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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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RE: Why iBooks anyway
By Shadowself on 5/15/2013 1:28:10 PM , Rating: -1
Music bought through iTunes has been DRM free for several years. In fact, Jobs in the early days of the iTunes store very publicly and repeatedly berated the music houses for requiring Apple to put DRM on music in iTunes. Jobs was even a strong proponent of Apple's "Rip, Mix, Burn" campaign.

The native iTunes format, AAC, is an industry standard that was not developed by Apple. It's part of the MPEG 4 standard. For the same quality of music AAC results in smaller files than does MP3. Conversely for the same file size AAC gives better quality than MP3. The oddity is that Apple is the only major music store that uses it as its standard format. So yet again, Apple uses an atypical standard. There are non Apple music players that support AAC. However, I'd be surprised if Apple isn't losing sales and market share because of this choice.

(It's no different from 25 years ago with Apple going with NUBUS for its card backplane in the Mac II. Virtually everyone complained that it was an "Apple proprietary bus" when in reality it was developed by MIT who licensed the technology to Texas Instruments. Apple just chose it because it was the first commercial "plug and play" bus. However, in the long run it was a stupid choice because no other major computer vendor picked up NUBUS. This made all the cards for it *much* more expensive than in the "IBM Compatible" world. Consequently it cost Apple sales and market share.)

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.

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