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Apple SVP Eddy Cue Takes Stand in E-Book Trial, Admits Some E-Books Rose in Price

Discussion in 'iOS Blog Discussion' started by MacRumors, Jun 13, 2013.

  1. macrumors bot



    Eddy Cue, Apple's senior vice president in charge of internet software and services, took the stand today in the Department of Justice's antitrust case against Apple over the price of e-books following the launch of the iBooks Store in 2010.

    Cue is Apple's chief negotiator and was in charge of all discussions with the major book publishing houses. The DoJ is alleging that Apple illegally worked with publishers to artificially increase e-book prices, a violation of U.S. antitrust laws.

    In testimony today, Cue admitted that the prices of some e-books -- including many of those appearing on the New York Times best sellers list -- did rise after the iBooks Store was opened, but it was more the result of publishers being unhappy with Amazon's pricing of $9.99/book than anything untoward that Apple did.

    Instead, Cue said that prices rose because publishers "expressed to us that they wanted higher prices". Apple's pricing model for e-books is the same agency model that it uses on the App Store -- publishers set book prices and Apple takes 30% of the revenue while returning 70% to the publishers.

    He also said that he didn't know if publishers were working together on the negotiations with Apple and Amazon, but because all the publishers had issues with different parts of Apple's proposed contract Cue said that "if they talked together, I assumed it would be easier to get the deals done." Cue also said that he "wasn't trying to negotiate" for the entire e-book market and he wasn't attempting to fix issues the publishers had with Amazon.

    Article Link: Apple SVP Eddy Cue Takes Stand in E-Book Trial, Admits Some E-Books Rose in Price
  2. macrumors 6502

    This entire trial makes you wonder who at Amazon bribed whom at the DOJ.
  3. macrumors regular

    I like that guy, Cue. He makes a lot of sense.

    I'm glad some of the higher profile people are testifying and are able to set the record straight, hopefully limiting unfounded assumptions.
  4. macrumors 6502a

    I still don't understand what Apple allegedly did wrong. They set up shop a charged a higher price?
  5. macrumors regular


    The Verge reports that at one point the DOJ attorney asked Eddy Cue if Apple's customers thanked Apple for raising prices.
  6. street.cory, Jun 13, 2013
    Last edited: Jun 13, 2013

    macrumors 6502


    As much as I love Apple, there did seem to be something fishy going on with this whole pricing fiasco. I often found that some books that were digital were around the same price as a paperback version.

    Although, I don't really use iBooks very much considering it isn't cross platform and they didn't have availability for use on computers.
  7. macrumors newbie

    It's illegal to collude in a monopolistic way to game a mature marketplace for more profit. If every airline were to get together and jointly decide to raise prices on a NY-LA route by $100, that's illegal.

    The DOJ's argument is that Apple sat down with the 6 major book companies and colluded to raise prices on the ebook market. Their argument fails because a) it wasn't a mature marketplace, since the 'eBooks market' had been around only for a few years, and only had one main player (Amazon), who had like 90% of the market, and b) Amazon was selling many of their eBooks for far below the intended price for eBooks. In many cases, Amazon was selling eBooks on their store for at or below wholesale price, which they were doing essentially to keep pricing pressure on brick and mortar bookstores and eventually drive more of them out of business.

    So essentially Amazon was the one using a monopoly to control prices. Funny how things work that way.
  8. macrumors G5

    "Cue admitted that the prices of some e-books -- including many of those appearing on the New York Times best sellers list -- did rise after the iBooks Store was opened, but it was more the result of publishers being unhappy with Amazon's pricing of $9.99/book than anything untoward that Apple did."

    So is he saying it was just a coincidence? :rolleyes:

    If publishers had been unhappy before Apple's involvement in the eBook market - why hadn't prices gone up?

    "So essentially Amazon was the one using a monopoly to control prices. Funny how things work that way. "

    Only Amazon never had a monopoly.
  9. macrumors 68000

    But they certainly were attempting, it in my opinion. Looks like they will have to be happy with 65% of the U.S. market.


    Publishers had no price control with the wholesale model.
  10. macrumors 6502

    Amazon met every necessary requirement for a Monopoly in the ebook market before Apple entered the market, they were the source of over 90% of the ebooks at that time. How exactly do you think they were not a monopoly?
  11. macrumors 6502a

    They also reported Apple considered offering Amazon a you keep out of music and we keep out of books deal.
  12. macrumors 6502a


    Amazon and others settled this [paid-up $ for their part in this] so they would not need to explain themselves further.

    Apple are claiming they did nothing wrong, so this has nothing to do with Amazon, only Apple right now.
  13. macrumors G5

    Publishers could charge anything they wanted. Could they control what Amazon charged? No. And I'm not arguing against or for either model. But if Apple and the publishers are guilty of collusion - no matter how "good" it might have been or "bad" it might have been - it's illegal.

    And every business tries to attain as much marketshare as possible. I'm not sure I get your point.

    Look at Apple and the music business. Are you suggesting Apple wouldn't like to have 90 or more percent of the share? :confused:

    Again - Amazon did not have a monopoly. Did Apple have a music monopoly?
  14. Guest

    Yeah he admitted during the trial that indeed Apple made the prices goes up and you like that.

    Like DOJ said: 'Did your customers thank you for raising prices?'

  15. macrumors 6502

    But, could the publishers charge anything they wanted? I don't believe so. Amazon decimated competition in the paper book market and had a huge share of the market. Thus, they were able to dictate terms on the ebook market. Thus, no windowing of ebooks and the lower cost of ebooks, which in turn were eroding the profits from the publishers hardcover books. Why would publishers want that. They had no choice since Amazon was the market leader in hardcover books and there wasn't anyone else in the marketplace to go to. By having the ebook market pretty locked up Amazon was killing the hardcover book market, thus pushing the industry in that direction. All funneling it to the Kindle platform and no viable competitor.
  16. macrumors 68000

    With Apple's business model, i.e. profit, and the Agency Model that Publishers' desired, there wasn't any barrier to entry for competitors. Similarly this has worked for music, video and most likely audio books.

    The fact that Amazon uses the Agency model for newspapers and magazines indicates to me that Amazon didn't have any issues with the model per se, other than the desire, in my opinion, to take an early movers shareholder advantage in ebooks to a 90% shareholder position, at least long enough to disrupt brick and mortar competitors.

    Whether Amazon would use that same shareholder position to control the Publishers seems to be a given; they did and it isn't illegal. Whether the Publishers colluded is now water under the bridge.

    Whether Apple colluded is the question, and the answer so for appears to be, again in my opinion: no.

    What the DOJ should be asking isn't what was the price that Amazon was offering Bestsellers at, but what was the natural pricing without the subsidized (i.e. Predatory) pricing of Bestsellers that Amazon brought to the market. That is what I as a consumer would expect to pay in a healthy ebook market.


    It's also true that Amazon created unnaturally low pricing.
  17. macrumors 6502

    Applemark, samcraig is again arguing that Amazon NEVER had a monopoly on ebook distribution, that is a ludicrous and inaccurate statement, you really want to be part of the Amazon was never a monopoly crowd?


    Because Amazon was selling at whatever price they wanted to, and was dictating what price they would buy books at, selling books at a loss in many many cases. See the Macmillan and Amazon dispute of 2010 or any of the small publishers they bullied starting back as long as 2007. Prices didn't go up because Amazon was selling the books at a loss, we've discussed that, at one point one of my wife's novels was selling for that amount she got per unit, that makes me real sure that Amazon was selling it at a loss as an Ebook.
  18. macrumors G5

    in your opinion.

    It's ok if I don't agree with you at the moment though based on everything I've read and the testimony so far, right?
  19. macrumors 6502

    Amazon controlled nearly all of the "best seller" ebook market (some niches had the publishers selling their own ebook), engaged in predatory pricing by discounting to near or below cost to ensure no other retailer could enter the market, and used their market power in physical books to threaten publishers who didn't play ball with them on eBooks.

    As such, the ebook market was the Kindle market. You can argue that wasn't a monopoly, but Amazon controlled the market and was taking active steps to ensure that didn't change. And not only did the DoJ ignore this anti-competitive behavior, the state department gave Amazon a non-bid contract to provide ebooks and ebook readers because of that control.

    And since you compared it to Apple's music - Apple never gave up their 30% margin so when the publishers were unhappy with Apple's control of the online music business and gave Amazon both non-DRMed music (which Apple had been asking for) and a lower price, Apple didn't go running to the DoJ screaming "collusion".

    Now I will say that if there had been a deal struck between Apple and Amazon, Apple gets music and Amazon gets books, that WOULD have been collusion and Apple would have been in deep trouble for it (and maybe Amazon would FINALLY have taken a step the DoJ couldn't ignore).
  20. macrumors G5

    I can argue it wasn't a monopoly. I can also argue that Amazon has not been found guilty of anything illegal. Just like people can claim that Apple has not been found guilty of anything illegal.

    Also - the issue is collusion. Not Monopolies.

    Regardless of what marketshare Amazon had. That doesn't entitle other companies to collude. If that is what happened. TBD
  21. macrumors 601


    In a trial, it's important to get all the background information to arrive at a correct decision. Amazon's actions at the time are 100% pertinent to the trial. If Amazon is found to have a monopoly on the ebook market during the period in question, it does affect what's considered collusion.
  22. macrumors 6502

    But Apple has been drug through the mud with the charges first being tried in the public and now the courtroom, while Amazon has been anointed by the State Department. If the DoJ had both taken action against Apple and the publishers and Amazon, I'd take these charges more seriously.

    So if organized crime is collecting protection money and the police do nothing - the merchants just have to shrug and pay up?
  23. macrumors G5

    No. But if they do something illegal - then they are still accountable.
  24. macrumors 68040

    Bubba Satori

  25. AppleMark, Jun 13, 2013
    Last edited: Jun 14, 2013

    macrumors 6502a


    Really? Where did I make this statement?

    Fact is this is not so much about monopolies, it is about creating a cartel [which is illegal] which engages in collusion to fix pricing. Price fixing, which Apple is accused of, which it duly denied and so is at the receiving end of legal action, with evidence being brought to that end.

    It is Apple, not Amazon in the dock right now.

    EDIT - Tigger11, I think I may have mis-read your post. I saw accusation, not perhaps a warning? However, my opinion on collusion still stands.

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