Publishing CEO highlights Apple role in ebook case (Update)

Jun 05, 2013 by John Biers
A top publishing executive Wednesday acknowledged Apple's role in reshaping the pricing model for electronic books, as the government sought to prove its case in a price-fixing trial.

A top publishing executive on Wednesday acknowledged Apple's role in reshaping the pricing model for electronic books, as the government sought to prove its case in a price-fixing trial.

Carolyn Reidy, chief executive of Simon & Schuster, admitted her company's involvement in a series of meetings, phone conversations and email exchanges ahead of the introduction of the iPad and a new price scheme for ebooks.

Reidy only grudgingly acknowledged these events in a tense series of exchanges with US Justice Department lawyer Lawrence Buterman in a New York federal court on the third day of the antitrust trial against Apple.

She testified that she met with Apple executive Eddy Cue and that was aware that other big publishers were in talks with the California tech giant to end the pricing model imposed by Amazon, which was the leading ebook retailer.

"You left the meeting understanding Apple didn't want (Amazon's price of $9.99) to continue?" Buterman asked.

"Clearly," Reidy responded.

Reidy—who had submitted written testimony in Apple's defense—was called by the government to corroborate facts in the alleged conspiracy.

The government queried Reidy on a series of dinners with publishing CEOs held in private dining rooms of fancy New York restaurants, but Reidy said Apple did not participate in them.

The Justice Department also presented evidence of Reidy's telephone contacts with other publishing CEOs during the Apple negotiations.

Reidy denied discussing the Apple talks with them, but the government introduced an email from Reidy to Cue, in which she said she "looked forward" to his progress in "herding us cats."

Reidy appeared reluctant to offer details on the alleged conspiracy, but her testimony could allow the government to build a case in the three-week trial that would deal a blow to the reputation of one of America's leading companies.

Simon & Schuster was among five publishers named in an indictment last year, but they all settled the charges, leaving Apple alone in the price-fixing conspiracy trial.

The case centers on an intense month and a half of negotiations between Apple and the six largest US publishers ahead of Apple's January 2010 launch of its iPad and the announcement of its e-bookstore.

Prior to then, the publishers sold books to Amazon and other online booksellers through a "wholesale" model in which the retailer set the price.

After Apple's entry, the industry shifted to an "agency" model, where the publisher sets the price and the online bookseller receives a 30 percent commission.

The government contends that this shift, orchestrated by Apple and imposed on Amazon and other booksellers, ended the days of Amazon's $9.99 online bestsellers and cost consumers hundreds of millions of dollars.

Apple has argued that its interests were in conflict with those of the publishers and that the negotiations were contentious.

During Wednesday's testimony, the government presented an initial Apple proposal that ordered Simon & Schuster to shift to the agency model with other book retailers.

Reidy also confirmed that Cue in a December 2009 phone conversation said Apple wanted publishers to shift to agency.

However, Reidy said the provision was dropped in subsequent drafts and not adopted as part of its contract with Apple.

"We wouldn't have signed a contract that would let Apple tell us what to do with other retailers," Reidy said.

Simon & Schuster subsequently renegotiated to an agency model with Amazon.

Reidy acknowledged that the economics of keeping Amazon on the wholesale model while having Apple on the agency model were poor for the publisher.

But she rejected the argument that Apple's move "forced" Simon & Schuster to change with Amazon.

"We embraced the Apple way of selling because it enabled us to change the way we sold to other retailers," Reidy said.

Amazon's Russell Grandinetti, who signed a declaration on behalf of the government, was also questioned by Apple on Amazon's negotiations with publishers to shift to the agency model after the industry tide shifted.

Grandinetti confirmed that Amazon insisted on the same key conditions with the publishers, including price and book selection.

Explore further: Apple battles ebook conspiracy in US court

add to favorites email to friend print save as pdf

Related Stories

Apple ebook price-fixing trial opens

Jun 03, 2013

The US government's trial against Apple, accused of leading a conspiracy to fix prices of electronic books, opened Monday in New York.

Apple fights manipulation claims on e-book prices

Jun 05, 2013

Apple Inc. defended itself Tuesday against claims that the computer giant manipulated electronic book prices and stifled competition when it opened an online bookstore three years ago.

US class-action ebook price-fixing suit can proceed

May 15, 2012

A judge Tuesday allowed a class-action case to proceed against Apple and six publishing houses alleging a price-fixing scheme for electronic books, citing "ample" indications of a conspiracy.

Recommended for you

Ex-Apple chief plans mobile phone for India

8 hours ago

Former Apple chief executive John Sculley, whose marketing skills helped bring the personal computer to desktops worldwide, says he plans to launch a mobile phone in India to exploit its still largely untapped ...

Airbnb rental site raises $450 mn

21 hours ago

Online lodging listings website Airbnb inked a $450 million funding deal with investors led by TPG, a source close to the matter said Friday.

US venture investments highest since 2001 (Update)

Apr 18, 2014

Funding for U.S. startup companies soared 57 percent in the first quarter to a level not seen since 2001, as venture capitalists piled more money into a growing number of deals, according to a report due out Friday.

User comments : 0

More news stories

Ex-Apple chief plans mobile phone for India

Former Apple chief executive John Sculley, whose marketing skills helped bring the personal computer to desktops worldwide, says he plans to launch a mobile phone in India to exploit its still largely untapped ...

Airbnb rental site raises $450 mn

Online lodging listings website Airbnb inked a $450 million funding deal with investors led by TPG, a source close to the matter said Friday.

Health care site flagged in Heartbleed review

People with accounts on the enrollment website for President Barack Obama's signature health care law are being told to change their passwords following an administration-wide review of the government's vulnerability to the ...

A homemade solar lamp for developing countries

(Phys.org) —The solar lamp developed by the start-up LEDsafari is a more effective, safer, and less expensive form of illumination than the traditional oil lamp currently used by more than one billion people ...

NASA's space station Robonaut finally getting legs

Robonaut, the first out-of-this-world humanoid, is finally getting its space legs. For three years, Robonaut has had to manage from the waist up. This new pair of legs means the experimental robot—now stuck ...

Filipino tests negative for Middle East virus

A Filipino nurse who tested positive for the Middle East virus has been found free of infection in a subsequent examination after he returned home, Philippine health officials said Saturday.

Egypt archaeologists find ancient writer's tomb

Egypt's minister of antiquities says a team of Spanish archaeologists has discovered two tombs in the southern part of the country, one of them belonging to a writer and containing a trove of artifacts including reed pens ...