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Opening Statement in US v. Apple
Opening Statement in US v. Apple
Opening Statement in US v. Apple
Opening Statement
June 3, 2013
PX-0514
Amazon screwed it up. It paid the wholesale price for some books, but started selling them below cost at $9.99. The publishers hated that.
So we told the publishers, Well go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but thats what you want anyway.
DX-086
Hachette Unhappy with $9.99 price point, one of three major publishers to announce its intention to hold back ebooks at time of hardcover release (up to four months). Other two publishers are Simon & Schuster and HarperCollins.
* * *
RandomHouse doesnt like the $9.99 price point, but doesnt want or support windowing. hasnt said so publicly
Penguin
* * *
not happy about $9.99 price point, but hasnt announced a position publicly; clear from the CEO, though, that they dont view a $9.99 eBook as sustainable model competing with much higher priced physical books
DX-086
Clearly, the biggest issue is new release pricing and they want a proposal from us.
realistic pricing.
We think these agency terms accomplishes all the goals we both have.
PX-0021, PX-0473, PX-0476, PX-0041, PX-0040, PX-0306
They believe that this is the best chance for publishers to challenge the 9.99 price point.
They decided they had to come up with a way that would move the whole market off 9.99 and they think an agency model is the only way to do it.
PX-0613
Carolyn Reidy
Im hoping that Wednesdays event... will sustain us as we move through the next steps in this process of changing the industry.
Eddy Cue
PX-0094
The optics make it look like I stood alone, but in the end I had no doubt that the others would eventually follow.
DX-434
Publisher
Establishes list price for book and sells it to retailer for percentage of list price (usually 50%)
Retailer
Establishes retail price for consumer
Consumer
Publisher
Establishes digital list price typically 20% lower than print list price and sells book to retailer for percentage of digital list price (usually 50%)
Retailer
Establishes retail price for consumer
Consumer
EXAMPLE
EXAMPLE
$10.00
Wholesale price sold to the retailer
$9.99
Retail price sold to consumer
$9.99
Publisher
Establishes digital list price equal to print list price and sells book to retailer for percentage of digital list price (usually 50%)
Retailer
Establishes retail price for consumer
Consumer
EXAMPLE
EXAMPLE
$12.50
Wholesale price sold to the retailer
$9.99
Retail price sold to consumer
$9.99
PX-0219
Arnaud Nourry
I am told Random House is concerned about the future of e-books and the potentially dominant role played by Google and Amazon. Would it make sense for the 2 of us to have meetings / diner [sic] with Markus Dohle, Brian Murray, John Sargent and whoever, in order to discuss options?
David Young
I am having dinner with that group on January 29 and will raise the matter then.
PX-0274
Completely confidentially, Carolyn has told me that they are delaying the new Stephen King, with his full support, but will not be announcing this until after Labor Day so that she can have an enjoyable vacation!
PX-0274
I think it would be prudent for you to double delete this from your email files when you return to your office.
PX-0133
Competition and collaboration we do appear to be on a collision course with Amazon, and possibly with Google as well.
It will not be possible for any individual publisher to mount an effective response, because of both the resources necessary and the risk of retribution, so the industry needs to develop a common strategy.
PX-0344
You are absolutely correct: weve always known that unless other publishers follow us, theres no chance of success in getting Amazon to change its pricing practices.
And of course you were right that without a critical mass behind us Amazon wont negotiate, so we need to be more confident of how our fellow publishers will react if we make a move like this.
We will keep thinking of how to attack the problem (as we perceive it) of current eBook pricing.... But clearly we need to gather more troops and ammunition first!
Apples Entry
Brian Murray
On December 8, Mr. Cue reaches out to Mr. Murray and Mr. Dohle to set up calls for the following day
Eddy Cue
PX-0314
Brian Murray
Brian Murray
On December 8, Mr. Cue reaches out to Mr. Murray and Mr. Dohle to set up calls for the following day
On December 10 at 9:47, Mr. Murray sends an internal e-mail concerning his call with Mr. Cue
Eddy Cue
PX-0314
PX-304
Brian Murray
Brian Murray
reaches out to Mr. Murray and Mr. Dohle to set up calls for the following day
We should put a proposal together for Apple. ... also bringOn in RH possible. On December 8, Mr. And Cue December 10 if at 9:47,
Mr. Murray sends an internal e-mail concerning his call with Mr. Cue
Eddy Cue
PX-0314
PX-304
Brian Murray
Brian Murray
Brian Murray
On December 8, Mr. Cue reaches out to Mr. Murray and Mr. Dohle to set up calls for the following day
On December 10 at 9:47, Mr. Murray sends an internal e-mail concerning his call with Mr. Cue
Eddy Cue
Markus Dohle
PX-0314
PX-304
PX-0448
Brian Murray
Brian Murray
Brian Murray
reaches out to Mr. Murray and Mr. Dohle to set up calls for the following day
I was wondering if you had any time for a quick call tomorrow. On December 8, Mr. Cue On December 10 at 9:47, On December 10 at 9:52,
Mr. Murray sends an internal e-mail concerning his call with Mr. Cue Mr. Murray e-mails Mr. Dohle
Eddy Cue
Markus Dohle
PX-0314
PX-304
PX-0448
PX-0162
David Young. Much happier cuz of meeting. Not spoil fun. Check in after. Dinner in Jan. Top Man talks different language. Not $9.95.
PX-0299
Carolyn Reidy
David: do you have a phone number for Eddie Cue? He didnt have a card when got to me (we were last and he left here to go to the plane) or even an email address? I want to take up your suggestion to email him about the term sheet
David Young
PX-0159
PX-0359
PX-0036
Markus Dohle
John Sargent
Carolyn Reidy
Carolyn Reidy
Markus Dohle
John Sargent
Eddy Cue
PX-0788
Eddy Cue
PX-0788
Eddy Cue
PX-0788
PX-0043
They saw both the plus (solves Amazon issue) and negative (little less than they would like).
PX-0540
Therefore they feel that new release eBooks should be priced at $12.99.
It is important to Apple that there be some level of reasonable pricing. They feel the only way to get this is for the industry to go to the agency model.... We would have to get everyone else to go to the agency model.
PX-0540
When they thought it through, they didnt think anything else would keep the market from its current pricing craziness.
PX-0336
He also thinks that book prices are becoming too low he is worried about the consumer perception. Therefore he suggests an agency model....
PX-0336
I also indicated that Amazon would not accept a distributor model. He answered that windowing could be used to establish a distributor model on print pub date for ebooks (coming back to simultaneous publication).
PX-0317
Publisher
Establishes digital list price equal to print list price and sells book to retailer for percentage of digital list price (usually 50%)
Retailer
Establishes retail price for consumer
Consumer
EXAMPLE
EXAMPLE
$14.00
Wholesale price sold to the retailer
$9.99
$9.99
Publisher
Establishes retail price
Retailer
Sells to consumer at retail price
Consumer
Pays retail price
EXAMPLE
EXAMPLE
EXAMPLE
$9.99
$9.99
$9.99
Publisher
Establishes retail price
Retailer
Sells to consumer at retail price
Consumer
Pays retail price
EXAMPLE
EXAMPLE
EXAMPLE
$9.99
$9.99
$9.99
$7.00 $7.00
Publisher receives 70% before author royalties
Publisher
Establishes retail price
Retailer
Sells to consumer at retail price
Consumer
Pays retail price
EXAMPLE
EXAMPLE
EXAMPLE
$14.99
$14.99
$14.99
Publisher
Establishes retail price
Retailer
Sells to consumer at retail price
Consumer
Pays retail price
EXAMPLE
EXAMPLE
EXAMPLE
$14.99
$14.99
$14.99
$10.50 $7.00
Publisher receives 70% before author royalties
Eddy Cue
Carolyn Reidy
Eddy Cue
Markus Dohle
Eddy Cue
John Sargent
Eddy Cue
David Young
After talking to all the other publishers and seeing the overall book environment, here is what I think is the best approach for ebooks.
Eddy Cue
David Shanks
After talking to all the other publishers and seeing the overall book environment, here is what I think is the best approach for ebooks.
Eddy Cue
Brian Murray
After talking to all the other publishers and seeing the overall book environment, here is what I think is the best approach for ebooks.
PX-0341
In order to not be in a situation whereby we must price our adult new release eBooks sold through Apple at $9.99, undercutting one of the reasons for making the deal, we need to change our eBook selling terms with our other eRetailers before that date.
Publisher $12.99
Establishes retail price
Apple $12.99
Sells to consumer at retail price
Consumer $12.99
$9.10
Publisher receives 70% before author royalties
Amazon $9.99
Establishes retail price
Consumer $9.99
Publisher $12.99
Establishes retail price
Consumer $9.99
$9.10
$7.00
Amazon $9.99
Establishes retail price
Consumer $9.99
PX-0065
I feel like its a giant win to keep pushing the MFN and forcing people off the amazon model and onto ours.
The interesting insight in the meeting was Eddys explanation that it doesnt have to be that broad any decent MFN forces the model.
PX-0540
We would have to get everyone else to go to the agency model. When I said, but of course we cant talk to our competitors, he said he didnt mean other publishers, but our accounts to which I replied, if we make these our terms, then they are our terms.
PX-0026
The response from both Penguin and Hachette was very similar willing to do an agency model go agency model for new releases with everyone else
PX-0058
We have reviewed all the books on Amazon and they have switched to agency with the publishers.
PX-0055
I can live with this, as long as they move Amazon to the agent model too for new releases for the first year. If they dont, Im not sure we can be competitive
John Sargent
Meeting
Russ Grandinetti
PX-0482
John Sargent
Meeting
Jan 20th: Russ met with John Sargent in NY. John indicated that he was working on an agency model but his plan was to offer both an agency and reseller model.
Russ Grandinetti
PX-0482 PX-0482
John Sargent
John Sargent
Meeting
Dinner
Russ Grandinetti
Eddy Cue
PX-0482
PX-0037, PX-0712
John Sargent
John Sargent
John Sargent
Meeting
Dinner
Russ Grandinetti
Eddy Cue
Eddy Cue
PX-0482
PX-0037, PX-0712
PX-0037
John Sargent
John Sargent
I am willing to give up on manypoints. The stumbling block is the single large issue that we clearly John Sargent about. John Sargent had a misunderstanding
Meeting
Eddy Cue
I understand. I dont believe we are asking you to do anything, you havent told us you are doing. We are just trying to get a commitment.
Eddy Cue
Dinner
Russ Grandinetti
Eddy Cue
PX-0482
PX-0037, PX-0712
PX-0037 PX-0037
John Sargent
John Sargent
John Sargent
John Sargent
Meeting
Dinner
Phone Call
Russ Grandinetti
Eddy Cue
Eddy Cue
Russ Grandinetti
PX-0482
PX-0037, PX-0712
PX-0037
PX-0482
John Sargent
John Sargent
John Sargent
John Sargent
Meeting
Jan 21st: John and Russ by phone. John realized that the Apple contract required him to only offer Dinner E-Mail the agency model only and wanted to talk through options with Russ.
Phone Call
Russ Grandinetti
Eddy Cue
Eddy Cue
Russ Grandinetti
PX-0482
PX-0037, PX-0712
PX-0037
PX-0482
PX-0482
3:07 p.m.
Brian Murray
E-mail from HarperCollins CEO Brian Murray to Mr. Cue indicating that he cannot do the deal with the pricing MFN
Eddy Cue
PX-0310
3:34 p.m.
3:47 p.m.
4:01 p.m.
Brian Murray
Eddy Cue
John Sargent
HarperCollins ultimately agreed to the MFN and signed the Apple Agency Agreement on January 26
Eddy Cue
John Sargent
Brian Murray
PX-0788
PX-0788
PX-0788
PX-0005
Brian Murray
Carolyn Reidy
John Sargent
David Shanks
David Young
Calls Between Publisher Defendant CEOs from December 1, 2009 to January 31, 2010
Jan. 4-5, 2010 Apple sends identical e-mails to publishers proposing key terms
Dec. 15, 2009 Apple holds initial meeting with Big Six publishers
(PX-0262) (PX-0021; PX-0473, PX-0476, PX0041; PX-0040; PX-0306)
Jan. 21-22, 2010 Apples deadlines for publishers to commit to the deal
(PX-0707; PX-0042)
Number of Calls
Jan. 26, 2010 All five publisher defendants have signed the agreement
(PX-0005)
December 2009
January 2010
PX-0020
John Sargent
Eddy Cue
PX-0029
David Shanks
My orders from London. You must have the fourth major or we cant be in the announcement.
Eddy Cue
Hopefully this is not an issue but if it is I will call you at 4pm. It would be a huge mistake to miss this if we have 3.
PX-0718
Penguin No change here, he is waiting for the others to sign. We have executables ready to sign but he wants an assurance that he is 1 of 4 before signing (not in the contract).
DX-239
Penguin Once previous two are signed, I will head to their offices to get this one signed.
PX-0032
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.
PX-0607
Mossberg wondered why someone should buy a [b]book for $14.99 when you can buy one from Amazon for $9.99 on the Kindle or Barnes & Noble? A confident Jobs replies, That wont be the case.... The prices will be the same.
I cannot believe that Jobs made the statement below. Incredibly stupid.
PX-0053
John Sargent
Hi Eddy. I am gonna need to figure out our final agency terms of sale tonight. Can you call me please?
Eddy Cue
PX-0514
But we also asked for a guarantee that if anybody else is selling the books cheaper than we are, then we can sell them at the lower price too. So they went to Amazon and said, You're going to sign an agency contract or were not going to give you the books.
PX-0284
David Shanks
I wanted to tell you before you read it on line that we have finally reached an agreement with Amazon on our new terms of sale.The playing field is now level.
* * *
DX-434
PX-0542
The other point that came out of the conversation was Heathers view that Indigo and the major publishers all have a massive stake in ensuring that the success of the physical book as a format continues (they are not making money out of ebook sales in the present price wars with Amazon) and that she would welcome a combined meeting on how we might achieve this in Canada.
David Shanks
We would never meet with Barnes and all our competitors. The Government would be all over that. We 8.84" with Indigo being the facilitator would meet separately and go between. That is how we worked with Apple and the government is still looking into that.