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

EddycueEddy 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.

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Posted: 16 months ago

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


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.
Rating: 7 Votes
Posted: 16 months ago
This entire trial makes you wonder who at Amazon bribed whom at the DOJ.
Rating: 5 Votes
Posted: 16 months ago



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

Only Amazon never had a monopoly.


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).
Rating: 5 Votes
Posted: 16 months ago



Only Amazon never had a monopoly.


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?
Rating: 4 Votes
Posted: 16 months ago

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


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.
Rating: 4 Votes
Posted: 16 months ago

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


Rating: 3 Votes
Posted: 16 months ago

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).


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
Rating: 3 Votes
Posted: 16 months ago

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.


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.
Rating: 3 Votes
Posted: 16 months ago



Only Amazon never had a monopoly.


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

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


Publishers had no price control with the wholesale model.
Rating: 3 Votes
Posted: 16 months ago

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.


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?
-Tig

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


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.
Rating: 3 Votes

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