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06-18-2013, 02:47 AM #1
Apple's Eddy Cue Explains "Agency" Contracts and Pricing in DOJ E-Books Trial
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
06-18-2013, 06:37 AM #2
Am I the only one who thinks Amazon was the threat here? They sold books so far under retail that they lost money. They under priced retail on e-books so excessively that it hurt hardcover sales. As publishers make the wheels spin in the book world this is terrible for everyone from the writers to us the readers.
They priced everyone out of the market. Does anyone honestly believe Amazon would have kept the books at $9.99 when they monopolized the industry? When the competition was gone they would have raised the prices just the same.
What Apple did was level the playing field as now all sources for e-books are at the same price. If you want a book you're not subjected to the price based on what device you are on or where you shop. You pay for the book, not for the source of the book.
Last edited by REMED1AL; 06-18-2013 at 08:32 AM.
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06-18-2013, 09:27 AM #3
06-18-2013, 09:45 AM #4
06-18-2013, 10:25 AM #5
Threat to whom? Only to mom and pop shop that sells books.
Paying low price benefit consumers that is what everyone wants.
When in your lifetime have you wished paying more for something?
If Apple can not compete in that environment then it should have not gone into eBooks business like Jobs wanted!!!
06-18-2013, 12:22 PM #6
And, who does it threaten? Let's make this clear. Amazon posed a threat to publishers large and small, writers, consumer and other businesses (Barnes & Noble, Microsoft, Apple, Ect.) in the same market. The basic threats are...
Publishers - Amazon cut their retail prices, discouraged purchase of hard cover and of retail priced e-books. This cut's profits significantly. As a business, doing business that makes you less profitable is a bad business choice. Not to mention e-books it meant to be a side business for books not the entire business. If you side job cost you money from your full time job you'd second guess it too.
Writers - There is a lot of time, effort and personal sacrifice to create these books that are being under priced. The result of the publishers making less also means the writers will make less. Basically this is like your boss telling you to accept less for the same work b/c their going to have a sale on the item you make so it's only worth paying you half.
Consumers - On the surface paying less sounds good but if you're paying less than the product is values at you undermine the very value. If a dealership sells cars at a loss and all dealerships around them sell the same cars at retail or even at cost they will go out of business. What happens when the competition goes out of business? The consumer loses because the seller can now do what ever they want. How long do you honestly believe Amazon would continue to lose money of their products? They would do it long enough to squeeze out competition.
Other businesses - Businesses can not complete with a company who loses money to sell their stuff at the cheapest prices. What happens when you can't buy a book for you Nook unless it's through Amazon, does that hurt Barnes & Noble? Yes. The same goes for other products and other companies. Amazon under priced the e-book industry to hinder competition at the cost of the consumer, writers and the publishing companies that clearly disagreed with their pricing maneuvers but had no other options.
It's the "cheap is king" mentality that limits innovation and deters growth. Enjoy cheap while you can as it's fleeting and when it's gone you realize you have no one to blame but yourself for being ignorant and only chasing the bottom dollar rather than leaving the world as a competitive marketplace with sustainable business concepts.
Last edited by REMED1AL; 06-18-2013 at 12:35 PM.
06-18-2013, 02:36 PM #7