Apple’s vice president of Internet Services and Software Eddy Cue retook the stand recently as he looked to add clarity to the U.S. Department of Justice allegations that the so-called agency model contracts the company signed with publishers caused an overall inflation in e-book pricing. During his testimony, Cue seemed to be in control as he put evidence from the Justice Department in perspective, including emails between himself and the late Apple cofounder Steve Jobs.
According to The New York Times, Cue said in court that Jobs was surprised that Apple was able to “create ripples” in the e-books industry, which at the time was dominated by Amazon. Jobs mentioned the following in a January 2010 email to Cue:
Wow, we have really lit the fuse on a powder keg.
The main argument in the DOJ’s case had to do with the agency contracts that Apple made with the publishing houses. The key to the government’s argument is the most-favored nation’s clause, which disallows content owners to sell e-books at another retailer for a lower price. Cue said this was put into place to protect Apple but the Justice Department asserts that this tactic destroyed Amazon’s ability to compete on price. Cue said publishers were ready to rebel against Amazon’s wholesale model by employing a windowing strategy that would delay the release of a title’s digital version until the more lucrative hardcover iteration had been on shelves for some time. Under wholesale, the Internet retailer bought content rights and sold e-books at or below cost, often at a set $9.99 price. Cue mentioned the following regarding Amazon:
Amazon could have negotiated a better deal. They had a lot more power.
Source: The New York Times