The Apple E-book Trial

[LazyLion]

A US government lawyer accused Apple Monday of concocting a deliberate scheme to fix prices of electronic books as the antitrust trial against the tech giant got underway.

"Apple knowingly and intentionally committed to a common scheme of publishers to raise prices," Justice Department attorney Lawrence Buterman told the court in an opening statement that laid out the government's case.

There was a "deliberate scheme by Apple" to "fix prices" in concert with major book publishers, Buterman said at the New York federal trial.

The alleged conspiracy cost consumers hundreds of millions of dollars in higher book fees, according to the government. The price of e-books soared right after Apple launched its iPad in 2010, the government alleged before a packed courtroom.

Apple attorney Orin Snyder said however that "the government has reverse-engineered a conspiracy" and that Apple was simply competing in the marketplace.

"Apple's intent was not to upend pricing paradigms throughout the industry, but to build the best bookstore and make sure prices were competitive," Snyder said in his opening comments.

US antitrust watchdogs have accused Apple of orchestrating a collusive shakeup of the electronic book business in early 2010 that resulted in higher prices. Apple denies that it conspired with publishers and maintains that it was a new entrant in a sector that at the time was dominated by Amazon.

Witness testimony got underway after Monday's opening statements with Apple associate general counsel Kevin Saul acknowledging to a government attorney that an initial Apple proposal included a provision that said publishers must move all book sellers to a different selling system. Saul's testimony will resume Tuesday and will include a rebuttal from Apple's attorneys.

The California technology giant is on its own in its fight against the US Justice Department, after five of the world's biggest book publishers named in the suit settled the charges and paid fines.

The civil trial is expected to last three weeks, and comes with Apple under pressure for its slumping share price, eroding market share for its iPhones and iPads and accusations in Congress it avoided billions in taxes.

Buterman's statement depicted Apple as the ringleader in a conspiracy that met the publishing industry's wish of ending Amazon's domination of e-books that limited the price of most best-sellers to just $9.99.

After Apple joined the market with its iPad and online bookstores, many of these books shot up to $12.99 or $14.99, according to the government.

Apple negotiated a different pricing system with the publishers whereby Apple as the seller received a 30 percent commission on sales. The other key point was an agreement that allowed Apple to match a lower price if a competitor cut prices.

The government maintains that Apple worked closely with the publishers as they pressured Amazon to accept the different model and effectively create a new, higher pricing range for electronic books.

The government's case will cite electronic messages and public and private comments, including some remarks from late chief executive Steve Jobs that the government says proves a conspiracy.

But Apple argues that the Jobs remarks and many other points of evidence are taken out of context. Apple acted out of self-interest and often in conflict with publishers with which the negotiations were contentious.

For example, Snyder cited correspondence between Apple and HarperCollins that showed sharp disagreement on the terms of the deal and undermine the conspiracy theory. Apple argues that it is not responsible for Amazon's decision to raise its prices.

"Apple cannot be held liable for business decisions made by other players as a result of its entry," Snyder said.

And he argued that after Apple entered the market for ebooks, "prices went down, not up."

Before his opening remarks, Snyder expressed concern following US Judge Denise Cote's comments last month that she tentatively supported the government's case. Cote will decide the non-jury trial.

But Cote assured Snyder that she has an open mind on the case.

"The deck is not stacked against Apple unless the evidence stacks the deck against Apple," Cote said.


Source : Sapa-AFP /mjs
Date : 04 Jun 2013 00:53

 

[Avenue]

I don't like Apple but im with them on this. If apple didn't do this, Barns and noble, kobo and a lot more players would be out of business.

 

[Albereth]

This thing sounds so stupid.

Apple told 5 publishers that they want 30% of whatever the price the publisher set.

Maybe 30% is more than Amazon are taking but then iPads are nicer than Kindles and maybe Apple can get the premium because of that.

So prices when up - doesn't mean that it anything more than supply and demand in action

 

[Demon7]

This thing sounds so stupid.

Apple told 5 publishers that they want 30% of whatever the price the publisher set.

Maybe 30% is more than Amazon are taking but then iPads are nicer than Kindles and maybe Apple can get the premium because of that.

So prices when up - doesn't mean that it anything more than supply and demand in action

after five of the world's biggest book publishers named in the suit settled the charges and paid fines

The above suggests something different.

 

[LazyLion]

queue all the Apple apologists....

 

[Avenue]

The above suggests something different.

There is more to it.
Amazon used the wholesale pricing model where a publisher would set the RRP lets say $15 and sell it to the retailer for $10. The retailer could then charge whatever they wanted- $11, $15, $20.
Unfortunately what Amazon did was undercut everyone else by selling ebooks at a loss. So they would pay $10 for an ebook and sell it for $7.

Apple came along and, not wanting to have to make a loss in order to compete, pushed for the agency model pricing. This is where publishers set the price and the retailers gets a 30% cut of the sales price regardless of what the book sells for.


With the big 5 publishers on board, they went to Amazon demanding the same model or they would pull their products. Amazon reluctantly agreed.

Now the DOJ is saying that books were selling on amazon for $7 are now selling for $13. What they're not taking into account is that a $7 book is not sustainable, and as soon as Amazon put the other stores out of business, they would have pushed up the prices anyway.
They're also saying that by publishers setting the price, stores cannot compete on price, giving the public better deals. Which is fine if there are other companies who are able to compete with Amazon, but besides for apple there is no one else. If the wholesale model continued within 2 years Barns and Noble, kobo and 100 other ebook stores would have closed down.

 

[Demon7]

well clearly it is not as simple as you put it, and they are not as innocent as you claim them to be....
Why would the publishers, if they did nothing wrong, acknowledge that they did, and take the punishment, which in this case, was a fine?

Only Apple are disputing the charge... perhaps because the damage to their image would be for more costly than the actual fine?

 

[Avenue]

It is as simple. Go do some research.
The suit is against Apple and the publishers for conspiring. They used their combined weight to push for change, A change that on the surface resulted in higher pricing, which they're not allowed to do.

But no, the publishers aren't entirely blameless- Most publishers make a loss on ebooks, and so they don't want the prices to sell for less than a certain amount, or that eats into the sales of their print books. The agency model ensures they can control the pricing.
Apple used this knowledge to their advantage, but in the end it was the best move for the industry.

 

[Demon7]

But what of the consumer?

Yes I understand competition is healthy and that it is good to not create an environment where a monopoly can be established, but how different is that to when the monopoly is an agreed group of companies?

 

[Avenue]

In this instance, Apple has shown that since they introduced their model, prices have in fact come down. Yes a different kind of monopoly has been created, but it isn't really a monopoly. The reason for this is that those 5 publishers only control a smaller portion of the total ebooks available. Most ebooks are indie authors and author backlists charging something like $1 a book and creating a culture of lower prices. This forces the publishers to rethink their pricing.

 

[LazyLion]

Apple was accused of being a "facilitator" and "go-between" of a publishing industry shift that led to higher e-book prices, in testimony on Tuesday in a US antitrust trial against the firm.

David Shanks, chief executive of Penguin USA, confirmed his characterization of Apple during the first full day of testimony in the three-week trial.

The government says Apple was a ringleader of the major publishing houses in a conspiracy to lift the price of best-selling e-books from the $9.99 charged by Amazon, which dominated the sector before Apple's entry in early 2010.

The case centers on an intense month and a half of negotiations between Apple and the six largest US publishers ahead of Apple's January 2010 launch of its iPad and the announcement of its e-bookstore.

Prior to then, the publishers sold books to Amazon and other online booksellers through a "retail" model in which the retailer set the price.

After Apple's entry, the industry shifted to an "agency" model, where the publisher sets the price and the online bookseller receives a 30 percent commission.

The government contends that this shift, orchestrated by Apple and imposed on Amazon and other booksellers, ended the days of Amazon's $9.99 online bestsellers and cost consumers hundreds of millions of dollars.

Apple has argued that its interests were in conflict with those of the publishers and that the negotiations were contentious.

Apple insists its updates to the publishers on the overall status of the negotiations were not evidence of collusion, but a pressure tactic to get other publishers to join.

Shanks said publishers were afraid Amazon's low pricing was "cannibalizing" the sector's profit structure, which rests on selling paperback bestsellers about a year after the hardcover version to appeal to cost-conscious customers.

By selling the books for $9.99 right after publication, Amazon threatened "the fairly delicate ecosystem" in publishing, Shanks said.

He recalled that he was "very excited" at news of Apple's interest in bookselling because of the opportunity to reach tens of millions of additional customers.

In an email presented by the government, he also effused that the Apple deal would allow Penguin to "take control" of the e-book price.

During cross-examination with Apple, Shanks said he never heard Apple refer to itself as a "facilitator" or a "go-between." Shanks also said he did not characterize Apple in this manner during the talks with the technology giant.

The government presented an email sent from Shanks to Apple's chief negotiator in which the Penguin executive reported reaching a groundbreaking agreement with Amazon to shift to the same pricing system Apple implemented.

The email, sent at 3:00 am, disclosed non-public information to Apple about an Apple competitor, said Mark Ryan, an attorney for the government.

"Great news and congratulations!!!," Apple executive Eddy Cue wrote back to Shanks.

Shanks said the private email was a heads-up given the Penguin-Apple deal, in which Apple had the right to match the price of any book that Amazon or another competitor offered.

The Amazon-Penguin deal would have allowed Apple to raise prices.

During cross-examination, Shanks described Apple as a tough negotiator with a "take or leave it" approach to entering the book business.

"I did not get the deal that I wanted, but I wanted to be sold to the Apple customers," Shanks said.

In earlier testimony with Apple associate counsel Kevin Saul, the government presented a letter from Apple to the publishers that included a provision for the publishers to move to the agency model with other booksellers.

Saul testified that this provision was quickly discarded because it did not meet Apple's business objectives.

The government also presented a written exchange between Saul and a negotiator from Wiley books in which Saul suggested Wiley could shift to the agency model with other retailers.

"I was negotiating a term," Saul said. "It was absolutely not a condition."


Source : Sapa-AFP /mjs
Date : 05 Jun 2013 01:49

 

[AlphaJohn]

You keep on talking about people making a loss.

It's Ebooks not paper so there is no cost but Licence fees and maybe advertising, and a publisher negotiate that part in their contracts. Also most publishers do not pay per book to the Author, they pay X amount for a book or number of future books to be written.

 

[Avenue]

Also most publishers do not pay per book to the Author, they pay X amount for a book or number of future books to be written.

They give an author an advance- lets say 10,000 dollars when they accept a book because it could take up to a year before its printed. Think of this as a loan on his royalties. Once the book is selling, the author earns say 10% of the cover price of a book, but he first has to pay back the advance. Once he has sold enough to cover his advance, he then can start claiming his royalties.

But lets say a book sells for $10 this is a break down of the expenses-
$1 - printing costs
$1 - publishers profit
$1 - marketing
$1 - Authors royalties
$1 - publishing costs- editing/cover design etc
$5 - retailer profits

You keep on talking about people making a loss.
It's Ebooks not paper so there is no cost but Licence fees and maybe advertising, and a publisher negotiate that part in their contracts.

At the moment the publishers are still selling more physical books than ebooks. This introduces a dilemma. Lets say book x will sell 10,000 copies. To print that many will cost them $1 each. But now lets say 3000 of those are ebooks, and they're only printing 7000 copies. All of a sudden those 7,000 cost $2 each. So now they are paying 4000 dollars more for less books. Therefore the ebooks are saving them $3000 printing costs, but they're still making $1000 less.

On top of that, something like 80%-90% of the books they sell will not earn out their advances, so they're making that loss on books they're not actually making any profit on.

Publishers also make most of their profit on Hard covers, where their profit margins are bigger than the usual 10%, but an ebook is an ebook. So they're losing out an additional say 10%

There are many factors like this to take into consideration, but until things swing around and ebook sales are the big majority of total sales, they're going to continue costing publishers money. That's why sometimes you will find that ebooks are more expensive than the physical book. Just because they've factored in all these additional costs.

 

[noxibox]

Then they should be pushing up the price of printed books.

I think it may be difficult to make the case against Apple, but any publishers still fighting are almost certainly going to lose if there was any communication between them to organise a change in pricing.

 

[LazyLion]

Apple attorneys in the US antitrust case on e-books went on the offensive Thursday, attacking the credibility of government witnesses and seeking to debunk key elements of the government's case.

Apple attorneys grilled a trio of witnesses from Apple rival Amazon and undertook a bruising cross-examination of a Google executive.

Apple attorney Howard Heiss peppered Amazon executives during a series of contentious exchanges with skeptical questions on Amazon statements about its business profile and pointed out inconsistencies between Amazon testimony and documentary evidence.

Amazon is very "metrics-focused," Heiss said to Amazon's vice president for Kindle Russell Grandinetti during a cross examination.

Grandinetti had previously testified that he did not know Amazon's market share of the e-books market.

"We were a very large seller of e-books," Grandinetti said, while denying he could estimate Amazon's market share.

Heiss then presented a news article quoting another Amazon executive estimating the company's market share at 70-80 percent.

Amazon is a key witness in the government's case, which maintains that Apple conspired with publishers to orchestrate a transformation of the e-book market in early 2010 that cost consumers hundreds of millions of dollars.

In entering the market, Apple signed a series of "agency" model contracts with publishers, in which publishers set the price and guaranteed Apple a 30 percent commission.

Prior to Apple's entry, the e-book industry was dominated by Amazon and run on a "wholesale" model where retailers set the prices. Amazon charged $9.99 for bestsellers prior to Apple's entry into the market.

Part of the government's case is that Apple and publishers forced Amazon to switch to the agency model, resulting in higher prices.

Apple attorneys sought to show that Amazon faced an increasingly difficult market in late 2009 and early 2010 in which publishers were already planning hardball tactics -- even before Apple's entry.

Amazon's pricing model was unpopular not only with publishers, but also with agents and authors who worried about the erosion of intellectual property.

Grandinetti confirmed that by the end of 2009 four of the "Big Six" publishers announced plans to "window" bestselling books, meaning they would delay release of the Amazon e-book for a period of months until after the release of the physical book.

As five of the major publishers signed agency models with Apple, they contacted Amazon to renegotiate terms.

The first negotiation was with MacMillan Chief Executive John Sargent, who presented Amazon with the choice of shifting to an agency model or accepting a wholesale model with windowing for seven months.

"We expressed quite strongly how unpalatable the choice was," Grandinetti said of his encounter with Sargent. "The meeting was very tense."

Amazon initially tried to punish MacMillan by removing the "buy" button from MacMillan titles.

But Amazon ultimately capitulated after three days and quickly negotiated the agency model with MacMillan.

Soon after that, Amazon negotiated similar contracts with the other four publishers.

Apple attorneys sought to show that Amazon's shift to the agency model was its own decision and not orchestrated by Apple.

But Amazon officials testified that the publishers were forcing the change at Apple's behest.

Laura Porco, who was director of Amazon's Kindle Books at the time, told the court in a written declaration that the publishers informed Amazon that they were switching to agency "because that's what Apple made them do."

Porco told the court Thursday she was "alarmed" when the publishers demanded agency from Amazon.

"I felt like we were being pushed into something that was really terrible for consumers," Porco said.

Following Porco's testimony, Apple attorney Orin Snyder aggressively questioned Thomas Turvey, an executive in Google's book selling division.

Turvey said in a written deposition that publishers told him that they could not accept wholesale terms with Google because of their terms with Apple.

During the testimony, Turvey was unable however to name a single publishing executive who said this.


Source : Sapa-AFP /mjs
Date : 07 Jun 2013 04:53

 

[Avenue]

"I felt like we were being pushed into something that was really terrible for consumers," Porco said.

Like they were valiant knights, doing this for the well being of the consumer.

 

[LazyLion]

US Govt blames Apple in Ebook Trial

A Justice Department lawyer urged a judge Thursday to find that Apple Inc. conspired with publishers in 2010 to raise electronic book prices, while an attorney for the computer giant warned that such a finding in the civil antitrust case would set a "dangerous precedent" for businesses.

Justice Department lawyer Mark Ryan said the government had proven overwhelmingly through testimony and evidence offered at a three-week trial in U.S. District Court in Manhattan that Apple conspired with publishers to boost e-book prices above the $9.99 bargain price that the Seattle-based Amazon.com had established for the most popular electronic books.

He said publishers were eager to force Amazon to raise prices when Apple approached them in December 2009, beginning talks to boost prices of many books to $12.99 and $14.99 over the next year.

"The publishers were unwilling to take Amazon on alone," Ryan told U.S. District Judge Denise Cote.

Ryan said the plan "succeeded quite well," with substantial price increases for e-books.

But Apple attorney Orin Snyder told Cote earlier that she would set a "dangerous precedent" if she concluded Apple manipulated e-book prices as it entered a market new to the company. He said Steve Jobs, the late founder of the Cupertino, California-based corporation, had no interest in the e-books industry in mid-2009, when one of his top executives convinced him it would be worthwhile.

"Apple did not conspire with a single publisher to fix prices in the e-book industry," Snyder said. "Apple acted lawfully and did not violate the antitrust laws."

He asked Cote - who had urged Apple before trial to settle - to "take a fresh and open look" at the evidence, which included testimony from executives for Apple, publishers and Amazon.com.

"The government has overreached and now is asking this court to draw inferences and make factual findings that cannot be supported," Snyder said.

Snyder said e-book competitor Barnes & Noble was acting in 2010 in a similar fashion as Apple to compete with Amazon because competitive forces in the industry required it.

The trial stemmed from an antitrust lawsuit that the government brought last year against Apple and major publishers. The government has reached settlements with five publishers.


Source : Sapa-AP /mv
Date : 21 Jun 2013 00:48

 

[LazyLion]

Publishers object to remedy in Apple ebook case in NY

Publishers who have settled an electronic book pricing dispute with the federal government say they object to penalties the government wants to impose on Apple Inc.

A judge ruled in an antitrust case last month that Cupertino, California-based Apple had joined a conspiracy to drive up the price of e-books. The trial revealed e-book prices rose after Apple signed so-called agency agreements with publishers that took effect in 2010. In such agreements, publishers set prices for each title, rather than retailers.

The publishers submitted papers Wednesday in federal court in New York that challenge the government's proposed remedy against Apple in the case.

The government seeks to ban Apple from entering into agency agreements for five years. The publishers say that penalizes them, not Apple.

The Justice Department did not immediately comment Wednesday.


Source : Sapa-AP /ma
Date : 08 Aug 2013 02:16

 

[LazyLion]

Judge denies Apple request in ebook case

A judge has refused a request by Apple to temporarily suspend her ruling that it violated antitrust laws by conspiring with publishers to raise electronic book prices in 2010, and she said it appeared collusion was continuing even after her findings.

U.S. District Judge Denise Cote, ruling Friday from the bench in Manhattan, declined to withdraw the effect of last month's ruling while Cupertino, California-based Apple Inc. appeals.

The judge said she wasn't ready to rule on the government's suggested remedies to eliminate antitrust behavior. She seemed dismayed as she noted that the publishers and Apple seemed to express together their opposition to some government recommendations, "reflecting a seriously continuing danger of collusion."

Apple, the maker of iPods, iPads and iPhones, continues to fight what it calls "false accusations."

The judge ruled last month that Apple had conspired with publishers to spoil the $9.99 e-book price Amazon.com had established. That ruling sided with government regulators' contention that Apple joined five major book publishers to gang up on Amazon to the detriment of consumers.

Apple, determined to protect one of the world's most beloved brands, has steadfastly denied it did anything wrong, even as the book publishers involved in the case settled to avoid going to trial.

The trial revealed e-book prices rose after Apple signed with publishers so-called agency agreements, in which publishers rather than retailers set prices for each title.

Earlier this week, publishers that have settled the e-book pricing dispute with the federal government objected to penalties the government wants to impose on Apple, saying they'll hurt publishers rather than the personal electronics company.

In court papers submitted on Wednesday, five publishers said the government's plans to ban Apple from engaging in agency agreements for five years wouldn't restrict Apple's pricing behavior.

"Rather, under the guise of punishing Apple, they effectively punish the settling defendants by prohibiting agreements with Apple using an agency model," lawyers for the publishers said.

As recommended by the government, a court order would require Apple to terminate any agency agreement with publishers.

The judge said Friday that any order she signs will be aimed at getting "us to a world" in which a publisher can negotiate independently with a retailer. She said it was clear that the largest book publishers don't engage in price competition with one another.

The publishers said the proposed remedy conflicts with consent decrees the publishers agreed to when they settled their cases with the government. Those deals permit the publishers to enter agency deals with e-book retailers with some agreed-to limitations.

The publishers said the Department of Justice "induced publishers to enter these agreements on the condition that publishers could continue to use the agency model." As a result, the court papers said, the publishers entered agency agreements with Apple and other e-book retailers under the agency model. Breaking those deals would be costly and disrupt business, they said.

The court papers were submitted on behalf of HarperCollins Publishers LLC, Hachette Book Group Inc., Simon & Schuster Inc., Holtzbrinck Publishers LLC and Penguin Random House LLC.

A Department of Justice spokeswoman has said the proposed settlement with Apple would prohibit the company from entering deals that limit retail price competition during a defined period.


Source : Sapa-AP /ma
Date : 10 Aug 2013 07:55

 

[zippy]

Consumers benefit because e-books are still cheaper.

Nothing but commercial reality forced publishers to accept Apple's terms. Buyers and sellers agreeing on a price is not collusion. Its a contract. They could have resisted and stayed with Amazon. iPad users can download the Kindle app to read Amazon's e-books.

I usually first look on Amazon because they are cheaper than iBook. I have more kindle books than I have iBooks on my iPad. The only reason I would prefer an iBook version is if it had some multimedia in it and thought that would be of value.

Hopefully this will result in them being even cheaper.