Yesterday the Department of Justice smacked an anti-trust lawsuit on Apple and five of the six biggest book publishers for price-fixing e-books. The dynamics that led to the lawsuit itself are complicated and involve a web of tensions between Amazon, the book publishers and Apple. But one big aspect has been way under-discussed in media coverage so far: how the lawsuit reflects on Steve Jobs.
The lawsuit has Steve Jobs‘ fingerprints all over it. Its main complaint stems from a series of private, CEO-only meetings that Jobs held with the heads of the publishers as Apple prepared to roll out the iPad in 2010. To incentivize them into offering books through iBooks, Jobs proposed allowing the publishers to set their own prices, with Apple taking a 30% commission. Additionally, the publishers agreed not to sell the books cheaper in other places.
But below the surface of this apparently illegal collusion is a deep philosophical consideration that’s classic Jobs.
Apple’s agreement was deemed “anti-competitive” since it eliminated the competition between sellers that could bring the price down for consumers, such as competition between Apple and Amazon. But the weird thing in this case is that before the iPad Amazon essentially had an e-book monopoly with 90% of the market—they were setting the price as a seller, but they weren’t facing any competition. In the process they set a price that was unacceptable to publishers—but Amazon threatened to stop selling their regular books if they protested, leveraging their dominance to muscle publishers into charging less than they wanted for e-books. Meanwhile, Amazon announced plans for its own publishing company, which could potentially put all the publishers out of business and allow Amazon to muscle authors as they’d been muscling publishers.
Steve Jobs was brilliantly strategic, but he was also passionate about how he believed things should be. It was a matter of principle. And he did not think this was how things should be.
Echoes of this e-book battle can be seen over the decades in Jobs’ battles with Microsoft and later with the Android phone. Jobs believed intellectual property should be valued—that unique creativity should be rewarded, so that greatness has an incentive to bloom. Which is why Apple always refused to license out its operating system, like Microsoft did, to other hardware makers who would propagate it in degraded quality to competitively undercut each other on price.
Jobs saw that publishers needed to make money in order to stay in business and find the next generation of authors. Putting them out of business in a race toward the bottom that results in Amazon price gouging authors so it can sell books for a dollar may well encourage the next generation’s Jonathan Franzens to become something other than authors. And then we all lose.
The US lawsuit actually cites a Jobs quote from Walter Isaacson’s biography, in which he said, “We’ll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that’s what you want anyway.”
It makes him sound like a colluding schemer. Which he was—anyone who’s read the book knows he could be a ruthless bastard. But he was also passionately dedicated to drawing out the best in people and in culture. He believed that consumers will and should pay a little more for the best experiences, and that the people who create them should be rewarded properly, so that the up-and-comers have the incentive to strive.
Three of the publishers named in the suit have already agreed to settle, with two of them and Apple left to fight it together. Ironically, if the US wins this anti-trust suit, it may result in a publishing landscape with even less competition, where Amazon sets the rules and everyone else from iBooks to the publishers simply follow along.
In the end it comes down to what kind of competition you want—how you think things should be. In that sense this legal battle really is Steve Jobs’ last stand.