From The New York Times:

Just days after Apple introduced the iPad and opened an e-bookstore, the biggest player in the e-book market, Amazon, changed the way it sold digital titles. Steven P. Jobs shot off an e-mail to the Apple executive who had negotiated deals with the publishers.

“Wow, we have really lit the fuse on a powder keg,” Mr. Jobs wrote in the e-mail dated Jan. 30, 2010, to Eddy Cue, Apple’s senior vice president of Internet software and services.

The e-mail was brought up as evidence during the second half of Mr. Cue’s testimony in a Manhattan courtroom on Monday, where much of the discussion focused on whether Apple intended to help the publishers raise Amazon’s prices.

Mr. Cue testified on Monday that Mr. Jobs’s e-mail was not a memo congratulating him about how Apple’s entry into the e-book market affected Amazon, causing it to switch to a business model called agency pricing, where the publishers, not the retailer, set the price of the books. Mr. Cue said Mr. Jobs was remarking on the company’s ability to “cause ripples” in the e-book industry, which was then largely dominated by Amazon.

While Mr. Cue conceded that some e-book prices had gone up as a result of agency pricing, he noted that many titles might not have become available in any digital store at all if Apple had not introduced agency pricing to the market. He said he had learned from his meetings with publishers that they were unhappy with Amazon’s uniform $9.99 pricing for e-books and that they were planning to use a tactic known as windowing — delaying the release of an e-book until after the more expensive hardcover had been in stores for a while.

. . . .

Lawrence Buterman, a Justice Department lawyer, asked Mr. Cue whether he was aware that only 37 e-books had ever been windowed.

“The number doesn’t matter,” Mr. Cue said. “What matters is which books. Thirty-seven could be a huge number if it’s the right books.”

. . . .

 On Monday, the Justice Department’s lawyers homed in on a condition in Apple’s contracts with the publishers: the “most favored nation” clause, which required publishers to allow Apple to sell e-books at the same price as the books would be sold in any other store. Apple has said this clause existed to guarantee that Apple customers got the lowest e-book prices. But Mr. Buterman argued that it defeated Amazon’s ability to compete on price, and that it left Amazon with no choice but to switch to the agency model while allowing the publishers to raise prices.

Link to the rest at The New York Times

From The Inquisitr:

The Apple e-Book pricing fixing lawsuit is currently underway and on Thursday morning Vice President for Internet software and services, Eddy Cue, testified about the company’s part in allegedly increasing the cost of e-book sales.

. . . .

Eddy Cue was responsible for negotiating publisher deals ahead of the Apple iBookstore launch in 2010. The DOJ has accused Apple of colluding with publishers to switch the e-book industry to an agency model.

. . . .

During his Thursday testimony in the Apple e-book price fixing case Eddy Cue admitted that e-book pricing increased immediately after Apple launched the iBookstore platform. Cue claims that pricing increased because publishers ”expressed to us [Apple] that they wanted higher prices.”

When asked if he thought publishers were working together in an attempt to collude over e-book pricing Cue said he wasn’t aware of any collusion.

Link to the rest at The Inquisitr

From All Things D:

So that seemingly smoking gun e-mail from Apple CEO Steve Jobs to SVP Eddy Cue in the Department of Justice’s e-book price fixing case against Apple? The one that appeared to undermine the company’s argument that it was indifferent to the pricing model publishers used with other retailers like Amazon?

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.

Crucially, it does not contain any language suggesting publishers need to push Amazon to the agency model Apple wanted for its own e-book store. Indeed, it expressly acknowledges that publishers might continue their wholesale pricing arrangements with Amazon.

“I can live with this,” Jobs wrote, “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.”

. . . .

That’s a very different message from the unsent draft showcased by the DOJ earlier today. It’s much more fully thought out; it shows Jobs concerned only about Apple potentially being discriminated against on price; it outlines the Most Favored Nation (MFN) agreements Apple would ultimately strike with publishers that ensured it would always be able to sell e-books at least as cheaply as rivals; and it omits the phrase that the DOJ presents as damning: “I can live with this as long as they move Amazon to the agent model too for new releases for the first year.”

Apple and its lead counsel Orin Snyder are undoubtedly going to have a field day with this in court tomorrow, as it speaks to their argument that the DOJ is unfairly twisting the words of Apple’s founder to build its case.

Link to the rest at All Things D and thanks to Joshua for the tip.

Here’s the key excerpt from the earlier draft email:

“I can live with this,” Jobs wrote on Jan. 14, 2010, less than two weeks before the iPad was unveiled, “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…”

PG thinks the draft vs. the sent email issue is not going to do Apple as much good as the All Things D reporter anticipates.

If both the draft and the sent email were written by Jobs, they each presumably reflect his thinking and knowledge as the CEO of Apple. If the language in the first email had been scribbled on a piece of paper and put in a file, it would help the DOJ case. The fact that it sat in an email drafts file doesn’t make any difference in its relevance.

The differences between the first and second emails could be easily explained.

Perhaps, unlike the Big Publishing CEO’s, Jobs had an idea that Apple was treading into dangerous antitrust territory and decided not to be so forthright in the email he eventually sent.

Perhaps Jobs had a face-to-face conversation or phone call with Eddy Cue, the recipient of the email, and conveyed much of the information in the draft at that time or maybe he had a conversation with someone who worked with Cue. Such a conversation would make the material in the draft redundant.

The fact that one email was sent and one was not will certainly be something Apple’s counsel will discuss at length, but each email is relevant as to what was really going on at Apple.

If PG were a diabolical character and drafted an email to a hit man describing an assassination but didn’t send it, then later sent a different email to the hit man describing the necessity of scheduling a meeting with the intended victim, wouldn’t each email tell a story? Of course. Particularly if the assassination took place.

From The Huffington Post:

Macmillan CEO John Sargent, who testified this week at a trial over alleged price-fixing of e-books, was no one’s idea of a friendly witness.

Of the five publishers the U.S. Justice Department sued last year, Macmillan was the last to settle and the most defiant. The government alleged that Macmillan, HarperCollins, Simon & Schuster, Penguin Group (USA) and Hachette Book Group illegally conspired to raise wholesale prices in an effort to help Apple make headway against Amazon in the e-books market. Speaking last month at BookExpo America, the publishing industry’s annual convention, Sargent labeled the government’s view of the e-market as “extraordinarily myopic.”

“They carried the water for Amazon, when it had 92 percent of the market,” he said, criticizing the justice department for caring more about price than a possible monopoly. “The senior guys, (Attorney General) Eric Holder, are just incompetent.”

. . . .

Sargent, 56, has said he only settled because Macmillan, owned by the German-based Holtzbrinck Publishers, was “not large enough to risk a worst-case judgment,” an opinion he clearly still held on the stand. Whether under direct or cross testimony in U.S. District Court on Monday and Tuesday, the lean, graying Sargent changed neither his posture nor manner of speaking. His dark, deep-set eyes stared right at the questioning attorney, his head was erect, chin upturned, his answers crisp and often terse.

“What I’m doing here is negotiating,” he said in response to questions from Justice Department lawyer Mark Ryan about exchanges he had with Apple over contract terms.

. . . .

Sargent acknowledged that his initial discussions with Amazon did not “go well” and that having four other major publishers sign with Apple would strengthen Macmillan’s position in negotiations. But he resisted suggestions by Justice Department lawyer Mark Ryan that he had forced Amazon to adopt the agency system. When Ryan suggested that Apple pressured Sargent into making Amazon accept agency, the Macmillan CEO said that such a scenario was “completely alien” to him.

. . . .

He called Barnes & Noble’s entry a question mark because the superstore chain had no experience designing electronic devices. Sony, an early maker of e-readers, was “clearly failing.” And Google, he said, has never showed a knack for retail.

“They’re very good at running search engines,” Sargent said.

With publishers accused of collusion on prices, Sargent found himself discussing the shifting relationships among rival houses. They might fight to sign up a given author, or juggle release schedules of popular books in hopes of gaining a coveted No. 1 spot on one of the New York Times’ best-seller lists. At other times, they are business partners with common goals, whether fighting piracy or censorship.

Link to the rest at The Huffington Post and thanks to Patricia for the tip.

PG is not familiar with the terms of the settlement agreement between any of the Big Publishers and the Justice Department. However, it is not unusual for such agreements to include an obligation on the part of the settling party to provide testimony consistent with its representations in the settlement documents.

He thinks it would be ironic if the petulant publishing CEO’s screw up and violate that obligation, thereby opening their companies back up to antitrust sanctions. Typical advice of counsel under these circumstances is that the testifying witness be absolutely neutral and cleave faithfully to the statements made in the settlement documents without any cowboying.

These folks prove absolutely nothing to anybody by acting like brats in court when they’ve already lost their case. Even your basic cocaine dealer knows better than that.

From Publishers Weekly:

Veteran Canadian publisher Kim McArthur announced late on Friday that she is closing her independent publishing house McArthur & Company. She plans to remain involved in Canadian publishing, however, as a literary agent in a new venture she and entertainment lawyer Miron Blumental are starting up, McArthur Blumental Creative.

McArthur & Company has been experiencing financial difficulties in recent years.

. . . .

McArthur stressed that she is in the process of closing the publishing house, and it is not bankrupt. “There’s none of this barricade the bomb bay doors and you can’t get at your stock or any of that kind of stuff,” she said.

McArthur plans to pitch the authors’ work to both multinational publishers in Canada as well as independents and hopes they will buy both new and backlist books . She wants to find “new homes, safe havens for her authors…. In some cases, they will be clients of the new agency, in some cases I’m doing this because [the agents and authors l have all been so patient,” she said.

. . . .

E-books are posted with various e-retailers — Kobo, Amazon, Apple, Sony, and Google, says McArthur, and she plans to leave them as they are until new publishers are found, so that the transition will be “as seamless as we can make it,” she said.

Link to the rest at Publishers Weekly and thanks to Eric for the tip.

PG says you don’t want to be published by a company that’s going out of business. Under most publishing contracts, the rights to publish your book can be sold to anybody and you lose the people who attracted to you to the original publisher in the first place.

From Digital Book World:

The DOJ suit against Apple wrapped up its first week of testimony.

. . . .

It has been fascinating to see the internal emails and discussions.
. . . .

Amazon created the modern eBook market:      Kindle was introduced in 2007. Amazon immediately grabbed over 90% of the market. Kindle proprietary files created a “walled garden” and shut others out. Once they got publishers on board, they started to demand more. Amazon played hardball with publishers and punished them by pulling titles for sale and charging below-cost for best-sellers.

Throughout the trial, concern about Amazon flexing its muscles is a common theme.

. . . .

Sony, B&N Nook and Google all fail to seriously challenge Amazon:      Sony was first in, but the store never got traction and is stuck at <1% of the market. Barnes & Noble launched the Nook and quickly grabbed 20% of the market. But they never capitalized on this share and are riddled with internal issues.

. . . .

When Google entered eBooks, many in publishing were thrilled that finally a company with sufficient resources would compete with Amazon. But after a failed experiment with Indie booksellers and other stumbles, Google remains small in eBooks. Apple’s Keith Moerer emailed Eddy Cue (Apple chief negotiator), “no one views Google as a particularly serious eBook commerce partner.”

. . . .

Apple as the “White Knight” to Amazon’s power:      Apple starts to contact publishers and states that they are going to sell eBooks and would like to have them on-board. Publishers are thrilled to have Apple open up a bookstore. But to work with Apple, it must be done the Apple way.

Apple was not interested in negotiating with publishers:

• “Maybe I am missing something, but I don’t see any other alternatives. Do you?” ~ Steve Jobs to News Corp’s James Murdoch.
• “Apple is the only other company currently capable of making a serious impact.” ~ Jobs to Murdoch.
• “Here’s the pricing I think will push them to the very edge.” ~ Eddy Cue to Steve Jobs.
• “We can not agree to your proposed changes. It needs to be if there is a lower price out there then you will match it.” ~ Apple’s Kevin Saul to Wiley’s Deidre Silver.

Apple sent out their required terms of sale and they didn’t budge.

. . . .

Apple’s attitude towards publishing can be summed up:

• “I actually think he is an idiot.” ~ Eddy Cue to Steve Jobs in reference to Harper’s Brian Murray.
• “I prevented an app from Random House from going live in the App store.” ~ Cue on how Apple finally convinced RH to join (although a year later).

Link to the rest at Digital Book World

From The Hollywood Reporter:

Scarlett Johansson is seeking to avenge the unauthorized use of her name in a French novel in a suit filed against publisher JC Lattes. She’s seeking compensation and damages from the “breach and fraudulent use of personal rights,” as well as a ban on “future transfer of rights and adaptations of the book.”

In the novel The First Thing We Look At, a woman shows up at the door of a mechanic in the northern village of Somme seeking help. At first the mechanic believes she is ‘Scarlett Johansson,’ though sixty pages later it is revealed she is not the actress but simply a doppelganger named Jeanine Foucaprez.

. . . .

“This corresponds with the fantasies of our times. All these famous people live with us,” he said, noting that many personal details of Johansson’s love life have been revealed on the Internet and the public feels as if it knows her. “But I wrote a book of fiction. My character is not Scarlett Johansson, it is Jeanine Foucaprez!”

Link to the rest at The Hollywood Reporter and thanks to Peggy for the tip.

From Fortune:

After Monday’s opening statements in the government’s federal antitrust case against Apple —  stemming from Apple’s game-changing foray into the then nascent ebooks market in 2010 — it’s apparent that the case raises novel legal questions that could well end up commanding the attention of the U.S. Supreme Court.

For casual observers of the case, this had not been so obvious before. That’s because the legal questions raised by the conduct of the five publishing companies who were also originally named as Apple’s co-conspirators and co-defendants in the case – Hachette, HarperCollins, MacMillan, Penguin, and Simon & Schuster – did not pose comparably challenging questions. (Each publisher settled before trial admitting no wrongdoing.)

Unlike Apple, the publisher defendants were charged with engaging in a horizontal price-fixing conspiracy – a well-recognized, frequently encountered, and widely condemned variety of collusive behavior. While the publishers’ motivations may have been unusual – some would argue laudable – there is much evidence that they did, in fact, collude to hike up the price of ebooks. Under Section 1 of the Sherman Act, which forbids conspiracies “in restraint of trade,” that’s hard to justify.

In contrast, though, Apple had a vertical relationship to all the other players in the alleged plot. As a result, its conduct poses far less familiar factual and legal questions. While there have been prior cases in which vertical players have participated in horizontal antitrust conspiracies, these have usually involved situations where a behemoth vertical player was the instigator and chief beneficiary of the whole scheme – the “ringmaster,” as courts have put it.

. . . .

Cue knew next to nothing about the book industry when he undertook his task in December, according to Snyder, the attorney for Apple. But one thing everyone knew by then – because it had been the subject of major articles in the Wall Street Journal and New York Times during the summer of 2009 – was that the publishing companies were, by this time, furious with Amazon about the rock-bottom $9.99 price at which it was selling the ebook versions of most of their new-releases and New York Times bestsellers.

Amazon then controlled about an 80% to 90% share of the ebook market, having helped pioneer that market with its November 2007 launch of the Kindle e-reader. Publishers sold Amazon the digital versions of their books using the same so-called “wholesale model” that they used for selling hardcover and paperback books to brick-and-mortar bookstores. Under that model, they’d sell the book to a retailer at about half the contemplated list price – say $12.50 for a hardback with a $25 price printed on the jacket –affording the retailer the discretion to determine how much of a discount they’d offer off the list price, if any.

Contemplating a retail price of about $20 for a digital book – about 20% off the standard $25 price for a new-release hardback – publishers sold ebooks to Amazon under this wholesale model for about $10. To their horror, however, Amazon resold the ebooks to the public for $9.99 — a slight actual loss or, as U.S. Department of Justice lawyer Lawrence E. Buterman put it in his opening, a “break-even” price. Buterman didn’t explain why Amazon did this in his opening, but Amazon evidently viewed the low-priced books as a way to kickstart a new market and stimulate sales of its new Kindle devices. Publishers feared, however, that such a low price would pull down the price of hardbacks and paperbacks, diminish authors’ royalties, torpedo the viability of brick-and-mortar bookstores, and possibly lead to the elimination of publishers altogether (disintermediation) as ebook distributors like Amazon would begin contracting directly with authors.

. . . .

What was less known at the time was that by the summer of 2009 the CEOs of the six major publishing companies had also begun meeting in private to discuss the future of their “industry” and what could be done about Amazon’s $9.99 pricepoint. There is evidence that they tried to keep these meetings secret, presumably out of concern that the discussions might be thought to violate the antitrust laws.

. . . .

Apple also contends that it never knew about the extent of the publishers’ horizontal collusion with one another, which seems both plausible to an extent, and implausible to an extent. Part of the problem here is that the concept of “collusion” is a funny one in the antitrust context. Whenever a traveler compares airline fares between two cities at a desired departure time, for example, he usually finds that all the key competitors charge exactly the same price – down to the penny. That’s not illegal price-fixing, so long as one Airline A set its price first, and Airlines B and C simply chose to match that fare later. If, on the other hand, all the competitors agreed beforehand that Airline A would announce its price first and that the others would then purport to “match” it after the fact, that’s illegal price-fixing. It’s a fine line for pragmatical, aggressive, business people to observe.

The government’s theory, in any case, is that once Apple did decide to get into the ebook business, it learned of the conspiracy and then exploited it. Apple gave the publishers a way to force Amazon to abandon the wholesale model, and to impose a new “agency” model on the entire ebook industry.

. . . .

The government theorizes that no publisher acting alone had the leverage to force Amazon to abandon the wholesale model, but that five major publishers acting in concert did have that leverage, and that Apple was the crucial “go-between,” “facilitator,” or “ringmaster” that could orchestrate this united effort.

Link to the rest at Fortune

From Fortune:

A subtle but potentially important shift took place Thursday in the Manhattan federal courthouse where U.S. District Judge Denise Cote just wrapped up the first week of what is expected to be a three week trial for the civil antitrust case known as U.S.A. v. Apple.

One of the central questions in the case is whether Apple executives told the six biggest book publishers they had to change the way they did business with Amazon or whether the publishers came to that conclusion because of the clever way Apple structured its contracts.

. . . .

On Thursday, Laura Porco, one of the Amazon executives who negotiated deals with book publishers, submitted a written statement that strongly suggested the former. In it she testified that the week before Steve Jobs announced the iBookstore, five of the six major publishers told her that “they were requiring Amazon to switch its terms … because that’s what Apple required them to do.”

. . . .

But before Porco was allowed to leave the witness stand, Judge Cote, who alone will decide the non-jury case, had a few questions.

She zeroed in on the next sentence in Porco’s written testimony:

“[The publishers] said their agreement with Apple included restrictions around consumer pricing that made it technically impossible to remain on reseller terms with Amazon or any other retailer.”

Could those “restrictions” be what the publishers were referring to when they said Apple “required” them to change their terms? Judge Cote asked Porco. In other words, were the publishers’ longstanding deals with Amazon off because of the structure of their agreement with Apple, not direct instructions from Apple?

. . . .

In questions that grew increasingly hostile, and at times almost brutal, Apple’s lawyer got Turvey to admit that he couldn’t remember the names of any of the publishers who told him Apple “did not allow” wholesale. He couldn’t remember any of the phone calls or meetings when the conversations took place. Had no notes to support his recollection.

Link to the rest at Fortune and thanks to Joshua for the tip.

PG cautions that trying to read the tea leaves of a judge’s questions is an unreliable exercise and witnesses become confused during cross-examination on a regular basis.

From The San Jose Mercury-News:

The chief executive of publisher Penguin testified Tuesday that a provision in its e-books contract with Apple played a role in a decision to change its contracts with other retailers, such as Amazon.com Inc.

The testimony of David Shanks appeared to bolster the U.S. government’s case that Apple conspired with five publishers, including Penguin, to fix prices in the developing e-books market in 2009 and 2010.

Shanks, the CEO of Penguin Group, said a clause in Apple’s contract allowing it to match the lowest prices for e-books sold by rivals was “certainly a factor” in seeking to move other retailers including Amazon to an agency model, in which publishers control prices.

. . . .

In several hours of testimony, Shanks said he was concerned by the low prices being offered by Amazon, which he said was one of Penguin’s biggest customers for books in 2009 and which also accounted for about 90 percent of its e-book sales.

Shanks said Amazon’s strategy of pricing new releases and best sellers at $9.99 threatened to disrupt a “delicate ecosystem” in which people who wanted to pay less for books waited until after the hardcover release.

“What transpired was by having e-books now at $9.99, it was cannibalizing hardcover editions, which sold on average at $26,” Shanks said.

Link to the rest at Mercury-News and thanks to David for the tip.