" hold any water?

 

Whether Amazon was or wasn't dumping is open to debate- and it could be tried as its own case.  They were selling some title below cost but making money on most- it is a common business practice.  Sell printers at cost/loss once, get the customers, make a ton of money selling them ink.  Plenty of entrants were coming to market.  Was it hard to enter the market?  Sure.  Low margins are hard to compete with, you need a ton of volume.  But that's like saying Walmart should be put on trial because they sell a ton of stuff at low margins, so that makes it hard for Joe Schmoe to open a store because no one will buy his stuff at high prices.

 

Publishers did clearly have a problem.  Getting on board with Apple and conspiring to all raise prices together was indeed a good fix for that "Amazon problem."  It was just an illegal one.

post #28 of 52
Quote:
Originally Posted by dasanman69 View Post

So which is it? Do the publishers set the price or does Apple? And if Apple just handles the transaction how are they a reseller? The MFN would be moot since they don't buy anything from the publishers.

Why are you commenting on things where you don't understand even the most basic concepts?

In the agency model, the publisher sets the price. Period. Apple sells it for whatever the publisher says to sell it for, keeps 30% and sends the rest to the publisher.
Quote:
Originally Posted by aaarrrgggh View Post

The publisher sets the price under the agency model.
The MFN clause adjusts the publisher's price to reflect the lowest price.
Independent of whatever the price is, the agent gets 30%.

So, if Amazon was on wholesale, they buy a $13 e-book for $10 and sell it for $10, making 0 profit.
When they do this, Apple's retail price is adjusted to $10, and they get $3 commission so the publisher only gets $7. Obviously, the publisher would prefer to get $10 from everybody, so they would want to shift Amazon to a agent model with the same MFN clause.

Your own example shows that your logic is wrong. In your example, Amazon pays the publisher $10 and sells it for $10. Apple pays the publisher $7 and sells it for $10. So why would the publisher want to switch Amazon to the agency model? They're making more money from Amazon.

The entire thing comes down to margins. If Amazon is keeping more than 30% - on average - then the publishers would prefer Apple's model. If, OTOH, Amazon is paying the publisher more than 70% of MSRP, then Amazon is a better deal. In the end, it should be up to the publisher to choose what's best for their business without the DOJ trying to take the position as to which model is better.
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post #29 of 52
Quote:
Originally Posted by Frood View Post

 

I meant the evidence was pretty damning as far as reality goes.  Everybody was pretty clearly on board and knew what the gig was.  They were obviously pretty good about avoiding legal pitfalls and because of that there's a pretty good chance they can wriggle out of it.  They made enough slip ups so its clear they all knew the goal and intent.

 

You have a 'no trespassing' sign on your property.  Your neighbor enters your property.  You shoot him.  Did you commit a crime?  Yes.  Would saying, "I shot him because he was breaking the law and I was just correcting that, so clearly I am innocent" hold any water?

 

Whether Amazon was or wasn't dumping is open to debate- and it could be tried as its own case.  They were selling some title below cost but making money on most- it is a common business practice.  Sell printers at cost/loss once, get the customers, make a ton of money selling them ink.  Plenty of entrants were coming to market.  Was it hard to enter the market?  Sure.  Low margins are hard to compete with, you need a ton of volume.  But that's like saying Walmart should be put on trial because they sell a ton of stuff at low margins, so that makes it hard for Joe Schmoe to open a store because no one will buy his stuff at high prices.

 

Publishers did clearly have a problem.  Getting on board with Apple and conspiring to all raise prices together was indeed a good fix for that "Amazon problem."  It was just an illegal one.


Respectfully disagree with your points. Amazon's predatory pricing is not on trial but really should be, as they lost 39 million on 61B of revenue in 2012. So where's the DOJ outrage? ...suppressed by the sea of public support that likes 'cheap'. As for "It was just an illegal one"...That is one for the judge  so we will need the ruling to determine if you are right. I am betting the DOJ fails to make the case, and you are wrong.

post #30 of 52
Quote:
Originally Posted by hill60 View Post

Apart from developers selling the same Apps through Amazon, Play or wherever.

Unless you want to say that iOS has all the Apps, other platforms have nothing. 1wink.gif

What part of 'iOS apps' didn't you understand? As a iDevice owner there's only one place to get apps from and as a developer there's only one place to sell your app. A iDevice user cannot buy apps from Amazon's appstore or from Google Play whereas a iDevice user can buy eBooks from a multitude of stores. There would be no trial if iDevice users had only the iBookstore to purchase ebooks from.
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post #31 of 52
Quote:
Originally Posted by jragosta View Post

Why are you commenting on things where you don't understand even the most basic concepts?

Did you even read what the OP wrote? Try understanding what he wrote before attacking me.
Quote:
MFN just guarantees me that if a reseller strikes a better deal with the publishers, I have the right to lower my prices to match.

Who's the "I" and "my" that he's referring to? Sounds like he's referring to Apple. Now how can Apple lower the price when they didn't set it in the first place? So either the OP doesn't understand correctly or Apple does indeed set the price but my understanding is intact.
Edited by dasanman69 - 6/14/13 at 5:57am
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post #32 of 52
Quote:
Originally Posted by genovelle View Post

But tthe hey loose every customer who doesn't use or want use Amazon. So their loss can be substantial. They also loose the opportunity to sell the books on their own or the authors websites because they are being undercut and their product devalued to benefit Amazon.

See now that's a valid point and one that I agree with but don't say they're losing money in one model versus the other when in the agency model the only one making money with the price increase is the seller.
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post #33 of 52
Quote:
Originally Posted by Frood View Post

 

If that was all there was to it, there likely would be no trial.  The problem is the MFN combined with Apple's 30% guarantee.  If competitive pricing drove the price to $9.99 on Amazon, Apple would be allowed to set their price at $9.99 *AND* be guaranteed to make $3 of that.  So if the publishers minimum price to make a profit was $9.99 they could not sell at that price.  They would be making no money at Amazon and losing their asses on Apple sales.

 

With the 'Apple plan' if those publishers broke even at $9.99 they would have to sell at $12.99 in order to make only the $9.99 needed (since Apple takes 30% guaranteed).  Voila the new price publishers have to set is now $12.99 across all resellers.

 

Have you actually read the DoJ's evidence?  It's pretty damning.  Apple is guilty as sin but I'm guessing they may have good enough lawyers to tap dance out of it.  With a jury they'd be off the hook for sure; with a judge that actually gets it- flip a coin.  As usual per Apple brilliance, I do believe Eddy Cue's statements are true.  If publishers wanted to set prices at $9.99 Eddy could care less.  Apple would make $3 per book and all the publishers would go out of business.  The system pretty much guaranteed they'd all have to raise prices and they all committed to doing that after Eddy got them all to sign up  ("Eddy we can't go with just 2 other publishers on board, you have to get at least 3 and then we'll sign on as the fourth",'double delete this message','you set the price, but if it is more than $12.99 we're not doing it and if it is less than that you will lose money....   You set the price, as long as it is $12.99'  blah blah blah

With physical books, yeah. Which is why Amazon's monopoly is so powerful over suppliers (like Walmart). Amazon uses eBooks as loss leader. Apple is ONLY interested in eBooks (being a Digital Store). There is no "losing money" to the publisher past the fixed cost of editing and turning the book into an eBook. The work has been done. They offer the author, etc. a cut, and Apple takes a cut, and the publisher gets a cut. The MORE they sell, period, at ALL stores, the better. So they make 1 million sales on Amazon, AND 2 million more on iTunes, albeit at 30% less.

 

Amazon is merely lowering expectations to what a book is worth in the minds of the consumer, and Amazon offers flat wholesale rate (whether bestseller, or not). Apple says you price it the way you want and that can change over time as it comes off best seller list. You know we take 30% off the frontend because we have 575 million credit card accounts attached to our Store and our customers like purchasing in our Store at least as much as Amazon customers use the online Amazon store or Kindle.

post #34 of 52
Quote:
Originally Posted by anonymouse View Post

 

What are, as an industry average, the exact percentages of the things you mention -- materials, printing, shipping -- of the overall cost of bringing a new fiction hardcover to market?

 

Sorry I don't know, but companies do go on about the costs of shipping etc as to why things cost more in some countries than others.

 

A typical example is the new Sony PS4 will cost 36% more: £349 to $256, & MS Xbox 1 will cost 34% more: £429 to $320, here in the UK than in the US after currency conversion, it would be like paying $399 & $499 in the US. Both firms blame higher transport costs, taxes in EU & other costs. (Details taken from a paper / press article.)

 

I know it's not quite the same, but the principles are the same regarding costs, after all ebooks are just downloaded data, not physical items like paperbacks or consoles requiring production or transport. The usual payment percentages still need to be paid of course, author, publisher etc, but costs should be less. Think of it as email compared to physical mail, data & not a physical product. Just imagine having to pay the same to email as you do to mail a letter, even though it is not a physical product.

post #35 of 52
Quote:
Originally Posted by Frood View Post

You have a 'no trespassing' sign on your property.  Your neighbor enters your property.  You shoot him.  Did you commit a crime?  Yes.  Would saying, "I shot him because he was breaking the law and I was just correcting that, so clearly I am innocent" hold any water?

 

 

Obviously you are not a lawyer (I'm not either).  Based on those facts there is not enough information to know if a crime was committed, period.  When did the neighbor enter the property? (noon?  3am?  makes a difference).  Why did he enter?  (to return the tools he borrowed or to vandalize your car?)  Did you have reason to be afraid for your life or serious physical harm?  Do you live in a state with the "castle doctrine" or "stand your ground" laws?  Was he drunk?  Were you?  Etc. etc.

 

Same thing with the Apple case.  We don't really know all the facts and we certainly aren't experts in the (I'm sure) complex laws and precedents about the particular laws that Apple is accused of violating.

 

Having said that, here's my interpretation of what happened (which I don't think should be illegal, but could be I suppose):

1. Apple has an interest in selling books.  But it likes the pricing model that works so well for apps and music: the creator/publisher sets the price and Apple takes 30%.  Sell your book or app for 99c or $9.99 or $29.99, Apple doesn't really care.

2. Apple needs to sign up publishers (duh).

3. Apple looks at the problem from a publisher's perspective and figures out what talking points will make the Apple agency model look attractive to a publisher.  Part of this pitch is: hey wouldn't it be nice to be less dependent on a single retailer (Amazon).

4. Apple presents this pitch to each publisher.  "Hey want to sign up under these terms?"  Note, there is nothing I've seen that they said "but this only works if all your competitors do too!"

5. After tough negotiations, various publishers agree that they like those terms.

 

So where is the illegal collusion exactly?  Sure, the publishers had/have incentives to collude on pricing, but what's the got to do with Apple.  They could do that under the agency model or any other pricing model.  Apple didn't particularly care if the publishers sold their books for $9.99 or $12.99; Apple probably makes the same money either way (since lower prices -> higher sales).  Frankly, I'd be surprised if at least some Apple execs weren't saying "this whole 'you can sell your books for $12.99' thing is probably BS, but if it helps the publishers decide to join us, who cares."

post #36 of 52
Quote:
Originally Posted by stelligent View Post

What's the point of your post? Why do you think the DOJ is looking for brownie points? Their lawyers know that they rarely get any.

 

In some trials, it can be argued that a specific prosecutor is deliberately grandstanding to gain the spotlight. But this case has not developed like that.

Many of these guys/gals are also pumping up their resumés. As you well know, there's a huge revolving door between private law firms and DOJ, SEC, etc. 

post #37 of 52
Quote:
Originally Posted by dasanman69 View Post


What part of 'iOS apps' didn't you understand? As a iDevice owner there's only one place to get apps from and as a developer there's only one place to sell your app. A iDevice user cannot buy apps from Amazon's appstore or from Google Play whereas a iDevice user can buy eBooks from a multitude of stores. There would be no trial if iDevice users had only the iBookstore to purchase ebooks from.

 

So, say for example Angry Birds isn't available on any other platform as it's "iOS only"...

 

...right 0_o.

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post #38 of 52
Quote:
Originally Posted by hill60 View Post

So, say for example Angry Birds isn't available on any other platform as it's "iOS only..

...right 0_o.

But can you get Angry Birds from Google Play for your iPhone? No. Would it matter much if Angry Birds was cheaper on Google Play than on the app store? What part of one store (apps for iDevices) versus many stores (ebooks for iDevices) is too hard for you to understand?
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post #39 of 52
Quote:
Originally Posted by dasanman69 View Post

But can you get Angry Birds from Google Play for your iPhone? No. Would it matter much if Angry Birds was cheaper on Google Play than on the app store? What part of one store (apps for iDevices) versus many stores (ebooks for iDevices) is too hard for you to understand?

Ummm… Bad analogy. By your logic you should be able to buy Windows games and play them on your Mac (both, after all, are computers). It is a gross over-simplification of what is going on here. Yes, Apple is using the same structure that has worked so well for iOS apps. Why not, like I said, it works well for everyone. The difference here is that we are talking about digital distrubutions of books, which are more than likely the same (or damn near it) across multiple platforms. As such, Apple didn't want to be undersold, and asked as a part of the negotiations a MFN clause. The publishers agreed to it, separately. So, who is setting the price? The publisher. All Apple is in this case is the store front. It is like suing Walmart for this same transgression (which is equally bizarre and stupid).

Sorry, the DOJ is completely in the wrong here. Apple had no monopoly when they started negotiations, Apple did not bring all parties together and dictate price, and Apple is not the one setting the price. End result: Apple could not collude with the publishers because they were not in a position to collude with them.
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post #40 of 52
Quote:
Originally Posted by Mike Eggleston View Post

Ummm… Bad analogy. By your logic you should be able to by Windows games and play them on your Mac (both, after all, are computers). It is a gross over-simplification of what is going on here. Yes, Apple is using the same structure that has worked so well for iOS apps. Why not, like I said, it works well for everyone. The difference here is that we are talking about digital distrubutions of books, which are more than likely the same (or damn near it) across multiple platforms. As such, Apple didn't want to be undersold, and asked as a part of the negotiations a MFN clause. The publishers agreed to it, separately. So, who is setting the price? The publisher. All Apple is in this case is the store front. It is like suing Walmart for this same transgression (which is equally bizarre and stupid).

Sorry, the DOJ is completely in the wrong here. Apple had no monopoly when they started negotiations, Apple did not bring all parties together and dictate price, and Apple is not the one setting the price. End result: Apple could not collude with the publishers because they were not in a position to collude with them.

Next time pay attention to the thread and what I was answering before writing a long winded post. Someone asked the difference between the app store and the iBookstore, and why isn't there collusion in the app store, and I will state yet again that there's only one store to buy apps for a iDevice. Is that so hard for you to comprehend?
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