Several publishers have already settled allegations that a legion of them, including Apple, were running an eBook price fixing scheme. Apple's still holding out for a trial that will take place on June 3. Tim Cook may be called in to testify, but the actual deals were inked long before he took his role as CEO. Indeed, the late Steve Jobs was responsible for some of these negotiations, and several of his emails to and from HarperCollins were recently published for evidence in the trial.
In a back-and-forth conversation with James Murdoch, Jobs and Murdoch argue over whether or not HarperCollins is getting a fair shake in a deal with Apple instead of a distribution partnership with Amazon. Murdoch said Amazon sells its books for $9.99, but was willing to pay HarperCollins $13 per title. "The other big issue is one of holdbacks," Murdoch explained to Jobs. "If we can't agree on the fair price for a book, your team's proposal restricts us from making that book available elsewhere, even at a higher price. Also, we are worried about setting prices to high—lots of ebooks are $9.99. A new release window with a lower commission (say 10[%]) for the first six months would enable us to proce (sic) much more kenly (sic) for Apple customers. We'd like to da (sic) that."
Here's Jobs' ultimate response, which ultimately led to a deal with HarperCollins:
Our proposal does set the upper limit for ebook retail pricing based on the hardcover price of each book. The reason we are doing this is that, with our experience selling a lot of content online, we simply don't think the ebook market can be successful with pricing higher than $12.99 or $14.99. Heck, Amazon is selling these books at $9.99, and who knows, maybe they are right and we will fail even at $12.99. But we're willing to try at the prices we've proposed. We are not willing to try at higher prices because we are pretty sure we'll all fail.
As I see it, HC has the following choices:
1. 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.
2. Keep going with Amazon at $9.99. You will make a bit more money in the short term, but in the medium term Amazon will tell you they will be paying you 70% of $9.99. They have shareholders too.
3. Hold back your books from Amazon. Without a way for customers to buy your ebooks, they will steal them. This will be the start of piracy and once started there will be no stopping it. Trust me, I've seen this happen with my own eyes.
Maybe I'm missing something, but I don't see any other alternatives. Do you?
So is Apple guilty of fixing prices? We'll let the court decide in June, but right now it looks like Jobs was trying to create some sort of new market, which he dubbed a "real mainstream ebooks market." It's unlikely he was trying to price gouge consumers, but there was certainly a clear eye on profits. After all, as Jobs said, Amazon has shareholders too.