Apple case cracks open e-books, digital goods pricing

Jul 12, 2013 by Rob Lever

A ruling by an American judge that Apple illegally conspired to fix e-book prices could boost competition in the market for all kinds of digital goods, including music and movies, analysts say.

Wednesday's decision by a federal judge also may allow online retail giant Amazon to cement its dominance, though are still evolving.

"The consumer is the huge winner," said David Balto, a Washington antitrust lawyer and former policy director for the Federal Trade Commission.

"Apple's policies clearly increased prices, and if permitted Apple would have used this formula to raise prices in numerous markets. This is a landmark decision that demonstrates the value of strong antitrust enforcement."

US District Judge Denise Cote's ruling followed a three-week trial in New York in June. She concluded that Apple was liable for "facilitating and encouraging" a collective effort by five publishers to end for . She has ordered a new hearing to determine damages.

David Crane, a University of Michigan specialist in , said Apple would now be heavily impeded from influencing the pricing of content.

"Whether it's music or movies or newspapers or whatever it is, basically Apple wants to be heavily involved in reformulating the business model of how pricing is set and who decides on release dates and so forth," Crane said.

"This kind of precedent says 'Apple: be very careful with anything other than having one-on-one negotiations with content providers.'"

The Justice Department has said it will seek interim relief and a court-ordered independent monitoring trustee.

A group of 33 states are seeking unspecified damages against Apple. A class-action suit against the technology giant could also be bolstered by judge Cote's ruling.

Apple has said it will appeal and "continue to fight against these false accusations."

Some analysts noted that the court decision could help Amazon assert its dominance in electronic books, and that the online retailer has moved to the "agency" model which Apple helped impose.

"Everybody is on agency now," said Roger Kay, analyst at Endpoint Technology Associates.

Before Apple came on the scene, Amazon used a "wholesale" model and sold e-books at the cut-rate price of $9.99 for most titles.

"Amazon was taking profit out for everyone else is well," Kay said. "Now it's busted open. But Amazon also benefits from higher prices."

Amazon is believed to control around two-thirds of US e-book sales—down from 90 percent a few years ago—while Apple's share is said to be around 20 percent.

E-book sales have been cooling after a few years of sizzling growth.

A survey by the Association of American Publishers said 2012 growth in such sales was 41 percent—an impressive figure but below the red-hot pace of recent years including 2011, when e-book sales doubled.

Michael Weinberg, vice president at the digital advocacy group Public Knowledge, said the marketplace is still sorting out the model for e-books and other content.

He hopes the case will raise awareness that the e-book market is being constrained by digital "locks," sometimes called digital rights management, which keep electronic content tied to one device.

"If you have all these files on your Kindle, and can move them to other devices, that would help the market grow," he said.

"While no one would argue that major publishers have fully come to terms with this lesson it is encouraging that they are at least aware enough of it to discuss it."

Explore further: Apple guilty in e-book conspiracy case, vows appeal (Update)

add to favorites email to friend print save as pdf

Related Stories

Apple exec challenges e-book conspiracy

Jun 17, 2013

A top Apple executive downplayed the theory of an e-book price-fixing conspiracy at an antitrust trial Monday, saying publishers were already moving away from Amazon's model when Apple launched its iPad.

Mysterious Steve Jobs emails hang over Apple trial

Jun 18, 2013

The late Steve Jobs took center stage Monday in the latest twist in the Apple antitrust trial on ebooks. A federal court attempted to plumb the meaning of a series of unsent emails Jobs addressed to Eddy Cue, an Apple senior ...

Apple CEO ordered to testify in e-books case

Mar 13, 2013

A judge on Wednesday ordered Apple's chief executive Tim Cook to testify in a case brought by the US government accusing the tech giant of conspiring to raise e-book prices.

Recommended for you

Record labels sue Pandora over older songs

16 minutes ago

Major record labels are suing Internet radio giant Pandora for copyright infringement for using songs recorded before 1972 without paying license fees.

Weibo IPO below expectations, raises $285.6 mn

13 hours ago

Sina Weibo sold fewer shares than expected in its US IPO which was priced below expectations ahead of a Thursday listing that takes place after tech selloffs on Wall Street.

'Chief Yahoo' David Filo returns to board

14 hours ago

Yahoo announced the nomination of three new board members, including company co-founder David Filo, who earned the nickname and formal job title of "Chief Yahoo."

Fired Yahoo exec gets $58M for 15 months of work

14 hours ago

Yahoo's recently fired chief operating officer, Henrique de Castro, left the Internet company with a severance package of $58 million even though he lasted just 15 months on the job.

User comments : 0

More news stories

Hackathon team's GoogolPlex gives Siri extra powers

(Phys.org) —Four freshmen at the University of Pennsylvania have taken Apple's personal assistant Siri to behave as a graduate-level executive assistant which, when asked, is capable of adjusting the temperature ...

Better thermal-imaging lens from waste sulfur

Sulfur left over from refining fossil fuels can be transformed into cheap, lightweight, plastic lenses for infrared devices, including night-vision goggles, a University of Arizona-led international team ...

Researchers discover target for treating dengue fever

Two recent papers by a University of Colorado School of Medicine researcher and colleagues may help scientists develop treatments or vaccines for Dengue fever, West Nile virus, Yellow fever, Japanese encephalitis and other ...