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Apple's New Evidence In Price Fixing Suit Shows They Knew What They Were Doing

by on15 May 2013 1546 times
14621rotten apple

Apple just will not give up in trying to get out of the pickle they are in over price fixing eBooks. Despite some pretty convincing evidence that Steve Jobs put together a new agency model with Apple at the head they are still claiming that Apple did nothing wrong. They are now trying to claim that the price of eBooks went down after their agreements with five publishers. They are also trying to throw the original publishers under the bus claiming they were already trying to hurt eBook sales long before Apple got involved.

One of the steps that Apple claims was already being used was “Windowing” This is a practice that delayed the release of eBooks to give paper books more time to sell. The problem here is that Windowing has nothing to do with pricing. Although I do not agree with the practice it is not uncommon in the industry. Companies often delay different products in the same vertical to give each more time to bring in revenue. If on top of the windowing they had also established set prices with resellers that would be different. The only thing Apple is doing here is showing they were aware of publisher concerns about eBooks and acted on it.

The second bit of evidence that Apple is trying to use is that Publishers had discussed setting a price range on eBooks and also raising the wholesale price of eBooks. Again, no dice here. The Publishers talked about doing these things, they did not implement these strategies until AFTER they entered into the agency agreement with Jobs and Apple. The fact that Apple was aware of these items is important though as it once again shows they knew the lay of the land before they began negotiations with Apple. Jobs also put them in a time crunch starting the negotiations a mere two weeks before the iPad 2 and their iBooks store launched.

The publishers involved had limited time to consider their options and already had a predisposition toward being able to set their own prices. Apple and their popular iPad (and iTunes/App Store) were a powerful lure for companies looking to find any way to recapture revenue. Amazon had made the eBook market viable for people that did not understand why they had to pay a premium price for something that only existed in digital form. Publishers feared losing more money on physical book sales on top of losing the money they expected to earn from each title. It is the same thing the movie and music industry faced before and are still facing now. Apple was a good out for the Music industry and they jumped onboard with Apple for iTunes. These publishers saw the potential money that Apple could bring them and gladly singed up.

From our conversations with iPhone/iPad accessory makers we know that Apple is a very difficult company to work with. We have heard multiple stories about how they wait to respond with design changes and how they are often arbitrary when they do some. This puts manufacturers in a constant defensive position, they are always ready to respond to Apple’s demands. They do this because the potential payoff can be massive. From these conversations we can see a pattern emerge in the way that Apple (and Steve Jobs) manipulate potential partners. We can see this pattern in the time line of the agreement Apple coordinated with the five publishers over iBooks.

Let’s not forget that Steve Jobs sent multiple emails to these publishers bringing them in one at a time. One-on-one meetings when you are dealing with multiple people is a great technique. It is often used in interrogation where you let it be known that you are talking to others, but you never reveal what is said, you insinuate and make references, but you never tell all. This is a perfect way to bring in multiple companies who are all afraid of losing money to a single competitor. It is not beyond the realm of possibility that Steve Jobs (a master at marketing and paranoid about secrecy) would have known about and practiced this technique. The email we have quoted below pretty much spells it out and all of the “new” evidence that Apple is bringing forward only serves to show that Apple used the situation to their advantage. The possibility that Apple and Steve Jobs were the ring leaders does not make the agreement any less real, if anything it males it worse.

“As I see it, [Conspiring Publisher] has the following choices:
1. Throw in with Apple and see if we can all make a go of this to create a real mainstream ebooks market at $12.99 and $14.99.
2. Keep going with Amazon at $9.99. You will make a bit more money in the short term, but in the medium term Amazon will tell you they will be paying you 70% of $9.99. They have shareholders too.
3. Hold back your books from Amazon. Without a way for customers to buy your ebooks, they will steal them. This will be the start of piracy and once started, there will be no stopping it. Trust me, I’ve seen this happen with my own eyes.
Maybe I’m missing something, but I don’t see any other alternatives. Do you?”

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Last modified on 15 May 2013
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