Testimony Reveals B&N’s Early Agency-ish Plans, Penguin’s Anger at “Selfish” Random House

The Apple price-fixing trial concludes today, after eleven days of testimony that provided a glimpse into the behind-the-scenes maneuvering among major publishers and Apple, Amazon and Google. Yesterday, it was Barnes & Noble’s turn to have its plans and tactics for launching an ebooks business revealed in court.

Apple called Barnes & Noble’s VP of digital content Theresa Horner to the stand, Publishers Marketplace reports, to show the bookseller was considering alternatives to the wholesale model used by Amazon as early as 2009.

As Horner described it, one of those models was a revenue share “where Barnes & Noble was assigning the price to the consumer, but that instead of paying the publisher 50 percent on the digital list price, we would pay them 50 percent on the monies received from the consumer. We also had a floor so that if — and the floor was 30 percent. And if we received less than 30 percent of the digital list price from the consumer, we were guaranteeing to the publisher we would give them 30 percent of the digital list price.”

Horner also confirmed that by late 2009 B&N wanted publishers to operate exclusively on the agency model with all retailers, ensuring a level playing field.

An email brought up during Horner’s testimony shows just how heated negotiations got during this period when publishers and retailers were vying to set themselves up to profit from ebooks. The email sent by Penguin CEO David Shanks to B&N’s Steve Riggio in March 2010 reads:

Hi Steve,

I wanted to share something that has me concerned. You know that we are working with your guys to come up with a formula where all of our accounts will be able to have the same prices on our ebooks. It will level the playing field for Penguin’s books and hopefully allow all of us to sell both paper and ebook product.

The one discouraging thing as you no doubt know is that Random House has chosen to stay on their current model and will allow retailers to sell at whatever price they wish. That is their prerogative.

When you go to the Kindle website, it could be the Random House home page. Amazon is showing us what they do to people who do not do what they want. Since Penguin is looking out for B&N’s welfare at what at what appears to be great cost to us, I would hope that B&N would be equally brutal to Publishers who have thrown in with your competition with obvious disdain for your welfare. You once told me that you were nice and Amazon played hardball and they were winning. I hope you make Random House hurt like Amazon is doing to people who are looking out for the overall welfare of the publishing industry.

I hope you can see how strongly I feel about this. They should not be allowed to be selfish and win.

Thanks for listening. I hope to see you soon.

David

Presumably, Shanks no longer wished brutality on Random House by the time its merger with Penguin was announced last October.

A ruling in the non-jury trial could take an estimated two months.

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