It turned out that Apple’s price cartel with publishers forced the online retailer to raise the prices of its e-books and enter into similar deals with its publishers. According to Russell Grandinetti, the company’s vice president for Kindle content, strengthened by an agreement with Apple which fixed the prices for their respective e-books higher, the publishers strong-armed online retailer into offering them similar terms.
As you might know, the US Department of Justice has taken Apple to court over price-fixing after reaching out-of-court settlements with a number of major publishers, including MacMillan, HarperCollins, Simon & Schuster, Hachette Books and Penguin. Actually, Apple’s Chief Executive Officer Steve Jobs even bragged about the deal in his biography, where he admitted that the deal meant higher e-book prices.
Press reports say that Russell Grandinetti sat down with Macmillan CEO Jon Sargent. The latter offered a stark choice: it could face a months-long delay between the hardcover release of a book and its appearance on Kindle. The other option was to convert from the reseller to agency model, where publishers have a heavier hand in setting retail pricing. Finally, Macmillan and Amazon ended up in conflict. In result, Amazon yanked the publisher’s e-books from its digital shelves, but in the end the company backed down and allowed customers to decide whether they believe it’s reasonable to pay $14.99 for a bestselling e-book. The emails emerged where Apple CEO Steve Jobs insisted to News Corp executive James Murdoch that the retailer’s pricing was ultimately unsustainable, but experts believe that it’s mostly because he said so.