Apple official defends e-book trial

A top executive at Apple who was a close associate of Steve Jobs said on Thursday that he had thrown himself into negotiations with the major publishing houses as Apple entered the e-book market because “Steve was near the end of his life.”

The executive, Eddy Cue, Apple’s lead negotiator with the publishers, said he was determined to close deals that would allow them to sell their e-books on Apple’s iBookstore in time for the introduction of the iPad in early 2010.

“I wanted to be able to get that done in time for that because it was really important to him,” Cue said, referring to Jobs. He was testifying in Federal District Court in Manhattan in the civil antitrust trial brought against Apple by the Justice Department.

“I pride myself on being successful, but this had extra meaning to me,” Cue added.
Those sped-up negotiations attracted the attention of the government, which filed a lawsuit against Apple and five publishers in April 2012. Jobs, the co-founder of Apple, died of cancer in October 2011.

 Cue, the highest-ranking Apple executive to take the stand so far in a trial that began almost two weeks ago, mounted a vigorous defence of Apple, which is accused of colluding with the publishers to fix e-book prices.

Through a nearly full day of testimony on Thursday, Cue denied that he had encouraged publishers to impose a new business model on other retailers, including Amazon.com.

Shown a slide displaying what the government has repeatedly called a “spider web” of communications among the publishing executives, Cue said he did not know that the executives, from publishers including the Penguin Group USA and Simon & Schuster, were talking to one another during their negotiations with him.


“I struggled and fought with them,” he said. “If they were talking to each other, I believe I would have had a much easier time getting those deals done.”

But he also revealed details of an unusually long and close working relationship between him and Jobs.

Cue, Apple’s senior vice president for Internet software and services, said he spoke or e-mailed with Mr. Jobs at nearly every step of the negotiations, once calling him on his way to the airport as he left a round of talks with publishers in New York.

The focus of the government’s questioning turned to December 2009 and January 2010, when Cue repeatedly flew to New York, met with publishers and tried to reach deals to make their e-books available in the iBookstore on the soon-to-be-unveiled iPad.

For publishers, the appeal of Apple getting into the e-book market was enormous. Amazon, which had introduced its Kindle e-reader in 2007, commanded a 90 percent share of e-book sales at the time.

But the default price for newly released and best-selling books on Amazon.com was $9.99, a paltry sum in the publishers’ eyes and one that undermined the value of the authors’ work and cannibalised hardcover sales.

Apple encouraged publishers to switch to a so-called agency model, in which the publishers set the price of a book and the retailer takes a commission. Previously, e-books had been sold on a wholesale model, where the retailer pays the publisher about half the list price, then is free to set another price. The agency model prevented Amazon from sharply discounting the books.

Five publishers — the Penguin Group USA, the Hachette Book Group, Simon & Schuster, HarperCollins and Macmillan — have already settled with the government. But Apple, intent on protecting Jobs’s legacy, is fighting the charges in a nonjury trial that was expected to last several weeks.

The defence was questioning Cue when the day ended and he will return to the stand when the trial continues on Monday.

Lawrence Buterman, a lawyer for the Justice Department, occasionally raised his voice while he questioned Mr. Cue for several hours before a packed courtroom presided over by Judge Denise L Cote.

According to Cue, Apple approached the negotiations with publishers the same way it did with record companies and other content providers in the iTunes store.