Apple 2.0

Covering the business that Steve Jobs built

Eddy Cue: Apple's star witness in the e-book antitrust trial

June 13, 2013: 7:20 AM ET

Cue was at the center of what the DOJ calls an illegal scheme to fix the price of e-books.

Cue and Jobs. Photo: EU

Cue and Jobs. Photo: EU

FORTUNE -- Did Apple (AAPL) take advantage of the turmoil in the digital book market in late 2009 to negotiate favorable deals with five of the six biggest book publishers? Or was it, in fact, the "ringmaster" of an illegal conspiracy that reshaped the industry, forced Amazon (AMZN) and other retailers to change their business models, and raised the price of e-books?

That's the central issue at the heart of U.S.A. v. Apple, and no one was closer to the events in question than Eddy Cue, the Apple senior vice president who takes the stand Thursday in a federal courthouse in Manhattan.

Cue was Steve Jobs' point man in the six weeks of negotiations that led to the introduction of the iBookstore on Jan. 27, 2010 -- the day Jobs unveiled the iPad.

In nearly two weeks of testimony, U.S. District Court Judge Denise Cote -- who will decide the non-jury trial -- has heard how Cue and two other Apple executives held exploratory meetings in mid-December 2009 with the Big Six, the book publishers responsible for most of the titles on the New York Times bestseller list.

She's seen the e-mail Cue sent the publishers on Jan. 5 that listed, as one of Apple's key objectives: "all resellers of new titles need to be in agency model," where the publishers, not Amazon, set the prices.

She's studied the so-called MFN -- the price-matching provision in the draft contracts Apple sent the publishers on Jan. 11, and which Cue steadfastly refused to remove, despite their strong objections.

She's heard the testimony from publishing CEOs who said that once they signed Apple's contract, the MFN meant they had to change the way they did business with Amazon -- which at that time controlled 80% to 90% of the e-book market and was using their titles as loss-leaders to promote the Kindle e-reader.

And she's heard from Amazon's VP of Kindle content that when faced with ultimatums from five of the Big Six, he had no choice but to capitulate.

Steve Jobs had spoken dismissively of Amazon's Kindle after it was introduced in 2007.

"It doesn't matter how good or bad the product is, the fact is that people don't read anymore," he told the New York Times in January 2008. "Forty percent of the people in the U.S. read one book or less last year. The whole conception is flawed at the top."

It was Cue who persuaded Jobs that an e-bookstore might enhance the value of the tablet Apple was preparing to introduce, and in late 2009 Jobs gave him the green light to fly to New York to talk to the publishers.

Cue at WWDC. Photo: The Verge.

Cue at WWDC. Photo: The Verge.

It was a familiar role for Cue. He had  helped Jobs negotiate the deals that put music on the iTunes Store, apps on the App Store and movies and TV shows on Apple TV.

On Monday at Apple's annual developers conference, he unveiled the results of his latest round of negotiations: iTunes Radio, a music-streaming service that will compete with Pandora and Spotify. See Eddy Cue's double billing: On stage and in federal court.

Eduardo H. Cue, 48, grew up in Florida, graduated from Duke in 1986 and joined Apple in 1989. Since Steve Jobs' death, he has emerged as Apple's key dealmaker for new content -- a role for which he is well compensated. In 2011, Cue was granted 200,000 restricted stock units. The first 50,000 shares vest in August; at Wednesday's closing price of $432.19, they are worth $21.6 million.

For background on the case, see:

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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