Publishers gave Amazon ‘ultimatum’ over e-book pricing: executive

Amazon said publishes gave it an ultimatum once they struck e-book deals with Apple. Credit: Amazon
Amazon said publishes gave it an ultimatum once they struck e-book deals with Apple. Credit: Amazon

Publishers gave Amazon.com an “ultimatum” to let them set prices of e-books sold on its website after they reached deals in 2010 to sell through Apple Inc. as well, a top executive at the retailer testified on Wednesday.

Amazon could have been barred from selling books for its Kindle e-reader the same day physical hardcovers were released unless the retailer agreed to their terms, said Russell Grandinetti, vice president for Kindle content on Amazon.com.

Grandinetti gave the testimony on the third day of an antitrust trial in Manhattan federal court. The U.S. Justice Department filed a lawsuit against Apple and five major U.S. publishers in April 2012, accusing them of conspiring to fix prices for e-books.

The publishers all settled before trial and together paid $164 million to resolve parallel claims by state attorneys that are also being asserted at trial. Apple, which became a Kindle rival when it launched the iPad in 2010, did not settle.

Amazon, which debuted the Kindle in 2007, controlled up to 90 percent of the market by 2009, court filings show. It was pricing new and bestselling e-books at $9.99, often below cost.

Amazon ultimately switched from the wholesale reseller model, in which it set prices, to the publisher-controlled agency approach similar to the one Apple had adopted in 2010.

In Apple’s model, publishers pay the retailer a commission and can set prices of $12.99, $14.99 or more.

Grandinetti said if Amazon could, it would want to sell books for cheaper.

“Certainly if someone offered reseller, we would have taken them up on that offer,” he said.

The Justice Department has sought to portray Amazon at the non-jury trial as the central victim of the alleged antitrust conspiracy amid disapproval by publishers of the low prices it was offering consumers for new and best-selling titles.

A provision in Apple’s contracts stipulated that if other retailers sold e-books for less, then e-books on Apple’s platform had to be the same price.

The Justice Department, which says Apple orchestrated the price-fixing scheme, contends the price parity clause was designed to compel publishers to move Amazon to the agency model.

At the trial, Grandinetti recounted that in January 2010, Jon Sargent, chief executive of the publisher Macmillan, offered him a choice of either moving to the agency model or having to delay selling e-books until after a title’s hardcover had been on the market for seven months.

“I think I expressed how unpalatable the choice presented was,” he said.

Amazon for a time subsequently pulled MacMillan books from its online store amid the e-books dispute, until finally capitulating and signing a three-year agency deal, according to Grandinetti.

“We wanted to avoid losing most or all of their titles from our store,” he said.

Other publishers soon also sought to move to agency, which Grandinetti said Amazon believed were in part intended to “slow down the success of the Kindle.” At times, Amazon told publishers it may need to re-evaluate business relationships, though it ultimately did switch models.

“We were not prepared to sign a contract for whatever length of time where we weren’t confident we couldn’t be further discriminated against by these publishers,” he said.

Two publishing executives have testified so far, both telling tales of tough negotiations with Amazon following their decisions to sign with Apple.

Earlier Wednesday, Simon & Schuster CEO Carolyn Reidy testified that after the CBS Corp unit decided to sign Apple’s agency agreement, she called Amazon to say her company would “want to change business terms with them.”

Several calls followed with Grandinetti, who she said initially told her he was “not entirely surprised to hear this.” In the third call, “he threatened our business,” she said.

The other publishers that settled are Pearson Plc’s Penguin Group, News Corp’s HarperCollins Publishers Inc., and Hachette Book Group Inc.



News
Entertainment
Sports
Lifestyle
National

Mutant worms stay sober, even on alcohol

U.S. researchers have developed "mutant worms" that do not get drunk by alcohol, a breakthrough that could lead to new treatment for people trying to quit drinking

Local

K-9 nose helps capture $150K in cocaine at…

A furry, four-legged security agent helped authorities stop an illegal cocaine shipment from sneaking past JFK customs.

National

Minnesota man asked to leave Southwest flight after…

A man and his two sons were asked to leave a Southwest Airlines flight after the man sent a tweet complaining about being treated rudely by a gate agent.

National

Man sues hospital after surprise penis amputation

An Alabama man who went in to a hospital last month for a circumcision awoke after surgery to find his penis had been amputated, his lawyer said on Thursday.

Movies

Review: Brett Ratner's big 'Hercules' movie is small…

The latest "Hercules," starring Dwayne Johnson as the half-god beefcake of Greek myth, strips its hero and tale of most of its fantastical elements.

Arts

Scientists recreate world's smallest Monet copy

Scientists have reproduced a famous Impressionist painting using nano-printing, to create what has been described as the world's smallest work of art. Reworked at the…

Television

Jerry Seinfeld is ambidextrous, and other Reddit AMA…

See some of the weirder highlights of Jerry Seinfeld's recent Reddit AMA.

Going Out

Grab a pedestrian and start dancing at What…

As a New Yorker, I’ve mastered the art of focusing my gaze straight ahead. Though it occasionally piques my interest, the absurdities that play out…

NFL

2014 NFL Fantasy Football Top 100 overall player…

2014 NFL Fantasy Football Top 100 overall player rankings

U.S. Soccer

NYCFC announce signing of Frank Lampard

The tease of a big signing Thursday by new MLS side NYCFC ended up being one rumored for weeks. England midfielder Frank Lampard agreed to…

NBA

NBA great LeBron James sends 800 cupcake apologies…

By Kim PalmerCLEVELAND (Reuters) - NBA star LeBron James, whose recent return to the Cleveland Cavaliers in his home state of Ohio sparked a frenzy…

NFL

Jerry Reese confident with Giants, skipping countdown clocks…

Last year, Giants GM Jerry Reese installed a countdown clock in the locker room to inspire Big Blue to play in their own stadium for Super Bowl XLVIII.

Tech

Forget Wi-Fi: Li-Fi could be the future

Li-Fi technology – developed by Mexican company Sisoft – is wireless internet connectivity using specialized LED light.

Tech

Weather app Climendo might be the most accurate…

The wait for a truly accurate weather forecast could finally be over thanks to a nifty new app called Climendo.

Tech

Napkin Table puts focus off the phone and…

Michael Jan, a design student at Tunghai University in Taiwan, has invented a serviette-picnic blanket hybrid called the Napkin Table.

Style

Essie's new Color Boutique

Essie launches high-tech kiosks at major airports and malls across the country.