Here's The Blow-By-Blow Account Of How Apple Decided To Screw Over Amazon And Consumers Over E-Books

Eddie Cue

One of the neat things about the DOJ’s lawsuit against Apple over e-book pricing is that we get an inside glimpse into what Apple was thinking when it decided to open the iBookstore.

At the time Amazon was just starting its Kindle ecosystem, and the iPad was still in development.

We read through the DOJ’s lawsuit against Apple and publishers and we’ve pulled out the most interesting elements. (It’s not every day you get to read some of the emails from Apple’s top executives.)

After reading the case, it’s hard to see how Apple didn’t work with publishers to screw over Amazon, and thus the consumer.

We don’t know if that’s illegal or not. Apple has a well compensated legal team working on destroying the case right now, so we’ll see what happens.

Regardless, it makes for a surprisingly compelling story.

Setting the scene: Amazon is selling e-books for $9.99 and publishers are worried...

Although, for a split second Apple thought about trying to do an illegal deal with Amazon where it would give Amazon books if Amazon gave up on music

It dropped that terrible idea quickly and decided to look at the e-book market. The only problem was that Amazon's $9.99 pricing model wouldn't work for Apple. (Amazon was LOSING money on every book sold.)

So Apple came along and said publishers could pick their price for e-books, as long as it wasn't over $12.99. Also, Apple gets a 30% cut of the sale.

And here are the key details of the deal.

One thing to note, Apple agreed to a max price of $14.99.

This part is jargon-y, but it's important. Apple said that it would always be able to sell e-books at the lowest possible price and no one could beat it on price.

But wouldn't the new pricing scheme hurt consumers? Yes it would, said Steve Jobs

Publishers were willing to work with Apple, but they wanted to make sure they would all do it at once.

As publishers fretted, Steve Jobs sent in an email to a top executive (our uninformed guess: Rupert Murdoch?) saying that publishers should just accept Apple's plan.

Eventually they all agreed, thus screwing Amazon and consumers. Here's the government's conclusion...

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