Steve Jobs saw Apple Inc. (AAPL)’s 70 percent market share for digital music slipping in 2004, called competitors “hackers” and told his staff in e-mails that Apple needed to pivot, according to evidence presented to a jury.
Apple CEO Steve Jobs introduces the new iPod nano the Moscone Center in San Francisco, on Sept. 7, 2005.
“We may need to change things here,” Jobs wrote to a top iTunes executive when he heard about online startups planning to bypass the service, setting in motion what lawyers suing Apple claim was an effort by the company to thwart rival music stores to maintain a monopoly over digital players.
After an almost decade-long fight in federal court, consumer lawyers are asking jurors in Oakland, California, to find Apple violated antitrust laws by locking customers into iTunes and owes more than $1 billion in damages.
Jobs and other top Apple executives took steps to block non-Apple song downloading software on the iPod after they learned that a competitor had figured out a way to have songs from their services work on the device, Bonny Sweeney, a lawyer for consumers, said today in her opening statement at the trial.
“There was a concern that this would eat into their market share,” Sweeney said.
The trial promises a trip back in time, when the iPod was still new and dominated digital music. Mariah Carey had the number one single in 2005, the year the lawsuit was filed, and Apple sold more than 22 million iPods.
A year earlier, in a press release Jobs drafted, Apple had accused RealNetworks Inc. (RNWK) of using “the tactics and ethics of a hacker” with a program allowing consumers to buy music, circumvent Apple’s digital rights software and play it on iPods.
ITunes Software
Attorneys representing as many as 8 million consumers and 500 retailers and resellers who bought iPods from 2006 to 2009 claim Apple modified iTunes software so music downloaded with RealNetworks software couldn’t be played. Locking iPod owners into iTunes stifled competition for downloading services and enabled Apple to charge more for iPods, they claim.
The result was overcharges of 7.5 percent on iPods sold to retail customers and 2.3 percent on iPods sold to resellers for total damages of almost $352 million, Sweeney said in court filings. Under federal antitrust law, the damages can be tripled if Apple loses.
Apple called this theory “implausible,” saying in a court filing that RealNetworks, which isn’t a party in the case, was a minor player and there’s no evidence consumers were locked into buying an iPod.
Prospective jurors in the iPod trial were vetted over how they feel about Jobs when they were selected for the panel last month.
One man acknowledged having strong views on both sides. In his responses on a written questionnaire, he used a profanity to characterize Jobs as a jerk while also calling him a “job creator and an innovator.”
The judge asked the man whether, in light of his opinions, he could “come in with an fair, open mind” and “decide this case solely based upon the evidence,” according to a court transcript.
“Yes, I can,” the man said. He didn’t make it onto the jury after Apple exercised its right to exclude him without saying why.
The case is The Apple iPod iTunes Antitrust Litigation, 05-37, U.S. District Court, Northern District of California (Oakland).
To contact the reporter on this story: Karen Gullo in federal court in Oakland, California, at
kgullo@bloomberg.net