As part of its ongoing effort to prove that Apple colluded with publishers to raise the price of e-books across the board, the U.S. Department of Justice alleges that Apple strong-armed publishers into renegotiating their existing contracts with Amazon in order to switch over to the agency model of e-book pricing.
Apple, of course, disputes this allegation. Last week, Apple lawyer Kevin Saul said that Apple was "indifferent" to Amazon's own contracts with publishers. Apple, Saul added, merely wanted its own contracts with publishers to be flexible enough as to ensure that Amazon wouldn't be able to undercut them on pricing. As a result, Apple's contracts with the accused publishing houses included a "Most Favored Nation" clause which allowed them to match any price set by competitors.
In an attempt to dispute Apple's assertion, the DOJ this week trotted out a January 14, 2010 email from Steve Jobs to Eddy Cue regarding e-book pricing.
The email reads:
I can live with this as long as they move Amazon to the agent model too for new releases for the first year. If not, I'm not sure we can be competitive ...
Seems like a smoking gun, right?
I mean, here's an email from Jobs himself where he seemingly insinuates that Apple may not enter the e-book business at all unless publishers get Amazon to move to the agency model of e-book pricing.
Well, there's more to the email than meets the eye.
As it turns out, the email in question was nothing more than a draft that Jobs never actually sent out.
All Things D reports:
According to new evidence submitted by Apple, it's hardly warm, let alone smoking. The document cited by the government is simply a draft message that was never sent. What Apple entered into evidence late Wednesday is the final version of that message, the one that was actually sent to Cue, and it differs significantly from that apparently damning draft.
Indeed, the email Jobs ultimately sent to Cue on the matter had a completely different tone and indicates that Jobs was okay with publishers carrying on with their existing contracts with Amazon, contracts which involved the wholesale model of e-book pricing wherein retailers, and not publishers, set the prices.
The email Jobs actually sent to Cue reads in part:
I can live with this as long as they also agree to the other thing you told me you can get: The retail price they will set for any book will be the LOWER of the applicable "iTunes" price below OR the lowest wholesale price they offer the book at to anyone else, with our wholesale price being 70% of such price. For example, normally our retail price for a $26 book will be $12.99 and we will pay 70% of that, or $9.10. However, if they offer the same book to Amazon for a wholesale price of, say $12.50, then our retail price for the same book shall be set at $12.50 and we will pay 70% of that price for the book.
Based on the above, it appears that Apple was less concerned with Amazon's own contracts with publishers than they were with ensuring that they wouldn't be undercut in the e-book marketplace. In essence, Jobs here is pushing for a "Most Favored Nation" clause, not sneakily looking to get Amazon on board with the agency model of e-book publishing.
Lastly, and in what can only be characterized as a legal teaser, Fortune's Philip Elmer-DeWitt writes that he has "learned that there's a twist to the story of Jobs' Jan. 14 e-mail that's going to make for some fireworks in the courtroom when Cue takes the stand."
Well, color me intrigued.
Cue is slated to take the stand today, so we'll keep you posted as to the latest developments and/or fireworks from the courtroom.