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Barnes & Noble VP delivers a bruising blow to DOJ case against Apple
Apple received a boost in its defense against the Department of Justice allegations about e-book price-fixing yesterday from a company that had already settled in the case: Barnes & Noble. The bookseller's Vice President of Digital Content, Theresa Horner, told the court that her company was in the process of negotiating agency pricing deals with publishers well before Apple came into the e-book market. The DOJ has repeatedly attempted to paint Apple as the nefarious ringleader conspiring with book publishers to raise prices on e-books. During her court appearance, Horner essentially shut down that argument by noting that Apple had nothing to do with Barnes & Noble talking with book publishers about agency pricing, which means that publishers set book prices rather than resellers. Barnes & Noble CEO William Lynch apparently proposed the idea to publishing companies in late 2009, before Apple even started negotiations with the same companies. Lynch felt that agency pricing was a must if his company was to compete and make money against Amazon's Kindle bookstore. The DOJ's case against Apple has received other blows. Penguin CEO David Shanks told the court that Apple seemed indifferent to the e-book market and was going to walk away from the market if it couldn't ink deals with publishers. Other evidence shows that even Amazon was working on the same agency pricing deals with publishers, with identical price-matching terms (i.e., other retailers couldn't sell e-books at lower prices) to what Apple and Barnes & Noble eventually achieved with their deals. Judge Denise Cote heard the case and felt before the trial that the DOJ had a strong case against Apple. Yesterday, at a point when Apple was going to demonstrate the "page curl" feature devised by Steve Jobs, Cote interrupted by saying "I have an iPad. I love my iPad. I have seen this feature." In contrast to her start-of-trial comments, Cote noted yesterday, "It seems to me the issues have somewhat shifted during the course of the trial. Things change. People have to stay nimble. I'm looking forward to understanding where we are now." The parties in the case deliver their summations today, and a ruling from the bench will be forthcoming in the future -- possibly as long as two months from now.
Apple says Department of Justice "sides with monopoly"
In Apple's eye, the U.S. government has cast its lot with monopolies. Apple's legal response to the Department of Justice lawsuit, which the company filed May 22, claims that the case against Apple and other publishers over ebook pricing is "is fundamentally flawed as a matter of fact and law." As Ars Technica points out, Apple paints itself as a savior of ebook pricing, and that its entry into the ebook market allowed growth in the industry. Furthermore, Apple says that the request for relief, as filed by the Department of Justice, is not in the best interests of the public. This relief would be doing away with the agency model pricing of ebooks and reworking Apple's deals with the publishers involved. The 31-page response can be found here. It echos earlier statements Apple made after the lawsuit was filed in April.
Ex-WSJ publisher: Apple's 30% profit sharing ebook agency model is not a conspiracy
As Apple prepares to go to trial to fight the US Department of Justice's claims that the Cupertino company conspired to fix ebook prices with publishers, former publisher of the Wall Street Journal L. Gordon Crovitz has an interesting oped in today's paper which he says that Apple's 30% profit sharing "agency model" with ebook publishers does not amount to the price fixing conspiracy that the DOJ accuses the company of. It is Crovitz's contention (as I assume Apple will also argue the same in court) that the government's assertion that the agency model is "inherently wrong" is false. The agency model means publishers, rather than resellers, set the prices of ebooks. Matter of fact, Crovitz says that Apple's agency model is not only good for Apple, but good for consumers and publishers as well, insisting that instead of conspiring to fix prices, they conspired to fix a broken ebook system in which Amazon controlled almost everything: Publishers conspired to repair an anticompetitive business model. They thought it made no sense for Amazon's Kindle to have a 90% market share and a single loss-leader price of $9.95 for consumers. They were right. Over the past couple of years, thanks to the agency model, the Kindle's market share has fallen to 60% thanks to competition from iPads and Barnes & Noble Nooks, and there is more variation in consumer prices, typically ranging from $5.95 to $14.95. Of noted interested is when Crovitz relates how he met with Apple's Eddy Cue to discuss the terms of revenue sharing for published works. Expecting a better deal than the 30% take Apple generates from apps Crovitz was a bit surprised when Cue told him, "'I don't think you understand. We can't treat newspapers or magazines any differently than we treat FarmVille." As Crovitz states: "It was a sobering reminder that traditional media brands have no preferred place in the new digital world."
Justice Department preparing Apple iBooks antitrust lawsuit
The Justice Department is reportedly preparing to go after Apple, Simon & Schuster, Hachette, Penguin, Macmillan and HarperCollins following its investigation into alleged e-book price-rigging. The case centers around a deal to switch to agency pricing, where the vendor takes a 30 percent cut of each sale, rather than the wholesale model that gives publishers more flexibility to reduce prices or even sell e-books at a loss. Some publishers are now trying to agree on a new policy in an effort to stave off the kind of federal suit that nobody wants to wear.
HP to undercut iPad price, iPad to undercut Amazon e-books prices, Courier to rule them all?
Today's Apple rumor roundup is brought to you by the word "money." First up is a piece carried by the New York Times citing no less than three people familiar with provisions that would require publishers to discount best seller e-book prices sold on Apple's iPad. In other words, below the $12.99 to $14.99 price dictated by the new agency model -- prices Amazon is being strong-armed into accepting. Apple's prices could be as low as Amazon's previously magical $9.99 price point for some titles just as soon as they hit the New York Times best-seller lists. Discounted hardcover editions could be priced at $12.99 even if they do not hit the best-seller list. The Wall Street Journal, meanwhile, has a pair of sources saying that HP will be meeting with its US and Taiwanese partners to "tweak prices and features" on its upcoming Slate. The move is meant to capitalize on a recent uptick in tablet interest with hopes of undercutting the $629 price of the similarly spec'd 3G-enabled iPad. Although it was introduced before the iPad, HP deliberatly held back on announcing a ship date or pricing so that it could tweak the Slate accordingly. Also noteworthy is renewed attention given to Microsoft's Courier. The WSJ says that Microsoft continues work on its two-screen Courier tablet at its Alchemy Ventures incubation laboratory in Seattle. However, it's still unclear whether Microsoft will launch the device.
