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Eddy Cue Speaks About iBooks Price-Fixing Case: 'We Feel We Have to Fight for the Truth'

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In a new interview, Apple's Eddy Cue spoke with Fortune about the e-books pricing scandal that has plagued the company over the past several years. After a July 2013 judgment found the company guilty of conspiring to fix prices of electronic books, and a settlement in a class-action lawsuit was reached over the summer, the Apple negotiator at the center of the lawsuit has shared his thoughts on the case with Fortune ahead of Apple's appeals court appearance later this month.

The specifics of the case lie in the opening of the iBooks Store and the 17 percent industry-wide increase in e-book prices following its unveiling in April of 2010. Cue, Apple's "master negotiator", played a key role in convincing five of the then-six major publishing houses to start selling e-books through Apple's new store alongside the launch of the iPad. Part of the deal involved a shift in the pricing model for the entire e-books industry, eliminating Amazon's previous pricing advantage in which it would sometimes sell books at a loss in order to attract customers to Kindle hardware and other Amazon products.

These events led the Justice Department and thirty-three state attorneys general to sue Apple and those five publishing houses for horizontal price fixing in violation of the Sherman Act. While the publishing houses settled the lawsuits, Apple declined to do so and proceeded to trial in the federal case where the company was found guilty.
"Is it a fact that certain book prices went up?" asks Cue. "Yes. If you want to convict us on that, then we're guilty. I knew some prices were going to go up, but hell, the whole world knew it, because that's what the publishers were saying: 'We want to get retailers to raise prices, and if we're not able to, we're not going to make the books available digitally.' At the same time, other prices went down too, because now there was competition in the market."
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A settlement in the separate state and class-action consumer lawsuit worked out this past June sees Apple paying around $450 million if the company loses its appeal in the federal case and nothing if it wins. The case has dragged on far longer than most expect, and Cue argues that the company is fighting more for reputation than for monetary reasons.

cue.jpg
"We feel we have to fight for the truth," says Cue. "Luckily, Tim feels exactly like I do," he continues, referring to Apple CEO Tim Cook, "which is: You have to fight for your principles no matter what. Because it's just not right."
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Cue met with all six CEOs of the major publishing houses before the original iPad launched, and discovered most wanted the cost of e-books at price points both he and Steve Jobs considered too high. Cue proposed price tiers tied to the suggested retail prices of the hardback versions of the books.

As part of the shift to a new "agency model" of pricing similar to that used in the App Store, Cue also proposed a "most favored nation" clause, allowing Apple to match the price at which any retailer was selling a new e-book. When the iPad launched a few weeks later, most iBooks were priced between $12.99 and $14.99, higher than Amazon's typical $9.99 price point for best sellers but in the range of where publishers wanted to be selling their books. The agency model quickly became the industry standard, with Amazon also being required to adopt the pricing at the insistence of the publishers.

The sequence of events led Judge Denise Cote to rule in July 2013 that Apple was guilty of e-book price-fixing. When asked how he looks back on the "nightmare", Cue plainly stated, "If I had it to do all over again, I'd do it again. I'd just take better notes."

Apple will appear before the federal appeals court on December 15.

Article Link: Eddy Cue Speaks About iBooks Price-Fixing Case: 'We Feel We Have to Fight for the Truth'
 
Article Link
https://www.macrumors.com/2014/12/02/cue-interview-ebooks/
You tell them, Fast Eddie.

How you kept your job after this blows my mind.


"Is it a fact that certain book prices went up?" asks Cue. "Yes. If you want to convict us on that, then we're guilty. I knew some prices were going to go up, but hell, the whole world knew it, because that's what the publishers were saying: 'We want to get retailers to raise prices, and if we're not able to, we're not going to make the books available digitally.' At the same time, other prices went down too, because now there was competition in the market."


Great, what are fighting? You admitted it. I give you credit for that.
 
“We feel we have to fight for the truth,” says Cue. “Luckily, Tim feels exactly like I do,” he continues, referring to Apple CEO Tim Cook, “which is: You have to fight for your principles no matter what. Because it’s just not right.”
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That certainly went well for Jobs and his patent insanity against Android last time Apple took that attitude.

If Cue manages to burn another multiple billion dollars for no effect, and continues to be responsible for most of Apple's most in trouble operations (iTunes music revenue in collapse, iTunes Video marketshare going to be lost to Google Play in the next 6 months on all trends, the continued Maps disaster etc etc) then how long has he got left at Apple? That would have been an unthinkable statement five years ago.
 
Zimmy68 said:
You tell them, Fast Eddie.

How you kept your job after this blows my mind.


"Is it a fact that certain book prices went up?" asks Cue. "Yes. If you want to convict us on that, then we're guilty. I knew some prices were going to go up, but hell, the whole world knew it, because that's what the publishers were saying: 'We want to get retailers to raise prices, and if we're not able to, we're not going to make the books available digitally.' At the same time, other prices went down too, because now there was competition in the market."


Great, what are fighting? You admitted it. I give you credit for that.
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I doubt Eddie is saying anything that's not setup by Apple legal at this point.
 
Good to see Apple execs are as pompous as their products (I'm an Apple user - the products are a bit pompous don't you think?)

Stick to your principles Eddie, don't forget to fall on your sword - if you have any honor.
 
Zimmy68 said:
You tell them, Fast Eddie.
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Well, and there is Amazon which is _really_ trying to corner the eBook market. By all means. And there is Apple, trying to break the monopoly. And then there are people who have no idea what this case is about and deliberately misinterpret what Eddy Cue says.
 
gnasher729 said:
Well, and there is Amazon which is _really_ trying to corner the eBook market. By all means. And there is Apple, trying to break the monopoly. And then there are people who have no idea what this case is about and deliberately misinterpret what Eddy Cue says.
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Oh, the irony on calling others ignorant about the case and then saying that App tried to break a monopoly
 
I confess I never followed this one real closely ....

But it sounds to me like Apple's making a sound argument. Book publishers were basically saying, "Screw you, Apple. We won't give you the rights to digital versions of our content because we don't think we get paid enough money when we sell our stuff that way." Apple said, "Well, hold on guys... How about you do pricing in tiers, like THIS (tied to the in store prices of the physical books)? Then you can make more money selling in our store and we're still at a price point we think is reasonable." They agreed, and it generally worked. Other publishers copied the same pricing structure, since it was working. And then people saw nobody was offering those "selling below cost" deals Amazon had been doing, and cried "Price fixing!" to the government.



rageofreason said:
Good to see Apple execs are as pompous as their products (I'm an Apple user - the products are a bit pompous don't you think?)

Stick to your principles Eddie, don't forget to fall on your sword - if you have any honor.
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If Apple wanted to prove a point all they would have to do is shutdown their bookstore and I would say within a year you would see book prices on Amazon e books rocket up in price. Because we all know only Barnes and Nobles and Apple are the only things preventing Amazon from having a monopoly of the ebook industry in the US. Without someone to undercut why would they keep prices low?
 
kingtj said:
But it sounds to me like Apple's making a sound argument. Book publishers were basically saying, "Screw you, Apple. We won't give you the rights to digital versions of our content because we don't think we get paid enough money when we sell our stuff that way." Apple said, "Well, hold on guys... How about you do pricing in tiers, like THIS (tied to the in store prices of the physical books)? Then you can make more money selling in our store and we're still at a price point we think is reasonable." They agreed, and it generally worked. Other publishers copied the same pricing structure, since it was working. And then people saw nobody was offering those "selling below cost" deals Amazon had been doing, and cried "Price fixing!" to the government.
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Taking into account that publishers got less money with the agency model it seems that it doesn't look like a sound argument
 
The Phazer said:
That certainly went well for Jobs and his patent insanity against Android last time Apple took that attitude.

If Cue manages to burn another multiple billion dollars for no effect, and continues to be responsible for most of Apple's most in trouble operations (iTunes music revenue in collapse, iTunes Video marketshare going to be lost to Google Play in the next 6 months on all trends, the continued Maps disaster etc etc) then how long has he got left at Apple? That would have been an unthinkable statement five years ago.
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Don't forget iCloud. Still blows my mind though that Google now has two streaming music services and we still have no direction on what Apple is planning to do with the Beats acquisition or iTunes in general.
 
I'm glad they're fighting this, especially when Amazon is allowed to get away with a similar strategy. Apple's deal with publishers would have meant much more affordable textbooks for students. It's insane that students are forced into paying over $100 for a book they'll use for one semester.

Price fixing is all over the place. But Apple's the one company that's being singled out in this case. The whole system needs a serious overhaul.
 
jayducharme said:
I'm glad they're fighting this, especially when Amazon is allowed to get away with a similar strategy. Apple's deal with publishers would have meant much more affordable textbooks for students. It's insane that students are forced into paying over $100 for a book they'll use for one semester.

Price fixing is all over the place. But Apple's the one company that's being singled out in this case. The whole system needs a serious overhaul.
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Which similar strategy are you talking about?
 
rageofreason said:
Good to see Apple execs are as pompous as their products (I'm an Apple user - the products are a bit pompous don't you think?)

Stick to your principles Eddie, don't forget to fall on your sword - if you have any honor.
Click to expand...

Doubt you 'get' Apple products if you see their products as 'pompous'. This sounds like the view of an observer, not an owner.
 
Less money?

But they got less money with the agency model, how? Simply because they were no longer refusing to sell digital versions of books, so made more money forcing people to buy the physical books instead?

I don't know.... It really *never* made sense to me that customers should pay the same price for a physical book as for a digital version. In most cases with the digital ones, you don't even retain the ability to transfer it to another person if you're done reading it and no longer want it.


Oletros said:
Taking into account that publishers got less money with the agency model it seems that it doesn't look like a sound argument
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kingtj said:
But they got less money with the agency model, how? Simply because they were no longer refusing to sell digital versions of books, so made more money forcing people to buy the physical books instead?
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What are you talking about? Do you know what the case is about? It has nothing to do with refusing to sell digital copies, but with the wholesale model being more profitable
 
kingtj said:
But they got less money with the agency model, how? Simply because they were no longer refusing to sell digital versions of books, so made more money forcing people to buy the physical books instead?

I don't know.... It really *never* made sense to me that customers should pay the same price for a physical book as for a digital version. In most cases with the digital ones, you don't even retain the ability to transfer it to another person if you're done reading it and no longer want it.
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With both media types you are paying for the content and there are additional costs for the delivery method be that paper or electronic (there are still "storage" costs for hosting the content), so why shouldn't both cost a similar amount?
 
I don't understand how Eddy is still in the job, they got rid of Scott for much less bad practices. The only Apple employee thats in the front line that I have confidence in is Craig. Hopefully he becomes CEO in future.
 
Oletros said:
Oh, the irony on calling others ignorant about the case and then saying that App tried to break a monopoly
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Well the irony of posting "Oh, the irony".

Do you have any actual arguments why we shouldn't call Amazon the big bully in the eBook market that it is?
 
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