Eddy Cue says Apple can't treat magazines differently than FarmVille when it comes to iBooks

Eddy Cue says Apple can't treat magazines differently than FarmVille when it comes to iBooks

Apple Senior Vice President of Internet Services, Eddy Cue bluntly commented on the iBooks pricing model and its legal quagmire, saying "We can't treat newspapers or magazines any differently than we treat FarmVille." Apple has recently been charged with colluding with publishers over pricing, sticking to an agency model whereby the publisher gets to set the prices rather than the retailer. This is in contrast to Amazon, which has taken the reins of pricing so they can undercut everybody else, even if means taking a loss so long as they can be number one and recoup through other purchases. Apple claims they're aiming to bust up Amazon's monopoly on e-books, but the Department of Justice isn't so sure and is moving ahead with their investigation.

Cue's commentary on the situation is certainly apt; why up-end their established fee structure for electronic goods just because these ones happen to be books rather than apps? That doesn't necessarily mean that the publishers didn't have their own conversations, but at first glance it doesn't seem like Apple was doing anything particularly wrong here.

Of course, we'll see how the trial pans out and what new evidence comes to light. In the end, iBooks isn't hugely popular, and I can't imagine it will be a massive blow if Apple is forced to change their model around a little bit. How do you guys feel about iBooks pricing? Are you willing to pay close to what a real copy costs, or should electronic versions be cheaper?

Source: WSJ

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Simon Sage

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Eddy Cue says Apple can't treat magazines differently than FarmVille when it comes to iBooks


What hogwash!
First, it isn't very apt that books should be treated like apps. Are you telling me that square pegs have to fit into a round holes? Books are books and apps are apps. Magazines & newspapers are different in that they are daily, weekly, monthly. Different products might follow different rules.
I remmeber how Apple didn't let the music industry manage the pricing in iTunes. They wanted more than 99 cents per song. After much consternation, Apple finally compitulated.
So, when it is in Apple's interest, THEY can define pricing. A little hipocritical, no?
It jsut seems convenient that apple comes up with this "excuse" that they can't treat different products differently. Why didn't they say that last week? Were they going through the best excuse to use?
Sorry, I don't buy it (and I won't lol)
Apple CAN price books differently (as they did with music).

And why is Cue talking about newspapers and magazines? I thought the suit concerned iBooks? Is he attempting misdirection of public opinion?
Nevertheless, I don't think Apple is in the wrong.

The iMore article is referencing a WSJ op-ed from an ex-WSJ person and giving some quotes about Eddie Cue's negotiations with the WSJ, a newspaper, for publishing WSJ in the Apple iTunes/App Store.

It is not apt; it is an outright lie.
Apple does treat books and magazines differently than apps, unless Cue is saying that Apple also effectively dictates to Zygna a price floor for their products on Google or Amazon App Stores.
I don't recall Apple sanctioning PopCap out of the App Store when Amazon offered Plants vs Zombies as their Android Free App of the Day, do you?

"Take it or leave it, bee hatches." That's what Apple tells everyone on the App Store 70/30 revenue split. Same thing with the "agency model" revenue split on iBooks. Neither one is "collusion" or "price fixing."

You miss the point.
The collusion is the agreement between Apple and the 6 publishers -- we have separate competitors, acting in concert to the detriment of customers. That is the textbook definition of collusion, though the finger should be more directly pointed at the publishers than at Apple.
The price fixing is Apple effectively telling other stores what their prices can be. "Take it or leave it bitches" is just fine within the context of their own store. It ventures into illegal territory when it dictates what other producers and resellers can do, and the DOJ's antennae perk up especially when that venture results in higher prices paid by consumers.
Put simply, once Amazon (or anybody) has purchased books from the publisher, Amazon should have every right to set their own margins, or even sell it as a loss leader, if they so desire. With their huge market share, should Amazon cross the line into dumping, the DOJ will sniff around them. But the potential for bad behavior by Amazon can in no way be used to excuse current bad behavior by Apple and the 6 publishers.

Collusion only exists if the companies truly acted in concert. If they reached the same conclusion acting independently, there is no antitrust claim.

well the argument of the government is it did not just happen. that there were agreements. so assuming they are true you can't merely ignore that claim. not only that they don't have to formally meet. and agreement can be inferred or based on the conduct of parties.

Correct...and the DOJ feels the publishers acted in concert, with negotiations with (and comments by) Apple being a large part of the evidence. If the government cannot establish that as a proven fact, the case will not proceed.

To answer your last question, yes there should be more of a delta between pricing for electronic and "real" books, but I don't get the "collusion" concerns here. If one gas station in my neighborhodd is selling for $3.89/gallon and another is selling for $3.69, does the first station should be forced to change it's pricing and business model?
Download the Kindle and Nook apps and buy books from the cheapest, whether it's iBooks, Amazon or B&N - problem solved. If iBooks wants to lock in all books at $1000 per copy, but you can still buy the same books from the other guys for $10, who cares? That's free enterprise. If Apple, Amazon and B&N work together to set pricing across the board - that is "collusion".

^ this
I think what this is resorting to is people want to get their fun for next to nothing. Let's be real... probably tons of people out there think that Apple shouldn't charge so much because they have billions in the bank. Am I right? I think it's quite disturbing that the government is starting to meddle more and more with the free-market. We are supposed to vote with our wallets, not through bureaucracy.

What you are missing is that the publisher agreement with each other and with Apple effectively precludes Amazon from selling for less.
Collusion is quite simple. It is when erstwhile competitors act in unison to the detriment of consumers. In terms of your gas stations:
If one gas station in my neighborhodd is selling for $3.89/gallon and another is selling for $3.69, does the first station should be forced to change it’s pricing and business model?
Collusion could be:
1) Gas station #1 and Gas station #2 get together and agree to sell their gas for $3.89
2) BP and Standard Oil (who supply both gas stations) get together and agree they will not sell to any gas station that sells for less than $3.89.
3) Gas station #1 tells BP and Standard they will not resell their gas unless they force gas station #2 to sell their gas at $3.89 as well.
The essence of capitalism is that firms compete against each other, squeezing inefficiencies out of the process, and, ultimately to the benefit of the consumer. The common thread in the above examples that you have competitors cooperating to the detriment of consumers. The DOJ is arguing that we have a case like #2 or #3 in the agreement between Apple and 6 competitors, and that the government has to step in to force these entities to act more like rational, competing, capitalist entities.

Note: they do not have to act to the detriment. its still collusion even if it benefits customers. you can't agree to fix prices even if it's really low. like amazon couldn't agree with barnes and noble and borders and walmart to set prices so low that nobody else could enter the market evne though at the time customers would benefit from the low price. so it's more then just detriment.

Thank you for the correction -- I meant just that the DOJ is much more likely to go sniffing around if is a detriment to consumers. There can be collusion, or other anti-trust behavior, even if (in the short term) it looks like a consumer benefit.

Well said.
The evidence released so far against Apple and the publishers is already pretty convincing. It boggles my mind why so many people seem to think this is no big deal, or that Apple did nothing wrong.
I can understand why Apple is saying what they are, as it is a publicity thing for them, and if they are going to fight it what else can they say? But their bloggers and fans are just being ignorant, still looking at Apple through rose-colored glasses. I mean, I understand this is a fan site and all, but they need to acknowledge that the government has a strong case.

Why should digital copies be less than physical? In most cases (unless it's just a straight PDF copy), there is far more to these books than just "carbon copies". Digital books have functionality to them. There is programming involved. They are more like applications than standard books. I think the pricing is completely fair. After all - - the only difference between print and digital (outside of what I already said) is there is no printing press. People still gotta edit and distribute.

Digital copies should cost less than print because the cost of production is much much lower, as is cost of distribution. In addition, fixed costs such as warehouse space and store space are virtually non-existent.

Yeah -- not really. The costs are more or less getting shifted. Instead of paying printing costs, that money is going into the development of the book. Programmers cost a lot of money.

Also, if the publisher still has physical copies - they now have to tack on development, so their cost just went up.

The digital copy won't go out of print. Once it has been developed and deployed on a platform, there's no need to worry about distributing the books to the retailers. Just a hunch, but to me digital seems easier and cheaper. I'll be very interested if someone can point me towards a real cost comparison.
Btw I dont buy that about needing to pay a lot of money to "program" the book. It doesn't take much work to put it on ePub format or the modified version that the new iBooks uses.

A good read:http://www.nytimes.com/2010/03/01/business/media/01ebooks.html?pagewante...
As for cost:
I'm a developer (in the real world), I make $80k. As a single employee, I am already eating up $80k of their revenue if a publisher was to hire me to work on converting their books to e-formats. Mind you, I already said I am not talking about simply carbon copying a book into a plain old PDF style book with no functionality. I am talking about really making an ebook and taking advantage of the platform like a lot books are heading to do. Let's go ahead and tack on the costs to "update" the books, as some publishers seem interested in doing now. Suddenly that cheap ebook isn't very cheap, is it?

You're seriously underestimating the pre-press costs of producing physical books, and also post-production costs of distribution and sales. Also, each book does need it's own development team. There is a standard system in place for each ebook platform, and publishers can create books using those systems quite easily. This is evidenced by the existence of iBooks author, as well as the fact that any document can be exported as a .epub file in several pieces of software, like Pages, Word, and InDesign.

Of course they fall hand-in-hand. A company is not going to spend $1,000 a unit to manufacture something when people will only pay $40 for it.
The problem with the logic people use when they make that statement is quite simple. If people had their way, their greedy little hearts would demand the product be free. Economics just doesn't work that way. :)

No, this logic not faulty. If people want a product, they realize that it will not be produced if they will not pay for it. Even if they do not realize this, it is a fact, and it works itself out in the aggregate. People should demand the lowest price possible. This is another mode of squeezing out inefficiencies.

The key word in your statement is "used." The original purchase price would have been enough to cover the cost of the creation, distribution, etc. of the book. And many books are way more than $.99, even at a used book store.
By your logic, used books should be free. Why are you paying $.99?

I think that electronic content should be cheaper than the physical items. Because I would usually much rather have a real book on a real shelf for display purposes at least, it of it were cheaper to buy an ebook then I would consider buying the ebook.