The U.S. DOJ’s bizarre case against Apple

“By the time summations concluded last week in the government’s ebook antitrust suit against Apple, Apple had amply vindicated CEO Tim Cook’s out-of-court characterization of the case as ‘bizarre,'” Roger Parloff writes for Fortune.

“At the same time, all the evidence presented seemed consistent with Apple’s contention that it simply sized up the unusual market conditions prevailing when it arrived on the scene in late 2009 and then acted to further its own independent, paradigmatically legitimate business goals: opening a store and trying to make a profit,” Parloff writes. “As a byproduct, if not a goal, Apple unquestionably enhanced competition and innovation in a sorely over-concentrated market. (I consequently adhere to my earlier view, expressed here, that if the case reaches the U.S. Supreme Court Apple will win.)”

Parloff writes, “Yet the crux of what makes the case so peculiar is something we learned surprisingly little about during the three-week trial before U.S. District Judge Denise Cote in Manhattan. When Apple decided to get into the ebook business in November 2009, it confronted a singularly unusual market: one in which an 80% dominant player,, was selling nearly every one of the publishers’ most desirable titles at $2 to $5 below cost.”

Read more in the full article here.

MacDailyNews Take: Jeff Bezos is a whiny little bitch. If there’s any justice in this world, this entire fiasco will end up blowing up in his face like a novelty cigar.

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  1. Clarification to all those who can’t read:

    “, was selling nearly every one of the publishers’ MOST DESIRABLE titles at $2 to $5 below cost”

    That’s only a few titles, most books were sold at a profit. So this was clearly not unsustainable.

    1. On what basis do you make that conclusion? How do you know that there are only a ‘few’ most desirable titles? Furthermore, even though the number of most desirable titles is relatively small in proportion to their total library, they can still comprise a significant percentage of overall sales. This is true in music and videos, as well.

      I do not have insight into the profit situation of Amazon’s Kindle and ebook markets. But it is reasonable to believe that hardware profits were used to subsidize ebooks sold well below cost. Some would say that this mirrors Apple’s approach with music because the ITunes Store was not profitable in the early years. But the music tracks were sold at a fair cost relative to their CD counterparts. There was no cost barrier to entry for competitors, and several other companies eventually undercut Apple’s prices in an attempt to gain market share. In contrast, Amazon was selling the most popular ebook titles at prices well below the actual cost of the product, and that is even before factoring in operational costs. This presented a significant barrier to entry for any company that was not willing to lose money on ebooks and make up the cost elsewhere.

  2. We must also look at the issue of Amazon selling below cost from a strategic perspective, and over time. What do they expect to gain by selling best-sellers below cost? Domination of the emerging e-publishing business (e-publishing, e-books, Kindle), through annihilation of the main potential competitors: the current publishing houses. Anti-trust abuse, anyone? Amazon’s fight is strategic and for the future. That is why they are fighting this issue so hard. They want to corner the e-publishing market.

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