Apple found guilty of conspiring to fix ebook prices, Karma smiles

While there are a lot of ‘I Love Apple’ and ‘I Dislike Apple’ based opinions, it’s quite easy to see, if we step back from our personal perspectives, that –

  1. The Agency Model would not have happened without Apple’s help.
  2. Apple, and in particular Steve Jobs, was quite happy to go around telling people how it has ‘ensured prices will be the same everywhere’. It takes a special type of hubris to say it on tape.
  3. The Agency Model led to a LOT of readers feeling the pain of either paying $13.99 or more for new releases, or having to wait 6 to 12 months for prices to reach below $9.99.

With that in mind, it is refreshing to see Apple found guilty of conspiring to fix ebook prices. Apparently, Apple’s ‘If we didn’t do illegal price collusion, then Amazon would have done it’ and ‘People at Amazon screamed and shouted, and were very un-gentleman-like’ defences didn’t work.

Paid Content points out that there’s a lot of HARD EVIDENCE the Judge used to make her ruling –

Cote also pointed to what she said was clear evidence that the conspiracy led ebook prices to go up:  ”two weeks of moving to agency [pricing led to an] increase of 14.2% for their New Releases, 42.7% for their NYT Bestsellers, and 18.6% across all of the Publisher Defendants’ e-books.”

Apple will, quite predictably, appeal. However, I really don’t see how it can win an appeal given there is an inordinate amount of evidence that Apple’s actions did, in fact, lead to higher book prices for customers.

A Blow in the Perception Wars?

Apple perhaps doesn’t care about ‘damages’. It does care about the perception. For Apple it’s ALL about the Perception Wars. Like the most popular girl in high school, it doesn’t really matter if she’s suspended. She just wants to make sure she was suspended for doing something ‘cool and rebellious’ that ‘stuck it to the man’ and not something tacky that hurt fellow students.

The new ‘Special Divisions’ VP at Apple, the former head of YSL, now has to work just a little bit harder to make sure the poor little rich girl still wins the Prom Queen crown.

Karma is calling

Remember how Steve Jobs (he still seems to figure rather prominently, doesn’t he) promised to wage thermonuclear war on Android.

Perhaps he should have shown the other cheek.

It seems Samsung won against Apple on some patent (probably for holding a device vertically with one hand (actually, it’s wireless related)) and on June 4th ITC banned the Apple iPhone 4 and the Apple iPad 2. The ban goes into effect in 30 days, unless the President overrules it (doesn’t he use a Blackberry? There goes that option).

Apple has asked for a stay, claiming it would do massive irreparable harm to Apple and to its wireless provider partners. Well, they should have thought of that before selling phones that could be held with one hand.

After all the drama and all the patents on things like rubber banding (yes, you can get patents for how scrolling a list ends, for the visual effect no less) it is poetic justice that it is Apple that might be forced to stop selling iPhone 4 and iPad 2.

Apple to control Music, Amazon to control Books – Apple’s Wishful Thinking

Wow! The DOJ’s Trial against Apple is the gift that keeps giving. Yesterday we found out that Apple claims 20% share of the ebook market, 100% growth in ebook sales in 2012, and 100 million customers of the iBookstore.

Today, we find out two big things (thanks to Eddy Cue, the senior most Apple executive questioned so far (SVP of Internet and Services)).

  1. Apple considered splitting Books & Music between Amazon and Apple. The key part from CNet’s coverage of DoJ vs Apple

    Eddy Cue, Apple’s senior vice president of Internet software and services, who took the stand Thursday in district court in lower Manhattan, also said Apple considered splitting the market with Amazon in a setup where Apple would control the music market, while Amazon would monopolize books.

  2. Apple’s Eddy Cue pretty much admitted that ebook prices went up because of Apple’s deal with Publishers.

This is a bit of a surprise. On the one hand, Apple claims it did nothing wrong. On the other hand, their senior executives are admitting Apple’s moves led to higher ebook prices.

Apple’s Reality Distortion Field affects Apple Executives too?

Apparently, Mr. Cue got testy when asked what he thought about ebook prices going from $9.99 to $12.99 to $14.99. He didn’t think it hurt consumers. Here’s what he said –

“Our consumers were protected by my price points,” he said. “I thought we were going to treat our consumers very, very fairly.”

Wait a minute. Books were $9.99. Then Apple struck a deal with Publishers and caused prices to rise to $12.99 to $14.99.

Apple executives actually thought by doing this they were protecting consumers?

That’s some good Kool-Aid they’re serving at Apple’s SpaceShip One HQ.

Apple to control Music? Amazon to control Books?

The juiciest part of this entire conversation is this:

Apple considered splitting the market with Amazon in a setup where Apple would control the music market, while Amazon would monopolize books

Let’s get this straight – In the middle of a collusion/price-fixing trial, Apple’s most senior executive questioned so far, brings up the fact that Apple was discussing what would be an EVEN MORE ILLEGAL arrangement.

Amazon to control Books and in return Apple gets to control Music.

Bonus Points for using ‘control the music market’ and ‘monopolize books’. Let’s not leave any room for doubt, shall we.

This is just madness. Why on Earth would you mention this? Does anyone see any reason for Apple to mention it was considering this whole ‘Let’s collude with Amazon and split and monopolize the Music and Books markets’ idea?

It’s an interesting thought. There are probably all sorts of illegal arrangements and secret/silent partnerships that happen all the time. However, bringing up that you were considering it in the middle of a DoJ trial – that’s just amazingly foolish.

How would an ‘Apple to control Music, Amazon to control Books’ arrangement work?

Apple probably considered music very important for selling iPods and for maintaining its ‘coolness’. It perhaps thought Amazon valued books a lot because Amazon had the Kindle and a huge revenue stream from selling paper books.

Perhaps Apple was thinking about asking Amazon to end Amazon Music and/or channel it to iTunes. In return, Apple would channel iBooks to Kindle Store. The arrangement would work well. However, DoJ would come after Apple and Amazon. Perhaps it would be a secret deal where iBooks either stalls or Apple secretly promotes Kindle a ton. In return, Amazon would ramp down Amazon Music.

At this point, it seems pretty obvious that the DoJ needs to investigate how many of these ‘secret’ partnerships there are between the big technology companies.

Apple wanting to partner up with Amazon and secretly carve out monopolized markets for each other. Wow! Every day you learn something new.

Apple claims 20% of US ebook market – Kindle, Nook, Kobo confused

Apple has made a bold claim – Apple’s iBooks owns 20% of the eBook Market. From Paid Content –

Apple now holds about 20 percent of the U.S. ebook market, director Keith Moerer testified in court on Tuesday. Moerer also said that the iBookstore’s sales grew by 100 percent in 2012.

Well, lots of interesting information coming out of the Apple Price Fixing Trial. Publishers Weekly has a more detailed account.

Something doesn’t add up

Here are the various claims we’ve heard in recent times –

  1. B&N claiming 25% of the market.
  2. Kobo claiming double digits.
  3. Amazon supposedly having 80% – according to various Publishers and such.

That doesn’t square with Apple having 20% of the eBook Market.

If we have Kindle with 80%, B&N with 25%, Apple with 20%, Kobo with 10% and everyone else with 5% – That would mean these ebook retailers own 140% of the market.

Who’s lying? Or are they all just confused?

Apple claims 100% growth in 2012, 100 million customers, 20% market share

Let’s evaluate each of Apple’s claims –

  1. 20% of the US eBook Market. That would leave just 80% for everyone else. There’s little chance Amazon and B&N have less than 60% and 20%. Does that mean everyone else isn’t selling?
  2. 100% growth in 2012. This is quite possible. This is faster than the average yearly growth rate of 56% for ebooks. However, it’s possible – especially since a ton of iPads and iPad Minis and iPhones were sold in 2012.
  3. 100 million customers. Perhaps this is meant worldwide – Because it’s hard to imagine 100 million people in the US buying books or ebooks from Everywhere combined, let alone from iBooks alone.

The 20% market share claim, if true, suggests that perhaps Amazon’s share has dropped to the 50% to 60% range. It would also suggest that B&N’s share has dropped to the 15% to 20% range. The latter seems really unlikely since B&N did sell millions of eReaders and Tablets in 2012. The former seems even more unlikely – Amazon has been on a tear with Kindle Fires.

What about Kobo and its 12.5 million customers? What about Sony eReader? What about Google Books? What about everyone else?

If Apple is correct, the eBook Market might look rather different from what is generally assumed

The general, implicit assumption has been a market with –

  1. 70% market share for Kindle.
  2. 20% market share for Nook.
  3. 10% divided between Apple and Kobo and Sony and Google.

At least that’s what authors and Publishers and bloggers seem to imply.

If Apple is accurate, then it changes things a ton –

  1. 50% to 55% market share for Kindle.
  2. 20% for Apple.
  3. 15% to 20% for Nook.
  4. 10% to 15% divided between Kobo and Sony and Google.

The biggest thing it does is, it makes Nook very important. Because Apple could buy Nook and instantly get to 35% to 40% market share. It could then change its app store rules to kick out Kindle and get to 50%.

The other possible strategy is to focus on customers of good intent, willing to pay for quality books. Apple could round-up all the customers willing to buy $10 and $15 books and let Amazon and Nook have the $1 and $2 and free book readers.

The latter strategy is not a bad path to take. Amazon is already doing a good job of using ‘free and cheap’ to attract all the ‘books should be free’ people (Note: Not saying all Amazon customers are such, just that Amazon for some strange reason is fixated on these ‘books should be free’ customers). Let Amazon have them. Just focus on customers of good intent who don’t mind paying for quality books.

Of course, buying Nook and instantly doubling market share in ebooks would be even better. Perhaps do both.

It’s all very strange

Apple wouldn’t claim 20% in a Court of Law if it wasn’t 20%. B&N has to have between 15% and 25% – they’ve sold tens of millions of Tablets and eReaders. Kobo and Sony and Google must have 5% to 10%.

That leaves just 50% to 60% for Amazon’s Kindle. Which would mean that, contrary to the claims of Amazon owning 80% of ebooks, Amazon has 50% to 60% share and is very vulnerable.

20% market share for Apple’s iBooks is a lot more than I would have thought – especially since iBooks isn’t available on anything other than iPhone and iPad.