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Thread: Apple's Eddy Cue Explains "Agency" Contracts and Pricing in DOJ E-Books Trial

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    Default 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.
    Cue said that this comment was in a congratulatory nature, but instead pointed to the impact that Apple’s ongoing negotiations with five major U.S. book publishers were having on the sector. The Apple executive did admit that e-book prices did rise after the company entered the market with its agency model contracts but noted that the strategy allowed a number of titles which may have never been made into e-books to be sold in the digital marketplace.

    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.
    We’ll have to see how the arguments in the court case continue to unravel by waiting.

    Source: The New York Times

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    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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    Quote Originally Posted by REMED1AL View Post
    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.
    Agreed.
    Amazon is behind all this, in the corner crying.

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    Quote Originally Posted by REMED1AL View Post
    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.
    That's pretty much how I see it. But Cue is right. The publishers probably would have gone to a "windowing" structure much like how the movie industry does it. The book is released as a hardcover, then a few months later it is released as an ebook. If Apple hadn't come along and allowed it's deal to be used as a bargaining chip with Amazon, the publishers would have used the threat of a windowing structure to try and broker a better deal. It was gonna happen one way or the other. The way it happened brought ebooks to the mainstream, whereas the windowing structure or the publishers brokering a deal by themselves would have done nothing for the ebook market's move to widespread acceptance.

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    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!!!

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    Quote Originally Posted by unison999 View Post
    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!!!
    WOW. Consumers pay more for things all the time. It could be the difference in shopping at a nice grocery store and buying the same cereal for more. Not everything is about the bottom dollar and people need to stop chasing the cheapest choice b/c it does little more than result in a cheaper product.

    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.

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    Quote Originally Posted by REMED1AL View Post
    WOW. Consumers pay more for things all the time. It could be the difference in shopping at a nice grocery store and buying the same cereal for more. Not everything is about the bottom dollar and people need to stop chasing the cheapest choice b/c it does little more than result in a cheaper product.

    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.
    "cheaper" does not necessarily mean "lower prices", more accurately it should be "lower price for per-unit of product or service". So, there is no problem at all with the "cheap is king" mentality. A good innovation can improve the quality of the product or the efficiency of the production. And, more importantly, when you say "sustainable business concept", don't simple-mindedly translate it into "more earnings for doing the same nothing-but-babbling all day long", how about accelerating the movement of every part of your body, including your brain, so that everyone can create more value to the world every minute and hour and day and year, not a list of people sitting at a privileged position trying to exploit other people in the world!

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