The official complaint document (PDF) is short and easy to read1. But if you don’t feel like reading it, and haven’t read any of the many articles about it, here you go:
- Pricing model for e-books is the same as physical books: retailers buy at wholesale prices and set the retail price. This allows for competition between retailers and lower prices for consumers.
- Amazon.com releases the Kindle and starts selling e-books—often at a loss—for $9.99.
- Book publishers do not like this and think this retail pricing will bring down the wholesale price of both digital and physical books.
- Apple is about to release the iPad and wants to strike a deal with book publishers for 30% of every e-book sold through iBooks.
- Apple and Book Publishers conspire to switch the industry from a wholesale pricing model to an agency pricing model, allowing Book Publishers to set the retail price of books2.
- Result: Book Publishers don’t need to worry about prices dropping and Apple won’t need to compete with Amazon’s prices.
And check out this quote from the complaint:
As Apple CEO Steve Jobs described his company’s strategy for negotiating with the Publisher Defendants, “We’ll go to [an] agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that’s what [the Publisher Defendants] want anyway.”
Yikes.
Related Posts:
- Monopoly and Monopsony of Amazon
- High Stakes Negotiating With Steve Jobs
- iPad 3: Non-Revolutionary Upgrades