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The DOJ is calling Apple the "ringmaster" in the creation of this price-fixing scheme

The U.S. Department of Justice (DOJ) says an old email written by former Apple CEO Steve Jobs proves that the company was the "ringmaster" in the e-books price-fixing scheme.

A recent government filing revealed an old email (dated in 2010) from Jobs to James Murdoch of News Corporation, which said "Throw in with Apple and see if we can all make a go of this to create a real mainstream e-books market at $12.99 and $14.99.”

According to the Department of Justice, this email is evidence that Apple led the e-book price-fixing arrangement. The DOJ also said that this arrangement forced Amazon to raise its e-book price from $9.99 to the higher price mentioned in Jobs' email. Many publishers were onboard with this, but it ended with higher prices to consumers and dishonest profits for Apple and these publishers.

In addition to the email, there are statements from publishers saying that Apple bullied them into the e-books price-fixing situation. For instance, Jobs told Random House CEO Markus Dohle that his company would lose support from Apple if it didn't make a quick decision about joining back in 2010. Furthermore, Apple threatened to block an e-book application by Random House from Apple’s App Store if the publisher didn't agree to a deal with Apple.

The government filing also mentions that Penguin CEO David Shanks said Apple was the facilitator between publishers when making the agreement.

What does Apple have to say about all this?

“We helped transform the e-book market with the introduction of the iBookstore in 2010, bringing consumers an expanded selection of e-books and delivering innovative new features,” said Tom Neumayr, a spokesman for Apple. “The market has been thriving and innovating since Apple’s entry, and we look forward to going to trial to defend ourselves and move forward.”

Apple is set to go to trial June 3. It was initially the target of the e-books investigation along with Hachette Livre (Lagardère Publishing France), Harper Collins (News Corp., U.S.A.), Simon & Schuster (CBS Corp., U.S.A.), Penguin (Pearson Group, United Kingdom) and Verlagsgruppe Georg von Holzbrinck (owner of inter alia Macmillan, Germany), but all the book publishers have already settled with the DOJ.

Back in April 2012, the U.S. Department of Justice (DOJ) sued Apple and the five book publishers over anticompetitive practices concerning e-book sales. The book publishers were accused of partaking in an agency sales model with Apple, which meant that publishers were allowed to set the price of a book and Apple would take a 30 percent cut. In addition, the publishers could not let rivals sell the same book at a lower price.

Traditionally, publishers sell physical books to retailers for about half of the cover price, which is considered a wholesale model. Retailers then had the ability to sell those books to customers for a lower price if they wanted to.

But when e-books came along, this model was challenged. Amazon started selling best sellers for as low as $9.99 to encourage its Kindle e-reader sales. Publishers were not happy. 
Apple then came along with iBooks, and publishers began to worry that it would take over the book industry the way Apple's iTunes took over the music industry, where customers would choose to purchase cheap, digital books instead of physical books.

However, Apple attempted to resolve this when it struck a deal with publishers to implement the agency model in 2010. This helped Apple at the time of its iPad and iBooks launch. But its deal with publishers made it seem like an attempt to thwart Amazon's dominance.

Sources: The New York Times, Reuters

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Why iBooks anyway
By rcarroll05 on 5/15/2013 11:02:44 AM , Rating: 5
Why would I buy a book on iBooks when I can only read it on an apple device? Buy it on kindle and then read it on any device. Android, iOS, windows, Mac and I assume blackberry has a kindle app too.

RE: Why iBooks anyway
By bug77 on 5/15/2013 11:22:28 AM , Rating: 2
I just went with Kobo. Not a trace of lock-in.

RE: Why iBooks anyway
By GulWestfale on 5/15/2013 11:46:03 AM , Rating: 2
there is a kindle app for iOS, but you can't buy books through it, only read what you already own. this is due to apple wanting a share of profits from books sold through the kindle app, and amazon -obviously- refusing.

a tip: if you want books that you can read anywhere, anytime: but from smashwords. their catalog is a bit on teh small side, but their books can be downloaded in any format, for any e-reader (or even be read online in a browser0 and are always DRM-free.

RE: Why iBooks anyway
By bug77 on 5/15/2013 12:30:08 PM , Rating: 2
I just opted for the Kobo because it doesn't have any DRM (I don't think it even supports DRMed formats). I don't buy many ebooks, I still like a real library better.

RE: Why iBooks anyway
By BRB29 on 5/15/2013 12:56:15 PM , Rating: 5
you can buy kindle books on iOS. It's called a browser.

RE: Why iBooks anyway
By CZroe on 5/15/2013 2:20:09 PM , Rating: 3
Yeah. I always thought it was funny that I can order a pizza from Dominoes or Pizza Hut in the iOS app and Apple doesn't get their 30% cut but I can't buy Amazon eBooks.

RE: Why iBooks anyway
By Fritzr on 5/16/2013 1:55:02 AM , Rating: 2
To buy Amazon books ... use browser to go to Amazon bookstore ... Use the Kindle app to *read* your books
To buy any third party book ... use browser to go to bookstore/archive/library ... download the book & use an ereader app such as Kobo, iBooks or other application that can read ePub & whatever proprietary format is needed for those rare books that cannot be found in ePub.

B&N for example sells "Nook" format. Nook==ePub

Avoid bookstores like the iBookstore that use a proprietary DRM or install the appropriate DRM remover on your computer and unlock the books that are only available in a DRM version

Tor is DRM free

Baen is DRM free & even has a FREE library on their site.

When you can't avoid DRM
Start here:

For iBooks (which Calibre can not currently unlock)

Enjoy the world of vendor independent eBooks with an eReader that is selected according the user's unique needs and is not selected based on the store where the books are found. Make sure any eReader selected can handle ePub even if your preferred store defaults to something else as that is the default cross platform format today.

Disclaimer: I use iBooks on an iPod Touch ... I have 1 book from the iBookstore that was a free offer. The other 700 are from Baen, Tor, Project Gutenberg, B&N, Internet Archive, Sigil (I created my own version of an unavailable title) and other Apple unrelated sources.

RE: Why iBooks anyway
By Motoman on 5/15/2013 12:56:16 PM , Rating: 5
For the same reason that people use iTunes, buying music and such that can only be played through Apple software with massive DRM and therefore unshareable/usable on anything else.

Because people are stupid.

RE: Why iBooks anyway
By Shadowself on 5/15/13, Rating: -1
RE: Why iBooks anyway
By Motoman on 5/15/2013 8:27:31 PM , Rating: 1
...the degree to which you're lost is staggering.

You can only play iTunes-bought crap through iTunes. And only on devices that are registered to *your* iTunes account. And there's even a limit to how many devices you can have attached to your iTunes account. exactly is that not DRM? iTunes is the most DRMd thing on the planet.

RE: Why iBooks anyway
By wookieiscool on 5/16/2013 12:14:48 AM , Rating: 1
You are partially wrong, the music purchased from iTunes has no DRM. I am not sure about books and to be honest, I don't care. Movies are DRM as far as I know, I am unsure about TV episodes but I assume they are as well. I am however, 100% certain that the music is DRM-free. Which makes you wrong. :)

RE: Why iBooks anyway
By Cheesew1z69 on 5/16/2013 12:21:27 AM , Rating: 2
Products Affected
iTunes, iTunes Store

What is iTunes Plus?
iTunes Plus is the new standard on iTunes. iTunes Plus downloads are songs and music videos available in our highest quality 256 kbps AAC audio encoding (twice the audio quality of protected music purchases), and without digital rights management (DRM). iTunes Plus music can be burned to CD as many times as you need, synced to any AAC-enabled device (such as iPod, iPhone, or Apple TV), and played on any Mac or Windows computers you own.

RE: Why iBooks anyway
By TakinYourPoints on 5/16/2013 3:13:08 AM , Rating: 3
Incorrect, music bought through iTunes does not have DRM, nor does it require an Apple device to play. iTunes was the first store to drop DRM for music, mostly because of pressure from Steve Jobs:

EMI was the first label to go along with it, and other record labels followed shortly after. Amazon followed with no DRM after Apple did.

Publishers and labels set the terms for wholesale prices and DRM restrictions, not Apple or Amazon. The best Apple and Amazon can do is use their leverage to convince content owners that DRM is useless, or on things like pricing structures. Labels wanted far more than the standard $1 per song that Apple pressured them into, and they didn't cave into removing DRM until they could raise their wholesale prices on them.

There is always a lot of pushback. Just look at the trouble Netflix is having with content owners, they're the leading streaming service for video content but they still rotate content or lose entire studio libraries when their contracts expire.

RE: Why iBooks anyway
By LRonaldHubbs on 5/16/2013 9:33:43 AM , Rating: 2
Apple removed the DRM from all songs on iTunes in 2009. They started the process in 2007 after Steve Jobs wrote an open letter to the record labels about the need to abolish DRM. Initially only songs from certain labels were DRM free and they carried a price premium. But in 2009 all songs on iTunes became DRM free, and they offered the option of redownloading DRMed songs that you already owned.

RE: Why iBooks anyway
By Piiman on 5/18/2013 10:45:22 AM , Rating: 2
You can always burn the music to CD and rip it with MS media player to remove any DRM and play it anywhere you like.

RE: Why iBooks anyway
By Reclaimer77 on 5/15/2013 6:32:51 PM , Rating: 5
Why would I buy a book on iBooks when I can only read it on an apple device?

Why buy stuff on iTunes? Why buy anything made from Apple?

We all know the P.T Barnum quote about suckers. Apple thrives on the idiocy of the common man.

By GulWestfale on 5/15/2013 10:49:06 AM , Rating: 5
i write and self-publish books on all major platforms, and i can tell you from personal experience that on amazon alone i sell twice as many books every month as on apple, kobo, and barnes&noble combined.

so this spokesperson's BS about apple having transformed the e-book market is just that, BS. nobody wants to read books on a tiny iphone screen, and few people read them in their ipads, as those are better suited to magazines, videos, and other multi-media content. i do see higher sales on apple than on kobo, but they're really only the second fiddle behind amazon.

RE: what?
By Tony Swash on 5/15/2013 12:57:13 PM , Rating: 1
write and self-publish books on all major platforms, and i can tell you from personal experience that on amazon alone i sell twice as many books every month as on apple, kobo, and barnes&noble combined.

I wonder if that is true for textbooks, I got the impression that Apple were doing very well in the education market.

RE: what?
By BRB29 on 5/15/2013 1:07:04 PM , Rating: 2
Go to any college or university and ask a few people. The first answer is always amazon.
Apple does have a good system for people to post tutorial videos of lessons though. I've used it before but I forgot what it's called.

What Apple has in the education market is their devices. It is recommended by most school to use apple laptops. They even have a $100 discount for students. The IT department also loves it because it makes it simple for them. All the universities here in the DC/maryland/virginia area promotes apple products and recommend their mac book pro as an essential tool for school. In fact, the school store sells mostly mac book pros.

RE: what?
By rlandess on 5/15/2013 3:37:15 PM , Rating: 5
A $100 discount doesn't amount to much when you pay 2x the price for an Apple laptop.

In 10yrs of IT I've never met a competent admin who prefers Apple products for a corporate IT environment. Schools push Apple for reasons other than simplicity of integration or value for the student.

RE: what?
By MojoMan on 5/16/2013 12:59:41 AM , Rating: 4
Agreed. I've been an admin for 10 years, and a school admin for the past four. I have a great Apple rep, and I've given Apple every chance to make their equipment work in an enterprise (managed) environment. They PALE in comparison to what we can do with Microsoft or Google devices. They just don't "get" enterprise management. Oh so frustrating when you have users who are not normally excited about tech, get excited about it, but you can't buy it because enterprise level management is so terrible. Even the tools they have provided are buggy and unreliable. I loathe Apple more than ever simply because of our experience with them. They are an awful choice for almost any enterprise.

We have almost 100 iPads, and they require more maintenance than any of our desktops, laptops, Neos (RenLearn), or netbooks.

RE: what?
By Reclaimer77 on 5/16/2013 1:19:13 AM , Rating: 2
No no no, see you don't understand Apple.

It's not they that need to "get" enterprise management. It's you who doesn't get how THEY want to do enterprise management for you.

That's how they roll, and why I have always loathed them as a company. Their philosophy of doing things is bullsh#t.

RE: what?
By LRonaldHubbs on 5/16/2013 9:36:29 AM , Rating: 2
Hey, this is one topic we can actually agree on...

RE: what?
By BRB29 on 5/15/2013 12:59:35 PM , Rating: 3
Even for apple users, I don't see the appeal of ibooks. Kindle can be used on any platform. I use it on PC and it works even better on a 27" screen. Kindle is just superior.
The prices on amazon is also cheaper. If using a browser to buy a book and save me 25% then I'm all game every time.

RE: what?
By TakinYourPoints on 5/16/2013 3:15:34 AM , Rating: 2
I've been a Kindle user since the first gen came out in 2007. The platform is restrictive in many ways, but they have applications for every hardware platform out there so its fine.

Great hardware too, the current Paperwhite is my favorite gadget right now.

RE: what?
By TakinYourPoints on 5/16/2013 4:07:55 AM , Rating: 2
Kindles really are the best, no other reader comes close

Don't understand why ebooks so expensive.
By rameshms on 5/15/2013 1:55:58 PM , Rating: 2
Why should ebooks be as expensive as a hardcopy ? There are no costs involved in printing, transporting, storing and retail. Shouldn't the ebook price be a fraction of the hardcopy (or paperback) for that matter ?

What portion of a books retail price actually goes to the author/publisher ?

RE: Don't understand why ebooks so expensive.
By Solandri on 5/15/2013 2:38:56 PM , Rating: 2

Why should ebooks be as expensive as a hardcopy ? There are no costs involved in printing, transporting, storing and retail. Shouldn't the ebook price be a fraction of the hardcopy (or paperback) for that matter ?

Actually, the cost to print a book is only about 30% of its retail price.

What portion of a books retail price actually goes to the author/publisher ?

For a regular (printed) book by a big-name publisher, about 7%-20% of its price goes to the author. The rest goes to the retailer and publisher. The author royalty is low enough that self-publishing an ebook and having iTunes/Amazon/Google take 30% (i.e. 70% to the author) is pretty attractive.

We'll have to give it a decade or two to see how it all shakes out. I suspect most of the publishers who insist on keeping most of the profits for themselves are going to die out. If they do survive, it'll be because their name becomes branded and associated with a certain minimum quality level (spelling, grammar, layout, etc) in their publications.

What the independent-publishing industry (both ebooks and indie music) really needs are some review sites which function like a bestseller's list or top 100 charts, to help spread publicity for popular titles/songs. I think that's why Amazon does so well here - their rating and suggestion system pretty much fills that role.

By GulWestfale on 5/15/2013 5:55:44 PM , Rating: 2
i can't speak for authors who have a publisher (why on earth do you need a publisher if all you do is e-books???), but for us freelancers it's quite simple:
we get 70% of the retail price on amazon, plus a fee for each book that is loaned out through amazon's lending program (this varies month to month, but it's usually around $1.50 or so per book).

i publish on apple, kobo, sony, nook and others through smashwords, who take their own cut in addition to the platform providers. so i end up with about 50% of the retail price.

given that an author with a publisher (and the obligatory agent, who takes 20% of the author's earnings) only earns about 7-15% of the wholesale price of a printed book (perhaps a s little as 50 cents), i think i'm doing quite well making 2 bucks off a 3 dollar book. the only reason why publishers would sell ebooks for 10+ dollars is simple: greed.

RE: Don't understand why ebooks so expensive.
By InsGadget on 5/15/2013 3:31:26 PM , Rating: 2
All books are too expensive, IMO. Compare the retail price of an average book, CD, and DVD/Blu-Ray. Now compare the cost of creation: movies cost by far the most to make, followed by music, and then books (generally speaking). Yet, often books cost more than the other 2 forms of media, even though they cost a fraction to create, especially compared to movies.

Look at video, music, and audiobook subscription services: Netflix is $8 a month, Spotify is $10 a month, and Audible is an insane $15 a month. AND, you can only get ONE audiobook per month!! Whereas with the music and video subscriptions, you can watch/download as much as you want per month. It's absolutely ridiculous.

The publishing industry is due for a shakeup. Sorry authors.

By GulWestfale on 5/15/2013 5:57:36 PM , Rating: 2
don't be sorry, read my above post. you'll see that many authors agree with you (and me). publishers are no longer really necessary. all they do is add cost for the reader, while gobbling up the profits of the writers.

By TakinYourPoints on 5/16/2013 3:20:16 AM , Rating: 2
The cost of physical distribution isn't that big a deal. Its the same reason why a digital download of a game really shouldn't cost much less than a hardcopy; the cost of DVD duplication, packaging, and distribution really isn't that much.

The bigger problem is the split between the publisher (whether it is for a book, album, etc) and the author. Publishers are taking far too much nowadays given that distribution is simpler than ever. Movies and big budget games are a bit different since they actually fund the product as well.

By techienate on 5/17/2013 12:19:06 PM , Rating: 2
The problem, in my opinion, is that e-books cost significantly more, because you can't sell them or buy used. (Not to mention that you can't truly loan them out to somebody.) That lowers the value and raises the cost. Or to look at it another way, if 50000 people read a paper book, but some of them bought the book used, some bought it new but at a discount from list price on Amazon, and a few paid full list price at an airport book store, and then some of these people re-sold the used book, compared to 50000 people buying the book at typical e-book prices. The people as a collective unit will have paid out much more money in the e-book situation.

From a personal individual perspective (and the real reason I have some major issues with e-book pricing), I love e-books. I love having my books with me all the time and being able to read them on my smartphone's Kindle app whenever I have a free couple of minutes. But I can't afford to buy many books in e-book form. Typically, I'll buy used or new but at a significant discount from Amazon for most of my books. I would love to buy e-books, but I can't afford the premium.

the verge
By kleinma on 5/20/2013 11:51:36 PM , Rating: 2
Shouldn't the verge be credited for the image in the article? Or was their watermark on it considered credit enough?

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