At first, Jobs didn’t want to sell digital books through the iTunes bookstore, according to two days of testimony by Eddy Cue, senior vice president of Internet software and services. But convinced that the iPad would create a rival platform to Amazon’s Kindle, Jobs became deeply involved in the creation of iBooks, from the way pages turn to the look of the iBooks retail platform, Cue said.
The Justice Department called Cue the “chief ringleader of the conspiracy.” Prosecutors presented evidence of Cue racing to clinch deals with the biggest publishing houses in six weeks between December 2009 and the launch of the iPad on Jan. 27, 2010. According to the evidence, Cue made more than 100 calls to top publishing executives to coordinate a change in how e-books were priced. He flew to New York and sent numerous e-mails to Penguin, HarperCollins, Hachette, Simon & Schuster and Macmillan.
Jobs was intimately involved in the formation of iBooks, and Cue kept him closely informed throughout his negotiations.
“Steve was nearing the end of life when we launched the iPad. . . . I wanted to be able to get that done in time for that because it was important to him,” Cue said, in a rare personal note.
To achieve that goal,Evidence presented during the trial showed that Apple went along with frustrated publishers who wanted to change the way the digital books industry functioned. The book publishers wanted to have more control over prices offered to consumers and proposed an “agency model” in which they could determine retail prices and Apple got a 30 percent cut of sales. At the time, Amazon had about a 90 percent share of digital books and set prices at $9.99.
Key to Apple’s agreement to the new model — and at the center of the Justice Departments’s case — were so-called Most Favored Nation clauses that ensured Apple would get matching rates offered to rivals. Justice Department attorneys argued that the MFN clause in e-books contracts kept prices artificially high because Apple’s rivals weren’t motivated to drop prices below the $12.99 to $14.99 range targeted by iBooks and publishers.
Apple’s Cue agreed that some prices went up, particularly for best sellers and new releases, which publishers were holding back from Amazon because of its price cap.
“Wow, we have really lit the fuse on a powder keg,” Jobs wrote in an e-mail to Cue, dated Jan. 30, 2010.
But Apple has argued that average e-book prices have gone down. Some economists brush off that notion, saying the most desired books have increased in price.
In his closing arguments, Ryan urged the judge to focus on evidence that he argued demonstrated a conspiracy. “The issue in this case is collusion,” he said. “We have no quarrels with the agency model. We have no quarrels in general with MFNs.”