The Department of Justice has accused Apple and five of the world’s largest publishers of conspiring to increase e-book prices. The publishers have all settled with the authorities but Apple has insisted that it is innocent and is standing trial in New York. Mr Cue was responsible for negotiating Apple’s entrance into the e-book market before the launch of the iPad in 2010.
Lawrence Buterman, the Department of Justice lawyer, asked: “Apple was happy for its consumers to be paying $14.99 [£9.55] for bestselling books that previously were available for $9.99, as long as they [the consumers] could not buy it for less than $14.99 anywhere else?”
“That is not the way I would have said it but it’s an accurate statement,” Mr Cue replied. Before the launch of the iPad, Amazon dominated the e-book market and regularly discounted bestsellers to $9.99. The publishing industry was concerned that this would become the de facto price for all e-books and was seeking ways to increase the price.
When Apple entered the market, it agreed a new model with the publishers that would allow them to set the price at either $12.99 or $14.99 for bestsellers. As part of this “agency model” Apple would take a 30 per cent cut.
To prevent Apple being undercut by Amazon, the publishers agreed that they would always give the iBookstore the lowest price in the market. They also moved Amazon on to the agency model and e-book prices rose almost overnight to $12.99 and $14.99.
Asked how Apple felt about making consumers pay $14.99 for e-books that might otherwise have been priced at $9.99, Mr Cue said: “I thought we treated our consumers fairly.”
Mr Buterman said: “By charging them higher prices?” Mr Cue replied: “By giving them books that had not been available elsewhere and giving them a better bookstore. We gave them a great offer.” Mr Buterman: “Do you recall customers coming up to you and thanking you for raising e-book prices?” Mr Cue: “I didn’t raise the prices, the publishers did.”
The prosecution attempted to show that Apple conspired with the publishers to make consumers pay more for bestselling e-books. Apple has contended, however, that it did not care what the publishers did with other retailers as long as the books on its store matched the lowest prices available elsewhere.
One of the most surprising pieces of evidence revealed that Apple had considered carving up the digital content market with Amazon. Mr Buterman said to Mr Cue: “In your very first conversation with Mr [Steve] Jobs about entering into the e-book space, you were not interested in competing with Amazon but rather discussed entering into a market allocation where Amazon would have e-books and Apple would have music.” Mr Cue agreed that this was true. The case continues.