John Paczkowski

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Apple’s Cue Says Publishers Pushed for Higher E-Book Prices


Just days after introducing Apple’s new iTunes Radio streaming music service at the company’s Worldwide Developers Conference in San Francisco, Eddy Cue — Apple’s senior VP for Internet services and software, and its master dealmaker — appeared in a Manhattan federal court as a central witness in the U.S. Department of Justice’s e-book price-fixing case.

According to the government, Cue was the main intermediary between Apple and five major publishers, and the “chief ringleader” of an alleged conspiracy to shift the e-book industry from the wholesale pricing model established by Amazon to an agency model where publishers, not retailers, set e-book prices, sending them higher than they had been in the past. But on the witness stand Thursday, Cue maintained he was anything but.

Presented with phone records that suggested a group of five publishers were discussing among themselves Apple’s agency model proposal, Cue denied any knowledge of the communications. In fact, Cue said he didn’t even suspect the publishers might be coordinating. “I don’t believe they were working together to do the deal that I was working on, because I did those deals and I struggled and fought with them for many, many days to get them to sign,” Cue said. “And they argued different points. So if they were talking to each other, I would have assumed that I would have had a much easier time getting those deals done.”

And while the government was able to force him to acknowledge that the price of some e-books did rise after Apple opened its iBookstore, Cue remarked that this shouldn’t have been a surprise, given the publishers’ dissatisfaction with Amazon’s lowball $9.99 pricing. “They had expressed they wanted higher prices from us,” he said, reiterating what Cupertino has argued throughout this process: That it was the publishers who raised e-book prices, not Apple.

And when pressed to admit that higher e-book prices were not in the best interest of the general public, Cue refused to concede. Instead, he insisted that Apple’s entrance into the e-book market dramatically improved it. “We gave consumers great prices and a great selection of books that weren’t available elsewhere, in a better bookstore,” Cue said. “We gave them a great offer.”

Questioned by Apple’s chief counsel, Orin Snyder, on Thursday afternoon, Cue was a bit more forthcoming, bolstering Apple’s argument that it was concerned only with its own deal with publishers, and not with those of other retailers.

“My focus [on these deals] was from an Apple point of view. I [wasn’t] interested in [the publishers’] business, or how they do business with the — with anybody else. … I didn’t care at all what type of deals the publishers got or didn’t get from Amazon or Barnes & Noble or anybody else. I knew that if Barnes & Noble or Amazon were able to negotiate a better deal than I had from a consumer price point, I would get it as part of our MFN (Most Favored Nation agreement).”

And speaking directly to those MFNs, which ensured that Apple would always be able to sell e-books at least as cheaply as other retailers, Cue insisted that they were not — as the government alleges — intended to force rival e-book sellers like Amazon and Barnes & Noble to the agency model.

“We did the MFN for the purposes of being able to compete on price,” Cue said. “The MFN has nothing to do with whether you’re on an agency model or any other model. That wasn’t the goal. [That] didn’t matter to us. That’s not what we were thinking. What we were thinking is, does the MFN give us competitive pricing irrespective of whatever models Amazon, Barnes & Noble, or anybody else is in.”

Cue will return to the stand on Monday.


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Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work