Yesterday, I posted the full back-and-forth between the Department of Justice and Apple regarding the DoJ’s allegations of Apple conspiring to fix prices on e-books with publishers, which I’d encourage everyone to read. All of Apple’s responses to the allegations involving them are uniformly denied, but some of them stand out in terms of punch. Here are a few of my favorites (Apple’s response in italics):
5. To accomplish the goal of raising e-book prices and otherwise limiting retail competition for e-books, Apple and the Publisher Defendants jointly agreed to alter the business model governing the relationship between publishers and retailers. Prior to the conspiracy, both print books and e-books were sold under the longstanding “wholesale model.” Under this model, publishers sold books to retailers, and retailers, as the owners of the books, had the freedom to establish retail prices. Defendants were determined to end the robust retail price competition in e-books that prevailed, to the benefit of consumers, under the wholesale model. They therefore agreed jointly to replace the wholesale model for selling e-books with an “agency model.” Under the agency model, publishers would take control of retail pricing by appointing retailers as “agents”who would have no power to alter the retail prices set by the publishers. As a result, the publishers could end price competition among retailers and raise the prices consumers payfor ebooks through the adoption of identical pricing tiers. This change in business model would not have occurred without the conspiracy among the Defendants.
Apple admits that it entered into individual bilateral contracts with book publishers to offer eBooks through its iBookstore using an agency model. Those contracts are the best evidence of their contents. Apple has always sold eBooks under the agency model. That practice predated the iBookstore. Apple’s App Store, which has distributed more than 25 billion applications (“apps”), has always been based on an agency model. A number of individual eBook titles were sold through the App Store prior to the opening of the iBookstore – each and every sale under an agency agreement with the author or publisher. Apple denies that its agency agreements represented a change in Apple’s business model but admits that absent the agency agreements (not some purported “conspiracy”) it would not have entered eBook distribution, given the circumstances of the business as it existed prior to Apple’s entry. Except as specifically admitted, Apple denies the allegations of paragraph 5.
6. Apple facilitated the Publisher Defendants’ collective effort to end retail price competition by coordinating their transition to an agency model across all retailers. Apple clearly understood that its participation in this scheme would result in higher prices to consumers. As Apple CEOSteveJobs described his company’s strategy for negotiating with the Publisher Defendants, “We’ll goto [an] 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.” Apple was perfectly willing to help the Publisher Defendants obtain their objective of higher prices for consumers by ending Amazon’s “$9.99″ price program as long as Apple was guaranteed its 30 percent margin and could avoid retail price competition from Amazon.
Apple denies the allegations of paragraph 6. Apple did not agree to, nor did it “facilitate,” the transition of other retailers to an agency model. The Government’s selective citation to hearsay from a small portion of Apple’s former CEO’s biography is irrelevant and has no place in this litigation. In an agency model, the “principal,” in this case the publisher, decides the price of its product in the retail marketplace. If that principal believes a particular product is worth more or less than others are charging, it is free under our economic and legal system to offer that higher or lower price. And it is perfectly legal for a principal and agent to discuss the pricing decisions of the principal. There is no allegation that Apple ever had any communications or agreements, directly or indirectly, with its competitor, Amazon, on any of the issues raised in the complaint.
7. The plan – what Apple proudly described as an “aikido move” – worked. Over three days in January 2010, each Publisher Defendant entered into a functionally identical agency contract with Apple that would gointo effect simultaneously in April 2010 and “chang[e] the industry permanently.” These “Apple AgencyAgreements” conferred on the Publisher Defendants the power to setApple’s retail prices for e-books, while granting Apple the assurance that the Publisher Defendants would raise retail e-book prices at all other e-book outlets, too. Instead of $9.99, electronic versions of bestsellers and newly released titles would be priced according to a set of price tiers contained in each of the Apple Agency Agreements that determined de facto retail e- book prices as a function of the title’s hardcover list price. All bestselling and newly released titles bearing a hardcover list price between $25.01 and $35.00, for example, would be priced at $12.99, $14.99, or $16.99, with the retail e-book price increasing in relation to the hardcover list price.
Apple denies the allegations of paragraph 7. The Government’s reference to an “akido move” – another selective citation to the biography of Apple’s former CEO – is flatly inconsistent with the concept of an agreement. “Akido” is not a team sport like football with a quarterback directing the plays; it is a defensive martial art practiced one-on- one by individuals, requiring use of little strength or power, based on redirecting an attacker’s own force. The small excerpted portion at most describes the impact of the additional competition introduced by the launch of the iBookstore and the iPad. This lawsuit wrongly seeks to condemn Apple based on the Government’s apparent dissatisfaction with the impact of competitive entry, demand stimulation and innovation (ignoring significant indicia of consumer and market benefit), not based on any anticompetitive conduct by Apple. This is contrary to law and sound economic policy.
37. Beginning no later than September 2008, the Publisher Defendants’ senior executives engaged in a series of meetings, telephone conversations and other communications in which they jointly acknowledged to each other the threat posed by Amazon’s pricing strategy and the need to work collectively to end that strategy. By the end ofthe summer of2009, the Publisher Defendants had agreed to act collectively to force up Amazon’s retail prices and thereafter considered and implemented various means to accomplish that goal, including moving under the guise of a joint venture. Ultimately, in late 2009, Apple and the Publisher Defendants settled on the strategy that worked—replacing the wholesale model with an agency model that gave the Publisher Defendants the power to raise retail e-book prices themselves.
Apple lacks sufficient information and belief as to the allegations regarding the Publisher Defendants to respond to those allegations in paragraph 37. Apple denies the remaining allegations that “Apple and the Publisher Defendants” in “late 2009” (or any time) settled on “the strategy” to “give the Publisher Defendants the power to raise retail eBook prices themselves.” It was perfectly lawful for Apple to offer an opportunity for individual publishers to sell eBooks directly to consumers with Apple as an agent on commission. The Complaint acknowledges that Apple did not participate in the formation of a purported publisher conspiracy (see, e.g., paragraph 53). Indeed, the Complaint alleges that Apple did not hold “exploratory conversations” with the publishers until December 2009 (paragraph 53). Although it alleges in conclusory terms that Apple and the Publishers apparently immediately agreed on a conspiratorial “strategy” in December 2009, there are no allegations that Apple was made aware of the purported underlying conspiracy between the publishers. Proposing an agency model was in Apple’s unilateral and independent business interests, and Apple’s separate negotiations with each of the publishers over a period of weeks is directly inconsistent with the allegations in paragraph 37.
38. The evidence showing conspiracy is substantial and includes: • Practices facilitating a horizontal conspiracy. The Publisher Defendants regularly communicated with each other in private conversations, both in person and on the telephone, and in e-mails to each other to exchange sensitive information and assurances of solidarity to advance the ends of the conspiracy. • Direct evidence ofa conspiracy. The Publisher Defendants directly discussed, agreed to, and encouraged each other to collective action to force Amazon to raise its retail e-book prices. • Recognition of illicit nature of communications. Publisher Defendants took steps to conceal their communications with one another, including instructions to “double delete” e-mail and taking other measures to avoid leaving a paper trail. • Acts contrary to economic interests. It would have been contrary to the economic interests of any Publisher Defendant acting alone to attempt to impose agency on all of its retailers and then raise its retail e-book prices. For example, Penguin Group CEO John Makinson reported to his parent company board of directors that “the industry needs to develop a common strategy” to address the threat “from digital companies whose objective may be to disintermediate traditional publishers altogether” because it “will not be possible for any individual publisher to mount an effective response,” and Penguin later admitted that it would have been economically disadvantaged if it “was the only publisher dealing with Apple under the new business model.” • Motive to enter the conspiracy, including knowledge or assurances that competitors also will enter. The Publisher Defendants were motivated by a desire to maintain both the perceived value of their books and their own position in the industry. They received assurances from both each other and Apple that they all would move together to raise retail e-book prices. Apple was motivated to ensure that it would not face competition from Amazon’s low-price retail strategy. • Abrupt, contemporaneous shift from past behavior. Prior to January 23, 2010, all Publisher Defendants sold their e-books under the traditional wholesale model; by January 25, 2010, all Publisher Defendants had irrevocably committed to transition all of their retailers to the agency model (and Apple had committed to sell e- books on a model inconsistent with the way it sells the vast bulk of the digital media it offers in its iTunes store). On April 3, 2010, as soon as the Apple Agency Agreements simultaneously became effective, all Publisher Defendants immediately used their new retail pricing authority to raise the retail prices of their newly released and bestselling e-books to the common ostensible maximum prices contained in their Apple Agency Agreements.
Apple lacks sufficient information and belief as to the allegations regarding the Publisher Defendants to respond to those allegations and on that basis denies those allegations in paragraph 38. Apple denies the remaining allegations, including the allegation that it provided “assurances” they “all would move together to raise retail eBook prices.” This allegation makes no sense. Apple had no power in its agreements to set prices, except to require a publisher to match lower prices offered elsewhere for a very small number of individual titles. The DOJ’s Competitive Impact Statement filed with this Court highlights the lack of logic in this allegation. It states, in pertinent part at page 6, that “[a]fter each round of negotiations with Apple over the terms of their agency agreements, Publisher Defendants’ CEOs immediately contacted each other to discuss strategy and verify where each stood with Apple.” Such alleged communications among the publishers underscores the fact that Apple was negotiating independently with each publisher and not providing the purported assurances alleged. The suggestion that Apple’s decision to pursue an agency model supports a showing of conspiracy because it is inconsistent with “the vast bulk of the digital media it offers in its iTunes store” ignores (among other things) that Apple’s “App Store” operates on an agency model. Prior to the iBookstore, Apple sold a number of individual eBook titles on the App Store, all under the agency model. Moreover, the use of the phrase “ostensible maximum prices” is conclusory rhetoric contrary to the facts – raising a price no higher than an “ostensible maximum” shows that it was in fact an actual maximum. Finally, Apple admits that any “illicit” communications among the Publishers, to the extent they existed, were concealed from Apple.
51. Apple’s entry into the e-book business provided a perfect opportunity for collective action to implement the agency model and use it to raise retail e-book prices. Apple was in the process of developing a strategy to sell e-books on its new iPad device. Apple initially contemplated selling e-books through the existing wholesale model, which was similar to the manner in which Apple sold the vast majority of the digital media it offered in its iTunes store. On February 19, 2009, Apple Vice President of Internet Services Eddy Cue explained to Apple CEO Steve Jobs in an e-mail, “[a]t this point, it would be very easy for us to compete and I think trounce Amazon by opening up our own ebook store.” In addition to considering competitive entry at that time, though, Apple also contemplated illegally dividing the digital content world with Amazon, allowing each to “own the category” of its choice—audio/video to Apple and e-books to Amazon.
Apple admits that in late 2009 it considered whether it would create an iBookstore to offer eBooks to read on its new and yet-to-be announced iPad. Apple considered whether it would utilize a wholesale model. Apple admits that Mr. Cue wrote an email to Mr. Jobs on February 19, 2009, almost a year before the iPad launch, before Apple began its evaluation of the eBook business, and ten months before Apple had its individual exploratory conversations with each publisher. That email is the best evidence of its contents. Apple denies that it contemplated “dividing the digital content world with Amazon,” and notes that there are no allegations in the Complaint of any communications between Apple and Amazon on any topic, much less a fictional market division that is not the subject of this, or any proceeding, because nothing of the sort was contemplated, much less acted upon.
60. As perhaps the only company that could facilitate their goal of raising retail ebook prices across the industry, Apple knew that it had significant leverage in negotiations with Publisher Defendants. Apple exercised this leverage to demand a thirty percent commission—a margin significantly above the prevailing competitive margins for e- book retailers. The Publisher Defendants worried that the combination of paying Apple a higher commission than they would have liked and pricing their e-books lower than they wanted might be too much to bear in exchange for Apple’s facilitation of their agreement to raise retail e-book prices. Ultimately, though, they convinced Apple to allow them to raise prices high enough to make the deal palatable to them.
Apple denies the allegations of paragraph 60, except that Apple admits that any positive margin on sales by definition would be significantly above the negative prevailing margin incurred by Amazon across at least some of its eBook sales. Apple specifically denies that the requested 30% agency commission represented a profit margin – instead it was a fee for a combination of services having a considerable cost to Apple – or that it was a function of any leverage or market power. Instead, Apple’s negotiating position was based entirely on its consistent business model, and the attraction of its innovative new iPad and the iBookstore as a distribution platform for book publishers who wanted to expand the market for eBooks. This was competition on the merits, with Apple providing a superior reading platform on a beautiful 10 inch iPad screen, with color, multi-media, and fixed display, and access to millions of future iPad purchasers. This is classic procompetitive behavior that should be celebrated, not condemned through litigation. The Government’s allegations highlight a fundamental problem with its theory as to Apple. Without Apple’s entry, eBook distribution would essentially be ceded to a single distributor (Amazon), who would then possess virtually unlimited power in the eBook business. Apple provided all publishers, large or small, similar opportunities to utilize Apple as an agent to sell eBooks directly to consumers through the iBookstore on non-discriminatory terms.
61. As it negotiated with the Publisher Defendants in December 2009 and January 2010, Apple kept each PublisherDefendant informed of the status of its negotiations with the other Publisher Defendants. Apple also assured the Publisher Defendants that its proposals were the same to each and that no deal Apple agreed to with one publisher would be materially different from any deal it agreed to with another publisher. Apple thus knowingly served as a critical conspiracy participant by allowing the Publisher Defendants to signal to one another both (a) which agency terms would comprise an acceptable means of achieving their ultimate goal of raising and stabilizing retail e-book prices,and (b) that they could lock themselves into this particular means of collectively achieving that goal by all signing their Apple Agency Agreement.
Apple denies that it “kept each Publisher Defendant informed of the status of its negotiations with the other Publisher Defendants.” Apple admits that on occasion in the weeks prior to the announcement of the iPad it provided individual publishers a general sense of progress toward the conclusion of negotiations with a sufficient number of publishers in total to warrant Apple’s entry, but Apple denies that it provided any one publisher with individual or specific information about any other publisher. Apple had no interest in negotiating arbitrary variations in agreements for the performance of an essentially identical agency role for similarly situated publishers and had concrete efficiency-based justifications for seeking terms that were not materially inconsistent across principals; accordingly, Apple admits and alleges that any assurances it made to individual publishers were consistent with these interests and justifications and wholly lawful. Apple engaged in individual negotiations with each publisher, and reacted on an independent basis to the separate input of each publisher. Apple had no intent to and did not facilitate a conspiracy among the publishers; it simply used commonsense and time-honored negotiating tactics to achieve its independent business interests as ultimately reflected in separate bilateral contracts between Apple and each Publisher Defendant, each of which is the best evidence of its contents. Apple wanted pricing to be competitive, and its bilateral negotiations were intended to achieve that goal. Apple denies that it knowingly allowed the publishers to signal to each other about agency terms at all, much less as part of an alleged “ultimate goal of raising or stabilizing retail eBook prices,” or that it knowingly allowed them to signal “they could lock themselves into” a “particular means of collectively achieving that goal” by entering into an agency agreement with Apple to offer eBooks directly to consumers.
65. The proposed e-book distribution agreement mainly incorporated the principles Apple set out in its e-mail messages ofJanuary 4 through January 6, with two notable changes. First, Apple demanded that the Publisher Defendants provide Apple their complete e-book catalogs and that they not delay the electronic release of any title behind its print release. Second, and more important, Apple replaced the express requirement that each publisher adopt the agency model with each of its retailers with an unusual most favored nation (“MFN”) pricing provision. That provision was not structured like a standard MFN in favor of a retailer, ensuring Apple that it would receive the best available wholesale price. Nor did the MFN ensure Apple that the Publisher Defendants would not set a higher retail price on the iBookstore than they set on other websites where they controlled retail prices. Instead, the MFN here required each publisher to guarantee that it would lower the retail price of each e-book in Apple’s iBookstore to match the lowest price offered by any other retailer, even if the Publisher Defendant did not control that other retailer’s ultimate consumer price. That is, instead of an MFN designed to protect Apple’s ability to compete, this MFN was designed to protect Apple from having to compete on price at all, while still maintaining Apple’s 30 percent margin.
Apple admits that the proposed agency agreements incorporated principles previously conveyed by Apple to individual publishers. The proposals and related documents referenced in this paragraph are the best evidence of their contents. Apple denies that it negotiated any restrictions on how a publisher dealt with another distributor. Apple denies the characterization of the MFN provisions in the respective proposals. In particular, the Government states that the MFN did not “ensure Apple that the Publisher Defendants would not set a higher retail price on the iBookstore than they set on other websites where they controlled retail prices.” The paragraph does not allege what “other websites” are being referred to. It is not surprising that the Government does not actually allege the language of the MFN, the best evidence of its terms, which applies on its face to any other eBook distributor. The MFN says nothing about excluding eBook distributors acting as publisher agents. If the MFN was not “standard,” this was because de novo entry into an alleged market controlled by a single dominant distributor is not a standard event. If the MFN was “unusual” this is only because it was sought by a party with no market power, it applied to a minimal share of sales (starting from zero), and it served a procompetitive purpose: to allow Apple to enter eBook distribution assured that its iBookstore would be price competitive on new releases. Apple denies that its commission was “a margin” – it was a negotiated fee for service as an agent that had associated costs.
66. The purpose of these provisions was to work in concert to enforce the Defendants’ agreement to raise and stabilize retail e-book prices. Apple and the Publisher Defendants recognized that coupling Apple’s right to all of their e-books with its right to demand that those e-books not be priced higher on the iBookstore than on any other website effectively required that each Publisher Defendant take away retail pricing control from all other e-book retailers, including stripping them ofany ability to discount or otherwise price promote e-books out of the retailer’s own margins. Otherwise, the retail price MFN would cause Apple’s iBookstore prices to drop to match the best available retail price of each e-book, and the Publisher Defendants would receive only 70 percent of those reduced retail prices. Price competition by other retailers, if allowed to continue, thus likely would reduce e-book revenues to levels the Publisher Defendants could not control or predict.
Apple denies the allegations of paragraph 66. The DOJ’s theory is that if Amazon remained on the wholesale model and continued to price at $9.99, the MFN would allow Apple to insist on a price match yielding the Publisher Defendants “only 70 percent of [$9.99]” on Apple sales, which supposedly would compel a publisher to compel Amazon (a monopolist) to flee the wholesale model. Not so. The courts and the DOJ itself have consistently recognized that for an MFN to exert inescapable compulsion of this sort (and, even then, only on non-dominant firms), the MFN must apply to a significant share of the market, as would typically be the case when imposed by a dominant firm holding market power due to its large market share. As the senior DOJ official who signed the Complaint initiating this case recently said: “It’s not that all MFNs lead to competitive harm. But we take a close look at them when employed by firms with significant market power.” Interview with Sharis A. Pozen, The Antitrust Source at 7 (April 2012), available at http://www.americanbar.org/publications/the_antitrust_source.html. But here, Apple was a new entrant with zero share and no market power. Apple was bringing a new group of potential consumers to the eBooks market, who unlike a Kindle owner, could buy eBooks from any seller. If Amazon had chosen to retain the wholesale model and continued to price selected books at $9.99, to the extent Apple sales yielded the publishers less money (70% of $9.99), this lower return would have been incurred on a very small base (starting from zero); at the same time, the publishers would have made more money from their growing Amazon sales, which constituted the bulk of the business. And if the argument is that Amazon would insist upon better terms because of those negotiated by Apple on an agency basis, then logic refutes this speculation, since Apple’s entry into the market can hardly be found to have increased Amazon’s monopsony power. Thus, there is no factual basis for an argument that the MFN exerted irresistible force on the publishers, much less any reason to disregard the MFN’s lawful procompetitive purpose.
74. On January 24,2010, Hachette signed an e-book distribution agreement with Apple. Over the next two days, Simon& Schuster, Macmillan, Penguin, and HarperCollins all followed suit and signed e-book distribution agreements with Apple. Within these three days, the Publisher Defendants agreed with Apple to abandon the longstanding wholesale model for selling e-books. The Apple Agency Agreements took effect simultaneously on April 3, 2010 with the release of Apple’s new iPad.
Apple admits that it signed agency contracts with Hachette, Simon & Schuster, Macmillan, Penguin and HarperCollins within a few days before the public announcement of the launch of the iPad. Those agency contracts are the best evidence of their contents. The timing was driven by the desire to announce the launch of the iBookstore at the time of the launch of the iPad. Apple further admits that the agreements became effective on the date of the launch of the iBookstore. While paragraph 74 alleges that there was a “longstanding wholesale model for eBooks,” this allegation ignores that eBooks had been available only for a few years, and were available primarily to Kindle owners on the platform of a single dominant player, Amazon, and therefore Apple denies that allegation. It also ignores that Apple had previously sold eBooks on the App Store – under the agency model. The Government’s allegations fail to address why the agency model, long recognized as perfectly lawful, and in this instance consistent with Apple’s legitimate business interests and prior business experience, should not have been utilized. This would have meant Apple would not enter the market, and would have allowed Amazon to cement a long-term dominance in the sale of eBooks.
78. Apple understood that the retail price MFN was the key commitment mechanism to keep the Publisher Defendants advancing their conspiracy in lockstep. Regarding the effect of the MFN, Apple executive Pete Alcorn remarked in the context of the European roll-out of the agency model in the spring of 2010:
I told [Apple executive Keith Moerer] that I think he and Eddy [Cue] made it at least halfway to changing the industry permanently, and we should keep the pads on and keep fighting for it. I might regret that later, but right now I feel like it’s a giant win to keep pushing the MFN and forcing people off the [A]mazon model and onto ours. If anything, the place to give is the pricing – long run, the mfh is more important. The interesting insight in the meeting was Eddy’s explanation that it doesn’t have to be that broad —any decent MFN forces the model.
Apple denies the allegation that it “understood that the retail price MFN was the key commitment mechanism to keep the Publisher Defendants advancing their conspiracy in lockstep,” or that the quoted excerpt from an Apple executive, not responsible for negotiating the agency agreements at issue, constitutes an admission. Apple’s MFN was very narrow – it generally simply allowed Apple to require a publisher to offer a competitive price on a new release in the iBookstore. The MFN excluded special promotions, for example, and was not self-executing. It was not a breach of the MFN for a lower competitive price on an individual title to exist elsewhere; it simply gave Apple the right to require the publisher meet the price on certain new releases. If as the Government alleges, pricing in the eBooks market was “competitive” prior to Apple’s entry, then having Apple, an agent without pricing discretion, with limited rights to require publishers to meet those prices in the marketplace cannot be viewed as anticompetitive. The eBooks price levels prior to Apple’s entry were not “competitive,” but simply reflected strategic decisions made by a 90% player to promote its long-term interests in preserving market dominance, and it would not be unexpected that significant entry and demand stimulation would change the pricing dynamics in the alleged market.
85. When a company takes a pro-competitive action by introducing a new product, lowering its prices, or even adopting a new business model that helps it sell more product at better prices, it typically does not want its competitors to copy its action, but prefers to maintain a first-mover or competitive advantage. In contrast, when companies jointly take collusive action, such as instituting a coordinated price increase, they typically want the rest of their competitors to join them in that action. Because collusive actions are not pro-competitive or consumer friendly, any competitor that does not go along with the conspirators can take more consumer friendly actions and see its market share rise at the expense of the conspirators. Here, the Defendants acted consistently with a collusive arrangement, and inconsistently with a procompetitive arrangement, as they sought to pressure another publisher (whose market share was growing at the Publisher Defendants’ expense after the Apple Agency Contracts became effective) to join them.
Insofar as paragraph 85 contains legal argument, no response is required. Apple lacks sufficient information or belief as to the factual allegations in paragraph 85 to respond, and on that basis denies the allegations. Apple denies that it sought to pressure a “hold out” publisher to move to the agency model. Apple provided all publishers, large or small, similar opportunities to utilize Apple as an agent to sell eBooks directly to consumers through the iBookstore on non-discriminatory terms. Apple did not “cajole” any publisher (a benign term meaning to persuade with flattery), but rather sought to explain the benefits of working with Apple.
92. Defendants’ conspiracy and agreement to raise and stabilize retail e-book prices by collectively adopting the agency model and Apple price tiers led to an increase in the retail prices of newly released and bestselling e-books. Prior to the Defendants’ conspiracy, consumers benefited from price competition that led to $9.99 prices for newly released and bestselling e-books. Almost immediately after Apple launched its iBookstore in April 2010 and the Publisher Defendants imposed agency model pricing on all retailers, the Publisher Defendants’ e-book prices for most newly released and bestselling e-books rose to either $12.99 or $14.99.
Apple denies that the $9.99 price level referenced in paragraph 92 was the result of “price competition.” Rather it reflected a strategic pricing decision made by Amazon, with a 90% share of eBook sales, made almost exclusively to consumers who had purchased Amazon’s Kindle eReader. Consumers who did not want to buy a Kindle because they did not find it an attractive device or an attractive value proposition did not benefit from a $9.99 price, or any price, no matter how ostensibly low.