"The Apple iPod iTunes Anti-Trust Litigation"

Filing 740

Administrative Motion to File Under Seal filed by Apple Inc.. (Attachments: # 1 Declaration Kiernan Declaration ISO Administrative Motion to Seal, # 2 Proposed Order Granting Motion to Seal, # 3 Exhibit Rdacted Version of Defendant's Notice of Motion and Motion for Summary Judgment and to Exclude Expert Testimony of Roger G. Noll, # 4 Exhibit SEALED Version of Motion for Summary Judgment and to Exclude Testimony, # 5 Exhibit REDACTED - Separate Statement ISO MSJ, # 6 Exhibit SEALED - Separate Statement ISO MSJ, # 7 Exhibit REDACTED - Exhibit 3 to Amiri Decl., # 8 Exhibit SEALED - Exhibit 3 to Amiri Dec, # 9 Exhibit REDACTED - Exhibit 4 to Amiri Dec, # 10 Exhibit SEALED - Exhibit 4 to Amiri Dec, # 11 Exhibit REDACTED - Exhibit 5 to Amiri Dec, # 12 Exhibit SEALED - Exhibit 5 to Amiri Dec, # 13 Exhibit REDACTED - Exhibit 6 to 8 to Amiri Dec, # 14 Exhibit SEALED - Exhibits 6 to 8 to Amiri Dec, # 15 Exhibit REDACTED - Exh 9 to Amiri Dec, # 16 Exhibit SEALED - Exh 9 to Amiri Dec, # 17 Exhibit REDACTED - Exh 10 to Amiri Dec, # 18 Exhibit SEALED - Exh 10 to Amiri Dec, # 19 Exhibit REDACTED - Exh 11 to Amiri Dec, # 20 Exhibit SEALED - Exh 11 to Amiri Dec, # 21 Exhibit SEALED - Exh 13 to Amiri Dec, # 22 Exhibit REDACTED - Exh 14 to Amiri Dec, # 23 Exhibit SEALED - Exh 14 to Amiri Dec, # 24 Exhibit SEALED - Exh 15 to Amiri Dec, # 25 Exhibit SEALED - Exh 16 to Amiri Dec, # 26 Exhibit SEALED - Exh 17 to Amiri Dec, # 27 Exhibit SEALED - Exh 18 to Amiri Dec, # 28 Exhibit SEALED - Exh 19 to Amiri Dec)(Kiernan, David) (Filed on 12/21/2013)

Download PDF
Exhibit 3 [PUBLIC VERSION - REDACTED] IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA OAKLAND DIVISION __________________________________________ ) ) ) THE APPLE IPOD ITUNES ) ANTITRUST LITIGATION ) ) ) __________________________________________) Case No. C 05 00037 YRG Case No. C 06 04457 YRG HIGHLY CONFIDENTIAL EXPERT REPORT OF KEVIN M. MURPHY August 19, 2013 (Amended) TABLE OF CONTENTS I. INTRODUCTION......................................................................................................... - 1 A. Qualifications .................................................................................................................. - 1 B. Assignment and Summary of Opinions .......................................................................... - 3 - II. BACKGROUND ........................................................................................................... - 6 A. iTunes .............................................................................................................................. - 7 B. The iPod .......................................................................................................................... - 8 1. iPod Classic ............................................................................................................... - 9 2. iPod Mini and iPod Nano ........................................................................................ - 11 3. iPod Shuffle ............................................................................................................ - 12 4. iPod Touch .............................................................................................................. - 12 5. The iPod/iTunes Interface ....................................................................................... - 13 C. The iTunes Store (iTMS) .............................................................................................. - 14 D. FairPlay ......................................................................................................................... - 17 - III. APPLE’S INTEGRATED SYSTEM IS PROCOMPETITVE ............................... - 19 A. Apple’s Initial Adoption of its Integrated System was Procompetitive. ...................... - 19 B. Apple’s Actions to Protect the Integrity of its Integrated Platform were Procompetitive .............................................................................................................. - 25 - IV. PROFESSOR NOLL’S STUDY OF IMPACT AND DAMAGES IS BASED ON UNSUPPORTED ASSUMPTIONS AND IS INCONSISTENT WITH THE ECONOMICS OF PLAINTIFFS’ THEORY .......................................................... - 32 A. Professor Noll Has Not Shown that the RMS Had Any Effect on iPod Owners.......... - 34 B. Professor Noll has done nothing to show that iPod owners were actually “lockedin” as opposed to choosing the iPod because it was a superior product. ...................... - 37 C. Professor Noll’s Claims of the Possible Impact of the Challenged Conduct are not Supported by Economics .............................................................................................. - 38 - V. PROFESSOR NOLL’S “HEDONIC REGRESSION” AND HIS CLAIMS OF ANTICOMPETITIVE IMPACT .............................................................................. - 40 A. Hedonic Models of Prices for Products with Changing Quality and the Facts of This Case ............................................................................................................................... - 40 1. Impact and Damages Would not Be Immediate or Constant .................................. - 40 2. Professor Noll’s Regression Predicts But-For Prices That are Inconsistent the Way in Which Apple Prices iPods .......................................................................... - 42 B. Professor Noll’s Regression Analysis Cannot Isolate the Effects of the Challenged Conduct ......................................................................................................................... - 42 - CONFIDENTIAL ATTORNEYS EYES ONLY i C. A High Adjusted R-squared and Small Standard Errors do not Show that the Model is Reliable...................................................................................................................... - 44 D. Professor Noll Makes a Critical Methodological Error and Thus Dramatically Overstates the Precision of His Estimates .................................................................... - 46 1. The Way in Which Professor Noll Constructs and Interprets His Data Causes Him to Vastly Overstate the Significance of His Results ....................................... - 47 2. Professor Noll did not Cluster his Observations and Thus His Results are Unreliable and not Scientifically Valid................................................................... - 49 E. Once some of Professor Noll’s Critical Errors and Omissions are Corrected, His Regression Model Cannot be used in Any Way to Support a Claim that the caused iPod Prices to Increase ...................................................................................... - 51 1. Professor Noll Does Not Properly Model the True But-for World, Which Included iTunes 4.7................................................................................................. - 52 2. Professor Noll’s Confusion about the “Log of Time” ............................................ - 53 3. Additional Features and the “Quality” of Professor Noll’s Regression ................. - 54 4. The Did Not Apply to All Models and in Any Event, Would Not have Affected All Models Equally .................................................................................. - 57 5. Professor Noll’s Models Overstate Damages ......................................................... - 59 VI. MARKET DEFINITION AND MARKET POWER............................................... - 60 - CONFIDENTIAL ATTORNEYS EYES ONLY ii LIST OF APPENDICES APPENDIX A: Curriculum Vitae APPENDIX B: List of Materials Relied Upon APPENDIX C: Collection of iPod Characteristics APPENDIX D: Additional Regression Results CONFIDENTIAL ATTORNEYS EYES ONLY iii I. INTRODUCTION 1. My name is Kevin M. Murphy. I am the George J. Stigler Professor of Economics in the Booth School of Business and the Department of Economics at The University of Chicago, where I have taught since 1983. I have been retained by counsel for Apple Inc. (“Apple”) to serve as an expert in economics in the above-captioned case. A. Qualifications 2. I received my bachelor’s degree in economics from University of California, Los Angeles, in 1981 and my doctorate degree in economics from The University of Chicago in 1986. I am a member of the faculty in both the Booth School of Business and the Department of Economics at The University of Chicago, where I teach graduate-level courses in microeconomics, price theory, empirical labor economics, and the economics of public policy issues. In these courses, I cover a wide range of topics, including the incentives that motivate firms and individuals, the operation of markets, the determinants of market prices, and the impacts of regulation and the legal system. In my teaching, I generally focus on two things: how to use the tools of economics to understand the behavior of individuals, firms, and markets and how to apply economic analysis to data. In both my research and my teaching, I emphasize the integration of economic principles with empirical analysis. 3. I have authored or co-authored more than sixty-five articles in a variety of areas in economics. Those articles have been published in leading scholarly and professional journals, including the American Economic Review, the Journal of Law and Economics, and the Journal of Political Economy. Many of my articles analyze economic issues related to industrial organization and antitrust.1 A list of the works I have published over the last ten years is included in my curriculum vitae, which is attached to this report as Appendix A. 1 See “A Competitive Perspective on Internet Explorer” (with Steven J. Davis), American Economic Review 90 (May 2000): 184-187; “Critical Loss Analysis in the Whole Foods Case” with Robert H. Topel, 3 (2) GCP Magazine (March 2008); “Competition in Two-Sided Markets: The Antitrust Economics of Payment Card Interchange Fees” (with Benjamin Klein, Kevin Green, and Lacey Place), Antitrust Law Journal 73 - 3: 571-626 (2006); “The Economics of Copyright ‘Fair Use’ In a Networked World” (with Benjamin Klein and Andres Lerner), American Economic Review 92 (May 2002): 205-208; “Vertical Integration as a Self-Enforcing Contractual Arrangement” (with Benjamin Klein), American Economic Review 87 (May 1997): 415-420; “Vertical Restraints as Contract Enforcement” (with Benjamin Klein), Journal of Law and Economics 31 (October 1988): 265-297; “Entry, Pricing and Product Design in an Initially Monopolized Market” (with Steven J. Davis and Robert H. Topel), Journal of Political Economy 112 (Feb. 2004): S188–S225; “Economic CONFIDENTIAL ATTORNEYS EYES ONLY -1- 4. I am a Fellow of the Econometric Society and a member of the American Academy of Arts and Sciences. In 1997, I was awarded the John Bates Clark Medal, which the American Economic Association was then awarding once every two years to an outstanding American economist under the age of forty.2 In 2005, I was named a MacArthur Fellow, an award that provides a five-year fellowship to individuals who show exceptional merit and promise for continued and enhanced creative work. 5. In addition to my position at The University of Chicago, I am also a Senior Consultant at Charles River Associates (“CRA”), an international consulting firm that specializes in the application of economics to legal and regulatory matters. I have consulted on a variety of antitrust, intellectual property and other matters involving economic and legal issues such as mergers, class certification, damages, labor practices, joint ventures, and allegations of anticompetitive exclusionary access, tying, price fixing, and price discrimination. I have submitted testimony in Federal Court, the U.S. Senate and to state regulatory bodies, and I have submitted expert reports in numerous cases. I have testified on behalf of the U.S. Federal Trade Commission, and I have consulted for the U.S. Department of Justice. A list of the reports I have filed and testimony I have given over the past four years is contained in my curriculum vitae. 6. In analyzing the economics in this case, I have consulted with my colleague Professor Robert Topel. My analyses have been supported by both Professor Topel and my colleagues at CRA. CRA is being compensated at my standard rate of $1250 for my work on this matter. I receive compensation from CRA based upon its billings in this matter. Neither my compensation nor that of CRA depends upon either the content of my testimony or the outcome of this litigation. 7. This report sets forth my opinions and describes the bases for those opinions as well as the data and analyses that underlie them. My opinions are based upon my analysis of documents and data produced in this matter; discovery responses; deposition transcripts; 2 Perspectives on Software Design: PC Operating Systems and Platforms” (with Steven J. Davis and Jack MacCrisken), Microsoft, Antitrust and the New Economy: Selected Essays (2002); and “Exclusive Dealing Intensifies Competition for Distribution” (with Benjamin Klein), Antitrust Law Journal 75 (Nov. 2008): 433466. Until 2009, the John Bates Clark Medal was awarded biennially. It is now awarded annually. See,”John Bates Clark Medal,” American Economic Association, http://www.aeaweb.org/honors_awards/clark_medal.php (accessed December 19, 2012). CONFIDENTIAL ATTORNEYS EYES ONLY -2- declarations, pleadings, and other filings; declarations previously submitted by Professor Noll, Dr. Burtis, Dr. Martin, and Dr. Kelly; reports of Professor Noll, Dr. Martin, and Dr. Kelly and materials cited therein; data provided by both parties, and information from public sources. My opinions are also based upon my general expertise in economics. During the course of my work, I have had access to an electronic database that contains all the documents and data produced in this case. The materials and information upon which I specifically rely in forming my opinions are listed in Appendix B to this report. 8. My opinions are based on the information available to me as of the date of this report. My work is ongoing, and I will continue to collect facts, data, and information relevant to the issues and opinions discussed herein. I will review, evaluate, and analyze any relevant material that becomes available including new opinions and analysis provided by plaintiffs’ experts, and I will supplement my report as necessary to reflect this information. B. Assignment and Summary of Opinions 9. Plaintiffs claim that the implementation of an update to FairPlay released at the same time as iTunes 7 (one of many updates to Apple’s iTunes software), which had the effect of disabling or blocking RealNetworks’ Harmony software, was anticompetitive because it allegedly raised the price of iPods during the class period. I have been asked by counsel for Apple to examine whether the conduct Plaintiffs challenge in this case was anticompetitive - that is, whether it allowed Apple to acquire or maintain monopoly power in any relevant market and allowed Apple to, and whether Apple did, charge higher prices for iPods than it otherwise could have. I have also been asked to evaluate Plaintiffs’ and Professor Noll’s theories and opinions. Based on the analysis described below, I have formed the following main opinions in addition to the opinions set forth in the remainder of this report: 10. Opinion 1: Apple’s integrated iTunes/iPod/iTunes Music Store (iTMS) platform for managing, delivering, and playing digital media is pro-competitive and beneficial to consumers. a) Apple’s integrated platform competed successfully against many other proprietary and non-proprietary platforms for accessing and playing digital media. b) Requiring iPod owners to use iTunes to add content to the iPod and thereby preventing the use of unsupported applications preserved the simplicity, reliability CONFIDENTIAL ATTORNEYS EYES ONLY -3- and ease of use of the iTunes/iPod/iTMS platform. This was procompetitive and beneficial to consumers. 11. Opinion 2: Professor Noll’s economic analysis is flawed and unreliable. a) Professor Noll ignores the pro-competitive reasons for the implementation of iTunes 7, particularly the substantial consumer benefits inherent in the integrated iTunes/iPod/iTMS platform. b) Professor Noll fails to examine whether iPod owners actually used RealPlayer with Harmony and/or purchased music from the RMS. He simply assumes they did. Thus, he fails to provide evidence of the critical factual basis for the existence of the harm he hypothesizes. His purported regression analysis cannot substitute for such evidence. c) Professor Noll’s analysis is at odds with both the undisputed facts and the Plaintiffs’ theory. Any incremental “lock-in” resulting from iTunes 7 could only apply to the small fraction of iPod owners who might otherwise have used RealPlayer with Harmony and the RMS in the future, and even then could only impact purchasing decisions in a vaguely defined “long run.” If iTunes 7 had any impact at all (and Professor Noll has not shown that it did), that impact would have been to make alternative music players more attractive to existing users of the RMS by reducing the proportion of their existing music library that could be played on the affected iPods while leaving the amount of that music that could be played on other MP3 players unchanged. But this would have led, if anything, to a reduction in iPod prices – the exact opposite of what Plaintiffs contend. 12. Opinion 3: Professor Noll’s regression analysis of iPod prices — which he claims demonstrates both anticompetitive impact and damages — is fatally flawed and highly speculative. a) Professor Noll’s regression analysis cannot identify the impact (if any) of the as distinct from other contemporaneous factors that may have influenced iPod prices. Among other things, his model cannot separate the alleged impact of the CONFIDENTIAL ATTORNEYS EYES ONLY from -4- the other changes that occurred at precisely the same time and, by the logic of his own model, would have affected Apple’s pricing. b) Professor Noll’s regression analysis is inconsistent with the timing implications of Plaintiffs’ theory of harm. He admits that iPod prices might be higher in the “long run,” but his regression is based on an assumption that the alleged overcharge began on the day on which iTunes 7.0 was released. As a matter of both economic theory and the evidence in this case, that is not possible. c) Professor Noll vastly overstates the precision of his model and its results. By ignoring the way his data are constructed and the pricing practices at issue in this case, he purports to estimate the “effects” of the with an astonishing degree of precision and statistical significance. But his claims are demonstrably wrong. Properly analyzed, even his (otherwise incorrect) estimates of impact and damage are not statistically significant. In other words, even using Professor Noll’s flawed regression one cannot conclude that the “impact” of iTunes 7 (to say nothing of the challenged ) was materially different from zero. d) Professor Noll’s model misrepresents the “but-for” world that would have existed in the absence of the challenged conduct. I understand that the relevant FairPlay technology in iTunes versions 4.7, 5 and 6 has been found legal. Despite this, Professor Noll’s regression model assumes that this legal technology would not have existed in the but-for world. This error alone doubles the magnitude of his otherwise flawed estimate of the “impact” on resellers, and it raises his claimed impact on direct purchasers by a factor of six. e) Professor Noll excludes from his model many other observable features of iTunes and iPods that, by his own “hedonic” theory, would affect the value and prices of iPods. Among these were features considered by Apple’s pricing committee in deciding how to price iPods. Correcting these errors and omissions undermines his claimed results — there is no evidence that iTunes 7 or the caused prices of iPods to be higher than they otherwise would have been. CONFIDENTIAL ATTORNEYS EYES ONLY -5- f) Professor Noll errs in using the logarithm of time instead of time measured in units to account for “Moore’s Law” of technical progress. This error also causes him to overstate damages. 13. Opinion 4: Professor Noll’s analysis of relevant markets and market power is misguided and does not address the economic issues in this case. a) On the music side, Professor Noll defines a separate antitrust market for digital music downloads. But this is a “market” without meaning. The central question in this case is whether iPod owners could be locked in through their purchases of music from the iTMS, and what matters in answering that question is where those owners get the music on their iPods and especially the relative importance of music from the RealNetworks Music Store. Since music from the RMS is a very small share of any music on the iPod, the effect of blocking Harmony will be negligible, regardless of whether digital music downloads are a separate market or they compete more broadly with other sources of music. b) Professor Noll’s analysis of market power in music players is similarly flawed. Professor Noll claims that Apple is able to charge a premium price and still maintain a large share of the market because it able to lock in customers and exercise market power. However, Apple was successful long before it was established as a market leader, and it has continued to be successful in selling to new customers entering the market. The overall history of this market shows that consumers bought their iPods not because of any alleged lock in or market power but because the iPod was a product they wanted. 14. The remainder of my report explains the basis for these opinions. II. BACKGROUND 15. The issues in this case center on Apple’s highly successful platform for managing, playing and acquiring digital media files. From an economic standpoint, the iPod is not simply a portable device for playing music and video files. Rather it is part of an integrated platform including software for managing and acquiring media files (iTunes), a portable device for playing those files (the iPod), and an online store from which such files may be purchased (the CONFIDENTIAL ATTORNEYS EYES ONLY -6- iTunes store). Exhibit 1 is a timeline of significant events in the development and enhancement of the iTunes/iPod/iTMS platform, as described below. Exhibit 2 is a similar timeline that describes significant events in the evolution of portable consumer devices for playing music. A. iTunes 16. Apple introduced iTunes in January 2001. On October 16, 2003 Apple introduced iTunes for Windows, which allowed owners of personal computers based on the Windows operating system to use the iTunes/iPod/iTMS platform. This exported the revolutionary software beyond Apple’s operating system for the first time. By moving beyond the relatively small Apple PC universe to include owners of the vastly larger number of “Wintel” based PCs, this greatly expanded the potential market for Apple’s integrated music platform. 17. In its original form iTunes was a software program that allowed users to import music digitally from CD (i.e., “rip” the CD) and other sources onto their computers. Once imported, iTunes could manage the music, play it using the computer’s speakers, or copy it back to a CD (i.e., “burn” it). iTunes was, and continues to be, offered as a free program for download aimed at streamlining the process by which users upload their entire digital music collection and making it easy to organize and play.3 The early version of iTunes could also write music files to various portable MP3 players that were available at the time. But Apple executives had low regard for those devices: “Every single one of them [stunk].”4 3 At the time, other computers already had software that enabled them to download music (from the internet or from CDs) and play it on the computer. Although two independent companies (Audion and SoundJam) had been working on the issue, there was nothing like it yet for Apple’s Macintosh computer. When Steve Jobs realized the potential importance of this for the Mac, he purchased SoundJam. It has been reported that, at the time, he was concerned that Apple had missed its chance. “I felt like a dope,” he later told Fortune magazine, noting that “millions of kids were using computers and CD burners to make audio CDs and to download digital songs called MP3s from illegal online services like Napster.” “I thought we had missed it. We had to work hard to catch up.” Brent Schlender, “How Big can Apple Get?” Fortune Magazine, February 21, 2005. Four months later, iTunes debuted. The new iTunes was “stripped down, cleaner, and many times friendlier than anything that had come before. It gave people the ability to search for their songs at lightning speed, a task performed without forcing you to go into some clumsy mode of specifying whether you were looking for the title, the artist, or the album. ‘iTunes was of course brilliant,’ concluded a stunned and disheartened Sasser of Audion. ‘It was a way to take a complicated digital music collection and make it easy. Sure, it was limited, but man, it was easy.’” Audion tried to compete, but eventually it was shut down. As Sasser wrote in his farewell, “iTunes is, you know, actually pretty awesome.” Levy, Steven The Perfect Thing: How the iPod Shuffles Commerce, Culture, and Coolness, New York, NY: Simon & Schuster (2006), hereinafter “The Perfect Thing”, p. 52. 4 The Perfect Thing, p. 53. CONFIDENTIAL ATTORNEYS EYES ONLY -7- ‘Everybody had the same story,’ says Greg Joswiak, who was then a Macintosh marketing manager. ‘I got it, it was cute, and now it’s in the drawer.’ And that means no second-time purchase. That means no telling your friends how cool it is. Because it isn’t cool.5 18. Since iTunes was first introduced, there have been ten major (version) updates, or just under one per year. In general, the new version updates enhanced the operation of the music player; added or supported new features in iPods, such as photo and/or video; and supported new content from the iTMS (e.g., movies, TV shows, and games). There have also been numerous smaller updates that added features, supported new iPods, or addressed technical issues. All told, there have been 88 different updates, the most recent of which was released on June 5, 2013.6 (See Exhibit 3 for a history of the various versions of iTunes and the major updates to those versions through March 2012.) B. The iPod 19. Apple introduced the iPod on October 23, 2001. The iPod became one of the most recognizable products in the United States, if not the world. By 2006 it was described as “the most familiar, and certainly the most desirable, new object of the twenty-first century.”7 There were many glowing reviews in magazines and newspapers,8 and musicians offered effusive 5 The Perfect Thing, p. 53. 6 This number includes 10 versions after version 1, 26 sub-version updates, and 52 more minor updates. iTunes 4.7 is not counted as a separate version, but rather as one of the sub-version updates. See “iTunes version history,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/ITunes_version_history (accessed 6/25/2013 - last checked 7/18/2013). 7 The Perfect Thing, p. 1. 8 “When we ran our First Take of the Apple iPod, we were convinced that it was the best MP3 player we had ever seen. After testing a final production unit, we still think that it beats the pants off of anything else out there.” CNET Staff, “New & Noteworthy: CNET Reviews,” November 28, 2001, http://reviews.cnet.com/830113727_7-1036303-263 html (accessed 9/25/2102). “Leave it to Apple to come out with the world’s coolest – and dare we say best – MP3 player, the Apple iPod ($399 list). Its usefulness and simplicity make it a standout product, even for the price” … “The Apple iPod’s pricing is at the high end for an MP3 player, but this is a tremendously good product. We hope to see a Windows-compatible version in the near future.” From “iPod: Not just iCandy,” PCMAG.com, November 7, 2001, http://www.pcmag.com/article2/0,2817,19362,00.asp (accessed 5/28/2013). “Susan Kervorkian, a digital music industry analyst with IDC, praised the new iPod design, saying the combination of its ease of use, portability and big storage space would influence competitors. ‘This raises the bar,’ she said.” Richtel, Matt, “TECHNOLOGY; Apple Introduces What It Calls an Easier to Use Portable Music Player,” NY Times, October 24, 2001, http://www nytimes.com/2001/10/24/business/technology-appleintroduces-what-it-calls-an-easier-to-use-portable-music-player html (accessed 9/25/2012). CONFIDENTIAL ATTORNEYS EYES ONLY -8- praise.9 As soul singer Seal put it: “Everyone’s going to want to have one of these.”10 Steven Levy described the iPod in his book The Perfect Thing: The triumph of the iPod is such that the word ‘success’ falls far short of describing it. Its massive sales don’t begin to tell the story… No one thought the iPod would change the music business, not only the means of distribution but even the strategies people would use to buy songs. … No one expected that there would be magazine covers and front-page newspaper stories proclaiming this an ‘iPod Nation.’ No one predicted that listening to the iPod would dethrone quaffing beer as the most popular activity for undergraduate college students. And certainly no one thought that the name of this tiny computer cum music player would become an appellation to describe an entire generation or a metaphor evoking any number of meanings: the future, great design, short attention span, or just plain coolness. 11 But that’s what happened.12 1. iPod Classic 20. The first iPod was smaller and lighter than other devices then on the market; with 5GB of memory it could put “a thousand songs in your pocket.”13 Designed to be used in conjunction with iTunes and Apple’s Macintosh computer, the new iPod could play music from a variety of sources, including a CD collection copied or ripped to the user’s computer and then synced or loaded to an iPod, music obtained online without DRM, music that originally had DRM but was copied to a CD and then copied back to a computer (burned and ripped), and later 9 Techno-deejay Moby, who at the time was on top of the music industry with an album that not only sold millions but provided sound tracks for movies and commercials, said: “I’m having a hard time getting my head around the fact that you can transfer an album onto this in ten seconds.” He went on to say: “The design is really cool. I don’t know who your [Apple’s] product designers are, but, boy, you’re not paying them enough. … I might have to steal your prototype.” (The Perfect Thing, pp. 10-11.) Smash Mouth singer Steve Harwell commented on the ease of use: “It doesn’t take a rocket scientist to figure this out. … Super simple – five buttons and a scroll pad. You’ve got the whole record store in this … thing. This kicks every other product’s …!” (The Perfect Thing, p. 11.) Soul singer Seal was similarly enamored: “Do you remember what it was like to get your first Walkman? Do you know that feeling? … I haven’t picked up any MP3 player [yet] that has made me go, ‘Wow, okay, I want to carry this everywhere I go. OK.’ Everyone’s going to want to have one of these.” (The Perfect Thing, p. 11.) 10 The Perfect Thing, p. 11. 11 The Perfect Thing, pp. 2-3. 12 In 2005, technology journalist and author Leander Kahney compared the iPod to other inventions and concluded, “gadgets don’t come more iconic than Apple’s digital music player.” Kahney summarizes the historical significance of the iPod, stating “[t]he iPod is to the 21st century what the big band was to the ‘20s, the radio to the ‘40s, or the jukebox to the ‘50s—the signature technology that defines the musical culture of an era.” Kahney, Leander “The Cult of iPod,” San Francisco, CA: No Starch Press, Inc. (2005), p. 3. 13 Apple Press Release, “Apple Presents iPod; Ultra-Portable MP3 Music Player Puts 1,000 Songs in Your Pocket.” October 23, 2001 (Apple_AIIA0097 4636). See also http://www.vaughanpl.info/vortex/?p=5261. CONFIDENTIAL ATTORNEYS EYES ONLY -9- music purchased from iTMS. Less than a year after its release, the iPod had already been updated twice and was capable of storing 2,000 songs.14 (Exhibit 4 describes the evolution of iPod features and models over time.) By September 2006 the iPod was available with 80GB memory,15 and a year later, it was available with 160GB, which allowed users to store the equivalent of 40,000 songs.16 (See Exhibit 5 for a summary of enhancements to iPod memory.) 21. In addition to adding memory, Apple continued to add features and to bring out new models that were smaller and lighter and had longer battery life and a variety of other features. Even with this technological innovation, Apple generally sold the newer models at prices equal to or lower than the models they replaced. For example, by 2003, the iPod was thinner and lighter than two CDs and contained twice the storage capacity of its predecessor.17 Further, Apple improved the hardware components available on the iPod. The second-generation iPod replaced the first-generation’s mechanical scroll wheel with the industry’s first solid-state touch wheel.18 By 2004, the iPod utilized a touch sensitive Click Wheel that contained mechanical switches beneath the wheel itself.19 To use any of the four included buttons, the user physically pushed the edge of the wheel inward over one of the four labels. Apple also added new features, including full-color screens, and the ability to view slideshows of photos and watch high resolution HD video.20 Each succeeding generation featured color screens with higher resolution than its predecessor. For example, when Apple introduced the fifth-generation iPod Classic in September 2006, it upgraded the display to a 2.5 inch full-resolution screen that was 60% brighter than the fourth-generation, capable of displaying TV shows and Hollywood movies 14 Apple Press Release, “Apple Introduces 10GB iPod-2,000 Songs in Your Pocket,” March 21, 2002 (Apple_AIIA00974574). 15 Apple Press Release, “Apple Introduces the New iPod,” September 12, 2006 (Apple_AIIA00974904). 16 Apple Press Release, “Apple Introduces the New iPod classic,” September 5, 2007 (Apple_AIIA00974713). 17 Apple Press Release, “Apple Introduces New iPods,” April 28, 2003 (Apple_AIIA00974667). 18 Id. 19 Apple Press Release, “Apple Introduces the New iPod,” July 19, 2004 (Apple_AIIA00974596). 20 See, e.g., Apple Press Release, “Apple Introduces iPod Photo,” October 26, 2004 (Apple_AIIA00974749); Apple Press Release, “Apple Merges iPod-iPod Photo Lines,” June 28, 2005 (Apple_AIIA0097 4463); Apple Press Release, Apple Press Release, “Apple Unveils the New iPod,” October 12, 2005 (Apple_AIIA0097 4546). CONFIDENTIAL ATTORNEYS EYES ONLY - 10 - from the palm of a user’s hand.21 (For a summary of the history of the iPod Classic, see Exhibit 6a.) 2. iPod Mini and iPod Nano 22. The iPod Mini was introduced in January 2004. At the time, the iPod Mini was the smallest portable digital music player that could hold 1,000 songs.22 It featured the same user interface as the traditional iPod and was one of the most popular electronic products of its time.23 A year after it first released the Mini Apple upgraded it, making it smaller and lighter, while increasing its storage capacity by 50 percent and increasing its battery life to 18 hours.24 (For a summary of the history of the iPod Mini, see Exhibit 6b.) 23. In September 2005, Apple replaced the Mini with the iPod Nano, a full-featured iPod that was slimmer than a standard No. 2 pencil and that featured a redesigned color screen.25 The following year, Apple introduced a completely redesigned Nano with a new aluminum body, twice the storage capacity of the original Nano, and 24 hours of battery life at the same price as the previous generation.26 (See Exhibit 6c.) In September 2008, Apple introduced the Nano 4th Generation with a screen large enough to support playback of widescreen videos; a built-in accelerometer, which allowed users to shake the Nano to “shuffle” their playlists; and 16 GB of storage.27 A year later, the Nano was updated again with an FM radio tuner and a built-in video 21 Apple Press Release, “Apple Introduces the New iPod,” September 12, 2006 (Apple_AIIA00974904). 22 The new Mini was half the size of the original iPod. Apple Press Release, “Apple Introduces iPod mini; Smallest 1,000 Song Music Player Ever Comes in Five Colors.” January 6, 2004 (Apple_AIIA00974840). 23 “iPod Mini,” Wikipedia, The Free Encyclopedia, https://en.wikipedia.org/wiki/IPod_Mini (accessed July 16, 2013). 24 The 2nd Generation iPod Mini was also available in a 4GB model with improved features at $199. Apple Press Release, “Apple Unveils New iPod mini Starting at Just $199.” February 23, 2005 (Apple_AIIA0097 4588). 25 Apple Press Release, “Apple Introduces iPod nano,” September 7, 2005 (Apple_AIIA00974603). PC World named it one five ground-breaking products in the audio category in its 2006 World Innovations Awards. “2006 PC World Innovations Awards,” PR Newswire, January 4, 2006, http://www.prnewswire.com/news-releases/2006-pc-world-innovations-awards-winners-unveiled53127872.html (accessed July 16, 2013). 26 Apple Press Release, “Apple Introduces the New iPod nano; World’s Most Popular Digital Music Player Features New Aluminum Design in Five Colors & 24 Hour Battery Life,” September 12, 2006 (Apple_AIIA00974838). 27 Apple Press Release, “Apple Introduces New iPod nano,” September 9, 2008, http://www.apple.com/pr/library/2008/09/09Apple-Introduces-New-iPod-nano html (accessed July 16, 2013). CONFIDENTIAL ATTORNEYS EYES ONLY - 11 - camera and microphone. Apple was able to incorporate these new features and still offer the iPod Nano to consumers at the same price.28 3. iPod Shuffle 24. On January 11, 2005, Apple introduced the iPod Shuffle, a digital music player based on iPod’s popular shuffle feature, which randomly selected songs from the user’s library for placement on the iPod, which “shuffled” the music to prevent playback of repeated tracks. The Shuffle was smaller and lighter than a pack of gum, and was available for less than $100.29 (See Exhibit 6d.) The Shuffle 2nd Generation was introduced in September 2006. It had twice the storage capacity of the original version, had shrunk to just a half cubic inch in volume, and weighed only half an ounce.30 4. iPod Touch 25. Apple introduced the iPod Touch in September 2007. The Touch featured the same Multi-Touch interface as the iPhone and introduced new features to the portable music player industry, including widescreen display and Internet access via built-in Wi-Fi wireless networking, which allowed browsing and wireless viewing of internet videos. Users could now browse the Internet and even preview music and other digital media directly through the device.31 A year later, Apple introduced the iPod Touch 2nd Generation. Smaller and lighter than the original, it featured a 3.5 inch widescreen glass display, 802.11 b/g Wi-Fi wireless networking, integrated volume control buttons, a built-in speaker, a built-in accelerometer, and other advanced sensors. At the same time Apple introduced the App Store, which allowed users to “download and play hundreds of great games on their iPods.” 32 (For a summary of the history of the iPod Touch, see Exhibit 6e.) 28 Apple Press Release, “Apple Introduces New iPod nano With Built-in Video Camera,” September 9, 2009, http://www.apple.com/pr/library/2009/09/09Apple-Introduces-New-iPod-nano-With-Built-in-VideoCamera.html (accessed July 16, 2013). 29 Apple Press Release, “Apple Introduces iPod shuffle; First iPod Under $100.” January 11, 2005 (Apple_AIIA00974708). 30 Apple Press Release, “Apple Unveils the New iPod shuffle,” September 12, 2006 (Apple_AIIA00974519). 31 Apple Press Release, “Apple Unveils iPod Touch,” September 5, 2007 (Apple_AIIA00974641). 32 Apple Press Release, “Apple Introduces New iPod touch,” September 9, 2008 (Apple_AIIA00974932). CONFIDENTIAL ATTORNEYS EYES ONLY - 12 - 5. The iPod/iTunes Interface 26. The iPod family of products can only play songs and videos that are formatted and organized in a compatible manner. iTunes software achieves this by, among other things, verifying that the file is the proper format (e.g., MP3, AAC, etc.). When loading, iTunes writes a music database (music index) that is used by the iPod to locate music and video files. Customers can use iTunes to manage and organize music and video files on iPods (e.g., create playlists) and to manage, organize and play music on their computers. By designing iTunes and iPods to work together, Apple offered customers an integrated platform designed to work seamlessly and reliably. From the time the iPod was introduced and by design, Apple’s iPod/iTunes platform was essentially a “walled garden” – an essentially closed platform that would compete with other approaches to satisfying consumers’ demands.33 27. Over the relevant time period, others also offered applications that could be used to manage music on portable media devices — e.g., RealNetwork’s RealPlayer, Microsoft’s Windows Media Player, Dell’s Jukebox by Musicmatch, Winamp, Anapod, GNupod, Ephpod, etc.34 I understand that some of the third-party applications could be used to manage music and video files on iPods with varying degrees of success (e.g., RealPlayer, Winamp, Anapod, Gnupod, and Ephpod).35 To load and manage music so that it could actually play on an iPod, these third-party programs had to mimic the way in which iTunes loaded and managed music, 33 “Walled garden” and “closed platform” are terms often used to describe technology in which the entire system is integrated, i.e., technology in which one entity provides the hardware, the software (applications) and the content and restricts access to non-approved applications or content. This is also referred to as a “closed ecosystem.” See, e.g., “Closed Platform,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/Closed_platform (accessed 7/17/2013). 34 See, e.g., Bloomberg Businessweek, “RealPlayer: Master Music Manager,” May 25, 2005, http://www.businessweek.com/stories/2005-05-25/realplayer-master-music-manager (accessed 5/28/2013); “Managing Music with Windows Media Player,” PCUG, http://www.pcug.org.au/pcug/training/upcd02dm01/dmLesson01Media%20Player.pdf, January 17, 2004 (accessed May 28, 2013); Ku, Andrew, “Dell’s Digital Jukebox 20 - Music, the Dell Way,” AnandTech, June 20, 2004, http://www.anandtech.com/show/1354/9 (accessed 6/4/2013). 35 See, e.g., Boswell, Wendy, “Manage your music with Winamp,” Lifehacker, July 8, 2007, http://lifehacker.com/276000/manage-your-music-with-winamp (accessed May 28, 2013); Sauners, Gareth J M, “Anapod - transfer files to your iPod via Explorer,” November 19, 2007, http://blog.garethjmsaunders.co.uk/archives/2007/11/19/anapod-transfer-files-to-your-ipod-via-explorer/ (accessed May 28, 2013); Ulrich, Adrian, “Gnupod; Manage your iPod,” GNU, last updated September 20, 2007, http://www.gnu.org/software/gnupod/gnupod html (accessed 5/28/2013); “How to Use the EphPod IPod Manager,” eHow, http://www.ehow.com/how_2145859_use-ephpod-ipod-manager.html (accessed 5/28/2013). CONFIDENTIAL ATTORNEYS EYES ONLY - 13 - including writing a properly formatted internal database.36 Apple did not support these applications. C. The iTunes Store (iTMS) 28. In recounting events following the introduction of the iPod, Apple’s late CEO Steve Jobs reported that he soon realized that “the whole iPod ‘platform’ was missing something, namely an online way for consumers to buy downloadable songs.”37 To provide this third leg, Apple would need to create an online store that could “automatically both serve up the songs and take care of billing and accounting for conceivably millions of purchases. Plus they would have to construct a ‘storefront,’ either as a website or preferably by modifying iTunes yet again so that the store was incorporated right into its screen.”38 29. At the time, most digital music came from peer-to-peer file sharing sites such as Napster and Kazaa.39 There were also some independent sites that sold licensed music (e.g., eMusic and Listen.com) and two sites (PressPlay and MusicNet) that were operated by the five major record labels.40 None of these lawful sites enjoyed much commercial success – they generally imposed recurring monthly subscription fees, had limited catalogues, and imposed tight restrictions on usage.41 Because of these limitations, PC World named Pressplay and MusicNet as Number 9 on their list of the worst tech products of all time.42 36 Kelly declaration, ¶¶33-37. See also See Expert Report of Dr. John P. J. Kelly, July 19, 2013 (“Kelly report”). 37 Schlender, Brent, “How Big can Apple Get?” Fortune Magazine, February 21, 2005. 38 Schlender, Brent, “How Big can Apple Get?” Fortune Magazine, February 21, 2005. 39 “Napster,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/Napster (accessed July 16, 2013); Kravitz, David, “Dec. 7, 1999: RIAA Sues Napster,” Wired, December 7, 2009, http://www.wired.com/thisdayintech/2009/12/1207riaa-sues-napster/ (accessed July 16, 2013). 40 Listen.com debuted its paid service in October 2001 under the name Rhapsody. (The company was later acquired by RealNetworks.) Mariano, Gwendolyn, “Listen.com to tune in new music service,” CNET News, December 2, 2001, http://news.cnet.com/Listen.com-to-tune-in-new-music-service/2100-1023_3-276476.html (accessed July 16, 2013); Evangelista, Benny, “Industry starting to endorse Net music / Listen.com to offer songs from all five major labels,” Listen.com, July 1, 2002, http://www.sfgate.com/business/article/Industrystarting-to-endorse-Net-music-2801248.php (accessed July 16, 2013). These two sites were essentially identical – each had non-exclusive licenses to the same recordings. The main difference was that MusicNet used the RealNetworks DRM format while PressPlay used the Microsoft WMA DRM format. 41 Tyson, Dan, “The 25 Worst Tech Products of all Time,” PCWorld, May 26, 2006, http://www.pcworld.com/article/125772/worst_products_ever html (accessed July 16, 2013). 42 Id. In describing the two services, PCWorld said: CONFIDENTIAL ATTORNEYS EYES ONLY - 14 - 30. By 2002, Jobs felt that Apple was in a position to build an online music store that could succeed where existing stores had not.43 But to do so he would need the co-operation of the five major record labels: Universal, Warner, EMI, BMG, and Sony.44 In the fall of 2002, Jobs began to negotiate with the labels. During the negotiations, the labels expressed concern over piracy and the ability to protect their copyrights. Ultimately, they required, as a condition of agreeing to license Apple to distribute their music, that Apple use some sort of encryption to limit use, including the number of computers that could be used to play music that had been purchased from Apple.45 Jobs said later: When Apple approached these companies to license their music to distribute legally over the Internet, they were extremely cautious and required Apple to protect their music from being illegally copied. The solution was to create a DRM system, which envelopes each song purchased from the iTunes store in special and secret software so that it cannot be played on unauthorized devices. Apple was able to negotiate landmark usage rights at the time, which include allowing users to play their DRM protected music on up to 5 computers and on an unlimited number of iPods. Obtaining such rights from the music companies was unprecedented at the time, and even today is unmatched by most other digital music services. However, a key provision of our agreements with the music companies is that if our DRM system is compromised and their music becomes playable on unauthorized devices, we have only a small number of weeks to fix the problem or they can withdraw their entire music catalog from our iTunes store.46 Digital music is such a great idea that even record companies finally, begrudgingly accepted it after years of implacable opposition. In 2002, two online services backed by music industry giants proposed giving consumers a legitimate alternative to illegal file sharing. But the services’ stunningly brain-dead features showed that the record companies still didn’t get it. PressPlay charged $15 per month for the right to listen to 500 low-quality audio streams, download 50 audio tracks, and burn 10 tracks to CD. It didn’t sound like an awful deal, until you found out that not every song could be downloaded, and that you couldn’t burn more than two tracks from the same artist. MusicNet cost $10 per month for 100 streamed songs and 100 downloads, but each downloaded audio file expired after only 30 days, and every time you renewed the song it counted against your allotment. Neither service’s paltry music selections could compete against the virtual feast available through illicit means. Several billion illegal downloads later, an outside company-Apple, with its iTunes Music Service-showed the record companies the right way to market digital music. 43 The Perfect Thing, p. 147. 44 “The kind of store that Jobs envisioned would require virtually any song that anyone could imagine, and lacking even one of the big players would mean that users would face a second-rate selection.” (The Perfect Thing, pp. 147-148). Sony later merged with BMG, and the “big five” became the “big four.” The Perfect Thing, p. 149. 45 See Robbin deposition, pp. 32:16-40:13. 46 Jobs, Steve, “Thoughts on Music”, February 6, 2007 (AIIA00093477). CONFIDENTIAL ATTORNEYS EYES ONLY - 15 - 31. Apple completed its integrated platform in April 2003 with the opening of the iTunes Music Store (iTMS).47 Like the iPod before it, the iTMS was an immediate success. Just a week after it opened, Apple announced that it had already sold over one million songs.48 Roger Ames, chairman and CEO of Warner Music Group said: Hitting one million songs in less than a week was totally unexpected. Apple has shown music fans, artists and the music industry as a whole that there really is a successful and easy way of legally distributing music over the Internet.49 His sentiments were echoed by Doug Morris, CEO of Universal Music Group: Our internal measure of success was having the iTunes Music Store sell one million songs in the first month. To do this in one week is an over-the-top success. Apple definitely got it right with the iTunes Music Store.50 Fortune Magazine named the iTunes Store its 2003 “product of the year.”51 Even the Assistant Attorney General for the Antitrust Division of the United States Department of Justice weighed in: [Apple] solved a problem that some observers, less than five years ago, predicted might never be solved: how to create a consumer friendly, yet legal and profitable, system for downloading music and other entertainment from the internet.52 32. The iTMS grew rapidly. When it first opened in April 2003, it offered 200,000 songs.53 By March 2004, there were more than 500,000 songs available, and in August, Apple 47 The store was originally called the iTunes Music Store. Apple later changed its name to the iTunes Store. See “iTunes Store,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/ITunes_Store (accessed July 16, 2013). 48 Apple Press Release, “iTunes Music Store Sells Over One Million Songs in First Week,” May 5, 2003 (Apple_AIIA00974824). 49 Id. 50 Id. See also Leonard, Devin, “Songs In The Key Of Steve Steve Jobs may have just created the first great legal online music service. That’s got the record biz singing his praises.” Fortune Magazine, downloaded from CNNMoney.com, May 12, 2003, http://money.cnn.com/magazines/fortune/fortune_archive/2003/05/12/342289/ (accessed 5/28/2013). 51 Lewis, Peter, “Product of The Year Apple iTunes Music Store,” Fortune Magazine (downloaded from CNN Money), December 22, 2003, http://money.cnn.com/magazines/fortune/fortune_archive/2003/12/22/356108/ (accessed July 16, 2013). 52 See, U.S. Department of Justice, Interoperability Between Antitrust and Intellectual Property, Thomas O. Barnett Presentation to the George Mason School of Law Symposium Managing Antitrust Issues In a Global Marketplace, Washington, D.C., September 13, 2006, http://www.usdoj.gov/atr/public/speeches/218316 htm (accessed July 16, 2013). 53 Apple Press Release, “Apple Launches the iTunes Music Store” April 28, 2003 (Apple_AIIA00974776). CONFIDENTIAL ATTORNEYS EYES ONLY - 16 - announced that its catalogue topped one million songs.54 By the time the iTMS began to offer DRM-free downloads in January 2009, the store offered nearly 10 million songs, and today there are more than 26 million songs available.55 In July 2008, Apple launched the App Store.56 By May 2013, consumers had downloaded more than 50 billion apps from a library of over 850,000 available.57 D. FairPlay 33. , Apple decided to develop its own proprietary DRM technology, which it called FairPlay.58 Other online music stores also developed proprietary DRM technologies, such as Real’s Helix and Microsoft’s WMA. Each of these technologies was different, and the result was that DRM-protected music purchased from a vendor using one of these methods could only be loaded and played on MP3 players that supported that particular method.59 This meant that digital music downloads 54 Apple Press Releases, “iTunes Music Store Downloads Top 50 Million Songs,” March 15, 2004 (Apple_AIIA00974577); “iTunes Music Store Catalog Tops One Million Songs,” August 10, 2004 (Apple_AIIA00974782). 55 Apple Press Release, “Changes Coming to the iTunes Store,” January 6, 2009, http://www.apple.com/pr/library/2009/01/06Changes-Coming-to-the-iTunes-Store html (accessed July 16, 2013); “Apple Unveils New iTunes; Featuring Dramatically Simplified Design & Seamless iCloud Integration,” September 12, 2012, http://www.apple.com/pr/library/2012/09/12Apple-Unveils-New-iTunes.html (accessed July 16, 2013). 56 Apple launched the App Store; officially introducing third-party application development and distribution to the platform. “Application Store,” The Free Encyclopedia, http://en.wikipedia.org/wiki/Application_store (accessed 7/16/2013) ; Apple Press Release, “iPhone 3G on Sale Tomorrow; Over 500 Native Applications for iPhone & iPod touch Available at Launch.” July 10, 2008, http://www.apple.com/pr/library/2008/07/10iPhone-3G-onSale-Tomorrow.html (accessed July 17, 2013). 57 Apple Press Release, “Apple’s App Store Marks Historic 50 Billionth Download.” May 16, 2013, http://www.apple.com/pr/library/2013/05/16Apples-App-Store-Marks-Historic-50-Billionth-Download.html (accessed July 17, 2013). 58 The Perfect Thing, pp. 152-153. 59 FairPlay developed a reputation for being unobtrusive and easy to use: “FairPlay also appeals to content providers because of its ease of use. Apple’s DRM is considered to be one of the less obtrusive forms of DRM on the market.” Jupiter Research analyst Joe Wilcox said: “FairPlay is a highly unobtrusive DRM. Consumers only see that FairPlay is there when they are trying to violate rights privileges. I can’t say the same about WMA DRM, for which, in testing, I’ve had trouble on nearly all stores and devices.” From Dalrymple, Jim, “iPod DRM faces another reverse-engineering challenge,” PCWorld, November 22, 2005, http://www.macworld.com/article/1048070/ipoddrm html (accessed 6/17/2013). CONFIDENTIAL ATTORNEYS EYES ONLY - 17 - obtained from online music stores that used Microsoft’s WMA DRM or downloads protected by RealNetworks’ Helix DRM could not be played directly on iPods.60 Similarly, music files obtained from the iTMS could not be played directly on MP3 devices that used WMA or Helix. 34. The use of DRM benefited consumers. It allowed Apple to create the iTMS and offer a wide range of music by providing a level of security that induced the record labels to participate. Ultimately it allowed Apple to do what many thought was impossible: to encourage consumers (through the iTMS) to pay for music they had previously been getting for free.61 As Professor Noll previously admitted, the iTMS was “procompetitive” and a “huge benefit” to consumers.62 Plaintiffs have likewise admitted that the iTMS provided “enormous advantages” for consumers.63 35. I understand that the Court in this case has ruled that Apple’s decision to use its proprietary DRM system, FairPlay, rather than adopt a competing system such as WMA, was lawful under the antitrust laws.64 Apple’s use of proprietary DRM was also procompetitive. It furthered Apple’s business interest in developing and maintaining its own system to ensure that it complies with its agreements with the record labels that require Apple to maintain the security of the DRM and to promptly repair any breaches. As Jobs put it: “Apple has concluded that, if it licenses FairPlay to others, it can no longer guarantee to protect the music it licenses from the big four music companies.”65 36. The use of a proprietary system also furthered Apple’s procompetitive interest in ensuring that the system was reliable so that customers could continue to download music from the iTMS and listen to it without problems. If there was a problem – if, for example, a 60 Although the RMS did not debut until July 2004, RealNetworks had been selling digital downloads through its subscription service Rhapsody since 2001. Evangelista, Benny, “Music firms open online services, but will fans pay?” SFGate.com, December 3, 2001, http://www.sfgate.com/business/article/Music-firms-open-onlineservices-but-will-fans-2845907.php (accessed 7/17/2013). 61 The Perfect Thing, pp. 152, 157. 62 Noll Dep. Trans (Sep. 19, 2008) at 105-8-20. 63 Amended Consolidated Complaint for Violations of Sherman Antitrust Act, Clayton Act, Cartwright Act, California Unfair Competition Law, Consumers Legal Remedies Act, and California Common Law of Monopolization, (filed Jan. 26, 2010), ¶¶ 14-15, 40. 64 Order Granting In Part and Denying In Part Defendant’s Motion For Summary Judgment; Denying As Premature Plaintiffs’ Motion For Class Certification (hereinafter, “Summary Judgment”), p. 6. 65 Jobs, Steve, “Thoughts on Music,” February 6, 2007 (AIIA00093477). CONFIDENTIAL ATTORNEYS EYES ONLY - 18 - downloaded song does not play properly – Apple knew that the problem had come from something within the Apple system and not from elsewhere. Experience has shown that competing systems, including Microsoft’s PlaysForSure, lacked the reliability of the Apple system: Plays for sure didn’t live up to its moniker, and the portable services were plagued by glitches. Songs wouldn’t transfer, players would freeze, tracks would stop playing inexplicably, software would have to be uninstalled and reinstalled repeatedly – stuff like that. Critics said it was just too difficult for Microsoft’s software to work with so many different services and players.66 III. APPLE’S INTEGRATED SYSTEM IS PROCOMPETITVE 37. As detailed in the following paragraphs, Apple’s proprietary model of software (iTunes), hardware (the iPod), and content (the iTMS) is procompetitive. The seamless manner in which the products work together reflects Apple’s overall business strategy and contributed to the success of the integrated platform. Nothing prevented others from developing their own competing players and music systems. Indeed, other companies have adopted different models. At the time Apple entered the marketplace, there were already at least two dozen other companies that offered MP3 players, most, if not all, of which followed open models. Later, other companies (notably Sony and Microsoft) began to offer their own competing closed systems. Proprietary models compete with “open” models on the other end of the spectrum and with hybrid models, which are somewhere in between. One model is not necessarily better than the other, and only time (and competition) will tell which one (if any) consumers will prefer. Consumers are well-served when alternative models compete – even though one model may win out in the end. Apple provided a product that consumers valued for its reliability, ease of use, and seamless operation. A. Apple’s Initial Adoption of its Integrated System was Procompetitive. 38. Industry analysts have recognized the value to consumers of Apple’s integrated approach. The day after Apple launched iTunes for Windows, Forrester Research reviewed the success of the iTunes/iPod/iTMS platform on the Macintosh and its prospects for more general growth among Wintel PC owners. Under the title “Apple iTunes Jump-Starts Windows Digital 66 Los Angeles Times Blog, available at http://opinion.latimes.com/bitplayer/2006/09. CONFIDENTIAL ATTORNEYS EYES ONLY - 19 - Music,” Forrester emphasized the benefits of Apple’s integrated “walled garden” model and its advantages against the competition: Apple announced the Windows version of iTunes yesterday. iTunes is both a free music application and an online music store with 400,000 downloadable and burnable songs for $0.99 a track. iTunes for Windows features two strengths: • Peerless ease of use. In porting its iTunes application to Windows, Apple has maintained all the features that made it popular on the Macintosh. iTunes’ interface makes it easy to: 1) organize and find digital music files; 2) rip songs from CDs with great sound quality; 3) make playlists; 4) burn CDs and DVDs; 5) copy files to Apple’s iPod portable players; and 6) buy music from Apple’s iTunes store. The strength here is the integration—everything here from iPod support to the store is part of one logically organized application. [Emphasis added] • Broad awareness. iPod users are a natural iTunes audience; Apple leads in portable player sales — with 1 million iPod users already — and continues to advertise heavily.67 The Forrester review went on to predict that success in digital music will depend on “the very two elements Apple has focused on”, including “Ease of use and integration.” Under the headline “OTHER MUSIC SERVICES MUST NOW BEAT APPLE”, the Forrester Review concludes that “Apple should get out to an early lead in music downloads, based on its strength in both distribution and ease of use.” 39. At the time of this review in October of 2003, Apple’s integrated iTunes/iPod/iTMS platform had successfully served the narrow niche of Macintosh PC users, which at the time made up around five percent of PC owners.68 Apple had no appreciable “market power” in any market relevant to this case, to say nothing of “monopoly power.” It did not control access to digital music played on portable devices, the vast majority of which had been acquired from CDs and online peer-to-peer file sharing services. It was a new entrant into music downloads, with existing competitors and other competing business models, such as subscription services.69 And while the iPod was popular and growing more so, other brands of MP3 players outsold it by roughly two to one. (See Exhibit 7a). 67 Bernoff, Josh, “Apple iTunes Jump-Starts Windows Digital Music,” Forrester Research, Inc., October 17, 2003 (Apple_AIIA00331431). 68 The Perfect Thing, p. 157. 69 In fact, Fortune magazine said: “Apple’s competitors dismiss the iTunes Music Store as a niche product. How, they ask, can Apple have any impact on the music industry when its share of the global computer market is a minuscule 3%? ‘It’s a very positive thing for their community,’ says Kevin Brangan, a marketing director at SonicBlue, which makes Rio MP3 players. ‘But their community is a very small percentage of the overall market.’” CONFIDENTIAL ATTORNEYS EYES ONLY - 20 - 42. This does not mean that Apple’s “closed” model was necessarily the best, or that it would compete successfully against other alternatives going forward. Indeed, Apple had historically followed a similar “integrated platform” strategy in personal computers, producing proprietary hardware (computers, processors, screens, keyboards and so on) and software (the operating system and many applications that ran on it). This integrated model was not as successful as the more open “Wintel” platform, in which one company (Intel) was the main producer of processors, another (Microsoft) produced the operating system and some applications, dozens of OEMs produced computers, and thousands of software developers produced applications written to the APIs exposed by the Windows operating system. By the end of the 1990s, Apple was a niche player in personal computers, with a small, albeit dedicated, following. Whether Apple’s commitment to the integrated iTunes/iPod/iTMS platform was the “right” strategy or not would be determined by competition on its merits.72 43. Apple has always faced competition on the merits. Its integrated model has competed, and continues to compete, with other methods of managing, distributing and playing music and video files, including solutions offered by major companies such as Sony and Microsoft and many vendors of music player software, music and devices. As noted above, just looking only at digital music players, portable MP3 players were already common at the time the iPod was introduced in late 2001, and during the time periods relevant to this case consumers could purchase players from literally dozens of competing manufacturers, including Sony, Samsung, Microsoft, Creative, SanDisk and Rio — see Exhibit 8. In some cases a competing brand of portable device was, like the iPod, part of an integrated platform offered by a single 72 Walled gardens or closed ecosystems are common for digital products. Video game consoles have a long history of walled gardens – developers were required to purchase licenses to develop games for the platform, and in some cases, they were also required to get editorial approval from the console manufacturer before they could publish their games. The Kindle, Amazon’s well-known e-reader, is also a walled garden. As an October 2011 article in Business Insider observed: “Amazon’s Kindle is no longer just a product: It’s a whole ecosystem.” Gobry, Pascal-Emmanuel, “How Amazon Makes Money From The Kindle,” Business Insider, October 18, 2011, http://www.businessinsider.com/kindle-economics-2011-10 (accessed July 16, 2013). Michael Gartenberg of the Gartner Group has said: “The new version of the Kindle shows that digital ecosystems are more important than devices.” Akasie, Jay, “With New Kindle, Bezos Proves Ecosystems Matter More Than Hardware,” September 7, 2012, http://www minyanville.com/sectors/technology/articles/amazon-new-kindle-amazon-kindlefamily/9/7/2012/id/43794 (accessed July 16, 2013). In December 2011, Barnes and Noble began to follow a similar strategy with respect to its NOOK. See, generally, “Closed Platform,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/Closed_platform (accessed July 17, 2013). CONFIDENTIAL ATTORNEYS EYES ONLY - 22 - company. For example, Sony operated the CONNECT Music Store which used Sony’s proprietary method of DRM protection, which could be transferred to a Sony portable music player.73 Microsoft later pursued a similar approach with its Zune integrated platform.74 Other device manufacturers such as Dell, Creative and Diamond Rio followed a less integrated approach offering players designed to work with a range of software and one DRM technology or another. For example, Creative’s relationship with RealNetworks resulted in certain Creative players that interoperated with Real’s Helix DRM technology, while other Creative players interoperated with Microsoft’s WMA technology.75 44. Similarly, as discussed above, there were alternative approaches to DRM protection, the sales of digital downloads, and software programs for managing digital music. Thus there was a range of solutions that competed for consumers’ attention — Apple’s integrated platform or “walled garden” was just one of them. Today, consumers still have a wide variety of options with many choices of software to manage digital files, portable devices on which to play those files, and stores from which to purchase music in digital and physical formats.76 45. In effect, Plaintiffs argue that Apple should have designed its platform differently. There is no economic basis for such a claim. First, there is no guarantee that Apple could have accomplished the same thing – seamless, reliable, integrated ease of use — with an open system in which it was continually forced to integrate someone else’s products into its own. And, even if it could have, it is highly likely that such a system would have been more costly, less secure, and inefficient to maintain. Allowing RealNetworks or others to provide software or content for the iPod may have made it easier for hackers to breach the system. And, if Apple started to work 73 Apple_AIIA00093477. 74 Apple_AIIA00093477. 75 McGuire, Mike, “U.S. Online Music Market to Show Steady Growth,” Gartner Industry Research, July 26, 2005 (Apple_AIIA00995575 at -86, -87). 76 In addition to iTunes, current choices of digital management software include: Media Monkey, Winamp, jetAudio, J. River Media Center, Blaze Media Pro, and ZenPoint Digital Center. See “MP3 Software Review”, 10TopTenReviews, http://mp3-software-review.toptenreviews.com/ (accessed June 10, 2013) and “Music Management software,” CNET, http://download.cnet.com/windows/music-management-software/ (accessed June 10, 2013). See also, Exhibits 8 and 9 for lists of some of the available players and sources of digital music, respectively. CONFIDENTIAL ATTORNEYS EYES ONLY - 23 - with others and then got hacked again, correcting the problem would have been more complicated.77 46. Plaintiffs forget that the world Apple entered was a world in which virtually all, if not all, of the participants were competing with open models. Apple entered that world with a completely new “product.” Apple started small, offering something new and untested. There was no guarantee it would succeed, but succeed it did – because it offered something that people valued: an integrated platform designed to be foolproof. It was a good way to buy, manage, and play music no matter how large or small the user. And, having a single seller with a strong reputation gave consumers confidence that the system would work. In short, Apple entered a world that was lacking certain things consumers valued, and the iTunes/iPod/iTMS platform filled that void. Had Apple been required to enter with an open model, consumers would have been deprived of the substantial benefits that came with Apple’s integrated system. Requiring Apple (or any other company that is using a closed system) to prove in the aftermath that they could not have achieved the same benefits with an open system would unnecessarily push companies towards open systems for fear of later being found to have violated the antitrust laws. The result would be that companies would tend to default to open systems thereby depriving consumers of the benefits of innovation and platform competition. 47. 77 Kelly report, Section VII. CONFIDENTIAL ATTORNEYS EYES ONLY - 24 - 48. The rapid growth of the market implies that there were many new users entering. The entry of those users, who had no prior investment in Apple’s platform, created the opportunity for competing products and platforms to take share away from Apple if they offered a superior product and/or better pricing than that offered by Apple, even if we ignore the ability of those suppliers to compete for the existing base of iPod users. .78 B. Apple’s Actions to Protect the Integrity of its Integrated Platform were Procompetitive 49. Almost immediately after the iTMS was launched, hackers attempted to bypass Apple’s FairPlay encryption.79 Some hackers would decrypt the code until they could wipe out the DRM and would then publish programs on the internet that would allow users to strip off the DRM and produce digital files that could be shared and played on virtually any computer or MP3 player.80 Some of the most well-known of these were developed by Jon Johansen, who was commonly known as DVD Jon. His earliest program was called QTFairUse. Released in November 2003, its purpose was to convert iTunes music into DRM-free files that would play, but not without manipulation, on other devices.81 Shortly thereafter, Johansen reverse 78 iPod Buyer Survey- Wave 3, p. 85. 79 “FairPlay – QTFairUse,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/FairPlay (accessed May 28, 2013). 80 See Deposition of Apple Inc., Designee: Jeffrey L. Robbin, December 3, 2010 (“Robbin deposition”), pp. 20:25-21:24. 81 This program was somewhat limited because the raw files could not be played on most computers or devices without further processing. “FairPlay – QTFairUse”, Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/FairPlay (accessed June 6, 2013). CONFIDENTIAL ATTORNEYS EYES ONLY - 25 - engineered the FairPlay encryption and created an algorithm that would remove the DRM in a way that would allow the songs to play directly on other devices.82 50. RealNetworks’ (Real) approach was different. Real introduced the Real Music Store (RMS) in January 2004.83 Like Apple’s iTMS, Real’s RMS was an online store that sold downloadable digital music files. And, like Apple’s iTunes, Real’s proprietary software program RealPlayer could be used to manage digital files on a computer, to acquire DRM-protected music files from the RMS, and to load digital files onto a portable music player. As noted above, files purchased from the RMS were encrypted using Real’s proprietary Helix DRM technology, which initially could not be loaded or played on iPods or on other portable devices that used different proprietary DRM technologies and thus did not support the Helix DRM technology. Unlike Apple’s integrated platform in which the software, the device, and the music store were integrated by a single firm (Apple), Real relied on agreements with hardware vendors to market players that supported its Helix DRM technology.84 51. In July 2004, RealNetworks introduced RealPlayer 10.5 with Harmony. Like some other third-party applications mentioned above (e.g., Winamp), RealPlayer 10.5 tried to mimic the way in which iTunes loaded music to iPods, including writing the internal database on the iPod. RealPlayer 10.5 with Harmony then mimicked FairPlay’s encryption/decryption methodology to allow music purchased from the RMS to be loaded onto an iPod. When music from the RMS was written to an iPod using Harmony, the iPod “saw” that music as iTMS music protected by FairPlay.85 Harmony not only mimicked FairPlay, it mimicked WMA as well. Using Harmony, an owner of a WMA-based device could purchase Helix-protected music from 82 Levine, Robert, “Unlocking the iPod; Jon Johansen became a geek hero by breaking the DVD code. Now he’s liberating iTunes - whether Apple likes it or not.” Fortune Magazine, downloaded from CNNMoney.com, October 23, 2006, http://money.cnn.com/magazines/fortune/fortune_archive/2006/10/30/8391726/ (accessed May 28, 2013). 83 Demery, Paul, “RealNetworks launches digital music store with latest RealPlayer,” Internet Retailer, January 7, 2004, http://www.internetretailer.com/2004/01/07/realnetworks-launches-digital-music-store-with-latestrealplayer (accessed July 18, 2013). 84 “RealNetworks lacks a digital music player of its own — the company relies on licensing partnerships with device manufacturers, and has struck deals with the manufacturers of hardware devices including Creative and Palm.” Cohen, Peter, “RealNetworks’ Harmony Promises iPod Compatibility”, PCWorld, 7/26/2004, http://www macworld.com/article/1035237/harmony html (accessed May 28, 2013). 85 Robbin deposition, pp. 83:8-84.2. CONFIDENTIAL ATTORNEYS EYES ONLY - 26 - the RMS and play it on a WMA-based MP3 player. In announcing the new technology, Real touted the number of devices on which it would work: With Harmony Technology, RealPlayer Music Store supports more than 70 secure portable media devices, including all 4 generations of the iPod and iPod mini, 14 products from Creative, 14 from Rio, 7 from RCA, 9 from palmOne, 18 from iRiver, and products from Dell, Gateway, and Samsung. Generally speaking, Harmony supports any device that uses the Apple FairPlay DRM, the Microsoft Windows Media Audio DRM, or the RealNetworks Helix DRM, giving RealPlayer Music Store support for more secure devices than any other music store on the Internet.86 52. As Dr. Kelly explained, third-party programs (like RealPlayer, Winamp and others) that attempted to add and manage songs on iPods without support from Apple interfered with the proper operation of the iPod and/or iTunes. The documentation for some of these programs listed known or fixed problems. Users of these programs posted bug reports and sought help in forums on the program’s web site or elsewhere. For example, there are reports of music disappearing from the iPod, playlists disappearing from the iPod, songs not playing or skipping, iTunes not recognizing the iTunes database, duplicate files, and artwork not displaying.87 88 53. The initial hacks in which hackers stripped the DRM from FairPlay-encrypted music created an immediate problem. According to its contracts with the record labels, Apple was required to maintain the security of the music it sold through the iTMS or face the loss of the right to offer that music.89 Apple released iTunes 4.7 on October 26, 2004. iTunes 4.7 changed the way FairPlay operated and thus allowed Apple (at least for a time) to prevent the removal of FairPlay from protected songs. 86 Bell, Ian , “RealNetworks Snaps Apple’s iPod Exclusivity”, Digital Trends, July 26, 2004, http://www.digitaltrends.com/gadgets/realnetworks-snaps-apples-ipod-exclusivity/ (accessed May 28, 2013). 87 Kelly report, ¶90. 88 Kelly report, ¶92. 89 See, e.g., Jobs, Steve, “Thoughts on Music”, February 6, 2007 (AIIA00093477 at -78). CONFIDENTIAL ATTORNEYS EYES ONLY - 27 - 90 54. In early 2005, Johansen released a new hack, called PyMusique. This was an iTMS “client” developed to allow the user to download songs from the iTMS before the DRM was even applied.91 The labels, Sony in particular, complained to Apple about this breach.92 On March 21, 2005, Apple began to require that all users upgrade to iTunes 4.7 if they wished to purchase music from the iTMS.93 55. the original version of Harmony ( ) could no longer convert Helix-protected files so that they would play on iPods. Put differently, because changed the way in which FairPlay-protected files were encrypted and decrypted, Harmony no longer mimicked the iTunes/FairPlay system. Thus, it could no longer convert files purchased from the RMS and protected by Helix into a format that could be played on iPods that had been updated with 94 I understand that the Court has ruled that the iTunes 4.7 update was not anticompetitive, and thus the fact that this update effectively blocked Harmony so that it could no longer interoperate with the iPod was not anticompetitive either. 90 Declaration of Jeffrey Robbin in Support of Defendant’s Renewed Motion for Summary Judgement, January 18, 2011, ¶44. 91 “SharpMusique,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/PyMusique (accessed May 28, 2013).There was another group of hacks, called Playfair, Hymn, and JHymn, that were initially based on source code that had been written by Johansen and operated in a similar fashion. “FairPlay,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/FairPlay (accessed May 28, 2013). 92 See Deposition of Eddy Cue on Behalf of Apple, Inc., December 17, 2010, pp. 128:16-129:11, discussing Cue Exhibit 61. See also AIIA00090546. 93 See, e.g., Borland, John, “iTunes hack disabled by Apple.” CNET News. March 21, 2005, http://news.cnet.com/Apple-disables-iTunes-hack/2100-1027_3-5628616.html#addcomm (accessed May 30, 2013).; Smith, Tony, “Apple plugs PyMusique iTunes ‘hole.’” The Register. March 22, 2005, http://www.theregister.co.uk/2005/03/22/apple_blocks_pymusique/ (accessed May 30, 2013). 94 Note that when iTunes 4.7 was first released, iPod users were not required to update their software in order to buy from the iTunes store. As mentioned above, that changed in March 2005 when Apple made the update mandatory in order to block a particular hack called PyMusique. “Apple plugs PyMusique iTunes ‘hole.’” The Register. March 22, 2005, http://www.theregister.co.uk/2005/03/22/apple_blocks_pymusique. CONFIDENTIAL ATTORNEYS EYES ONLY - 28 - 56. On April 26, 2005, RealNetworks announced that it had updated its Harmony software so that it could once again interoperate with iPods.95 I understand that Harmony continued to interoperate with all new iPod models until September 12, 2006. This began to change in September 2006 - some seventeen months later - when Apple released iTunes 7.0, the update that is at issue in this case.96 97 57. Any owner that had used one of these applications to load music onto the iPod would have to reload that music using iTunes in order for the music to play properly.99 Both of these changes reestablished the integrity of the iTunes/iPod/iTMS platform by preventing Harmony and other unsupported applications from adding files to the affected iPod. 95 Borland, John, “RealNetworks rekindles iPod Tech Tussle,” CNETNews, April 26, 2005, http://news.cnet.com/2100-1027_3-5685286 html (accessed May 28, 2013). 96 Expert report of David M. Martin Jr., Ph. D., April 8, 2003 (hereinafter “Martin report”), ¶74. 97 As I discuss in detail below, the “affected iPods.” 98 Martin report, ¶¶75-76. See also Kelly report. 99 Declaration of Augustin Farrugia in Support of Defendant’s Renewed Motion for Summary Judgement, (hereinafter “Farrugia Declaration”), ¶¶29-30; Martin report, ¶¶75-76. and applied only to selected new iPod models, which I call the CONFIDENTIAL ATTORNEYS EYES ONLY - 29 - 58. .102 59. 103 60. Apple had procompetitive reasons to protect its platform by making efforts to prevent third parties from writing outside content to iPods, as this could affect performance and undermine the value of its products. Just as it was procompetitive to adopt the walled garden at the outset, it was also procompetitive to update the system to keep it walled. The same considerations apply: The use of the closed system allowed Apple to maintain the very features consumers valued — reliability, ease of use and integration – by allowing it to control the risk of 100 This number has been calculated based on the assumption that iPod owners replace iPods every two years on average. See Declaration of Roger G. Noll on Liabilities and Damages, April 3, 2013, hereinafter “Noll declaration.”, p. 4 and NOLL 4095-96. Assuming that iPod owners replaced their iPods every 18 months on average, there would have been approximately 28 million iPods in use as of September 2006; however, assuming that owners replace their iPods every 36 months, there would have been approximately 36 million iPods in use as of that date. 101 Farrugia declaration, ¶¶29-32; Martin report, ¶92; Supplemental declaration of Augustin Farrugia, July 2, 2013, ¶¶2-3. 102 Farrugia Declaration, pp. 7,8. Martin report, p. 34. Supplemental declaration of Augustin Farrugia, July 2, 2013, ¶¶2-3. 103 Supplemental Declaration of Augustin Farrugia, July 2, 2013, ¶3. CONFIDENTIAL ATTORNEYS EYES ONLY - 30 - bugs and other problems that would disrupt the user experience. It also spared Apple the time and expense of working with other companies (some of which were its competitors) to try to ensure that their products would work properly on Apple’s system without creating problems that would impair the user experience of Apple’s customers.104 When Apple first entered the market, it did not adopt an open system and wait for problems to develop; instead, it made an independent determination that the walled garden was the best way to offer a quality product that met the demands of both consumers and the record labels.105 Having adopted the walled garden, it had every reason to prevent any efforts by others to compromise the system, without waiting for problems to develop.106 61. At the end of the day, Apple’s closed system competes with a variety of other systems, both open and closed. When Apple adopted the walled garden, it was a new entrant with a new approach. There was nothing like the iTunes/iPod/iTMS platform in the market, and there was no way to know whether it would be successful. As it turns out, the product has been a great success, driven by the fact that it has been able to offer a high-quality user experience. In fact a recent article attributes Apple’s overall success in consumer products like the iPod and the iPhone specifically to its walled garden business model: The fundamental difference between Apple and its competitors lies not at the margins but in the totality of sterling hardware, comprehensive and ongoing support, usability assurances, unequaled product integration and unmatched reliability. . . . I am the buyer. I am the user. I am prepared to switch. Neither my apps, my downloads, nor my music collection is holding me back. Apple’s competitors have simply failed to offer me equivalent or better value.107 104 Professor Noll argues that Apple would not be forced to cooperate with RealNetworks because “RealNetworks managed to produce Harmony and to keep it operating during two periods, one lasting more than a year, without cooperation from Apple.” Noll declaration, p. 65. Professor Noll ignores substantial evidence of incompatibilities, bugs, and other issues relating to using RealPlayer with Harmony to manage iPods. I understand that Apple’s technical expert, Dr. Kelly, has conducted several experiments that illustrate RealPlayer with Harmony’s incompatibility, including: (1) inconsistent iTunes database contents; (2) corrupted playlists; (3) deletion of On-The-Go playlists; (4) incorrect database lengths; (5) crashes causing music to disappear; (6) incorrect display of certain song tags; and (7) improper management of orphan files. 105 See Jobs, Steve, “Thoughts on Music,” February 6, 2007 (AIIA00093477). 106 And, of course, in this case, problems had developed, which provides even stronger support for Apple’s updates to maintain the integrity of its systems. See Kelly report. 107 Brian S. Hall, “The Apple Walled Garden is Grounded in Old Fashioned Product Superiority,” techpinions.com, March 4th, 2013 CONFIDENTIAL ATTORNEYS EYES ONLY - 31 - It would produce no economic benefit to conclude that, having produced significant consumer benefits through its walled garden approach, Apple must abandon that approach now that its products have proven successful in the marketplace. IV. PROFESSOR NOLL’S STUDY OF IMPACT AND DAMAGES IS BASED ON UNSUPPORTED ASSUMPTIONS AND IS INCONSISTENT WITH THE ECONOMICS OF PLAINTIFFS’ THEORY 62. Plaintiffs claim that, because music from the RMS could no longer play on affected iPods after Apple released the (and later the ), the owners of these iPods who would otherwise have used Harmony would now be “forced” to stop buying music downloads from the RMS and buy them from the iTMS instead.108 The argument is that, over time, the music libraries of these allegedly affected owners would contain more FairPlay-protected music than they would have had Harmony not been blocked. Unlike the music they would have purchased from the RMS, plaintiffs assert that this FairPlay-protected music could not be easily transferred to another brand of portable music player.109 Thus, when owners of these affected iPods See also an article from Time.com which attributes Apple’s success to its integrated product, including the Apple Store: “Apple builds great hardware, owns the core software experience, optimizes its software for that hardware, equips it with web services (iTunes and iCloud), and finally controls the selling experience through its own retail stores.” “In fact, if we take a hard look at the consumer and personal electronics landscape, we would be hard pressed to find a better hardware, software, services, and retail combination in the marketplace.” Bajarin, Ben, “Why Competing with Apple Is So Difficult,” Time.com, July 1, 2011, http://techland.time.com/2011/07/01/why-competing-with-apple-is-so-difficult/#ixzz2ZN8itJ6i (accessed July 16, 2013).) 108 Professor Noll offers no evidence whatsoever on how many iPod owners might have been affected in this way; in fact, he doesn’t even offer evidence that any owners were affected. 109 Plaintiffs’ assertion about the ease of transferring ignores the fact that FairPlay-protected music is readily transferrable to competing players by copying the music to a CD (i.e. “burning”) and then importing the music (i.e. “ripping”) to whatever computer is used to load songs onto the user’s player. See Apple Knowledge Base Support Article, “iTunes: About Third-Party Music Player and AAC File Support,” http://support.apple.com/kb/HT2698 (accessed 6/18/2013). Professor Noll asserts that this process is “costly and time consuming.” But he cites no evidence in support of that assertion. Moreover, Professor Noll admitted at his deposition to not having analyzed how long it takes to burn a music CD and could not recall how costly burning was. Noll deposition, 151:21 – 152:11; also 151:12-16 (Professor Noll has never burned a music CD). More importantly, Professor Noll’s assertion is contrary to the evidence. Once users have identified the songs they wish to burn and created a playlist of those songs, they can burn a CD with three mouse clicks. Apple Knowledge Base Support Article, “iTunes: How to Create CDs from Audible Content,” http://support.apple.com/kb/HT2955 (accessed July 18, 2013). Or users can “virtually burn” their entire music CONFIDENTIAL ATTORNEYS EYES ONLY - 32 - eventually wanted to replace their devices, they would be “locked in” - meaning they would be more likely to purchase another iPod rather than some alternate brand of portable music player. This eventual “lock-in” of iPod owners who, in the absence of the , would have used Harmony and ultimately purchased a non-iPod music player might, according to Plaintiffs and Professor Noll, have allowed Apple to charge higher prices for iPods in the “long run,” which is an undefined point in time sometime after September 12, 2006. The possibility of this “longrun” increase in price is the alleged anticompetitive impact of the . 63. Professor Noll acknowledges that Plaintiffs’ “lock-in” theory need not raise the prices of affected iPods.110 He asserts that whether the raised iPod prices, lowered them or left them unchanged is “an empirical question.”111 Based on a “hedonic regression” model of iPod prices that he claims is capable of identifying the impact of Apple’s challenged conduct, Professor Noll concludes that the challenged conduct caused Apple to raise the prices of all new iPods purchased on or after September 12, 2006 through March 31, 2009. However, Professor Noll’s analysis does not support this claim. In particular, as I explain in detail in the following paragraphs: a) Professor Noll presents no evidence that the RMS was actually selling enough music to iPod owners (and would have continued to do so in the “but-for” world) that there could have been any material effect on iPod demand. b) Professor Noll presents no evidence that, to the extent RMS sales were reduced to iPod owners by the , those owners later purchased a replacement iPod as a result of lock-in as opposed to choosing the iPod because it was a superior product. c) Professor Noll’s theory implies that, if anything, prices for at least the would have been expected to fall, not rise as a result of iTunes 7.0. collection by copying their iTunes library to their hard drive (negating the need for a CD) and then directly import the music to the alternative player’s jukebox and play the music on the alternative player. 110 See Noll declaration, pp. 15-17. 111 Noll declaration, pp. 57-58 CONFIDENTIAL ATTORNEYS EYES ONLY - 33 - A. Professor Noll Has Not Shown that the RMS Had Any Effect on iPod Owners 64. For Professor Noll’s theory and study of impact/damages to be valid, he must show, as a threshold matter that iPod owners actually used RealPlayer with Harmony to purchase RMS music and load it on their iPods.112 Professor Noll offers no evidence on this point: He does not tell us how many iPod owners were using Harmony, how many were buying from the RMS, how much music they had bought that way, or how important that music was in their pre- music libraries. And, even more important, he does not tell us how many owners of affected iPods might have bought music from the RMS in the absence of the , how much music they might have bought, or how important that music would have been in their post- libraries. When asked in his deposition: “Do you have any information or any estimate on how many iPod users bought music from RealNetworks?” Professor Noll answered: “No.”113 65. Professor Noll makes much of RealNetwork’s claim that during a late August, 2004 three-week “half-price” sale that offered digital downloads for $0.49 instead of the $0.99 the RMS and the iTMS generally charged, Real sold 3 million additional downloads, which allegedly “doubled” its market share.114 But he offers no evidence that any of these sales were to iPod users. And, he offers no evidence that there was any effect on RMS sales beyond the initial three-week period. On this latter point, contemporaneous accounts are skeptical. As The Register said in its 2004 review of the digital music industry: “It’s [Harmony] arguably made little difference in any case. There’s no indication that Harmony has increased adoption of Rhapsody. Real had more luck by slashing song prices for a time.”115 More pointedly, The Register commented on Real’s claim of selling 3 million songs: What the company doesn’t say is how many songs it sold in the three-week period to the $0.49-a-track promo kick-off, or in the period since the offer ended. 112 While there might be some technical argument that iPod owners who had not been buying music from the RMS in the months prior to September 2006 would suddenly have started to do so if only iTunes 7.0 had not been released, this seems highly unlikely, and in any event would certainly require economic evidence, and Professor Noll offers none. 113 Videotaped Deposition of Roger G. Noll, May 16, 2013, hereinafter “Noll deposition,”, p. 116:18-23. 114 Noll declaration, p. 53, note 93. 115 Smith, Tony, “Downloading digital music: Majors and minors, players and platforms, lawsuits and licences,” The Register. December 24, 2004, http://www.theregister.co.uk/2004/12/24/digital_music_in_2004/print html (accessed June 4, 2013). CONFIDENTIAL ATTORNEYS EYES ONLY - 34 - Almost certainly sales went up during the promo. It’s clear from other low price offers Real and other digital music companies have run in the past—not to mention common sense—that punters prefer lower prices. But when Real’s prices went back to $0.99, sales are likely to have fallen. Had sales momentum been maintained, Real surely would have boasted about it. What company wouldn’t?116 66. Exhibit 10 shows quarterly iTMS downloads from 2003 to 2010. The RMS halfprice sale, which allegedly doubled its market share, occurred in the third quarter of 2004. But there is no apparent decline in iTMS sales in that quarter, or even a noticeable slowdown in growth. RMS may have sold a lot more music, but those sales were evidently made to owners of other portable devices, not to owners of iPods or users of the iTMS - or at least they did not displace iTMS sales. This finding is consistent with the view that users of the iTunes/iPod/iTMS platform valued its integrated design and ease of use. To play DRM-protected music purchased from the RMS on an iPod, iPod owners would have had to commit to using Harmony instead of iTunes to manage their music libraries and load music onto their iPods.117 That prospect was evidently unattractive, even if the music they might have acquired in this way would have been portable to some other, non-Apple, device in the future. And it wasn’t as if the RMS was generally offering music at a lower price than the iTMS — the vast majority of music from both stores sold for $0.99 per song, which was evidently the competitive price.118 There simply wasn’t much economic incentive for satisfied users of Apple’s integrated platform to switch to Harmony and the RMS. 67. Even more fundamentally, knowing what RMS sales were in 2004 does not tell me how many songs the RMS was selling in September 2006 when the was implemented, or what the RMS’s sales would have been after September 2006 and in the “but-for” world. On that question, Professor Noll offers no evidence at all. Indeed, he has previously stated that he suspected consumers were not taking advantage of Harmony after it relaunched in 2005 because 116 Smith, Tony, “Real ‘49c a song’ promo pushes downloads to 3m,” The Register, September 9, 2004, http://www.theregister.co.uk/2004/09/09/real_promo_results/ (accessed June 4, 2013). 117 Apple-AIIA0093860, Real Customer Support, “How do I install the iPod to work with RealPlayer”, http://service.real.com/musicstore/support.html?section=iPodRPinstall (accessed April 27, 2010). 118 Following the promotion, RealNetworks continued to sell top-10 singles as “49-cent loss leaders.” “Real says digital song sale doubled market share,” USA Today, September 09, 2004, http://usatoday30.usatoday.com/tech/techinvestor/corporatenews/2004-09-08-real_x.htm (accessed July 2, 2013). CONFIDENTIAL ATTORNEYS EYES ONLY - 35 - 69. The basic conclusion is simple—once one accounts for the actual market importance of downloads from the RMS, whether the was included in iTunes 7 or not would have no material impact on the amount of RMS music on affected iPods, on competition or on iPod prices. This is because the had essentially no impact on the amount of iTunes music that iPod users accumulated and hence no impact on the degree of “lock-in.” Without this, Plaintiffs’ theory has no economic content. Nor do Professor Noll’s regression results. Whatever he is measuring with his itunes7_0 variable (if anything), it cannot be the impact of the on iPod prices. B. Professor Noll has done nothing to show that iPod owners were actually “locked-in” as opposed to choosing the iPod because it was a superior product. 70. Even if the RMS had been selling Harmony music to iPod owners and would have continued to do so absent the , that would still not establish that disabling Harmony increased demand for iPods. To show such increased demand, Professor Noll would also need to show, among other things, that (1) the additional amount of iTMS music that iPod owners purchased as a result of Harmony being disabled was enough to lock them in when they would not otherwise have been locked in under Plaintiffs’ theory by their existing iTMS library, (2) that those same owners purchased an additional iPod at some point within the class period, and (3) that, absent the challenged conduct, they would have elected to purchase a competing player rather than an iPod. 71. Professor Noll offers no evidence of any of these critical predicate facts. He does not cite any evidence to indicate how much iTMS music was on the iPods of any iPod owners who might have purchased from the RMS. Nor does he offer any reason to believe that any CONFIDENTIAL ATTORNEYS EYES ONLY - 37 - additional music such consumers might have bought from the iTMS as a result of the would have been enough to create lock-in if it did not otherwise already exist. He likewise offers no evidence as to the number of consumers who on it (and who would have purchased from the RMS absent the ) who then purchased an additional iPod during the class period. And, finally, Professor Noll does not present any evidence to show that any such additional iPod purchases were because the purchaser was locked-in as opposed to being simply because the consumer was happy with the performance of the existing iPod and believed iPods were superior to competitive products. C. Professor Noll’s Claims of the Possible Impact of the Challenged Conduct are not Supported by Economics 72. In addition to the lack of evidence to support its central factual predicates, Professor Noll’s hypothesis of increased iPod prices is also contrary to basic economics. The economic evidence suggests that, if anything, the prices of affected iPods would have been lower, not higher with the introduction of the played . The reduced the types of music that could be , but it had no effect on the types of music that could be played on other players. Thus, the introduction of the would have made attractive relative to other competing players. To the extent that hypothetical iPod owners with substantial libraries of music they had purchased from the RMS might have been considering the introduction of the iPod prior to the , these individuals would have been less likely to buy the and more likely to buy some other device. As a result, if Plaintiffs’ theory was otherwise correct, consumers would have been willing to pay less for a , not more. In other words, they would have been locked out, not in - which is exactly the opposite of what Plaintiffs’ theory would predict. To the extent that these hypothetical “intensive” RMS customers would have preferred to use Harmony going forward, their valuation of affected iPod models would have been reduced even further. 73. The same is true for RMS users who owned other portable devices but might have considered With the introduction of the would no longer load, and thus under Plaintiffs’ theory , their RMS music would be less attractive, not more. Similarly, those potential iPod buyers - whether current iPod owners or not - who would have preferred the option of using Harmony in the future would also find CONFIDENTIAL ATTORNEYS EYES ONLY - 38 - to be less attractive. Under Plaintiffs’ theory, all of this indicates that the effect of the introduction of the on buyers’ willingness to pay for -compatible iPods would have been negative. Thus, if anything, the direct effect of introducing the must have been that Apple would charge less for affected models, not more. 74. All of this can be summarized by considering those consumers who already owned iPods at the time iTunes 7.0 was introduced. They can be roughly categorized by the amount and type of music they had on their iPods and their likely reaction to the introduction of the : a) All music on their iPods is DRM-free: For these owners, the value of an affected iPod will not change; b) All music is from the iTMS, and they have no desire to buy from another online store: For these owners, the value of an affected iPod will not change; c) All music is from the iTMS, but they might want music from the RMS in the future: For these owners, the affected iPod will now be less valuable; d) Some music is from the iTMS and some is from the RMS: For these owners, the value of the iPod will change as follows: i. If the majority of their music is from the iTMS, the affected iPod will be less valuable, but only a little less so; ii. If majority of their music is from the RMS, the affected iPod will be much less valuable than for owners in the previous category; iii. And, if their music comes from both stores in roughly equal parts, the value of the affected iPod will be somewhere in between; e) And, finally, if virtually all of their music is from the RMS, the affected iPod will likely be much less valuable. In short, with respect to those consumers who already own an iPod, the overall value of affected iPods will go down, and the effect on price will either be neutral or negative. Consumers who have never owned an iPod, but might consider buying one, fall into one of three categories: 1) This is their first MP3 player; 2) They already own a non-Apple MP3 player; and 3) They are CONFIDENTIAL ATTORNEYS EYES ONLY - 39 - adding to a “collection” of non-Apple MP3 players. For these potential buyers, the situation is similar: In each case, either they care about the ability to buy from the RMS, in which case the other players will be relatively more attractive, or they do not care about the flexibility, in which case, there will be no change in the relative attractiveness. Once again, the overall value of affected iPods will go down, and the effect on price will either be neutral or negative. V. PROFESSOR NOLL’S “HEDONIC REGRESSION” AND HIS CLAIMS OF ANTICOMPETITIVE IMPACT 75. Professor Noll attempts to avoid confronting the implications of his theory by claiming that whether the caused iPod prices to be higher, lower or unchanged is an “empirical question.”123 He then claims that his “hedonic regression” analysis of iPod prices proves both anticompetitive impact and damages.124 As I show below, Professor Noll’s regressions are fundamentally flawed, lack statistical significance, and do not (and cannot) reliably determine impact or measure damages. A. Hedonic Models of Prices for Products with Changing Quality and the Facts of This Case 1. Impact and Damages Would not Be Immediate or Constant 76. Under Professor Noll’s theory, iTunes 7 created lock-in by preventing owners of iPods with from accumulating music from RMS. He concedes that any lock-in and impact would necessarily occur in the long run. Whether lock-in actually occurs, and when, depends upon a number of factors, including the amount of iTMS music an owner has relative to other music that could be played directly on other devices (e.g., music from the RSM, DRM-free music, etc.) An iPod owner can become locked in as a result of iTunes 7 only after she has purchased an iPod with and has built a library of iTMS music (which creates switching costs), and then only when she seeks to purchase a new MP3 player. Although he does not make the connection, Professor Noll cites evidence that consumers replace 123 Noll declaration, pp. 57-58. 124 Noll declaration, p. 71. CONFIDENTIAL ATTORNEYS EYES ONLY - 40 - their portable music players every 18 to 24 months.125 Taken together, this means that lock-in cannot occur until sometime in the long run after the consumer has purchased an , and the impact will occur even later when the consumer considers purchasing a replacement player, which would, on average, be a year and a half to two years after the iPod had been purchased. For consumers who purchased , lock-in wouldn’t occur until long after the introduction of iTunes 7 in September 2006, and the impact would, on average, not be felt until 18 to 24 months after that. By then, the iTMS was already DRM-free, and the class period was over. 77. Professor Noll also posits that lock-in has a greater effect in later periods as the number of replacement purchases grows relative to new purchases, saying: “lock-in normally has a greater effect on price as the fraction of sales that are accounted for by replacement purchases grows.”126 In other words, the impact on demand and prices, if any, would not be constant, but instead would increase over time. Despite this clear implication of his theory, Professor Noll restricts his regression model to estimate that iTunes 7 impacted prices of all iPod models immediately and that the impact on prices was constant throughout the entire class period — i.e., it never increased. This is directly contrary to his theory of impact, and demonstrates that there is no connection between his theory of “lock-in” or the underlying economics and the impact and damages he claims to have measured. 125 Noll declaration, p. 18, note 20 (citing Jemima Kiss, “How Big Is the iPod Installed Base?” Guardian, September 9, 2009 (reporting discussion with executive at Forrester Research); Larry Dignan, “Tablet Replacement Rates: More Like an MP3 Player than PC,” ZDNet January 4, 2011 (reporting a Forrester Research study); “Mobile Phone Lifecycles,” GSM Association, 2006 (reporting that about half of phone sales are replacements and that the replacement rate is about 18 months); “The Life Cycle of a Cell Phone,” U.S. Environmental Protection Agency, 2005 (reporting cell phone replacement rate of 18 months); John Paczkowski, “I Got a Fever, and the Only Prescription is… More iPhone!” All Things Digital, June 25, 1010 (reporting that the replacement cycle for iPhones is 14.7 months); Victor H., “Americans Replace Their Cell Phones Every 2 Years, Finns – Every Six, a Study Claims,” Phonearena.com, July 11, 2011 (reporting a study by Recon Analytics finding that the replacement rate for mobile phones was 18.7 months in 2007, 19.6 in 2008, and 21.1 in 2009). 126 Noll declaration, p. 18. CONFIDENTIAL ATTORNEYS EYES ONLY - 41 - cherry-picked certain product attributes and variables to include, leaving out significant ones that would be expected to affect iPod prices. These omissions bias his results in favor of finding an overcharge, even if there was no overcharge. In addition, some of the events that may have affected iPod prices occurred simultaneously with the updates about which plaintiffs complain, and he has provided no way to separate their effects from any effect from the challenged updates. 80. Professor Noll uses a form of “before and after” analysis in which he uses a “dummy variable” (itunes7_0) to separate the period before the release of iTunes 7.0 from the period after. He then claims that the coefficient on this dummy variable measures the impact of the challenged conduct. Indeed, the coefficient on this variable is the entire content of his claim to have demonstrated impact and damages. Putting aside his model’s other flaws, this indicator is incapable of identifying the impact of the challenged conduct, for two related reasons. First, the challenged was only one feature of iTunes 7. Other enhancements of iTunes occurred at the same time, and by their very nature as product improvements they can be expected to affect consumers’ valuation of iPods and hence prices. Professor Noll does not control for these changes, and so his regression cannot identify the effect of the challenged element of iTunes 7. Second, the features and functionalities of iPods themselves were different after September 2006 than before. Like the features and functionalities of iTunes, these were product improvements that enhanced the value of iPods. Unless these changes are also controlled for — and they were not — their omission from Professor Noll’s regression will cause him to estimate an effect of iTunes 7 even if the true effect of the 81. feature is zero. Many things changed on September 12, 2006, only one of which was the implementation of the . For example, at the same time the was implemented Apple introduced new iPods, including the iPod Nano 2nd Generation (2GB, 4GB, and 8GB) and the iPod Shuffle (N98 Best 1 GB), all of which included upgraded features compared to their predecessors. Although it did not introduce a new model of the iPod Classic 5th Generation, it did enhance the existing model with improved video and additional capacity (30GB and 80GB). iTunes 7 itself — which contained the — was a major version update that included upgrades to the previous version of iTunes software with enhanced video, support for the movie for reasons unrelated to the existence of the alleged conspiracy.” Daniel L. Rubinfeld, Quantitative Methods in Antitrust, in 1 Issues in Competition Law and Policy 723 (ABA Section of Antitrust Law 2008), p. 726. CONFIDENTIAL ATTORNEYS EYES ONLY - 43 - downloads available for the first time from the iTMS, new Cover Flow, and a redesigned layout. (See also Exhibit 11.) These improvements would be expected to enhance the value of new iPod models to consumers. Professor Noll’s model does nothing to account for them, and thus, his estimated “overcharge” is biased upward, which means that he would estimate a positive effect of iTunes 7 on prices even if the true effect had been zero. 82. These criticisms are not speculation—they can be clearly and convincingly demonstrated. As detailed below, when I include other valuable product features in Professor Noll’s model and correct other obvious flaws, Professor Noll’s estimates of “overcharge” vanish. C. A High Adjusted R-squared and Small Standard Errors do not Show that the Model is Reliable 83. Professor Noll’s regression results — reported in Exhibits 13.1 and 13.2 of his declaration — record “high” adjusted R-squared values. Professor Noll also reports the standard errors of his coefficient estimates, which are astoundingly small because Professor Noll has committed a fundamental error in estimating them. According to Professor Noll, the combination of a “high” regression R-squared and small standard errors reflects the “overall power of the regression[s].”131 He claims that the high R-squared (roughly .98) on each regression “means that virtually all of the variation in prices across models of iPods and among time periods is explained” by the regressions and that the low standard errors imply that all of his key coefficient estimates are highly statistically significant.132 It is well established that a high adjusted R-squared and small standard errors — whether they occur individually or together — do not indicate that the regression results establish the true relationship between the variables of interest.133 84. A regression can generate a high R-squared even when it is of little actual value in explaining the hypothesis of interest. The R-square of a regression is simply the proportion of the total variance in the dependent variable — here price — that is accounted for (correlated with) the estimated linear combination of included explanatory variables. In this case, for 131 Noll declaration, p. 80. 132 Noll declaration, p. 89. 133 A Guide to Econometrics, Peter Kennedy, Second Ed. p 185. CONFIDENTIAL ATTORNEYS EYES ONLY - 44 - example, quality-adjusted iPod prices fell dramatically over time, and Professor Noll includes time-varying factors such as storage capacity (which increased dramatically over the period) in his model. So long as the chosen explanatory variables (which include a time trend) are able to track the overall decline in prices fairly closely, the R-squared of his regression can be quite high. But that has nothing to do with whether the regression is reliable for measuring the impact of the challenged conduct in the case, which is the impact of the 85. on iPod prices. Similarly, relying on low estimated standard errors can be misleading, and it will be misleading when, as here, they have been calculated incorrectly. As discussed more fully in the next section, Professor Noll’s standard errors are incorrectly estimated because he wrongly pretends that the millions of price “observations” he used in his model are statistically independent outcomes. They are not independent, and this causes him to grossly underestimate the standard errors of his regression and therefore to grossly exaggerate the statistical significance of his findings. 86. As an example of the fact that high R-squared and small standard errors do not signal the reliability of a regression model, consider the alternative models that Professor Noll estimated but chose not to use for his overcharge and damage calculations. Professor Noll rejected several regressions he ran that also had adjusted R-squared values of .98 and low standard errors. In addition to his “preferred logarithmic regressions,” on which he ultimately relies, Professor Noll also ran regressions with “linear specifications” — in which price was measured in dollars — to estimate impact and damages. Significantly, the two linear regressions have nearly identical adjusted R-squared values (the linear reseller regression has adjusted Rsquared of .98 and the linear direct reseller regression has an adjusted R-squared of .9713) and both have very low standard errors, which means that in Professor Noll’s analysis, every estimated coefficient is highly statistically significant. 87. Despite the high R-squared and extremely low standard errors, he rejected his linear regressions, finding them “less reliable.”134 At deposition he explained that the results of those regressions did not fit reality, in part the regressions predicted “but for” prices for some models that would have been below cost. 134 Noll declaration, pp. 76-7. CONFIDENTIAL ATTORNEYS EYES ONLY - 45 - 88. Professor Noll vastly overstates the precision of his model and thus he overstates the significance of his claimed results. By ignoring the way his data are constructed and the very pricing practices at issue in this case, he purports to estimate “effects” with a high degree of precision and statistical significance. This is demonstrably wrong. Properly analyzed, even his (otherwise incorrect) estimates of impact and damage are not statistically significant. In other words, even using Professor Noll’s flawed regression one cannot conclude that the “impact” of iTunes 7.0 (to say nothing of the challenged ) was materially different than zero. D. Professor Noll Makes a Critical Methodological Error and Thus Dramatically Overstates the Precision of His Estimates 89. Two of the key outputs of a regression analysis are the estimates of the coefficients on each of the variables and the estimates of the precision with which each of these coefficients is estimated. Economists generally report these coefficients in terms of their estimated values and the standard error of those estimated values. The estimated standard error is intended to measure the precision with which the model has estimated the associated coefficient. When the standard error is very small, the estimate is similarly very precise. Economists are also typically interested in expressing the degree of confidence they have that the estimated value of the coefficient did not arise by chance when the true effect of the variable in question is actually zero. This can be measured by taking the ratio of a coefficient estimate to its standard error, which is called the “t-ratio” or “t-statistic” for that estimate. Intuitively, the t-statistic measures the distance between the estimated value of the parameter in question and zero, measured in standard deviations. When the t-statistic is large, the estimated coefficient is “far” from (many standard deviations away from) zero, which increases our confidence that the true effect of that variable is not zero. 90. When sample sizes are sufficiently large, as they are in this case, a common rule of thumb for saying that an estimated coefficient is “statistically significant” is that its associated t- CONFIDENTIAL ATTORNEYS EYES ONLY - 46 - statistic is 2.0 or larger. This corresponds to approximately a five-percent probability that an estimated coefficient as large as the one obtained could have occurred by chance if the true effect of the variable in question is zero.135 91. Professor Noll has made a fundamental error in constructing his data and in interpreting his regression. He incorrectly assumes that literally millions of identical price “observations” are statistically independent. But they are not independent — they are highly correlated with each other — and this error causes Professor Noll to grossly exaggerate the amount of information in his data. As a result of this very basic error, he totally misrepresents both the statistical precision and the significance of his estimates. Properly analyzed, even his otherwise flawed estimates of “overcharges” are not statistically significant. That is, they are not statistically distinguishable from zero. 1. The Way in Which Professor Noll Constructs and Interprets His Data Causes Him to Vastly Overstate the Significance of His Results 92. Professor Noll committed critical and serious errors in constructing and interpreting the observations in his data. Because of these errors, he vastly overstates the precision of his model and the statistical significance of his results. He reports extremely low standard errors, by 135 A t-statistic of 2.0 corresponds to approximately a five percent (p = .05) probability that a coefficient estimate as large as the one obtained could have arisen by chance if the true value of that coefficient is zero. This would sometimes be referred to as “statistical significance at the 5 percent level.” Larger values of the t-statistic correspond to rapidly declining probabilities that the true effect of the variable in question is zero. For example, a t-statistic of t = 2.58 corresponds to a 1-in-100 (p=.01) probability of arising by chance—”statistical significance at the 1 percent level.” A t-statistic of t = 4.9 corresponds to a one-in-one million chance (p = .000001. CONFIDENTIAL ATTORNEYS EYES ONLY - 47 - which he measures the precision with which the regression has estimated the value of the coefficients in his model. He obtains such small standard errors because he committed an extreme econometric error in calculating them. Properly computed, his estimates of impact and damages have no statistical significance, which means the estimates cannot be statistically distinguished from zero. 93. Calculating accurate standard errors is critical if one is to draw proper statistical inferences. Professor Noll’s estimates of the parameters of his model and their associated standard errors are based on the assumption that the residuals in his model are statistically independent — that is, that they are not correlated with each other. Professor Noll’s error is fundamental — by assuming that his observations are independent, he grossly exaggerates the amount of price information in his data, and as a result, he misrepresents the statistical precision and significance of his estimates. 94. Specifically, Professor Noll wrongly assumes that the price of each individual iPod sold to either a reseller or a direct purchaser represents a statistically independent draw from an underlying distribution. But the structure of his data should have alerted him that this cannot be the case. Because Professor Noll treated each unit in a multi-unit transaction as a separate price observation, he calculates his standard errors as if he had approximately 113 million independent CONFIDENTIAL ATTORNEYS EYES ONLY - 48 - one tells you the price of the remaining ones. When observations are not independent, the regression “must control for clustering, as failure to do so can lead to massively underestimated standard errors and consequent over rejection using standard hypothesis tests.”138 At deposition, Professor Noll explained that he refused to examine whether there was a clustering problem because he knew it wasn’t appropriate to do so. He either doesn’t understand statistical independence or doesn’t understand the data in this case. 97. There are standard tests one can perform to determine whether there is a clustering problem. As noted, if the regression residuals are positively correlated, the observations are not independent and there is a clustering problem. To test this, I disaggregated the observations used in his regression into family-by-quarter categories (i.e. an individual category might be the iPod Nano 1st Generation in the first quarter of 2006). I then split the units sold in each group randomly into two halves and calculated the average residual (which represents the statistical error in professor Noll’s model) for each of these two groups. If the observations were truly independent as Professor Noll assumes, there would be no systematic relationship between the errors in the two halves. As Exhibit 13a demonstrates, there is simply no way that Professor Noll’s assumption of independence can be correct. In fact, it is fair to say that his assumption could not be farther from the truth. The exhibit shows a scatter plot of the average residual in the second half of each family-quarter group against the average residual in the first half. The exhibit shows that these residuals lie almost entirely along a 45-degree line, which means that the two averages are almost exactly equal. In other words, the figure shows that the residuals are almost perfectly correlated — exactly the opposite of what Professor Noll assumed. Thus his assumption that his observations are independent is completely rejected by the very data he himself used.139 For comparison, Exhibit 14a illustrates what Exhibit 13a would have looked like had Professor Noll’s assumption been correct.140 138 Colin Cameron and Douglas L. Miller, “Robust Inference with Clustered Data,” in Handbook of Empirical Economics and Finance, edited by Aman Ullah and David E. A. Giles, CRC Press 2011, p at 2. 139 Exhibit 13a shows the scatter plot of the average residuals from Professor Noll’s Reseller Sales regression. Exhibit 13b presents the same information for the average residuals from Professor Noll’s Direct Sales regression. Note that the two exhibits are nearly identical. 140 For this exercise, the regression residuals are first reallocated randomly across categories before dividing each category residuals in two groups. Similar to above, Exhibit 14b illustrates what Exhibit 13b would look like for the Direct Sales regression if Professor Noll’s assumptions were correct. CONFIDENTIAL ATTORNEYS EYES ONLY - 50 - 98. There are standard techniques that allow for clustering in the calculation of regression standard errors. If it were the case that clustering is unimportant, as assumed by Professor Noll, he could have employed these techniques to demonstrate that accounting for clusters does not affect his results. He simply refused to do so. The most common method, widely used in modern empirical economics, is to allow for arbitrary non-independence within empirically designated groups, or “clusters,” which allows the regression package to calculate the degree of correlation.141 In the current context, this method allows for the fact that the prices of iPods, particularly those in multi-unit transactions, are not independent, but rather are highly correlated. 99. The consequences of Professor Noll’s mistake in calculating standard errors are shown in column (2) of Exhibits 15a and 15b. Consider the reseller sales regression in Exhibit 15a. Using the standard and well-accepted methods mentioned above, I have calculated the standard errors of Professor Noll’s model allowing for “clusters” of non-independent price observations within product family and quarter. The only thing that changes here is the information about the precision of these estimates. As the exhibits show, once I correct for the (obvious) high correlation among the residuals, Professor Noll’s estimated “overcharges” (and his other estimates as well) are not statistically significant. Both of these values are well below any conventional or accepted threshold for statistical significance. Properly interpreted, and even ignoring its many other flaws, Professor Noll’s hedonic regression model provides no reliable evidence that the iTunes 7 update had any material effect on the prices of iPods. E. Once some of Professor Noll’s Critical Errors and Omissions are Corrected, His Regression Model Cannot be used in Any Way to Support a Claim that the caused iPod Prices to Increase 100. Exhibits 15a and 15b also summarize certain modifications of Professor Noll’s regression models that show the impact of correcting just some of his other critical errors and 141 See William H. Greene, Econometric Analysis, 7th Edition, Prentice Hall, 2012, Chapter 11. See also Joshua Angrist and Jorn-Steffan Pischke, Mostly Harmless Econometrics, Princeton University Press, 2009, Chapter 8, “Clustering and Serial Correlation in Panels.” CONFIDENTIAL ATTORNEYS EYES ONLY - 51 - omissions. Exhibit 15a presents the impact of the modifications to Professor Noll’s reseller sales model, and Exhibit 15b presents the same impacts for Professor Noll’s direct sales model. I present the results of the modifications sequentially in order to illustrate the individual and cumulative impact of those corrections. As noted above, the first column in each table simply reproduces Professor Noll’s model. The only difference is that instead of reporting the coefficient estimate and the standard error for each explanatory variable, I report the coefficient estimate and the t-statistic for that estimate. The second column makes the essential correction to Professor Noll’s method of statistical inference, recognizing that pricing decisions are not independent within product family clusters. The remaining columns in Exhibits 15a and 15b show the effect of correcting some of Professor Noll’s other errors and omissions. 1. Professor Noll Does Not Properly Model the True But-for World, Which Included iTunes 4.7 101. Professor Noll includes an indicator variable for the issuance of iTunes 4.7 in October 2004. By doing so, he recognizes that, if plaintiffs’ theory were correct, iTunes 4.7 would be expected to have an effect on iPod prices by disabling Harmony. Professor Noll’s regression includes several other variables that are similarly intended to capture the effect on iPod prices of other events, such as the launch of the iTMS in April 2003 and the launch of Harmony in 2004. For each of these other variables, Professor leaves them turned on from the time of the event until the end of the data, so as to capture any continuing effect of that event. 102. In contrast to his treatment of those other variables, however, Professor Noll turns off the variable for iTunes 4.7 at the time he turns on the variable for iTunes 7. The effect of doing so is to treat iTunes 4.7 as having no independent continuing effect from September 12, 2006 onward—the date iTunes 7 was introduced. It is also to treat the but-for world Professor Noll is attempting to model as not including any effect from iTunes 4.7. By constructing his model in this way, he is comparing the prices of iPods after iTunes 7 with prices of iPods between July 2004 (the launch of Harmony) and October 2004 (the launch of 4.7). The effect is that his iTunes 7 variable picks up any effects of iTunes 7 and any effects from iTunes 4.7 103. This is incorrect. As noted above, I understand that the Court in this case has ruled that iTunes 4.7 was lawful, which means that iTunes 4.7 would have existed in any but-for world and that any effect it had on prices was not anticompetitive and cannot be included in determining impact and damages. Thus, to measure any incremental impact of iTunes 7 on CONFIDENTIAL ATTORNEYS EYES ONLY - 52 - prices, he must compare prices of iPods after iTunes 7 to prices of iPods just before iTunes 7 (not before iTunes 4.7). Moreover, Professor Noll offers no evidence, or reason to believe, that any effect on iPod prices from iTunes 4.7 would cease to exist as of the date iTunes 7 was issued. To the contrary, he admitted at his deposition that he suspected that iTunes 4.7 discouraged consumers from going back to Harmony even after Harmony was re-launched in April 2005.142 If that is true, that effect would likewise have continued even after iTunes 7 was issued. His treatment of iTunes 4.7 also ignores that iTunes 7 was included on only the . It was not included on the millions of existing iPods, . 104. To capture any continuing effect from iTunes 4.7, Professor Noll should have left the iTunes 4.7 variable turned on throughout the relevant time period. The result of turning it off on the same day as he turns on the iTunes 7 variable is to cause the iTunes 7 variable to capture the continuing effect from iTunes 4.7. In the case of Professor Noll’s reseller regression, the effect of turning off iTunes 4.7 is to increase the alleged overcharge from 1.6 to 3.2 percent. In the case of the direct sales regression, turning off iTunes 4.7 increases the overcharge from 1 to 6 percent. 2. Professor Noll’s Confusion about the “Log of Time” 105. According to Professor Noll, the electronics in MP3 players are semiconductors that follow “Moore’s Law” of technical progress, i.e., “the amount of functionality that can be placed on a semiconductor of a given size doubles every 18 months.”143 This is one reason that “prices for consumer electronics generally fall through time.”144 In an attempt to control for this, Professor Noll includes in his regressions a variable that he calls “the log [or logarithm] of time” instead of measuring time in natural units such as weeks, months, or years. It is common to include a time trend (measured in natural units such as months) in regressions in which the dependent variable is measured as a logarithm (here, the natural logarithm of price). This treatment allows for unmeasured technical progress that changes the dependent variable at a 142 Noll deposition (May 13, 2013), pp. 65:21-70:16. 143 Noll declaration, p. 18. 144 Noll declaration, p. 80. CONFIDENTIAL ATTORNEYS EYES ONLY - 53 - constant rate, such as 10 percent per year. Here, it would allow for constant progress that reduces prices at a constant percentage rate. 106. Based on his declaration and deposition testimony, Professor Noll clearly believes that “the log of time”, instead of time measured in natural units, has the properties mentioned in the previous paragraph.145 But in fact it does not. Because changes in logarithms of a variable are approximately equal to percentage changes, using “the log of time” yields nonsense results as a control for technical progress. For example, advancing time from the 100th month to the 101st month of a dataset is a change of one month, but it is a percentage change of just one percent. Changing time from the 10th month of the data to the 11th month is also a change of one month, but it is a percentage change of 10 percent — ten times greater than the same one-month change from 100 to 101. This implies two things for Professor Noll’s regression. First, his control for “technical progress” will be forced to have a large effect at the beginning of the data (when percentage changes in time are large) and almost none at the end (when percentage changes are small). This is exactly the opposite of what Professor Noll claims he intended the variable to do. Second, the effect of the log of time will depend crucially on the starting value for time—if time is measured in months since 2001, the regression will give an entirely different result than if time is measured in months since 1981 or 1843. Again, this is exactly the opposite of what Professor Noll claimed his control should do. 107. One can only conclude that Professor Noll did not understand the properties of his “log of time” control for technical progress and Moore’s law. If he had, he would have controlled for these phenomena using a time trend measured in natural units, which allows for a constant rate of price change over time. Had he done so, however, his (otherwise flawed) regression would have yielded much smaller estimates of “overcharge” and consequent damages, as I show below. 3. Additional Features and the “Quality” of Professor Noll’s Regression 108. Similarly, by even the most charitable interpretation of his “empirical” analysis, Professor Noll can only claim to have identified an increase in all iPod prices related to the introduction of iTunes 7 and its upgrades, not the impact of the 145 or a hypothetical induced Noll deposition, pp. 24-25 CONFIDENTIAL ATTORNEYS EYES ONLY - 54 - reduction in usage of Harmony and the RMS.146 Professor Noll agreed that factors that would explain or impact price, including significant product attributes, must be included in his model to avoid biasing his results. Professor Noll’s report says that he controlled for significant product attributes that explain price. At deposition, Professor Noll retreated from that position, admitting that there may be other product attributes that impacted iPod prices and correlated with the challenged conduct. 109. As Professor Noll recognizes, iPods evolved rapidly over the period he is measuring. Compared with earlier models, later iPods differ dramatically in their attributes, technologies and features. The original iPod line was larger, thicker, had less capacity, etc. Just a few years later, iPods had color screens, were thinner, had greater capacity and battery life, and could display album art, play television shows and movies. And the iPod Touch once against revolutionized the device market with its multi-touch interface and ability to play video, watch movies and television shows on a larger screen, send and receive emails, play video games, download and use apps from Apple’s iTMS, and access the internet. 110. 146 This ignores the fact that there were three new or enhanced iPods introduced at the same time. Professor Noll would claim that the “value” of the new features in these iPods is accounted for by the characteristics in his regressions. However, as I show later, this is not the case. 147 Professor Noll apparently was aware of the fact that he had failed to consider a number of characteristics. See Expert Report of Dr. Michelle M. Burtis in Apple Inc.’s Opposition to Plaintiffs’ Motion to Exclude, May 2, 2011, ¶¶16-17; Noll January 18, 2011 declaration, pp. 39, 76-78, 81-82, and Exhibits 1-6; Noll April 7, 2011 deposition, pp. 87:18-88:1. CONFIDENTIAL ATTORNEYS EYES ONLY - 55 - 111. .149 112. . 113. Professor Noll also makes no effort to separate the impact of from the other features of iTunes 7 that enhanced iPods. As shown in Exhibits 11 and 16, both the initial and upgraded versions of iTunes 7 contained a number of features and enhancements that improved iPod performance and quality, including new album covers views of music, TV shows, movies with better browsing capability and videos with “near DVD” quality. Without controlling for these features it is impossible to claim that any price-elevating impact of iTunes 7 — assuming there even was one — was due to the as opposed to other value-enhancing features of iTunes 7 and the new and improved iPod models it supported. As just one example, the enhanced video functionality of iTunes 7 improved the video playback quality of the already 148 In order to choose the characteristics I used in my model, I started with a list of all iPod models (by MPN) that Apple had introduced between 2001 and December 2010 (the latest date for which I have usable price data). (Note: MPN stands for “Marketing Part Number.” “Marketing Part Number,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/Marketing_part_number (accessed June 14, 2013).) I then asked my staff to collect information on the characteristics of each of these models. They searched both Apple.com and Everymac.com, and they reviewed Apple press releases and Apple price committee documents that were produced as part of the discovery in this case. In some cases they could not find the needed information on these websites. In such instances, they searched a variety of other websites. (For a list of the websites used and a description of the process by which the search was conducted, see Appendix C.) 149 I have tested to see whether the variables I have included in this exercise are jointly significant, and I find that they are. CONFIDENTIAL ATTORNEYS EYES ONLY - 56 - , a model that could not invoke the because it did not have the requisite firmware. At deposition, he admitted that these enhancements to the iPod could present a multi-collinearity issue, biasing his results. His only response was that he believes, without any empirical support, that owners of the iPod with video didn’t actually use the video function. That assumption is not only unsupported, but is also contrary to logic (Apple enhanced the video quality through iTunes 7 presumably because it determined that customers wanted that feature) and to the specification of his own model, which includes a variable for video feature of iPods. 114. In addition, his regression does not include any controls for influence that other versions of iTunes may have had on iPods or enhancements to iTMS. With respect to iTMS, under plaintiffs’ lock-in theory, any increase in iTMS demand as a result of new features and content would ultimately lead to increased demand for iPods and thus prices. If plaintiffs’ theory were correct, as customers were drawn to purchase more iTMS content that could be played only on iPods, they would become more locked in to purchasing iPods in the future, thus increasing demand and prices. Professor Noll recognizes this by including a variable for introduction of iTMS, the number of music downloads available, and when the iTMS offered all music without DRM. But he has no variables to account for other significant changes to the iTMS (e.g., ability to rent or purchase movies and television programs). Any impact from such changes will be mistakenly attributed to other variables. 4. The Did Not Apply to All Models and in Any Event, Would Not have Affected All Models Equally 115. Because of the way he constructed his regression, Professor Noll estimates a single average percentage overcharge that he applies across all models over the entire class period. First, this is inconsistent with his theory that any price impact would increase over time. But, second, it assumes that iTunes 7 would have exactly the same impact on every iPod that was sold. There is no basis for his assumption. Though “iPods,” different models were different from one another and were affected differently by iTunes7. Under Professor Noll’s theory, whether lock-in occurs is peculiar to the consumer’s behavior — what iPod she purchases and when, how much iTMS music she purchases relative to other music, when she would consider purchasing a new device, whether she would consider a non-iPod but for her iTMS library, etc. CONFIDENTIAL ATTORNEYS EYES ONLY - 57 - There is no reason to expect that the number of consumers who meet all of these conditions is relatively the same for each iPod. 116. 117. These facts indicate that, to the extent the challenged feature of iTunes 7 had any impact on iPod prices, that impact would vary across models. Even if it might raise the price of some model or models, Plaintiffs’ theory indicates that it may not affect others at all and that it may in fact reduce prices of some or all models. During the class certification phase, Professor Noll recognized that estimating an average impact across models could mask variation of impact, with the result that buyers of some models might appear to be harmed when in fact they were not. Although during that phase he indicated that he could fix the problem by estimating separate effects of his iTunes 7 indicator for each iPod model, he has done nothing in this phase to address this issue. 118. At deposition, Professor Noll again claimed that he could fix the problem by turning an indicator variable on for models that had iTunes 7 and turning it off for models that didn’t . This method cannot provide a meaningful answer because it implicitly assumes that the effect of iTunes 7 on non-affected iPods was zero. However, as I have shown above, just because a particular iPod could not invoke the feature of iTunes 7 does not mean that its price could not have been impacted. 119. Column (6) of Exhibits 15a takes this additional step of allowing for separate effects of iTunes 7 on each iPod model. For all three models the estimated “effect” of iTunes 7 is CONFIDENTIAL ATTORNEYS EYES ONLY - 58 - negative - which is inconsistent with Plaintiffs’ claim that these class members were damaged - and one of these (for the Classic) is statistically significant. Similarly for direct purchasers, column (6) of Exhibit 15b shows that three of four model-specific coefficients for iTunes 7 are negative, and the lone positive estimate is virtually zero. Not one of these findings is consistent with Plaintiffs’ theory. 5. Professor Noll’s Models Overstate Damages 120. As discussed above, Professor Noll’s regressions do not and cannot determine impact or provide any reliable measure of damages. Even accepting the regressions on their own flawed terms, he has specified his model in such a way as to bias his results upward. For example, among other things, he estimates damages on all iPods starting on September 12, 2006 even though he admits that any impact on price would occur in the long run and on average 18 to 24 months after September, 12, 2006; he uses the wrong before period to nearly double the damages; he uses a time trend that is contrary to his own theory and admissions at deposition; he cherry picks what features to control for and excludes others without any justification; and he estimates a single percentage overcharge across all models, including models that did not include iTunes 7. 121. In addition to the errors discussed above, Professor Noll also biased his results in the way he handled the variable for accounting for the impact of the availability of DRM-free music on iPod demand and prices. Professor Noll’s regressions include dummy variables to capture any impact of online stores that competed with iTMS offered their collections without DRM and any impact from iTMS offering its entire collection without DRM on March 31, 2009. Under his theory, which he later clarified at deposition, it is the availability of substantial amounts of DRM-free music that he believes would impact iPod prices. Indeed, at deposition he agreed that the date on which Apple offered 80% of its collection DRM-free would “of course” impact prices. On January 6, 2009, Apple offered 80% of its iTMS collection (8 million of the 10 million tracks) available without DRM. It also announced that all ten million would be available without DRM by the end of March, 2009. The announcement was widely covered in the popular press. Professor Noll knew this when he specified his model; among other things, he refers to documents that establish this fact. And according to iTMS data Professor Noll cites to, approximately 24 percent of all DRM-free upgrades sold during the first 21 and a half months CONFIDENTIAL ATTORNEYS EYES ONLY - 59 - were sold during the month of January 2009 and 45 percent were sold between January and March 2009, the three months before Noll’s dummy variable was “turned on.” 122. All these errors result in greatly overstated damage calculations. In Exhibits 15a and 15b, I have rerun his models correcting for some of these errors. The results show that, even correcting a few, has a substantial impact on his damages calculations. (See Exhibit 15c.) Indeed, his models properly interpreted predict that there are no damages. VI. MARKET DEFINITION AND MARKET POWER 123. Professor Noll asserts that Apple has monopoly power in two markets: A market for digital music downloads and a market for portable digital music players.150 The analyses he presents to support his conclusions have no meaningful economic implications for this case. Monopoly (or market) power is the ability of a firm to restrict output and thereby increase market price above the competitive level. Economists (and courts) often attempt to measure this ability by defining the relevant market and calculating the firm’s share in that market.151 The usefulness of this approach depends critically upon asking the appropriate question. Professor Noll fails in this regard. 124. This case is about the impact of the , a particular update to Apple’s iTunes 7.0 software that, in conjunction with the firmware on certain iPods (in particular the disabled Harmony’s ability to load RMS music onto those iPods. What matters in assessing the magnitude of that impact, if any, is how important downloads of RMS music would have been to users of iPods absent the introduction of the . This depends, in turn, upon where users get the music they load onto their iPods and how much of that music is accounted for by music purchased from the RMS. If music from the RMS is a small share of the music iPods owners have on their iPods (and it is), then the effect, if any, of blocking Harmony will also be small, regardless of whether music downloads are a separate market or they compete more broadly with streaming services, physical copies, or other sources of music. 150 Noll declaration, pp. 4-5. 151 Professor Noll says: “The purpose of relevant market analysis is to identify products that are close substitutes.” See Noll declaration, p. 23. This statement misses the mark. Even if one identifies the close substitutes, one may still not be able to draw meaningful conclusions, particularly in markets that are growing and in which there are no barriers to entry. See, e.g., Landes, William and Richard Posner, “Market Power in Antitrust Cases,” Harvard Law Review, Vol. 94, No. 5. (Mar. 1981), pp. 947-950. CONFIDENTIAL ATTORNEYS EYES ONLY - 60 - 125. Second, even if the market in which Apple sells music were relevant, Professor Noll presents no coherent analysis to suggest that it is as limited as he asserts. He does not meaningfully analyze, for example, whether prices for paid downloads are constrained by the availability of free downloads from peer-to-peer file sharing sites. Early in his report he suggests otherwise when he describes how the record labels and later Apple had to make their sites for paid downloads attractive enough to lure consumers away from obtaining music for free from the file-sharing sites.152 Both Steve Jobs and the then-head of the Department of Justice Antitrust Division similarly cited to downloads from file sharing sites as a significant challenge to the success of outlets such as the iTMS.153 126. Professor Noll’s exclusion of other sources of music is likewise unsupported. It is beyond dispute that, at the time Apple launched the iTMS and set its prices that prevailed throughout the class periods, it had to design its sites to compete against not just the file sharing sites, but also on-line subscription services,, online CD sales, and brick-and-mortal CD sales. Professor Noll argues that physical CDs do not compete with digital downloads. ”154 He acknowledges that the available evidence supports the conclusion that ondemand streaming services are in the same market with digital downloads, but he dismisses them on the ground that they could not support access by mobile telephones during the class period.155 Support for mobile devices, however, is not relevant to iTMS consumers who purchased music to listen to on other devices – and Professor Noll presents no analysis as to the amount of iTMS sales for use on such other devices. Nor does Professor Noll address the fact that Apple does not own the music but is dependent on licenses from the record labels, which could and did put restrictions on Apple’s ability to sell or could revoke the licenses. 152 Noll Declaration, pp. 7-9. 153 See Jobs, Steve, “Thoughts on Music”, February 6, 2007 (AIIA00093477); U.S. Department of Justice, Interoperability Between Antitrust and Intellectual Property, Thomas O. Barnett Presentation to the George Mason School of Law Symposium Managing Antitrust Issues In a Global Marketplace, Washington, D.C., September 13, 2006, http://www.usdoj.gov/atr/public/speeches/218316 htm (accessed 7/17/2013). 154 Apple_AIIA00105851 - Apple_AIIA00105861. 155 Noll Declaration, pp. 33-35. CONFIDENTIAL ATTORNEYS EYES ONLY - 61 - 127. Professor Noll presents an analysis of market definition and market power to support his conclusion that there is a separate antitrust market for digital downloads and that Apple has market power in that market. This analysis is misguided and sheds no light on any of the issues in this case. Market power in digital downloads is related only to the question of whether Apple has the ability to raise prices of digital downloads above the competitive level. But this case is not about raising prices in a hypothetical market for digital downloads, it is about the ability of customers to substitute across music players. Since Apple does not sell music for other players, it cannot reduce the attractiveness of other players by increasing the price of iTunes music. Indeed, any attempt by Apple to increase the price of iTunes music would only make other players more attractive and encourage consumers to switch away from iPods and towards those other players. Moreover, Plaintiffs have not alleged that Apple attempted to increase prices for digital downloads above the competitive level – and, in fact, this apparently is not something Apple ever did (or even attempted to do.) This makes Professor Noll’s analysis of market power in digital downloads essentially irrelevant. 128. Professor Noll’s analysis of market power in music players is also flawed. Professor Noll attributes Apple’s ability to sell iPods at higher prices and still maintain a large share of the market to Apple’s alleged ability to “lock in” customers and exercise monopoly power.156 However, the fact that a firm has a large market share does not mean it has market power. As I showed in Exhibit 7a and the accompanying discussion, Apple achieved great success and was able to charge a price premium even before it was established as the market leader. Moreover, as I show in Exhibit 7a, the market for digital music players has expanded enormously. By all accounts Apple has been very successful selling to new customers entering the market even though, as I explain below, there are literally dozens of companies, many of which offer wellestablished brands of consumer electronics that also sell MP3 players and competing products. 156 Noll declaration, p. 57. CONFIDENTIAL ATTORNEYS EYES ONLY - 62 - consumers additional options to the iPod. While these were a relatively small factor in 2006, they have increased in importance and are now an important force in the market. Given the widespread success of these products in recent years, such alternatives need to be considered in any analysis of the relevant market. Professor Noll admits that smartphones were a plausible substitute for iPods.162 But he says that they did not compete initially because they were not capable of quickly downloading music over the wireless carriers’ networks. But he ignores the fact that iPods have never had that capability. Even the iPod touch could download music only over a Wi-Fi connection, not a mobile telephone network. Thus, from day one smartphones had the same ability to load music as iPods - by connecting them to a computer and syncing them through iTunes or by connecting to a Wi-Fi network. Evidencing this substitutability, Apple’s iPods sales declined as iPhone sales grew. (See Exhibit 17.) 131. While these alternative products should be considered in such analysis, my conclusions do not depend upon whether these products are included in some hypothetical relevant market or not. It is the impact of the on iPod owners that matters. ________________________________ Kevin M. Murphy 162 Noll Declaration, p. 27, note 35. CONFIDENTIAL ATTORNEYS EYES ONLY - 64 - Exhibit 1 Sources (cont): http://www.apple.com/pr/library/2007/04/02Apple-Unveils-Higher-Quality-DRM-Free-Music-on-the-iTunes-Store.html http://www.apple.com/pr/library/2007/06/28iPhone-Premieres-This-Friday-Night-at-Apple-Retail-Stores.html http://www.apple.com/pr/library/2007/09/05Apple-Introduces-All-New-iPod-nano.html http://www.apple.com/pr/library/2007/09/05Apple-Unveils-iPod-touch.html http://www.apple.com/pr/library/2007/09/05Apple-Unveils-iPod-touch.html http://www.apple.com/pr/library/2009/09/09Apple-Premieres-iTunes-9.html http://www.apple.com/pr/library/2010/03/29iPad-Arrives-This-Saturday.html http://www.apple.com/pr/library/2010/09/01Apple-Introduces-iTunes-10-With-Ping.html http://www.apple.com/pr/library/2011/10/04Apple-to-Launch-iCloud-on-October-12.html http://en.wikipedia.org/wiki/Ipod http://en.wikipedia.org/wiki/Itunes http://en.wikipedia.org/wiki/ITunes_Store http://en.wikipedia.org/wiki/Apple_TV http://www.wired.com/science/discoveries/news/2004/07/64341 http://news.cnet.com/RealNetworks-rekindles-iPod-tech-tussle/2100-1027_3-5685286.html http://www.pcworld.com/article/115553/article.html http://en.wikipedia.org/wiki/ITunes_version_history http://en.wikipedia.org/wiki/IPad http://en.wikipedia.org/wiki/Icloud HIGHLY CONFIDENTIAL Exhibit 2 Sources (cont.): http://www.apple.com/pr/library/2004/01/06Apple-Introduces-iPod-mini.html http://www.apple.com/pr/library/2004/07/19Apple-Introduces-the-New-iPod.html http://www.apple.com/pr/library/2005/09/07Apple-Introduces-iPod-nano.html http://www.apple.com/pr/library/2005/10/12Apple-Unveils-the-New-iPod.html http://www.apple.com/pr/library/2005/10/12Apple-Announces-iTunes-6-With-2-000-Music-Videos-Pixar-Short-Films-Hit-TV-Shows.html http://www.apple.com/pr/library/2006/09/12Apple-Announces-iTunes-7-with-Amazing-New-Features.html http://www.apple.com/pr/library/2006/09/12Apple-Introduces-the-New-iPod-nano.html http://www.apple.com/pr/library/2006/09/12Apple-Unveils-the-New-iPod-shuffle.html http://www.apple.com/pr/library/2006/09/12Apple-Introduces-the-New-iPod.html http://www.apple.com/pr/library/2007/03/21Apple-TV-Now-Shipping.html http://www.apple.com/pr/library/2007/04/02Apple-Unveils-Higher-Quality-DRM-Free-Music-on-the-iTunes-Store.html http://www.apple.com/pr/library/2007/06/28iPhone-Premieres-This-Friday-Night-at-Apple-Retail-Stores.html http://www.apple.com/pr/library/2007/09/05Apple-Introduces-All-New-iPod-nano.html http://www.apple.com/pr/library/2007/09/05Apple-Unveils-iPod-touch.html http://www.apple.com/pr/library/2007/09/05Apple-Unveils-iPod-touch.html http://www.apple.com/pr/library/2009/09/09Apple-Premieres-iTunes-9.html http://www.apple.com/pr/library/2010/03/29iPad-Arrives-This-Saturday.html http://www.apple.com/pr/library/2010/09/01Apple-Introduces-iTunes-10-With-Ping.html http://www.apple.com/pr/library/2011/10/04Apple-to-Launch-iCloud-on-October-12.html http://en.wikipedia.org/wiki/Ipod http://en.wikipedia.org/wiki/Itunes http://en.wikipedia.org/wiki/ITunes_Store http://en.wikipedia.org/wiki/Apple_TV http://www.wired.com/science/discoveries/news/2004/07/64341 http://news.cnet.com/RealNetworks-rekindles-iPod-tech-tussle/2100-1027_3-5685286.html http://www.pcworld.com/article/115553/article.html Time magazine article, called: “A Brief History of the Walkman” 2009 http://en.wikipedia.org/wiki/Discman http://web.archive.org/web/20081203130622/http://www.americanheritage.com/articles/magazine/it/2004/2/2004_2_12_print.shtml http://www.theregister.co.uk/2008/03/10/ft_first_mp3_player/ http://www.pcworld.com/article/120146/article.html http://en.wikipedia.org/wiki/Pandora_Radio http://www.pcworld.com/article/115995/article.html http://www.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20070925005710&newsLang=en http://www.nytimes.com/2008/01/11/technology/11sony.html?_r=0&adxnnl=1&ref=technology&adxnnlx= 1366826676-ymmK7p9HEqdahXynzAiDzA http://en.wikipedia.org/wiki/ITunes_version_history http://en.wikipedia.org/wiki/IPad http://en.wikipedia.org/wiki/Icloud HIGHLY CONFIDENTIAL Exhibit 3 iTunes Update History iTunes Version Update 1.0 Release Date Major changes 1/9/2001 Original release based on SoundJam MP code 1.1 2/22/2001 External burners, improved visual effects, more supported CD burners 2.0 10/23/2001 Adds support for newly introduced iPod, CD burning improvements, equalizer/crossfader/sound enhancer added 3.0 7/17/2002 Smart playlists, more song list categories (including the My Rating column) 4.0 4/28/2003 Adds support for new iTunes Music Store, AAC audio codec, DVD burning, music sharing, GUI improvements 4.1 10/16/2003 Music store/CD burning improvements, Windows support added, voice notes, on-the-go playlists. 4.2 12/18/2003 AOL accounts with music store, GUI, and performance improvements 4.5 4/28/2004 iMix, party shuffle, CD insert printing, music store improvements, WMA to AAC conversion (Windows only), Apple Lossless audio codec 4.6 6/9/2004 AirTunes support, minor improvements. 4.7 10/27/2004 4.8 5/9/2005 Video support, international music stores supported, security enhancements 4.9 6/28/2005 Podcasting, Motorola ROKR E1 mobile phone support added 5.0 9/7/2005 GUI refined, search bar improvements, parental controls, smart shuffle, iPod Nano support 6.0 10/12/2005 GUI/music store changes, blocks DRM remover utilities, transfer videos to 5th generation iPod classic, included a complete redesign of FairPlay 7.0 9/12/2006 7.1 3/4/2007 Video playback/purchasing improvements, iPod games, Major GUI changes, gapless playback and album, sync purchased content from iPod to computer, Cover Flow added, . Apple TV support, additional 2G shuffle support, GUI improvements, fixes Windows Vista issues, enhanced sorting options, full-screen Cover Flow 7.2 5/29/2007 Fully supports Vista, iTunes Plus introduced with 256 kbit/s DRM-free music tracks, iTunes U introduced which offers free content from some of the top universities around the United States. Also included GUI Update for Windows Vista 7.3 6/29/2007 Support for iPhone activation/synching, GUI changes/fixes. Changes sorting pattern 7.4 9/6/2007 7.5 11/5/2007 Support for iPod Touch, Classic (6G), Nano (3G), and adds interface art for new iPod Shuffle colors. GUI improvements; Allows activation of iPhones outside of the United States wherever activation is available, (e.g. United Kingdom and Germany) as well as security and stability fixes. Also included is a GUI update for Leopard, and the ability to add custom ringtones for free. Includes support for iPod game Phase. Shows iPod battery level in source list (iPod Nano 3G, iPod Classic, iPod Touch, and iPhone with 1.1.2 software) 7.6 1/15/2008 Rent movies from the iTunes Store. Transfer Apple TV purchases to your computer. Allows manual management of music on iPhones. Added support for Windows Vista 64-bit 7.7 7/10/2008 Support for iPhone 3G, iOS 2.0 and the new App Store which features application downloads for the iPhone and iPod Touch as well as enabling the two products to act as remotes for wireless iTunes control 8.0 9/9/2008 Genius Sidebar and playlists, Grid View, HD TV shows, Shows capacity of Apps on iPhone/iPod Touch on device summary tab, new default visualizer, more flexible podcast options and support for second generation iPod Touch and 4th generation iPod Nano Copying photos to iPod Photo, GUI/performance improvements, Windows taskbar minimizing, updated FairPlay in effort to block hacking of music from the iTMS HIGHLY CONFIDENTIAL Exhibit 3 iTunes Version Update Release Date 8.1 3/11/2009 Support for the third generation iPod Shuffle, speed improvements for browsing large libraries and the iTunes Store, as well as 'preparing to sync' and 'optimizing photos' for syncing to iPods and iPhones, Party Shuffle has been replaced by iTunes DJ which now has the ability to receive requests for songs, the ability to import/convert files and CDs to iTunes Plus format, better performance when downloading iTunes Plus songs, accessibility improvements, Genius has been expanded to cover TV shows and movies, refined parental controls and refined auto-fill options. Supports Multi-touch gestures 8.2 6/1/2009 Supports iPhone 3GS and iOS 3.0 Software Update for the iPhone and iPod Touch. Includes many accessibility improvements and bug fixes 9.0 9/9/2009 New UI and redevelopment of the iTunes Store using WebKit. Genius Mixes were added, as were Home Sharing, iTunes LPs and iTunes Extras. Support for activation/syncing of iPod touch (late 2009). Music is automatically added to the library from a watched folder. 1-Click purchases. 9.1 3/30/2010 Adds support for iPad, adds the ability to sync and organize downloaded books between iPad and the iTunes library, and Genius Mixes can now be renamed, rearranged, or removed. "Applications" are renamed "Apps" 9.2 6/16/2010 Added ability to sync with iPhone 4. Also added ability to sync and read books with iPhone or iPod touch with iOS 4 and iBooks 1.1. Added ability to organize and sync PDF documents as books, and to read PDFs with iBooks 1.1 on iPad and any iPhone or iPod touch with iOS 4. Added option to organize your apps on iOS 4 home screens into folders using iTunes. Speed up back-ups while syncing an iPhone or iPod touch with iOS 4. Album artwork improvements make artwork appear more quickly when exploring your library 10.0 9/1/2010 10.1 11/12/2010 Adds new social networking layer named "Ping". Adds support for iPod shuffle 4G, iPod nano 6G, iPod touch 4G, and Apple TV (late 2010). Renamed AirTunes to AirPlay. Adds visual improvements to list view. Improves performance. Adds additional support for VoiceOver Kit for iPod. New application icon. Bug fixes. Streaming to AirTunes speakers working again. Adds Twitter connectivity to Ping. Adds printing support and support for devices running iOS 4.2 10.2 4/18/2011 Adds support for iPad 2, and iOS 4.3. Improves Home Sharing, allowing browsing and playback of entire iTunes libraries on devices running iOS 4.3, and brings back the colored icons in the Preferences window 10.3 6/6/2011 Adds support for iTunes in the Cloud (beta), allowing automatic downloading of purchased content between iTunes and iOS devices, and downloading previously purchased music. Adds support for iBookstore on the iTunes Store 10.4 7/20/2011 10.5 10.6 10/11/2011 3/7/2012 Adds support for Mac OS X Lion. It now allows users to take advantage of the Full-Screen App capability. GUI slightly improved. Better integration with Windows Vista and Windows 7 (Aero effects support). Adds support for iPhone 4S, iCloud, iTunes in the Cloud, Wi-Fi Syncing, and iOS 5. Adds support for iPad (3rd generation). Adds the ability to play 1080p HD movies and TV shows from the iTunes Store. Higher bit rate songs can be converted to 128, 196, or 256 kbit/s when syncing to iOS devices or iPods. Improvements for iTunes Match. Bug fixes Major changes Sources: http://en.wikipedia.org/wiki/ITunes_version_history http://www.apple.com/pr/library/2001/01/09Apple-Introduces-iTunes-Worlds-Best-and-Easiest-To-Use-Jukebox-Software.html http://www.apple.com/pr/library/2001/10/23Apple-Announces-iTunes-2.html http://www.apple.com/pr/library/2002/07/17Apple-Announces-iTunes-3.html HIGHLY CONFIDENTIAL Exhibit 3 Sources (cont.): http://www.apple.com/pr/library/2003/04/28Apple-Launches-the-iTunes-Music-Store.html http://www.apple.com/pr/library/2003/10/16Apple-Updates-iPod.html http://www.apple.com/pr/library/2004/10/26Apple-Introduces-iPod-Photo.html http://www.oldapps.com/itunes.php?old_itunes+4#changelog http://gigaom.com/2005/05/09/itunes-48-released http://www.apple.com/pr/library/2005/06/28Apple-Takes-Podcasting-Mainstream.html http://www.apple.com/pr/library/2005/09/07Apple-Introduces-iTunes-5.html http://www.apple.com/pr/library/2005/10/12Apple-Announces-iTunes-6-With-2-000-Music-Videos-Pixar-Short-Films-Hit-TV-Shows.html http://www.apple.com/pr/library/2006/09/12Apple-Announces-iTunes-7-with-Amazing-New-Features.html http://appleinsider.com/articles/07/03/05/apple_releases_itunes_71_quicktime_715_more http://www.apple.com/pr/library/2007/05/30Apple-Announces-iTunes-U-on-the-iTunes-Store.html http://www.apple.com/pr/library/2007/05/30Apple-Announces-iTunes-U-on-the-iTunes-Store.html http://appleinsider.com/articles/07/06/29/itunes_7_3_supports_iphone_adds_apple_tv_photo_streaming http://www.apple.com/pr/library/2007/09/05Apple-Unveils-the-iTunes-Wi-Fi-Music-Store.html http://www.apple.com/pr/library/2008/01/15Apple-Premieres-iTunes-Movie-Rentals-With-All-Major-Film-Studios.html http://www.apple.com/pr/library/2003/10/16Apple-Updates-iPod.html http://www.apple.com/pr/library/2008/09/09Apple-Announces-iTunes-8.html http://www.macworld.com/article/1139330/itunes.html HIGHLY CONFIDENTIAL Exhibit 4 Evolution of iPod Features Model Update Major Changes Release Date iPod Classic: Original iPod introduced October 23, 2001 iPod P68 Oct01 10/23/2001 First iPod introduced; portable device design; large capacity; featured Auto-Sync technology Available capacity: 5GB iPod P95 Mar02 3/21/2002 Added 10 GB model to the family; users now can personalize their iPods with the laser engraving Available capacity: 5GB, 10GB iPod P68A/97 Jul02 7/17/2002 Introduced 20 GB model; compatible with Windows; 10GB model is physically smaller than the previous comparable models Available capacity: 10GB, 20GB iPod Q14 Apr03 4/28/2003 Introduced 15 GB and 30 GB models; smaller and lighter than earlier iPods; prices are lower than previous comparable models Available capacity: 10GB, 15GB, 30GB iPod Q14A Sep03 9/8/2003 Upgraded 15 GB and 30 GB models to 20 GB and 40 GB, respectively, while keeping the same introduction prices Available capacity: 10GB, 20GB, 40GB iPod Q14A Sep03 1/6/2004 Added 15 GB back to the family; 15 GB model is smaller, lighter, and costs less than previous comparable models Available capacity: 10GB, 15GB, 20GB, 40GB iPod Q21 Jul04 7/19/2004 New 20 GB and 40 GB models have longer battery life and are in smaller sizes than the previous comparable models Available capacity: 20GB, 40GB iPod Photo P98 Oct04 10/26/2004 Allow photo browsing on the high-resolution color screeen; have more memory Available capacity: 40GB, 60GB iPod Photo P98A Feb05 2/23/2005 Replaced the 40 GB model with the 30 GB model; longer battery life Available capacity: 30GB, 60GB iPod Photo P98A Feb05 6/28/2005 Merged iPod and iPod photo lines; all iPods now equiped with color display Available capacity: 20GB, 60GB iPod Video M25 Oct05 10/12/2005 Enhanced color display with larger screen and higher resolution; smaller and lighter; faster battery recharge; introduced at lower prices Available capacity: 30GB, 60GB iPod Video M25B Sep06 9/12/2006 Upgraded 60 GB model to 80 GB while maintaining the same size; enhanced color display with larger screen and higher resolution; supported video playback; increased game support; longer battery life for the 30 GB model than the previous comparable models; lower introduction price Available capacity: 30GB, 80GB iPod Classic N25 Sep07 9/5/2007 Introduced the 160 GB model; longer battery life for music, photo, and video playback while keeping the same introduction prices Available capacity: 80GB, 160GB iPod Classic N25B Sep08 9/9/2008 Introduction at same price as 80 GB model of iPod Video M25B in Sep07 Available capacity: 120GB iPod Classic N25C Sep09 9/9/2009 Greater capacity while keeping the introduction price the same as the 120 GB model of iPod Classic N25B Sep08 Available capacity: 160GB HIGHLY CONFIDENTIAL Exhibit 4 Model Update Major Changes Release Date iPod Mini: Introduced January 6, 2004 iPod Mini Q22 Jan04 1/6/2004 Introduced iPod mini, smallest portable music player available; lightweight; new design in various colors; touch-sensitive click wheel controller; large capacity Available capacity: 4GB iPod Mini Q22B Feb05 2/23/2005 Added 6GB model; lower introduction prices; longer battery life Available capacity: 4GB, 6GB iPod Nano: Introduced September 7, 2005 to replace iPod Mini iPod Nano M26 Sep05 9/7/2005 Available in black and white for both Mac and Windows users; held 1000 songs; thinner than a standard #2 pencil; supported photo playback Available capacity: 2GB, 4GB iPod Nano M26 Sep05 2/7/2006 Introduced the 1 GB model Available capacity: 1GB, 2GB, 4GB iPod Nano N36 Sep06 9/12/2006 Introduced 8 GB model at same price as 4 GB model from the first generation Nano; longer battery life; improved screen resolution; aluminum body with click wheel; smaller and lighter; additional colors; lower prices for 2 GB and 4 GB models Available capacity: 2GB, 4GB, 8GB iPod Nano N46 Sep07 9/5/2007 New design; enhanced video user interface; larger screen with higher resolution; supported video playback Available capacity: 4GB, 8GB iPod Nano N58 Sep08 9/9/2008 Additional colors; new design with a curved aluminum and glass enclosure; incorporate "Genius" technology; lower introduction prices than previous comparable models Available capacity: 8GB, 16GB iPod Nano N33 Sep09 9/9/2009 New design; built-in video camera; larger screen with higher resolution; lower introduction prices than previous comparable models Available capacity: 8GB, 16GB iPod Nano N20 Sep10 9/1/2010 New design; multi-touch interface; smaller and lighter than previous comparable models at same introduction prices Available capacity: 8GB, 16GB iPod Shuffle: Introduced January 11, 2005 iPod Shuffle Q98 Jan05 1/11/2005 smaller and lighter than any other iPods; 512 MB model for under $100. Available capacity: 512MB, 1GB iPod Shuffle N98 Sep06 9/12/2006 Built-in clip; smaller, lighter, and more affordable than previous comparable model Available capacity: 1GB iPod Shuffle N98A Jan07 1/30/2007 Additional colors; built-in clip; smaller, lighter, and more affordable than the previous comparable model Available capacity: 1GB iPod Shuffle N98C Sep07 9/5/2007 New colors Available capacity: 1GB iPod Shuffle N98E Feb08 2/19/2008 New colors; higher capacity while maintaining the same size and weight at a lower introduction price than the 1 GB model of iPod Shuffle N98C Sep07; reduced price of 1 GB model Available capacity: 2GB iPod Shuffle N98F Sep08 9/9/2008 New colors; lower prices Available capacity: 1GB, 2GB iPod Shuffle D98 Mar09 3/11/2009 Greater capacity; smaller and lighter; faster battery recharge Available capacity: 4GB HIGHLY CONFIDENTIAL Exhibit 4 Model Update Major Changes Release Date iPod Shuffle D55 Sep09/ iPod Shuffle D98A Sep09 9/9/2009 Lower price; button controller with voice over; in-ear headphones with remote Available capacity: 2GB, 4GB iPod Shuffle N12 Sep10 9/1/2010 New design Available capacity: 2GB iPod Touch: Introduced September 5, 2007 iPod Touch N45 Sep07 9/5/2007 Multi-touch interface; built-in wifi wireless networking; 3.5-inch display; longer battery life for audio and video playback Available capacity: 8GB, 16GB iPod Touch N45 Sep07 2/5/2008 Introduced 32 GB model Available capacity: 8GB, 16GB, 32GB iPod Touch N72 Sep08 9/9/2008 New design; longer battery life for audio and video playback; lighter than previous comparable models Available capacity: 8GB, 16GB, 32GB iPod Touch N18 Sep09/ iPod Touch N72B Sep09 9/9/2009 Introduced 64 GB model; new design; longer battery life for audio and video playback; lighter and lower introduction prices than the previous comparable models; greater memory and onboard RAM capacity for 32 GB and 64 GB models Available capacity: 8GB, 32GB, 64GB iPod Touch N81 Sep10 9/1/2010 Higher screen resolution; included front-facing camera for FaceTime; longer battery life for audio and video playback; lighter and smaller than previous comparable models Available capacity: 8GB, 32GB, 64GB Sources: iPod characteristics data in Murphy/Topel reports, Wikipedia and Apple press releases, including: http://www.apple.com/pr/products/ipodhistory/ http://www.apple.com/pr/library/2002/07/17Apple-Unveils-New-iPods.html http://www.apple.com/pr/library/2002/07/17Apple-Unveils-New-iPods.html http://www.apple.com/pr/library/2003/04/28Apple-Introduces-New-iPods.html http://www.apple.com/pr/library/2004/01/06Apple-Introduces-iPod-mini.html http://www.apple.com/pr/library/2004/07/19Apple-Introduces-the-New-iPod.html http://www.apple.com/pr/library/2004/10/26Apple-Introduces-iPod-Photo.html http://www.apple.com/pr/library/2005/01/11Apple-Introduces-iPod-shuffle.html http://www.apple.com/pr/library/2005/02/23Apple-Unveils-New-iPod-mini-Starting-at-Just-199.html http://www.apple.com/pr/library/2005/06/28Apple-Merges-iPod-iPod-photo-Lines.html http://www.apple.com/pr/library/2005/09/07Apple-Introduces-iPod-nano.html http://www.apple.com/pr/library/2005/10/12Apple-Unveils-the-New-iPod.html http://www.apple.com/pr/library/2006/05/23Nike-and-Apple-Team-Up-to-Launch-Nike-iPod.html http://www.apple.com/pr/library/2006/09/12Apple-Introduces-the-New-iPod-nano.html http://www.apple.com/pr/library/2006/09/12Apple-Unveils-the-New-iPod-shuffle.html http://www.apple.com/pr/library/2006/09/12Apple-Introduces-the-New-iPod.html http://www.apple.com/pr/library/2007/09/05Apple-Unveils-iPod-touch.html http://www.apple.com/pr/library/2007/09/05Apple-Introduces-New-iPod-classic.html http://www.apple.com/pr/library/2007/09/05Apple-Introduces-All-New-iPod-nano.html http://www.apple.com/pr/library/2008/09/09Apple-Introduces-New-iPod-nano.html http://www.apple.com/pr/library/2008/09/09Apple-Introduces-New-iPod-touch.html http://www.apple.com/pr/library/2009/09/09Apple-Introduces-New-iPod-nano-With-Built-in-Video-Camera.html http://www.apple.com/pr/library/2010/09/01Apple-Introduces-New-iPod-touch.html http://www.apple.com/pr/library/2010/09/01Apple-Reinvents-iPod-nano-With-Multi-Touch-Interface.html HIGHLY CONFIDENTIAL Exhibit 5 iPod Timeline by Memory Size 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 O N D J F MAM J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F M 0.5 GB 0.5 GB 1 GB 1 GB 2 GB 2 GB 4 GB 4 GB 5 GB 5 GB 6 GB 6 GB 8 GB 8 GB 10 GB 10 GB 15 GB 15 GB 16 GB 16 GB 20 GB 20 GB 30 GB 30 GB 32 GB 32 GB 40 GB 40 GB 60 GB 60 GB 64 GB 64 GB 80 GB 80 GB 120 GB 120 GB 160 GB 160 GB iPod Classic iPod Mini iPod Nano iPod Shuffle iPod Touch Note: Special editions of U2, Harry Potter, and Product Red are excluded from this exhibit. Source: Price change data, Price Committee Documents, Apple Press Release, Direct Sales Data, Everymac.com. HIGHLY CONFIDENTIAL Exhibit 6a iPod Timeline of iPod Classic Family Start Date Memory IPOD CLASSIC N25C GOOD 9/9/2009 9/9/2008 9/5/2007 9/5/2007 9/12/2006 9/12/2006 30 IPOD VIDEO M25 BEST 10/12/2005 60 IPOD VIDEO M25 BETTER 10/12/2005 30 IPOD PHOTO P98A GOOD 6/28/2005 20 IPOD PHOTO P98A BEST 2/23/2005 60 IPOD PHOTO P98A BETTER 2/23/2005 30 IPOD PHOTO P98 BEST 10/26/2004 60 IPOD PHOTO P98 BETTER 10/26/2004 40 IPOD Q21 BEST 7/19/2004 40 IPOD Q21 BETTER 7/19/2004 20 IPOD Q14B GOOD 1/6/2004 15 IPOD Q14A BEST 9/8/2003 40 IPOD Q14A BETTER 9/8/2003 20 IPOD Q14 BEST 4/28/2003 30 IPOD Q14 BETTER 4/28/2003 15 IPOD Q14 GOOD 4/28/2003 10 IPOD P97 BEST 7/17/2002 20 IPOD P97 BETTER 7/17/2002 10 IPOD P68A GOOD 7/17/2002 5 IPOD P95 BETTER 3/21/2002 10 IPOD P68 GOOD 10/23/2001 5 2007 2008 2009 2010 2011 O N D J F MA M J J A S O N D J F MA M J J A S O N D J F MA M J J A S O N D J F MA M J J A S O N D J F MA M J J A S O N D J F MA M J J A S O N D J F MA M J J A S O N D J F MA M J J A S O N D J F MA M J J A S O N D J F M 80 IPOD VIDEO M25B BETTER 2006 80 IPOD VIDEO M25B BEST 2005 160 IPOD CLASSIC N25 GOOD 2004 120 IPOD CLASSIC N25 BETTER 2003 160 IPOD CLASSIC N25B GOOD 2002 $249 $249 $349 $249 $349 $249 $399 $299 $299 $449 $349 $599 $499 $399 $299 $299 $499 $399 $499 $399 $299 $499 $399 $299 $499 $399 Note: Special editions of U2, Harry Potter, and Product Red are excluded from this exhibit. Source: Price change data, Price Committee Documents, Apple Press Release, Direct Sales Data, Everymac.com. HIGHLY CONFIDENTIAL Exhibit 6b iPod Timeline of iPod Mini Family Start Date Memory IPOD MINI Q22B BEST 2/23/2005 2/23/2005 1/6/2004 4 2004 2005 2006 2007 2008 2009 2010 2011 O N D J F MA M J J A S O N D J F MA M J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F MA M J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F M 4 IPOD MINI Q22 BEST 2003 6 IPOD MINI Q22B BETTER 2002 $249 $199 $249 Note: Special editions of U2, Harry Potter, and Product Red are excluded from this exhibit. Source: Price change data, Price Committee Documents, Apple Press Release, Direct Sales Data, Everymac.com. HIGHLY CONFIDENTIAL Exhibit 6c iPod Timeline of iPod Nano Family Start Date Memory IPOD NANO N20 BEST 9/1/2010 9/1/2010 9/9/2009 9/9/2009 2006 2007 2008 2009 2010 16 IPOD NANO N58 BEST 9/9/2008 9/5/2007 9/5/2007 9/12/2006 9/12/2006 9/12/2006 2 IPOD NANO M26C GOOD 2/7/2006 1 IPOD NANO M26 BEST 9/7/2005 4 IPOD NANO M26 BETTER 9/7/2005 2 $199 4 IPOD NANO N36 GOOD $149 8 IPOD NANO N36 BETTER $179 4 IPOD NANO N36 BEST $149 8 IPOD NANO N46 BETTER $179 8 IPOD NANO N46 BEST 2011 O N D J F MA M J J A S O N D J F MA M J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F MA M J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F M 8 IPOD NANO N58 ULTIMATE 9/9/2008 2005 16 IPOD NANO N33 GOOD 2004 8 IPOD NANO N33 BETTER 2003 16 IPOD NANO N20 BETTER 2002 $149 $199 $149 $249 $199 $149 $149 $249 $199 Note: Special editions of U2, Harry Potter, and Product Red are excluded from this exhibit. Source: Price change data, Price Committee Documents, Apple Press Release, Direct Sales Data, Everymac.com. HIGHLY CONFIDENTIAL Exhibit 6d iPod Timeline of iPod Shuffle Family Start Date Memory IPOD SHUFFLE N12 BETTER 9/1/2010 2002 2003 2004 2005 2006 2007 2008 2009 9/9/2009 9/9/2009 4 IPOD SHUFFLE D98A BETTER 9/9/2009 $49 4 IPOD SHUFFLE D98A BEST 2 IPOD SHUFFLE D98 BEST 3/11/2009 9/9/2008 $79 $59 2 IPOD SHUFFLE N98F BETTER 9/9/2008 $99 4 IPOD SHUFFLE N98F BEST 1 IPOD SHUFFLE N98E BEST 2/19/2008 9/5/2007 $69 $49 1 IPOD SHUFFLE N98A BEST 1/30/2007 $79 2 IPOD SHUFFLE N98C BEST 1 IPOD SHUFFLE N98 BEST 9/12/2006 1/11/2005 1 $69 $79 $79 1 IPOD SHUFFLE Q98 BEST 2011 O N D J F MA M J J A S O N D J F MA M J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F MA M J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F M 2 IPOD SHUFFLE D55 BEST IPOD SHUFFLE Q98 BETTER 1/11/2005 2010 0.5 $79 $149 $99 Note: Special editions of U2, Harry Potter, and Product Red are excluded from this exhibit. Source: Price change data, Price Committee Documents, Apple Press Release, Direct Sales Data, Everymac.com. HIGHLY CONFIDENTIAL Exhibit 6e iPod Timeline of iPod Touch Family Start Date Memory IPOD TOUCH N81 BEST 9/1/2010 9/1/2010 9/1/2010 9/9/2009 9/9/2009 9/9/2009 9/9/2008 9/9/2008 16 IPOD TOUCH N72 GOOD 9/9/2008 8 IPOD TOUCH N45A BEST 2/5/2008 32 IPOD TOUCH N45 BETTER 9/5/2007 16 IPOD TOUCH N45 GOOD 9/5/2007 2009 2010 2011 O N D J F MA M J J A S O N D J F MA M J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F MA M J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F MAM J J A S O N D J F M 32 IPOD TOUCH N72 BETTER 2008 8 IPOD TOUCH N72 BEST 2007 32 IPOD TOUCH N72B GOOD 2006 64 IPOD TOUCH N18 BETTER 2005 8 IPOD TOUCH N18 BEST 2004 32 IPOD TOUCH N81 GOOD 2003 64 IPOD TOUCH N81 BETTER 2002 8 $399 $299 $229 $399 $299 $199 $399 $299 $229 $499 $399 $299 Note: Special editions of U2, Harry Potter, and Product Red are excluded from this exhibit. Source: Price change data, Price Committee Documents, Apple Press Release, Direct Sales Data, Everymac.com. HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENT AL Exhibit 9 Sources: Addictech Amazon MP3 Amie Street Arkade artistxite Batanga (eLatinMusic) Beatport Bleep.com Boomkat BuyMusic CDBaby Cdigix Classical Archives Digital-Tunes Discogs eBay Digital Music Center eMusic FYE Download Zone GoMusicNow Grazemusic HDtracks iMesh Indieburn iTunes Music Store Jamendo Juno / Juno Download Source 1 Source 2 http://www.trademarkia.com/addictech76553281.html http://www.gizmag.com/go/7269/ http://en.wikipedia.org/wiki/Amazon_ MP3 http://en.wikipedia.org/wiki/Amie_Stre et http://www.arkade.com/ http://musowiki.net/index.php/ArtistXit http://artistxite.com/ e http://www.batanganetwork.com/batan http://www.bizjournals.com/triad/storie ga-inc-announces-seamless-musics/2006/11/06/story6.html?page=all purchase-experience-linked-directly-withhttp://en.wikipedia.org/wiki/Beatport http://www.beatport.com/ http://en.wikipedia.org/wiki/Bleep.com http://www.boomkat.com/ http://www.webwiki.com/boomkat.com http://usatoday30.usatoday.com/tech/n http://en.wikipedia.org/wiki/BuyMusic ews/2003-07-28-buymusic_x.htm http://www.cdbaby.com/About http://en.wikipedia.org/wiki/CD_Baby http://en.wikipedia.org/wiki/Cdigix http://www.classicalarchives.com/about. http://en.wikipedia.org/wiki/Classical_ html Archives http://www.digital-tunes.net/ http://www.prleap.com/pr/73840/ http://en.wikipedia.org/wiki/Discogs http://news.cnet.com/eBay-plugs-intohttp://www.ebaychatter.com/the_chatter digital-music-market/2100-1025_3/2008/03/digital-downloa.html 5270681.html http://en.wikipedia.org/wiki/Emusic http://www.emusic.com/listen/#/ http://www.prnewswire.com/newsreleases/trans-world-entertainmenthttp://www.trademarkia.com/fyeannounces-launch-of-fye-download-zonedownload-zone-78763697.html 74257247.html http://en.wikipedia.org/wiki/GoMusicN http://hardnews1.ansci.usu.edu/archive ow /dec2006/121306_15cents.html http://www.billboard.biz/bbbiz/retail/t rans-world-to-launch-digital-servicehttp://news.minnesota.publicradio.org/f 1003571570.story eatures/2005/10/26_horwichj_graze/ http://www.berkleegroove.com/2010/04 https://www.hdtracks.com /29/david-chesky-hd-tracks/ http://en.wikipedia.org/wiki/Imesh http://www.prweb.com/releases/2005/0 7/prweb258343.htm http://en.wikipedia.org/wiki/ITunes_St ore http://www.jamendo.com/en http://en.wikipedia.org/wiki/Jamendo http://en.wikipedia.org/wiki/Juno_Reco rds http://www.junodownload.com/ HIGHLY CONFIDENTIAL Source 3 http://website.informer.com/artistxite.co m http://www.underconsideration.com/sp eakup/archives/001534.html http://www.billboard.biz/bbbiz/retail/t rans-world-to-launch-digital-service1003571570.story http://en.wikipedia.org/wiki/Chesky_R ecords http://www.junodownload.com/welcom e_to_junodownload/ Source 4 Exhibit 9 Sources: Kazaa Lifeway Stores LimeWire Misrolas mMode Music Store Morpheus mp3tunes.com Mperia MSN Music Music Giants Music Rebellion Musica360 MusicNOW Napster 2.0 National Geographic World Music Optus Music Store Pandora Radio Pass Along PayPlay.FM Source 1 Source 2 Source 3 http://deadspin.com/titus-young-willtake-a-nap-in-your-at-t-store496122722?utm_campaign=socialflow_dea dspin_twitter&utm_source=deadspin_twi tter&utm_medium=socialflow http://www.baptiststandard.com/index. php?option=com_content&task=view&id =1249&Itemid=131 http://en.wikipedia.org/wiki/LimeWire http://www.billboard.com/features/mis rolas-com-shuts-download-storehttp://www.billboard.com/features/mis 1003844475.story#/features/misrolas-com-http://www.theorchard.com/news/2005 rolas-mobile-links-with-at-tshuts-download-store-1003844475.story _08C.htm 1003716969.story http://news.cnet.com/AT38T-Wirelessopens-mobile-music-store/2100-1027_3- http://www.phonenews.com/cingular-to5396072.html?tag=item shut-down-mmode-lbs-services-1117/ http://en.wikipedia.org/wiki/MMode http://en.wikipedia.org/wiki/Morpheus _(software) http://news.cnet.com/MP3tunes.comshuns-digital-rights-management/2100http://www.mp3tunes.com/cb/about/ 1027_3-5569293.html http://en.wikipedia.org/wiki/BitPass http://en.wikipedia.org/wiki/MSN_Mus http://news.cnet.com/8301-10784_3ic 9926476-7.html http://www.stereophile.com/news/more http://www.wired.com/listening_post/2 _on_musicgiants/index.html 007/09/musicgiants-a-h/ http://www.avsforum.com/t/365725/ishttp://keynet.blogs.com/networks/2004 http-www-musicrebellion-com-legal-inhttp://web.archive.org/web/2006042507 /01/psychology_schm.html usa 1714/http://www.musicrebellion.com/ http://web.archive.org/web/2007031205 http://www.latinrapper.com/news_octo http://www.cnet.com/profile/Musica360 4839/http://musica360.com/store/about ber25d.html .com/ us.php http://www.internetretailer.com/2003/1 http://www.pcworld.com/article/128520 1/10/best-buy-music-now-launch-digital- http://news.cnet.com/aols-got/aol_scraps_music_now_in_favor_of_nap music-store musicnow/2100-1027_3-5930749.html ster.html http://news.cnet.com/8301-17938_105http://en.wikipedia.org/wiki/Napster_( http://techcrunch.com/2011/10/06/jon9945987-1.html pay_service) irwin-on-why-rhapsody-bought-napster/ http://press.nationalgeographic.com/200 6/08/03/worldmusicchanneldeliverssoun http://worldmusic.nationalgeographic.co dtrackoftheworldwithfreedownloads/ m/ http://en.wikipedia.org/wiki/Optus_Mu sic_Store http://www.techhttp://lifehacker.com/219114/downloadrecipes.com/rx/1391/pandora_how_to_ri http://lifehacker.com/232533/download- of-the-day-pandoras-jarp_save_music_mp3/ of-the-day-pandora-downloader-windows windows?tag=softwarepandora http://en.wikipedia.org/wiki/PassAlong _Networks http://en.wikipedia.org/wiki/PayPlay.F M HIGHLY CONFIDENTIAL Source 4 http://reviews.cnet.com/musicservices/fullaudio-music-now/45059240_7-30974743-2.html Exhibit 9 Sources: Peer Impact Philadelphia Orchestra PlayNow Puretracks RCN Music Rhapsody (Started as Listen.com) Rhino Entertainment Songtouch Sony Connect Streamwaves Tower Records Digital Traxsource TVT Records URGE Virgin Digital Vitaminic Music Club Voy Music Wal-Mart Yahoo! Music Unlimited Source 1 Source 2 http://www.technologyreview.com/new s/407000/p2p-from-internet-scourge-to- http://en.wikipedia.org/wiki/Peer_Impa savior/ ct http://www.playbillarts.com/news/artic http://www.philorch.org/recordings/ le/5262.html http://en.wikipedia.org/wiki/PlayNow_ http://www.javamidlet.com/2007/11/09 Arena /playnow-music-download-service.html http://us.puretracks.com/content/viewer http://en.wikipedia.org/wiki/Puretracks .aspx?cid=GlobalNav_Home http://www.businesswire.com/news/ho me/20061117005100/en/RCN-Reacheshttp://music.rcn.net/ Enhance-Music-Game-Content-Choices http://en.wikipedia.org/wiki/Rhapsody _(online_music_service) http://www.allamericanpatriots.com/487 http://www.rhino.com/global/faq#restri 35056_music_led_zeppelin_rocks_over_ai ctions_on_digital r_verizon_wireless http://christianmusic.about.com/od/top http://www.songtouch.com/ 10songtouchsongs/tp/tpSTsgl41805.htm http://downloadsquad.switched.com/20 http://en.wikipedia.org/wiki/Sony_Con 07/08/30/sony-kills-off-connect-onlinenect music-store-atrac-format/ http://en.wikipedia.org/wiki/Streamwa ves http://www.ipodobserver.com/ipo/artic le/Tower_Records_Digital_Joins_Music_ http://www.dmwmedia.com/news/tag/ Download_Market/ tower_records http://www.traxsource.com/index.php?a ct=page&page_id=311 http://en.wikipedia.org/wiki/TVT_Reco rds http://en.wikipedia.org/wiki/URGE_(di http://www.pcmag.com/article2/0,2817, gital_music_service) 2009421,00.asp http://en.wikipedia.org/wiki/Virgin_Di gital http://www.prnewswire.com/newsreleases/epo-technology-announcesbundle-agreement-with-vitaminic-to-addinstant-music-access-to-the-vitaminichttp://www.vitaminic.co.uk/pressmusic-club-76927317.html releases.html http://www.dmwmedia.com/news/2006 http://www.hispanicbusiness.com/2005/ /06/08/starmedia-voy-music-launch-latin- 11/21/voyr_announces_launch_of_voy_ digital-music-service musictm.htm http://www.macobserver.com/tmo/artic le/Inside_Walhttp://arstechnica.com/business/2011/0 Marts_Online_Music_Store_Digital_Right 8/walmart-pulling-the-plug-on-its-mp3s_Management/ store-but-not-its-drm-servers/ http://en.wikipedia.org/wiki/Yahoo!_M http://www.informationweek.com/news usic_Unlimited /191000022 HIGHLY CONFIDENTIAL Source 3 http://www.fatwallet.com/forums/offtopic/943427/ http://news.cnet.com/8301-1023_310049186-93.html http://www.gazette.com/articles/music15226-christian-songtouch.html http://betanews.com/2007/07/24/drmfree-mp3s-coming-to-yahoourge/#comments http://www.dmwmedia.com/news/tag/ voy http://tech.fortune.cnn.com/2011/08/10 /itunes-triumphant-walmart-kills-itsmusic-download-store/ Source 4 Exhibit 9 Sources: YouTube Zune Marketplace Source 1 Source 2 http://labnol.blogspot.com/2007/04/ho w-to-rip-audio-from-youtube-videos.html http://en.wikipedia.org/wiki/Zune http://www.zune.net/en-US/ HIGHLY CONFIDENTIAL Source 3 Source 4 HIGHLY CONFIDENTIAL Exhibit 11 iTunes 7.0 Features · Released 9/12/2006 · First version of iTunes to sell movies (All of the first 75 movies from 4 studio of the Walt Disney Company) · Movies will become available on the iTunes Store the same day they are released on DVD, with new releases priced at $12.99 when pre-ordered and during their first week of availability, and $14.99 thereafter, and library titles available for just $9.99 every day · Delivers video near-DVD quality at a resolution of 640x480, 4 times higher than the previous version · Redesigned layout to better organize and enjoy digital music and video · New Cover Flow which lets you visually browse through your music and video by cover art · iPod can now be used to transfer content to different computers · The iTunes Store now also offers downloads of popular video games for fifth generation iPods (New iPod Classic only) available for $4.99 each · Existing iPods can be updated with all features listed above · Sources: Apple_AIIA00974436 http://www.apple.com/pr/library/2006/09/12Apple-Announces-iTunes-7-with-Amazing-New-Features.html HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL Exhibit 16 iTunes 7.4 Features · Released 9/5/2007 · iTunes unveiled the iTunes Wi-Fi Music Store, offering music fans the ability to browse, search, preview, purchase and download songs and albums from the iTunes Music Store over a Wi-Fi network directly onto their iPod touch or iPhone to enjoy immediately. · Music is automatically downloaded back to their iTunes library when the iPod touch or iPhone is connected to their PC or Mac · iTunes customers will now be able to create custom ringtones by selecting up to a 30-second segment from over a million participating songs on iTunes and easily sync them onto their iPhone. Once a customer has purchased a participating song from iTunes, including previously purchased participating songs, it will only cost 99 cents to make up to a 30-second segment of that song into a ringtone and easily sync it onto their iPhone. · iTunes 7.4 includes a larger viewing area for movies and TV, filling the entire iTunes window for a richer, seamless video playback experience that looks better than ever · User can now rate entire albums as well as individual songs. · Support for iPod Touch, Classic (6G), Nano (3G), and adds interface art for new iPod Shuffle colors · Sources: http://en.wikipedia.org/wiki/ITunes_version_history http://www.apple.com/pr/library/2007/09/05Apple-Unveils-the-iTunes-Wi-Fi-Music-Store.html HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL Curriculum Vitae Kevin M. Murphy November 2013 Business Address: Home Address: University of Chicago Booth School of Business 5807 South Woodlawn Avenue Chicago, Illinois 60637 email: kevin.murphy@chicagobooth.edu 1810 Pennington Court New Lenox, Illinois 60451 Phone: (815)463-4756 Fax: (815)463-4758 Current Positions July 2005-Present: George J. Stigler Distinguished Service Professor of Economics, Department of Economics and Booth School of Business, University of Chicago Faculty Research Associate, National Bureau of Economic Research Education University of California, Los Angeles, A.B., Economics, 1981 University of Chicago, Ph.D., 1986 Thesis Topic: Specialization and Human Capital Previous Research and Academic Positions 2002-2005: George J. Stigler Professor of Economics, Department of Economics and Booth School of Business, University of Chicago 1993 – 2002: George Pratt Shultz Professor of Business Economics and Industrial Relations, University of Chicago 1989 – 1993: Professor of Business Economics and Industrial Relations, University of Chicago 1988 – 1989: Associate Professor of Business Economics and Industrial Relations, University of Chicago 1986 – 1988: Assistant Professor of Business Economics and Industrial Relations, University of Chicago 1983 – 1986: Lecturer, Booth School of Business, University of Chicago 1982 – 1983: Teaching Associate, Department of Economics, University of Chicago 1979 – 1981: Research Assistant, Unicon Research Corporation, Santa Monica, California Honors and Awards 2008: John von Neumann Lecture Award, Rajk College, Corvinus University, Budapest 2007: Kenneth J. Arrow Award (with Robert H. Topel) October 2005: Garfield Research Prize (with Robert H. Topel) September 2005: MacArthur Foundation Fellow 1998: Elected to the American Academy of Arts & Sciences 1997: John Bates Clark Medalist 1993: Fellow of The Econometric Society 1989 – 1991: Sloan Foundation Fellowship, University of Chicago 1983 – 1984: Earhart Foundation Fellowship, University of Chicago 1981 – 1983: Fellowship, Friedman Fund, University of Chicago 1980 – 1981: Phi Beta Kappa, University of California, Los Angeles 1980 – 1981: Earhart Foundation Fellowship, University of California, Los Angeles 1979 – 1981: Department Scholar, Department of Economics, University of California, Los Angeles Publications Books Social Economics: Market Behavior in a Social Environment with Gary S. Becker, Cambridge, MA: Harvard University Press (2000). Measuring the Gains from Medical Research: An Economic Approach edited volume with Robert H. Topel, Chicago: University of Chicago Press (2003). -2- Articles “Government Regulation of Cigarette Health Information,” with Benjamin Klein and Lynne Schneider, 24 Journal of Law and Economics 575 (1981). “Estimation and Inference in Two-Step Econometric Models,” with Robert H. Topel, 3 Journal of Business and Economic Statistics 370 (1985). “Unemployment, Risk, and Earnings: Testing for Equalizing Wage Differences in the Labor Market,” with Robert H. Topel, in Unemployment and the Structure of Labor Markets, pp. 103-139, ed. Kevin Lang and Jonathan S. Leonard. London: Basil Blackwell (1987). “The Evolution of Unemployment in the United States: 1968-1985,” with Robert H. Topel, in NBER Macroeconomics Annual, pp. 11-58, ed. Stanley Fischer. Cambridge, MA: MIT Press (1987). “Cohort Size and Earnings in the United States,” with Mark Plant and Finis Welch, in Economics of Changing Age Distributions in Developed Countries, pp. 39-58, ed. Ronald D. Lee, W. Brian Arthur, and Gerry Rodgers. Oxford: Clarendon Press, (1988). “The Family and the State,” with Gary S. Becker, 31 Journal of Law and Economics 1 (1988). “A Theory of Rational Addiction,” with Gary S. Becker, 96 Journal of Political Economy 675 (1988). “Vertical Restraints and Contract Enforcement,” with Benjamin Klein, 31 Journal of Law and Economics 265 (1988). “Income Distribution, Market Size, and Industrialization,” with Andrei Shleifer and Robert W. Vishny, 104 Quarterly Journal of Economics 537 (1989). “Wage Premiums for College Graduates: Recent Growth and Possible Explanations,” with Finis Welch, 18 Educational Researcher 17 (1989). “Industrialization and the Big Push,” with Andrei Shleifer and Robert W. Vishny, 97 Journal of Political Economy 1003 (1989). “Building Blocks of Market Clearing Business Cycle Models,” with Andrei Shleifer and Robert W. Vishny, in NBER Macroeconomic Annual, pp. 247-87, ed. Olivier Jean Blanchard and Stanley Fischer. Cambridge, MA: MIT Press (1989). “Efficiency Wages Reconsidered: Theory and Evidence,” with Robert H. Topel, in Advances in the Theory and Measurement of Unemployment, pp. 204-240. ed. Yoram Weiss and Gideon Fishelson. London: Macmillan, (1990). -3- “Empirical Age-Earnings Profiles,” with Finis Welch, 8 Journal of Labor Economics 202 (1990). “Human Capital, Fertility, and Economic Growth,” with Gary S. Becker and Robert F. Tamura, 98 Journal of Political Economy, S12 (1990). “Accounting for the Slowdown in Black-White Wage Convergence,” with Chinhui Juhn and Brooks Pierce, in Workers and Their Wages: Changing Patterns in the United States, pp. 107-143, ed. Marvin Kosters. Washington, D.C.: American Enterprise Institute (1991). “The Role of International Trade in Wage Differentials,” with Finis Welch, in Workers and Their Wages: Changing Patterns in the United States, pp. 39- 69, ed. Marvin Kosters. Washington, D.C.: American Enterprise Institute (1991). “Why Has the Natural Rate of Unemployment Increased over Time?” with Robert H. Topel and Chinhui Juhn, 2 Brookings Papers on Economic Activity 75 (1991). “The Allocation of Talent: Implications for Growth,” with Andrei Shleifer and Robert W. Vishny, 106 Quarterly Journal of Economics 503 (1991). “Rational Addiction and the Effect of Price on Consumption,” with Gary S. Becker and Michael Grossman, 81 American Economic Review 237 (1991). “Wages of College Graduates,” in The Economics of American Higher Education, pp. 121-40, ed. William E. Becker and Darrell R. Lewis. Boston: Kluwer Academic Publishers (1992). “Changes in Relative Wages, 1963-1987: Supply and Demand Factors,” with Lawrence F. Katz, 107 Quarterly Journal of Economics 35 (1992). “The Structure of Wages,” with Finis Welch. 107 Quarterly Journal of Economics 285 (1992). “The Transition to a Market Economy: Pitfalls of Partial Planning Reform,” with Andrei Shleifer and Robert W. Vishny, 107 Quarterly Journal of Economics 889 (1992). “The Division of Labor, Coordination Costs, and Knowledge,” with Gary S. Becker, 107 Quarterly Journal of Economics 1137 (1992). “Industrial Change and the Rising Importance of Skill” with Finis Welch, in Uneven Tides: Rising Inequality in America, pp. 101-132, ed. Peter Gottschalk and Sheldon Danziger. New York: Russell Sage Foundation Publications (1993). “Wage Inequality and the Rise in Returns to Skill,” with Chinhui Juhn and Brooks Pierce, 101 Journal of Political Economy 410 (1993). -4- “Occupational Change and the Demand for Skill, 1940-1990,” with Finis Welch, 83 American Economic Review 122 (1993). “Inequality and Relative Wages,” with Finis Welch, 83 American Economic Review 104 (1993). “Why Is Rent-Seeking So Costly to Growth?” with Andrei Shleifer and Robert W. Vishny, 83 American Economic Review 409 (1993). “A Simple Theory of Advertising as a Good or Bad,” with Gary S. Becker, 108 Quarterly Journal of Economics 941 (1993). “Relative Wages and Skill Demand, 1940-1990,” with Chinhui Juhn, in Labor Markets, Employment Policy, and Job Creation, pp. 343-60, ed. Lewis C. Solmon and Alec R. Levenson. The Milken Institute Series in Economics and Education. Boulder, CO: Westview Press, (1994). “Cattle Cycles,” with Sherwin Rosen and Jose A. Scheinkman, 102 Journal of Political Economy 468 (1994). “An Empirical Analysis of Cigarette Addiction,” with Gary S. Becker and Michael Grossman, 84 American Economic Review 396 (1994). “Inequality in Labor Market Outcomes: Contrasting the 1980s and Earlier Decades,” with Chinhui Juhn, 1 Economic Policy Review 26 (1995). “Employment and the 1990-91 Minimum Wage Hike,” with Donald R. Deere and Finis Welch, 85 American Economic Review 232 (1995). “Examining the Evidence on Minimum Wages and Employment,” with Donald R. Deere and Finis Welch, in The Effects of the Minimum Wage on Employment, pp. 26-54, ed. Marvin H. Kosters. Washington, D.C.: The AEI Press, (1996). “Social Status, Education, and Growth,” with Chaim Fershtman and Yoram Weissm, 104 Journal of Political Economy 108 (1996). “Wage Inequality and Family Labor Supply,” with Chinhui Juhn, 15 Journal of Labor Economics 72 (1997). “Quality and Trade,” with Andrei Shleifer, 53 Journal of Development Economics 1 (1997). “Wage Inequality and Family Labor Supply,” with Chinhui Juhn, 15 Journal of Labor Economics 72 (1997). “Vertical Integration as a Self-Enforcing Contractual Arrangement,” with Benjamin Klein, 87 American Economic Review 415 (1997). -5- “Unemployment and Nonemployment,” with Robert H. Topel, 87 American Economic Review 295 (1997). “Wages, Skills, and Technology in the United States and Canada,” with W. Craig Riddell and Paul M. Romen, in General Purpose Technologies and Economic Growth, pp. 283309, ed. Elhanan Helpman. Cambridge, MA: M.I.T. Press, (1998). “Perspectives on the Social Security Crisis and Proposed Solutions,” with Finis Welch, 88 American Economic Review 142 (1998). “Population and Economic Growth,” with Gary S. Becker and Edward Glaeser, 89 American Economic Review 145 (1999). “A Competitive Perspective on Internet Explorer,” with Steven J. Davis, 90 American Economic Review 184 (2000). “Industrial Change and the Demand for Skill” with Finis Welch, in The Causes and Consequences of Increasing Inequality, pp. 263-84, ed. Finis Welch. Volume II in the Bush School Series in the Economics of Public Policy. Chicago: University of Chicago Press, (2001). “Wage Differentials in the 1990s: Is the Glass Half Full or Half Empty?” with Finis Welch, in The Causes and Consequences of Increasing Inequality, pp. 341-64, ed. Finis Welch. Volume II in the Bush School Series in the Economics of Public Policy. Chicago: University of Chicago Press, (2001). “Economic Perspectives on Software Design: PC Operating Systems and Platforms,” with Steven J. Davis and Jack MacCrisken, in Microsoft, Antitrust, and the New Economy: Selected Essays, pp. 361-420, ed. Davis S. Evans. Boston, MA: Kluwer, (2001). “Current Unemployment, Historically Contemplated,” with Robert H. Topel and Chinhui Juhn, 1 Brookings Papers on Economic Activity 79 (2002). “The Economics of Copyright ‘Fair Use’ in A Networked World,” with Andres Lerner and Benjamin Klein, 92 American Economic Review 205 (2002). “The Economic Value of Medical Research” with Robert H. Topel, in Measuring the Gains from Medical Research: An Economic Approach, pp. 41-73, ed. Robert H. Topel and Kevin M. Murphy. Chicago: University of Chicago Press, (2003). “School Performance and the Youth Labor Market,” with Sam Peltzman, 22 Journal of Labor Economics 299 (2003). “Entrepreneurial ability and market selection in an infant industry: evidence from the Japanese cotton spinning industry,” with Atsushi Ohyama and Serguey Braguinsky, 7 Review of Economic Dynamics 354 (2004). -6- “Entry, Pricing, and Product Design in an Initially Monopolized Market,” with Steven J. Davis and Robert H. Topel, 112 Journal of Political Economy: S188 (2004). “Diminishing Returns: The Costs and benefits of Increased Longevity,” with Robert H. Topel, 46 Perspectives in Biology and Medicine S108 (2004). “Persuasion in Politics,” with Andrei Shleifer, 94 American Economic Review 435 (May 2004). “Black-White Differences in the Economic Value of Improving Health,” with Robert H. Topel, 48 Perspectives in Biology and Medicine S176 (2005). “The Equilibrium Distribution of Income and the Market for Status,” with Gary S. Becker and Iván Werning, 113 Journal of Political Economy 282 (2005). “The Market for Illegal Goods: The Case of Drugs,” with Gary S. Becker and Michael Grossman, 114 Journal of Political Economy 38 (2006). “Competition in Two Sided Markets: The Antitrust Economics of Payment Card Interchange Fees,” with Benjamin Klein, Kevin Green, and Lacey Place, 73 Antitrust Law Journal 571 (2006). “The Value of Health and Longevity,” with Robert H. Topel, 114 Journal of Political Economy 871 (2006). “Social Value and the Speed of Innovation,” with Robert H. Topel, 97 American Economic Review 433 (2007). “Education and Consumption: The Effects of Education in the Household Compared to the Marketplace,” with Gary S. Becker, 1 The Journal of Human Capital 9 (Winter 2007). “Why Does Human Capital Need a Journal?” with Isaac Ehrlich, 1 The Journal of Human Capital 1 (Winter 2007). “Critical Loss Analysis in the Whole Foods Case,” with Robert H. Topel, 3 (2) GCP Magazine (March 2008). “Exclusive Dealing Intensifies Competition for Distribution,” with Benjamin Klein, Antitrust Law Journal, Vol. 75 (October 2008). “Fertility Decline, the Baby Boom and Economic Growth,” with Curtis Simon and Robert Tamura, 2 The Journal of Human Capital 3 (Fall 2008). “The Market for College Graduates and the Worldwide Boom in Higher Education of Women,” with Gary S. Becker and William H. J. Hubbard, 100 American Economic Review: Papers & Proceedings 229 (May 2010). -7- "Explaining the Worldwide Boom in Higher Education of Women," with Gary S. Becker and William H. J. Hubbard," 4 Journal of Human Capital No. 3 (2010). “How Exclusivity is Used to Intensify Competition for Distribution-Reply to Zenger” with Benjamin Klein, 77 Antitrust Law Journal No. 2 (2011). “Achieving Maximum Long-Run Growth,” Federal Reserve Bank of Kansas City Proceedings of the Annual Jackson Hole Conference 2011. “On the Economics of Climate Policy,” with Gary. S. Becker and Robert. H. Topel, 10 B.E. Journal of Economic Analysis and Policy No. 2 (2011). “Measuring Crack Cocaine and its Impact,” with Fryer, R. G., P. S. Heaton, and S. D. Levitt, 51 Economic Inquiry No. 3 (July 2013). “Some Basic Economics of National Security,” with Robert H. Topel, 103 American Economic Review No. 3 (2013). Selected Working Papers “Gauging the Economic Impact of September 11th,” with Gary S. Becker, Unpublished Working Paper (October 2001). “War In Iraq Versus Containment: Weighing the Costs,” with Steven J. Davis and Robert H. Topel, NBER Working Paper No.12092 (March 2006). “Estimating the Effect of the Crack Epidemic,” with Steve Levitt and Roland Fryer, Unpublished Working Paper (September 2006). “The Interaction of Growth in Population and Income,” with Gary S. Becker, Unpublished Working Paper (2006). “Persuasion and Indoctrination,” with Gary Becker (2007). “The Value of Life Near Its End and Terminal Care,” with Gary S. Becker and Tomas Philipson (2007). “On the Economics of Climate Policy,” with Gary S. Becker and Robert H. Topel, Working Paper No. 234 (January 2010, Revised September 2010). “The Collective Licensing of Music Performance Rights: Market Power, Competition and Direct Licensing” (March 2013). “Competitive Discounts and Antitrust Policy,” with Edward Snyder and Robert Topel (March 2013). -8- Selected Comments Comment on “Causes of Changing Earnings Equality,” by Robert Z. Lawrence. Federal Reserve Bank of Kansas City (1998). “Comment: Asking the Right Questions in the Medicare Reform Debate,” Medicare Reform: Issues and Answers, pp. 175-81, ed. Andrew J. Rettenmaier and Thomas R. Saving. Chicago: University of Chicago Press (2000). Comment on “Social Security and Demographic Uncertainty,” by Henning Bohn in Risk Aspects of Investment-Based Social Security Reform, ed. John Y. Campbell and Martin Feldstein. Chicago: University of Chicago Press (2001.) Comment on “High Technology Industries and Market Structure,” by Hal R. Varian. Federal Reserve Bank of Kansas City (2001). Popular Press Articles “The Education Gap Rap,” The American Enterprise, (March-April 1990), pp. 62. “Rethinking Antitrust,” with Gary S. Becker, Wall Street Journal, (February 26, 2001) pp. pA22. “Prosperity Will Rise Out of the Ashes,” with Gary S. Becker, Wall Street Journal, (October 29, 2001) pp. pA22. “The Economics of NFL Team Ownership” with Robert H. Topel, report prepared at the request of the National Football League Players’ Association. (January 2009). Articles About Murphy “Higher Learning Clearly Means Higher Earning,” by Carol Kleiman. Chicago Tribune, March 12, 1989, Jobs Section pp. 1. Long article about “The Structure of Wages” with picture of Murphy. “Why the Middle Class Is Anxious,” by Louis S. Richman. Fortune, May 21, 1990, pp. 106. Extensive reference to Murphy's work on returns to education. “Unequal Pay Widespread in U.S.,” by Louis Uchitelle., New York Times, August 14, 1990, Business Day section pp. 1. Long piece on income inequality. “One Study’s Rags to Riches Is Another’s Rut of Poverty,” by Sylvia Nasar, New York Times, June 17, 1992, Business Section pp. 1. Long piece on the income inequality research. -9- “Nobels Pile Up for Chicago, but Is the Glory Gone?” by Sylvia Nasar, New York Times November 4, 1993, Business Section pp. 1. Long piece on Chicago School of economics. Featured a photo of five of the “brightest stars on the economics faculty” (including Murphy) and a paragraph about Murphy’s research. “This Sin Tax is Win-Win,” by Christopher Farrell. Business Week, April 11, 1994, pp. 30. Commentary section refers to Murphy, Becker, and Grossman’s work on rational addiction. “Growing inequality and the economics of fragmentation,” by David Warsh, Boston Sunday Globe, August 21, 1994, pp. A1. Two-page article with picture and biographical details about Murphy and his research; part of a series about “how the new generation replaced the old in economics.” “A Pay Raise’s Impact,” by Louis Uchitelle. New York Times, January 12, 1995, Business Section pp. 1. Article about consequences of proposed increase in the minimum wage. Articles featuring Murphy's comments on the minimum wage appeared in numerous other publications, including the Chicago Tribune; in addition, Murphy was interviewed on CNN (January 26, 1995). “The Undereducated American,” Wall Street Journal, August 19, 1996, pp. A12. Changes in the rate of returns to education. “In Honor of Kevin M. Murphy: Winner of the John Bates Clark Medal,” by Finis Welch, 14 Journal of Economic Perspectives 193 (2000). Testimony, Reports, and Depositions (Last 4 Years) Final Submission of Kevin M. Murphy, January 16, 2009, in the 2006 MSA Adjustment Proceeding. Expert Report of Kevin M. Murphy, January 23, 2009, in the Matter of City of New York v. Amerada Hess Corp., et al., The United States District Court for the Southern District of New York. Report submitted on behalf of Citgo Petroleum Corporation. Declaration of Kevin M. Murphy, January 29, 2009, in the Matter of Insignia Systems, Inc. v. News America Marketing In-Store, Inc., The United States District Court for the District of Minnesota. Deposition of Kevin M. Murphy, February 10, 2009, in the Matter of Valassis Communications, Inc. v. News America Incorporated, a/k/a News America Marketing Group, News America FSI, Inc. a/k/a News America Marketing FSI, LLC and News America Marketing In-Store Services, Inc. a/a/a News American Marketing In-Store Services, LLC., The United States Third Circuit Court of Michigan Detroit Division. Case No. 07-706645. - 10 - Expert Report of Kevin M. Murphy, February 13, 2009, in the Matter of City of New York v. Amerada Hess Corp., et al., The United States District Court for the Southern District of New York. Report submitted on behalf of Citgo Petroleum Corporation regarding Citgo’s share of total RFG supply at the New York Harbor. Expert Report of Kevin M. Murphy, March 3, 2009, in the Matter of St. Francis Medical Center, on behalf of itself and all others similarly situated vs. C.R. Bard, Inc., The United States District Court for the Eastern District of Missouri Southeastern Division. Deposition of Kevin M. Murphy, March 6, 2009, in the Matter of St. Francis Medical Center, on behalf of itself and all others similarly situated vs. C.R. Bard, Inc., The United States District Court for the Eastern District of Missouri Southeastern Division. Expert Report of Kevin M. Murphy, March 17, 2009, in the Matter of ZF Meritor LLC and Meritor Transmission Corporation v. Eaton Corporation., The United States District Court of Delaware. Case No. 06-CV-623. Deposition of Kevin M. Murphy, April 6, 2009, in the Matter of ZF Meritor LLC and Meritor Transmission Corporation v. Eaton Corporation., The United States District Court of Delaware. Case No. 06-CV-623. Declaration of Kevin M. Murphy, April 16, 2009, in the Matter of Sun Microsystems, Inc., a California corporation v. Hynix Semiconductor Inc., et al., The United States District Court Northern District of California San Francisco Division. Declaration of Kevin M. Murphy, April 23, 2009, in the Matter of Sun Microsystems, Inc., a California corporation v. Hynix Semiconductor Inc., a Korean corporation, Hynix Semiconductor America Inc., a California corporation, et al., The United States District Court Northern District of California San Francisco Division. Expert Report of Kevin M. Murphy, May 11, 2009, in the Matter of Jim Hood, Attorney General ex rel State of Mississippi v. Microsoft Corporation., The Chancery Court of Hinds County First Judicial District. Expert Report of Professor Kevin M. Murphy, June 12, 2009, in the Matter of CITGO Petroleum Corporation v. Ranger Enterprises, Inc., The United States District Court for the Western District of Wisconsin. Expert Report of Kevin M. Murphy, June 24, 2009, in the Matter of Novell, Incorporated v. Microsoft Corporation., The United States District Court Northern District of Maryland. - 11 - Trial Testimony of Kevin M. Murphy, July 16, 2009, in the Matter of Valassis Communications, Inc. v. News America Incorporated, a/k/a News America Marketing Group, News America FSI, Inc. a/k/a News America Marketing FSI, LLC and News America Marketing In-Store Services, Inc. a/a/a News American Marketing In-Store Services, LLC., The United States Third Circuit Court of Michigan Detroit Division. Case No. 07-706645. Declaration of Kevin M. Murphy, August 14, 2009, in the Matter of EBay Seller Antitrust Litigation, The United States District Court for the Northern District of California. Declaration submitted in support of defendant Ebay Inc.’s motion for summary judgment. Expert Report of Kevin M. Murphy, August 21, 2009, in the Matter of Go Computer, Inc., and S. Jerrold Kaplan v. Microsoft Corporation., The Superior Court for the State of California for the City and County of San Francisco. Deposition of Kevin M. Murphy, September 16, 2009, in the Matter of Novell, Incorporated v. Microsoft Corporation., The United States District Court Northern District of Maryland. Deposition of Kevin M. Murphy, September 21, 2009, in the Matter of Ebay Seller Antitrust Litigation, The United States District Court for the Northern District of California. Deposition in support of defendant Ebay Inc.’s motion for summary judgment. Expert Report of Kevin M. Murphy, September 29, 2009, in the Matter of Motor Fuel Temperature Sales Litigation, The United States District Court of Kansas. Trial Testimony of Kevin M. Murphy, October 1, 2009, in the Matter of ZF Meritor LLC and Meritor Transmission Corporation v. Eaton Corporation., The United States District Court of Delaware. Case No. 06-CV-623. Declaration of Kevin M. Murphy, October 16, 2009, in the Matter of Ebay Seller Antitrust Litigation, The United States District Court for the Northern District of California. Declaration in further support of defendant Ebay Inc.’s motion for summary judgment. Expert Report of Kevin M. Murphy, October 20, 2009, in the Matter of Advanced Micro Devices, Inc., and AMD International Sales & Service, LTD v. Intel Corporation and Intel Kabushiki Kaisha., The United States District Court for the District of Delaware. Deposition of Kevin M. Murphy, October 24, 2009, in the Matter of Go Computer, Inc., and S. Jerrold Kaplan v. Microsoft Corporation., The Superior Court for the State of California for the City and County of San Francisco. Deposition of Kevin M. Murphy, October 26, 2009, in the Matter of Motor Fuel Temperature Sales Litigation, The United States District Court of Kansas. - 12 - Expert Report of Kevin M. Murphy, December 14, 2009, in the Matter of Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, The United States District Court for the Eastern District of New York. Supplemental Expert Report of Kevin M. Murphy, December 21, 2009, in the Matter of Valassis Communications, Inc. v. News America Incorporated, a/k/a News America Marketing Group, News America FSI, Inc. a/k/a News America Marketing FSI, LLC and News America Marketing In-Store Services, Inc. a/a/a News American Marketing In-Store Services, LLC., The United States Third Circuit Court of Michigan Detroit Division. Case No. 07-706645. Trial Testimony of Kevin M. Murphy, January 11, 2010, in the Matter of Go Computer, Inc., and S. Jerrold Kaplan v. Microsoft Corporation., The Superior Court for the State of California for the City and County of San Francisco. Supplemental Rebuttal Expert Report of Kevin M. Murphy, January 14, 2010, in the Matter of Valassis Communications, Inc. v. News America Incorporated, a/k/a News America Marketing Group, News America FSI, Inc. a/k/a News America Marketing FSI, LLC and News America Marketing In-Store Services, Inc. a/a/a News American Marketing In-Store Services, LLC., The United States Third Circuit Court of Michigan Detroit Division. Case No. 07-706645. Deposition of Kevin M. Murphy, January 26, 2010, in the Matter of Valassis Communications, Inc. v. News America Incorporated, a/k/a News America Marketing Group, News America FSI, Inc. a/k/a News America Marketing FSI, LLC and News America Marketing In-Store Services, Inc. a/a/a News American Marketing In-Store Services, LLC., The United States Third Circuit Court of Michigan Detroit Division. Case No. 07-706645. Declaration of Kevin M. Murphy, January 28, 2010, in the Matter of Automobile Antitrust Cases I and II., The United States Superior Court of the State of California for the County of San Francisco. Declaration of Kevin M. Murphy, April 2, 2010, in the Matter of the Application for the Determination of Interim License Fees for The Cromwell Group, Inc. and Affiliates, et al., The United States District Court Southern District of New York. Deposition of Kevin M. Murphy, April 13-14, 2010, in the Matter of Payment Card Interchange Fee and Merchant Discount Antitrust Litigation., The United States District Court for the Eastern District of New York. Supplemental Expert Report of Kevin M. Murphy, June 1, 2010, in the Matter of Insignia Systems, Inc. v. News America Marketing In-Store, Inc. (corrected June 8, 2010)., The United States District Court for the District of Minnesota. - 13 - Expert Report of Kevin M. Murphy, June 21, 2010, in the Matter of Applications of Comcast Corporation, General Electric Company and NBC Universal, Inc., for Consent to Assign Licenses or Transfer Control of Licensees., Federal Communications Commission. Supplement to Expert Report of Kevin M. Murphy, June 24, 2010, in the Matter of Payment Card Interchange Fee and Merchant Discount Antitrust Litigation., The United States District Court for the Eastern District of New York. Second Supplemental Expert Report of Kevin M. Murphy, July 6, 2010, in the Matter of Insignia Systems, Inc. v. News America Marketing In-Store, Inc., The United States District Court for the District of Minnesota. Deposition of Kevin M. Murphy, July 8, 2010, in the Matter of Insignia Systems, Inc. v. News America Marketing In-Store, Inc., The United States District Court for the District of Minnesota. Expert Report of Kevin M. Murphy, July 28, 2010, in the Matter of Commonwealth of Pennsylvania by Thomas W. Corbett, Jr., in his capacity as Attorney General of the Commonwealth of Pennsylvania v. TAP Pharmaceutical Products, Inc., et al., in the Commonwealth Court of Pennsylvania, No. 212 MD 2004. Response of Kevin M. Murphy to Reply Report of Mark Israel and Michael Katz, August 19, 2010, in the Matter of Applications of Comcast Corporation, General Electric Company and NBC Universal, Inc., for Consent to Assign Licenses or Transfer Control of Licensees., Federal Communications Commission. Expert Report of Kevin M. Murphy, September 14, 2010, in the Matter of City of St. Louis, et al. v. American Tobacco Co., et al., The Circuit Court of the City of St. Louis State of Missouri. Deposition of Kevin M. Murphy, September 24, 2010, in the Matter of City of St. Louis, et al. v. American Tobacco Co., et al., The Circuit Court of the City of St. Louis State of Missouri. Supplemental Expert Report of Kevin M. Murphy, September 30, 2010, in the Matter of Commonwealth of Pennsylvania by Thomas W. Corbett, Jr., in his capacity as Attorney General of the Commonwealth of Pennsylvania v. TAP Pharmaceutical Products, Inc., et al., in the Commonwealth Court of Pennsylvania, No. 212 MD 2004. Expert Report of Kevin M. Murphy, October 1, 2010, in the Matter of State of New Hampshire v. Hess Corporation, et al., The State of New Hampshire Superior Court. Expert Report of Kevin M. Murphy, October 4, 2010, in the Matter of the Arbitration between Cordis Corporation and Abbott Vascular., CPR International Institute for Conflict Prevention & Resolution. - 14 - Deposition of Kevin M. Murphy, October 7, 2010, in the Matter of the Arbitration between Cordis Corporation and Abbott Vascular., CPR International Institute for Conflict Prevention & Resolution. Trial Testimony of Kevin M. Murphy, November 8, 2010, in the Matter of the Arbitration between Cordis Corporation and Abbott Vascular., CPR International Institute for Conflict Prevention & Resolution. Declaration of Kevin M. Murphy, November 12, 2010, in the Matter of RWJ Management Company, Inc. v. BP Products North America, Inc., The United States District Court for the Northern District of Illinois Eastern Division. Expert Report of Kevin M. Murphy, November 15, 2010, in the Matter of RWJ Management Company, Inc. v. BP Products North America, Inc., The United States District Court for the Northern District of Illinois Eastern Division. Expert Report of Kevin M. Murphy, November 19, 2010, in the Matter of Craft, et al., v. Philip Morris Companies, Inc., a corporation, and Philip Morris Incorporated, a corporation, Missouri Circuit Court, Twenty-Second Judicial District (City of St. Louis), Case No. 002-00406-02. Economic Analysis of Kevin M. Murphy to Guide Interpretation of Provisions of the Dodd-Frank Act Regarding Regulation of Debit Interchange Fees, November 23, 2010, submission on behalf of Bank of America Corporation. Comments of Kevin M. Murphy on the November 10, 2010 Report of Drs. Mark Israel and Michael L. Katz, November 24, 2010, in the Matter of Applications of Comcast Corporation, General Electric Company and NBC Universal, Inc., for Consent to Assign Licenses or Transfer Control of Licensees., Federal Communications Commission. Expert Report of Kevin M. Murphy, November 29, 2010, in the Matter of Reggie White, et al., v. NFL: Lockout Insurance & Lockout Loans., The United States District Court District of Minnesota. Deposition of Kevin M. Murphy, December 3, 2010, in the Matter of Reggie White, et al., v. NFL: Lockout Insurance & Lockout Loans., The United States District Court District of Minnesota. Deposition of Kevin M. Murphy, December 13, 2010, in the Matter of RWJ Management Company, Inc. v. BP Products North America, Inc., The United States District Court for the Northern District of Illinois Eastern Division. Deposition of Kevin M. Murphy, January 17-18, 2011, in the Matter of Craft, et al., v. Philip Morris Companies, Inc., a corporation, and Philip Morris Incorporated, a corporation, Missouri Circuit Court, Twenty-Second Judicial District (City of St. Louis), Case No. 002-00406-02. - 15 - Report of Kevin M. Murphy, February 15, 2011, submitted by TCF Financial Corporation on February 16, 2011 to the Subcommittee on Financial Institutions and Consumer Credit of the Committee on Financial Services of the U.S. House of Representatives. Declaration of Kevin M. Murphy, March 2, 2011, in the Matter of TCF National Bank v. Ben S. Bernanke, Janet L. Yellen, Kevin M. Warsh, Elizabeth A. Duke, Daniel K. Tarullo and Sarah Bloom Raskin, the Board of Governors of the Federal Reserve System, in their official capacities; and John Walsh, Comptroller of the Currency, in his official capacity. Expert Report of Kevin M. Murphy, April 11, 2011, in the Matter of Datel Holdings, LTD., and Datel Design & Development, Inc., v. Microsoft Corporation., The United States District Court Northern District of California. Declaration of Kevin M. Murphy, May 26, 2011, filed with the National Labor Relations Board on behalf of the National Basketball Players Association. Deposition of Kevin M. Murphy, June 14, 2011, in the Matter of Datel Holdings, LTD., and Datel Design & Development, Inc., v. Microsoft Corporation., The United States District Court Northern District of California. Expert Report of Kevin M. Murphy, July 1, 2011, in the Matter of Certain Gaming and Entertainment Consoles, Related Software, and Components Thereof., The United States International Trade Commission. Expert Report of Kevin M. Murphy, August 17, 2011, in the Matter of American Airlines, Inc. v. Sabre Inc., et al., The Judicial District of Tarrant County, Texas 67th Judicial District. Expert Report of Kevin M. Murphy, August 19, 2011, in the Matter of Motor Fuel Temperature Sales Litigation, The United States District Court for the District of Kansas. Deposition of Kevin M. Murphy, September 6, 2011, in the Matter of Certain Gaming and Entertainment Consoles, Related Software, and Components Thereof., The United States International Trade Commission. Expert Report of Kevin M. Murphy, September 9, 2011, in the Matter of State of New York v. Intel Corporation, The United States District Court for the District of Delaware. Deposition of Kevin M. Murphy, September 14, 2011, in the Matter of Motor Fuel Temperature Sales Litigation, The United States District Court for the District of Kansas. Direct Testimony of Kevin M. Murphy, September 27, 2011, in the Matter of Certain Gaming and Entertainment Consoles, Related Software, and Components Thereof., The United States International Trade Commission. - 16 - Deposition of Kevin M. Murphy, October 8-10, 2011, in the Matter of State of New York v. Intel Corporation, The United States District Court for the District of Delaware. Report of Kevin M. Murphy, October 10, 2011, in connection with dispute between NRLC and railroad employees, National Mediation Board Case Nos. A-13569; A-13570; A-13572; A-13573; A-13574; A-13575; A-13592, before Emergency Board No. 243. Hearing Testimony of Kevin M. Murphy, October 13, 2011, in connection with dispute between NRLC and railroad employees, National Mediation Board Case Nos. A-13569; A-13570; A-13572; A-13573; A-13574; A-13575; A-13592, before Emergency Board No. 243. Expert Report of Kevin M. Murphy, October 17, 2011, in the Matter of State of New Hampshire v. Hess Corporation, et al., The State of New Hampshire Superior Court. Declaration of Kevin M. Murphy, December 1, 2011, the Matter of Motor Fuel Temperature Sales Litigation, The United States District Court for the District of Kansas. Expert Report of Kevin M. Murphy, December 5, 2011, in the Matter of Retractable Technologies, Inc. and Thomas Shaw v. Becton, Dickinson and Company, The United States District Court for the Eastern District of Texas Marshall Division. Trial Testimony of Kevin M. Murphy, December 7-8, 2011, in the Matter of Novell, Incorporated v. Microsoft Corporation., The United States District Court Northern District of Maryland. Trial Testimony of Kevin M. Murphy, December 29, 2011, in the Matter of RWJ Management Company, Inc. v. BP Products North America, Inc., The United States District Court for the Northern District of Illinois Eastern Division. Supplemental Expert Report of Kevin M. Murphy, January 15, 2012, in the Matter of Retractable Technologies, Inc. and Thomas Shaw v. Becton, Dickinson and Company, The United States District Court for the Eastern District of Texas Marshall Division. Trial Testimony of Kevin M. Murphy, January 18, 2012, in the Matter of Certain Gaming and Entertainment Consoles, Related Software, and Components Thereof., The United States International Trade Commission. Supplemental Expert Report of Kevin M. Murphy, February 23, 2012, in the Matter of State of New Hampshire v. Hess Corporation, et al., The State of New Hampshire Superior Court. Affidavit of Kevin M. Murphy, March 12, 2012, in the Matter of Sharon Price and Michael Fruth, Individually and on Behalf of Others Similarly Situated vs. Philip Morris Incorporated, The United States Circuit Court, Third Judicial Court, Madison County, Illinois. - 17 - Declaration of Kevin M. Murphy, May 3, 2012, in the Matter of Retractable Technologies, Inc. and Thomas Shaw v. Becton, Dickinson and Company, The United States District Court for the Eastern District of Texas Marshall Division. Comments of Kevin M. Murphy of DirecTV, LLC, June 22, 2012, in the Matter of Revision of the Commission’s Program Access Rules; News Corporation and the DIRECTV Group, Inc., Transferors, and Liberty Media Corporation, Transferee, for Authority to Transfer Control; Applications for Consent to the Assignment and/or Transfer of Control of Licenses, Adelphia Communications Corporation (and Subsidiaries, Debtors-in-Possession), Assignors, to Time Warner Cable, Inc. (Subsidiaries), Assignees, et al., Federal Communications Commission. Expert Report of Kevin M. Murphy, July 20, 2012, in the Matter of American Airlines v. Sabre, Inc., Sabre Holdings Corp., and Sabre Travel International Ltd., The United States Judicial District Tarrant County, Texas 67th Judicial District. Declaration of Kevin M. Murphy, July 21, 2012, in the Matter of Kirk Dahl v. Bain Capital Partners, LLC., The United States District Court District of Massachusetts. Expert Report of Kevin M. Murphy, July 23, 2012, in the Matter of Kirk Dahl v. Bain Capital Partners, LLC., The United States District Court District of Massachusetts. Expert Report of Kevin M. Murphy, July 24, 2012, in the Matter of Microsoft Corporation v. Motorola, Inc., The United States District Court Western District of Washington at Seattle. Deposition of Kevin M. Murphy, August 22, 2012, in the Matter of Microsoft Corporation v. Motorola, Inc., The United States District Court Western District of Washington at Seattle. “Economic Analysis of the Impact on DIRECTV’s Subscribership of Carrying an RSN: Evidence from San Diego,” August 31, 2012, submitted in the Matter of Revision of the Commission’s Program Access Rules; News Corporation and the DIRECTV Group, Inc., Transferors, and Liberty Media Corporation, Transferee, for Authority to Transfer Control; Applications for Consent to the Assignment and/or Transfer of Control of Licenses, Adelphia Communications Corporation (and Subsidiaries, Debtors-inPossession), Assignors, to Time Warner Cable, Inc. (Subsidiaries), Assignees, et al., Federal Communications Commission.) Expert Report of Kevin M. Murphy, September 7, 2102, in the Matter of Willard R. Brown, et al. v. The American Tobacco Co., Inc., et al., Superior Court for the State of California for the County of San Diego. Deposition of Kevin M. Murphy, September 14, 2012, in the Matter of Willard R. Brown, et al. v. The American Tobacco Co., Inc., et al., Superior Court for the State of California for the County of San Diego. - 18 - Deposition of Kevin M. Murphy, September 24, 2012, in the Matter of American Airlines Inc. v Sabre, Inc., Sabre Holdings Corp., and Sabre Travel International Ltd. for the State of Texas for the Judicial District of Tarrant County. Expert Report of Kevin M. Murphy, October 10, 2012, in the Matter of Avery Dennison Corporation v. 3M Innovative Properties and 3M Company, The United States District Court for the District of Minnesota. Expert Report of Kevin M. Murphy, November 12, 2012, in the Matter of Re High-Tech Employee Antitrust Litigation, The United States District Court Northern District of California San Jose Division. Trial Testimony of Kevin M. Murphy, November 13, 2012, in the Matter of Microsoft Corporation v. Motorola Inc, The United States District Court Western District of Washington at Seattle. Expert Report of Kevin M. Murphy, November 15, 2012, in the Matter of New Jersey Dep’t of Envtl. Prot., et al. v. Atlantic Richfield Co., et al., The United States District Court Southern District of New York. Deposition of Kevin M. Murphy, December 3, 2012, in the Matter of Re High-Tech Employee Antitrust Litigation, The United States District Court Northern District of California San Jose Division Expert Report of Kevin M. Murphy, December 21, 2012, in re: Titanium Dioxide Antitrust Litigation, The United States District Court for the District of Maryland. Deposition of Kevin Murphy, January 16, 2013, in the Matter of Avery Dennison Corporation v. 3M Innovative Properties and 3M Company, The United States District Court for the District of Minnesota. Amended Expert Report of Kevin M. Murphy, February 8, 2013, in the Matter of New Jersey Dep’t of Envtl. Prot., et al. v. Atlantic Richfield Co., et al, The United States District Court Southern District of New York. Expert Report of Professor Kevin M. Murphy, February 8, 2013, in United States of America v. Apple Inc., et al., The United States District Court Southern District of New York. Declaration of Kevin M. Murphy, February 22, 2013, in the Matter of Willard R. Brown, et al. v. The American Tobacco Co., Inc., et al., Superior Court for the State of California for the County of San Diego. Rebuttal Expert Report of Kevin M. Murphy, March 1, 2013, in United States of America v. Apple Inc., et al., The United States District Court Southern District of New York. - 19 - Second Supplemental Expert Report of Kevin M. Murphy, March 8, 2013, in the Matter of Retractable Technologies, Inc. and Thomas Shaw v. Becton, Dickinson and Company, The United States District Court for the Eastern District of Texas Marshall Division. Direct Testimony of Kevin M. Murphy, April 26, 2013, in United States of America v. Apple Inc., et al., The United States District Court Southern District of New York (revised and resubmitted on May 29, 2013). Declaration of Kevin M. Murphy, May 13, 2013, in the Matter of Brenda Blakeman v National Milk Producers Federation, et al., The United States District Court for the Southern District of Illinois. Expert Report of Kevin M. Murphy, May 29, 2013, in the Matter of Microsoft Corporation v. Motorola, Inc., et al., The United States District Court Western District of Washington at Seattle. Declaration of Kevin M. Murphy, June 6, 2013, in the Matter of WNET, Thirteen, Fox Television Stations, Inc.; Twentieth Century Fox Film Corporation, WPIX, Inc., Univision Television Group, Inc.; The Univision Network Limited Partnership, and Public Broadcasting Service v. Aereo, Inc. f/k/a Bamboom Labs, Inc., The United States Court for the Southern District of New York. Expert Report of Kevin M. Murphy, June 7, 2013, in the Matter of Patrick Brady, et al., v. Airline Pilots Association, International, The United States District Court District of New Jersey. Rebuttal Expert Report of Kevin M. Murphy, June 10, 2013, in the Matter of Microsoft Corporation v. Motorola, Inc., et al., The United States District Court Western District of Washington at Seattle. Trial Testimony of Kevin M. Murphy, June 19, 2013, in United States of America v. Apple Inc., et al., The United States District Court Southern District of New York. Supplemental Expert Report of Kevin M. Murphy, June 21, 2013, Re High-Tech Employee Antitrust Litigation, The United States District Court Northern District of California San Jose Division. Trial Testimony of Kevin M. Murphy, July 1, 2013 and July 2, 2013, in re: Tobacco Cases II, Willard R. Brown, et al., v. The American Tobacco Company, et al., in The Superior Court of the State of California in and for The County of San Diego Central Division. Expert Report of Kevin M. Murphy, July 3, 2013, in re: Text Messaging Antitrust Litigation, in The United States District Court For the Northern District of Illinois Eastern Division. - 20 - Video Deposition of Kevin M. Murphy, July 5, 2013, in re: High-Tech Employee Antitrust Litigation, in United States District Court Northern District of California San Jose Division. Expert Report of Kevin M. Murphy, July 19, 2013, in The Apple iPod iTunes Antitrust Litigation, in The United States District Court For the Northern District of California Oakland Division. Trial Testimony of Kevin M. Murphy, August 29, 2013 and August 30, 2013, in the Matter of Microsoft Corporation v. Motorola, Inc., et al., The United States District Court Western District of Washington at Seattle. Trial Testimony of Kevin M. Murphy, September 17, 2013, in the Matter of Retractable Technologies, Inc. and Thomas Shaw v. Becton, Dickinson and Company, The United States District Court for the Eastern District of Texas Marshall Division. Deposition of Kevin M. Murphy, September 26, 2013, in re: Text Messaging Antitrust Litigation, in The United States District Court For the Northern District of Illinois Eastern Division Expert Report of Kevin M. Murphy, September 27, 2013, in re: Petition of Pandora Media, Inc., related to United States of America v. American Society of Composers Authors and Publishers, in The United States District Court for the Southern District of New York. Rebuttal Expert Report of Kevin M. Murphy, October 21, 2013, in re: Petition of Pandora Media, Inc., related to United States of America v. American Society of Composers Authors and Publishers, in The United States District Court for the Southern District of New York. Expert Report of Kevin M. Murphy, October 21, 2013, in the Matter of Mary A. Carroll and Betty C. Lynn, et al., v. Philip Morris USA, Inc., et al., Superior Court for the State of Delaware in and for New Castle County. Deposition of Kevin M. Murphy, November 2, 2013, in re: Petition of Pandora Media, Inc., related to United States of America v. American Society of Composers Authors and Publishers, in The United States District Court for the Southern District of New York. Rebuttal Expert Report of Kevin M. Murphy, November 8, 2013, in the Matter of US Airways, Inc. v. Sabre Holdings Corp., Sabre, Inc., and Sabre Travel International Ltd., The United States District Court for the Southern District of New York. - 21 - Appendix B: List of Materials Relied Upon Court Documents 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. DECLARATION OF ROGER G. NOLL ON LIABILITY AND DAMAGES – April 3, 2013 (and sources and documents considered, cited or relied upon therein) CORRECTIONS TO DECLARATION OF ROGER G. NOLL ON LIABILITY AND DAMAGES – May 31, 2013 (and sources and documents considered, cited or relied upon therein) EXPERT REPORT OF DAVID M. MARTIN – April 8, 2013 (and sources and documents considered, cited or relied upon therein) DEPOSITION OF JEFFREY L. ROBBIN – December 3, 2010 (and sources and documents considered, cited or relied upon therein) DEPOSITION OF ROGER G. NOLL – September 19, 2008 (and sources and documents considered, cited or relied upon therein) DEPOSITION OF ROGER G. NOLL - April 7, 2011 (and sources and documents considered, cited or relied upon therein) DEPOSITION OF ROGER G. NOLL - May 16, 2013 (and sources and documents considered, cited or relied upon therein) DECLARATION OF ROGER G. NOLL – January 18, 2011 (and sources and documents considered, cited or relied upon therein) SUPPLEMENTAL DECLARATION OF ROGER G. NOLL - July 18, 2011 (and sources and documents considered, cited or relied upon therein) SECOND SUPPLEMENTAL DECLARATION OF ROGER G. NOLL – September 23, 2011 (and sources and documents considered, cited or relied upon therein) SECOND SUPPLEMENTAL REPORT OF DR. MICHELLE M. BURTIS – November 14, 2011 (and sources and documents considered, cited or relied upon therein) DECLARATION OF DR. JOHN P. J. KELLY - April 18, 2011 (and sources and documents considered, cited or relied upon therein) See Expert Report of Dr. John P. J. Kelly - July 19, 2013 (and sources and documents considered, cited or relied upon therein) DEPOSITION OF AUGUSTIN J. FARRUGIA - December 8, 2010 (and sources and documents considered, cited or relied upon therein) DECLARATION OF AUGUSTIN FARRUGIA – January 18, 2011 (and sources and documents considered, cited or relied upon therein) SUPPLEMENTAL DECLARATION OF AUGUSTIN FARRUGIA - July 2, 2013 (and sources and documents considered, cited or relied upon therein) DEPOSITION OF JOHN P.J. KELLY, Ph.D. - February 22, 2011 (and sources and documents considered, cited or relied upon therein) DECLARATION OF DAVID F. MARTIN – February 28, 2011 (and sources and documents considered, cited or relied upon therein) DEPOSITION OF DAVID M. MARTIN, JR., PH.D. - May 9, 2013 (and sources and documents considered, cited or relied upon therein) 20. DEFENDANT APPLE INC.'S RESPONSES TO PLAINTIFF'S FIRST SET OF INTERROGATORIES August 29, 2008 (and sources and documents considered, cited or relied upon therein) 21. DECLARATION OF BONNY E. SWEENEY – January 18, 2011 (and sources and documents considered, cited or relied upon therein) 22. DECLARATION OF DAVID KIERNAN - January 18, 2011 (and sources and documents considered, cited or relied upon therein) 23. DECLARATION OF BONNY E. SWEENEY – February 28, 2011 (and sources and documents considered, cited or relied upon therein) 24. DECLARATION OF DAVID KIERNAN - February 28, 2011 (and sources and documents considered, cited or relied upon therein) 25. DECLARATION OF MICHAEL SCOTT – June 6, 2006 (and sources and documents considered, cited or relied upon therein) 26. Deposition of Michelle Burtis – September 30, 2009 (and sources and documents considered, cited or relied upon therein) 27. Deposition of David K. Heller – December 15, 2010 (and sources and documents considered, cited or relied upon therein) 28. Deposition of Arthur Rangel – December 17, 2010 (and sources and documents considered, cited or relied upon therein) 29. Deposition of Eddy Cue – December 17, 2010 (and sources and documents considered, cited or relied upon therein) 30. APPLE’S MOTION FOR SUMMARY JUDGMENT - April 18, 2011 (and sources and documents considered, cited or relied upon therein) 31. AMENDED CONSOLIDATED COMPLAINT FOR VIOLATIONS OF SHERMAN ANTITRUST ACT, CLAYTON ACT, CARTWRIGHT ACT, CALIFORNIA UNFAIR COMPETITION LAW, CONSUMERS LEGAL REMEDIES ACT, AND CALIFORNIA COMMON LAW OF MONOPOLIZATION – January 25, 2010 (and sources and documents considered, cited or relied upon therein) 32. ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION FOR SUMMARY JUDGMENT; DENYING AS PREMATURE PLAINTIFFS’ MOTION FOR CLASS CERTIFICATION – May 19, 2011 (and sources and documents considered, cited or relied upon therein) 33. UNREDACTED MEMORANDUM IN OPPOSITION TO MOTION FOR CLASS CERTIFICATION (December 15, 2008) 34. Plaintiffs’ Rule 30(b)(6) Notice of Videotaped Deposition of Corporate Designees (2010-11-17) 35. SFI_658005_1_AIIA_ Responses to Data Questions 12.23.10 36. Plaintiffs’ Notice of Motion and Renewed Motion for Class Certification and Appointment of Lead Class Counsel Under Seal (April 18, 2011) 37. SFI_658005_3_Responses to Data Questions 12.23.10 38. SFI_658269_4_Responses to Reseller Transaction Data Questions 2011-01-28 39. SFI_658573_3_Updated answers to 1.6.11 Follow Up Data Questions 40. SFI_658573_4_Responses to 1.7.2011 Data Questions 41. SVI_88493_7_Responses to iPod BOM and Gross Margin Reports 2011-02-04 42. PLAINTIFFS’ MEMORANDUM IN OPPOSITION TO APPLE’S MOTION FOR SUMMARY JUDGMENT - April 18, 2011 43. DECLARATION OF BONNY E. SWEENEY IN SUPPORT OF PLAINTIFFS' MEMORANDUM IN OPPOSITION TO APPLE'S MOTION FOR SUMMARY JUDGMENT - April 18, 2011 44. EXPERT REPORT OF DR. MICHELLE M. BURTIS - April 18, 2011 (and sources and documents considered, cited or relied upon therein) 45. APPLE’S OPPOSITION TO RENEWED MOTION FOR CLASS CERTIFICATION - April 18, 2011 46. APPLE’S REPLY IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT - April 18, 2011 47. DECLARATION OF MICHAEL T. SCOTT IN SUPPORT OF APPLE'S REPLY IN SUPPORT OF ITS MOTION FOR SUMMARY JUDGMENT - April 18, 2011 48. DECLARATION OF CARMEN A. MEDICI IN SUPPORT OF REPLY MEMORANDUM IN SUPPORT OF PLAINTIFFS’ RENEWED MOTION FOR CLASS CERTIFICATION - April 18, 2011 49. REPLY MEMORANDUM IN SUPPORT OF PLAINTIFFS’ RENEWED MOTION FOR CLASS CERTIFICATION - April 18, 2011 50. Reply Declaration of Roger G. Noll 2011-03-28 51. SFI_662507_4_AIIA_ APPLE’S OPPOSITION TO RENEWED MOTION FOR CLASS CERTIFICATION 2011-04-11 52. ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION FOR SUMMARY JUDGMENT; DENYING AS PREMATURE PLAINTIFFS’ MOTION FOR CLASS CERTIFICATION 2011-05-19 53. SUPPLEMENTAL REPORT OF DR. MICHELLE M. BURTIS 2011-07-26 54. Exhibit 1 to DECLARATION OF DAVID C. KIERNAN IN SUPPORT OF APPLE’S RESPONSE TO PROFESSOR NOLL’S JULY 18 DECLARATION 2011-01-26 55. Exhibit 2 to DECLARATION OF DAVID C. KIERNAN IN SUPPORT OF APPLE’S RESPONSE TO PROFESSOR NOLL’S JULY 18 DECLARATION 2011-01-26 56. DECLARATION OF DAVID C. KIERNAN IN SUPPORT OF APPLE’S RESPONSE TO PROFESSOR NOLL’S JULY 18 DECLARATION 57. APPLE’S RESPONSE TO PROFESSOR NOLL’S JULY 18 DECLARATION 58. ORDER GRANTING PLAINTIFFS’ MOTION FOR CLASS CERTIFICATION 2011-11-22 59. ORDER REGARDING SCHEDULE 2013-01-28 60. Class Certification Report Backups for Michelle Burtis 61. DECLARATION OF JEFFREY ROBBIN IN SUPPORT OF DEFENDANT’S RENEWED MOTION FOR SUMMARY JUDGEMENT - January 18, 2011 Bates Numbered Documents 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. Internal Apple iTMS Surveys Internal Apple iPod Surveys Apple_AIIA00178491 Apple_AIIA00178737 iTunes Surveys Mac customers (Aug ‘03) Windows customers (Dec ‘03) Windows Prospects (Dec ‘03) December 2003 Apple_AIIA00323221 Apple_AIIA00477469 Final Report 2005 CYQ3 iTMS Tracker Program October 2005 Apple_AIIA00355775 Apple_AIIA00526882 Apple_AIIA00178867 73. iTunes Store Tracker Program Final Report—2006 CYQ4 January 2007 74. Apple_AIIA00193099 75. iTunes Store Tracker Survey CYQ4 2008 – Apple Market Research & Analysis March 2009 76. iTunes Store Tracker Survey CYQ1 2010 – June 2010 77. Apple_AIIA00331445 78. Apple_AIIA00389307 - Wave 4 79. Apple_AIIA00331431 - Forrester – Apple iTunes Jump-Starts Windows Digital Music 80. Apple_AIIA00455825 - iPod and iPod mini Buyer Survey January 2005 81. Apple_AIIA00493743 - iPod Buyer Survey — Wave 1 July 2005 82. iPod Owner Survey - Wave 2 January 2006 83. iPod Buyer Survey FY09 – Q2 84. iPod Owner Survey - Wave 3 June 2006 85. W5 iPod/iPhone Buyer Survey - Nov 2007 Apple Confidential Internal Use Only 86. Apple_AIIA00002914 87. Apple_AIIA00115845 88. Apple_AIIA00135089 89. Apple_AIIA00178888 90. Apple_AIIA00180903 91. Apple_AIIA00195126 92. Apple_AIIA00199264 93. Apple_AIIA00199280 94. Apple_AIIA00319774 95. Apple_AIIA00320223 96. Apple_AIIA00331431 97. Apple_AIIA00331434 98. Apple_AIIA00333439 99. Apple_AIIA03335100 100. Apple_AIIA00336153 101. Apple_AIIA00351078 102. Apple_AIIA00446624 103. Apple_AIIA00445669 104. Apple_AIIA004489705 105. Apple_AIIA00458544 106. Apple_AIIA00481550 107. Apple_AIIA00481589 108. Apple_AIIA00511000 109. Apple_AIIA00549197 110. Apple_AIIA00572228 111. Apple_AIIA00572232 112. Apple_AIIA00572600 113. Apple_AIIA00572676 114. Apple_AIIA00572699 115. Apple_AIIA00573587 116. Apple_AIIA00575626 117. Apple_AIIA00576776 118. Apple_AIIA00577214 119. Apple_AIIA00093860 120. Apple_AIIA00945275 121. Apple_AIIA00945600 122. Apple_AIIA00959717 123. Apple_AIIA00959724 124. Apple_AIIA00948352 125. Apple_AIIA00948381 126. Apple_AIIA00948413 127. Apple_AIIA00948739 128. Apple_AIIA00948960 129. Apple_AIIA00948962 130. Apple_AIIA00950304 131. Apple_AIIA00951449 132. Apple_AIIA00953603 133. Apple_AIIA00954126 134. Apple_AIIA00954141 135. Apple_AIIA00954156 136. Apple_AIIA00956496 137. Apple_AIIA00956962 138. Apple_AIIA00959170 139. Apple_AIIA00959446 140. Apple_AIIA00959620 141. Apple_AIIA00959724 142. Apple_AIIA00959757 143. Apple_AIIA00959872 144. Apple_AIIA00959648 145. Apple_AIIA00959694 146. Apple_AIIA00959713 147. Apple_AIIA00959717 148. Apple_AIIA00959740 149. Apple_AIIA00959787 150. Apple_AIIA00959792 151. Apple_AIIA00959851 152. Apple_AIIA00962282 153. Apple_AIIA00964813 154. Apple_AIIA00964990 155. Apple_AIIA00969312 156. Apple_AIIA00970146 157. Apple_AIIA00970153 158. Apple_AIIA00970162 159. Apple_AIIA00970250 160. Apple_AIIA00971555 161. Apple_AIIA00974904 162. Apple_AIIA00974636 163. Apple_AIIA00974470 164. Apple_AIIA00974713 165. Apple_AIIA00974667 166. Apple_AIIA00974749 167. Apple_AIIA00974463 168. Apple_AIIA00974546 169. Apple_AIIA00974840 170. Apple_AIIA00974588 171. Apple_AIIA00974603 172. Apple_AIIA00974838 173. Apple_AIIA00974708 174. Apple_AIIA00974519 175. Apple_AIIA00974641 176. Apple_AIIA00974932 177. Apple_AIIA00093477 178. Apple_AIIA00974824 179. Apple_AIIA00974776 180. Apple_AIIA00974577 181. Apple_AIIA00974782 182. Apple_AIIA00974735 183. Apple_AIIA00974843 184. Apple_AIIA00974620 185. Apple_AIIA00974799 186. Apple_AIIA00974906 187. Apple_AIIA00974894 188. Apple_AIIA00974982 189. Apple_AIIA00974561 190. Apple_AIIA00975107 191. Apple_AIIA00975139 192. Apple_AIIA00975167 193. Apple_AIIA00975191 194. Apple_AIIA00976658 195. Apple_AIIA00291156 196. Apple_AIIA01383364 197. Apple_AIIA01358752 198. Apple_AIIA01358805 199. Apple_AIIA00549184 200. Apple_AIIA00963459 201. Apple_AIIA00355606 202. Apple_AIIA00963492 203. Apple_AIIA00963340 204. Apple_AIIA00963340 205. Apple_AIIA00093499 206. Apple_AIIA00093499 207. Apple_AIIA00966312 208. Apple_AIIA00968156 209. Apple_AIIA00943649 210. Apple_AIIA00969283 211. Apple_AIIA01358744 212. Apple_AIIA00549183 213. Apple_AIIA00549198 214. Apple_AIIA0059199 215. Apple_AIIA00549200 216. Apple_AIIA01062282 217. Apple_AIIA01238828 218. Apple_AIIA01238820 219. Apple_AIIA00957597 220. Apple_AIIA01238839 221. Apple_AIIA00951291 222. Apple_AIIA00995575 223. Apple_AIIA01287859 224. Apple_AIIA00807000 225. Apple_AIIA01121058 226. Apple_AIIA00970285 227. Apple_AIIA00531624 228. Apple_AIIA01058774 229. Apple_AIIA01090043 230. Apple_AIIA01061533 231. Apple_AIIA01122425 232. Apple_AIIA00825977 233. Apple_AIIA00470249 234. Apple_AIIA00350891 235. Apple_AIIA00511587 236. Apple_AIIA00511463 237. Apple_AIIA00511581 238. Apple_AIIA00511483 239. Apple_AIIA00511572 240. Apple_AIIA00511549 241. Apple_AIIA00511499 242. Apple_AIIA00511544 243. Apple_AIIA00511540 244. Apple_AIIA00362516 245. Apple_AIIA00511501 246. Apple_AIIA00511476 247. Apple_AIIA00511467 248. Apple_AIIA00361301 249. Apple_AIIA00586924 250. Apple_AIIA00586940 251. Apple_AIIA00589630 252. Apple_AIIA00586761 253. Apple_AIIA00568674 254. Apple_AIIA00586947 255. Apple_AIIA005587043 256. Apple_AIIA00587053 257. Apple_AIIA00586847 258. Apple_AIIA00586841 259. Apple_AIIA00586961 260. Apple_AIIA00587018 261. Apple_AIIA00586956 262. Apple_AIIA00586928 263. Apple_AIIA00826100 264. Apple_AIIA00826134 265. Apple_AIIA00826069 266. Apple_AIIA00826063 267. Apple_AIIA00826053 268. Apple_AIIA00826010 269. Apple_AIIA00708248 270. Apple_AIIA00708205 271. Apple_AIIA00708163 272. Apple_AIIA00724232 273. Apple_AIIA00193955 274. Apple_AIIA00947706 275. Apple_AIIA00947643 276. Apple_AIIA01383219 277. Apple_AIIA01364726 278. Apple_AIIA01218566 279. Apple_AIIA01218377 280. Apple_AIIA01362655 281. Apple_AIIA01362603 282. Apple_AIIA01218253 283. Apple_AIIA00445995 284. Apple_AIIA00448231 285. Apple_AIIA00448356 286. Apple_AIIA00583911 287. Apple_AIIA00319724 288. Apple_AIIA00350916 289. Apple_AIIA00953526 290. Apple_AIIA00361480 291. Apple_AIIA00511322 292. Apple_AIIA00531724 293. Apple_AIIA00544957 294. Apple_AIIA00554643 295. Apple_AIIA00961911 296. Apple_AIIA01038556 297. Apple_AIIA01239186 298. Apple_AIIA00318980 299. Apple_AIIA00463988 300. Apple_AIIA00811549 301. Apple_AIIA01024886 302. Apple_AIIA00355620 303. Apple_AIIA01035239 304. Apple_AIIA00949979 305. Apple_AIIA00795191 306. Apple_AIIA00959232 307. Apple_AIIA00960451 308. Apple_AIIA00127056 309. Apple_AIIA00319983 310. Apple_AIIA00106919 311. Apple_AIIA00337602 312. Apple_AIIA00106989 313. Apple_AIIA00949715 314. Apple_AIIA00949772 315. Apple_AIIA00954873 316. Apple_AIIA00467172 317. Apple_AIIA00180654 318. Apple_AIIA001809902 319. Apple_AIIA00954933 320. Apple_AIIA00954724 321. Apple_AIIA00960055 322. Apple_AIIA01383038 323. Apple_AIIA00960073 324. Apple_AIIA00135124 325. Apple_AIIA00963542 326. Apple_AIIA00963282 327. Apple_AIIA00963298 328. Apple_AIIA00708319 329. Apple_AIIA01383386 330. Apple_AIIA01358855 331. Apple_AIIA00974863 332. Apple_AIIA00090447 333. Apple_AIIA00098417 334. Apple_AIIA00099100 335. Apple_AIIA00974436 336. Apple_AIIA00105851 Price Committee Documents 337. Apple_AIIA01278611 - 2001-03-11 iPod March line-up Decision 338. Apple_AIIA01276219 - 2004-06-30 iPod Decision 339. Apple_AIIA01278395 - 2004-10 iBook, Xserve RAID, iPod Decision 340. Apple_AIIA01278345 - 2005-01 iPod, Xserve, Displays, Keyboard & Mouse, Q97, Q88, PowerBook Decision 341. Apple_AIIA01277415 - 2005-06 iPod Decision 342. Apple_AIIA01277431 - 2005-06-09 iPod Decision 343. Apple_AIIA01384542 - 2005-08-15 PowerBook, iPod, Xserve RAID Decision 344. Apple_AIIA01277614 - 2006-01-18 iPod Decision 345. Apple_AIIA01278341 - 2006-01-18 PCM Back-up iPod Decision 346. Apple_AIIA01277439 - 2006-01-19 iPod Decision 347. Apple_AIIA01277541 - 2006-01-20 iPod Decision 348. Apple_AIIA01277329 - 2006-09 iPod Presentation 349. Apple_AIIA01276233 - 2007-04 iPod Presentation 350. Apple_AIIA01276249 - 2007-08 iPod, iPod nano Decision 351. Apple_AIIA01276307 - 2007-08 iPod, iPod nano, iPod shuffle Decision 352. Apple_AIIA01276342 - 2007-08-16 iPod, iPod nano, iPod shuffle Decision 353. Apple_AIIA01276402 - 2007-09 iPod Presentation 354. Apple_AIIA01276439 - 2007-10 iPod touch, app bundle pricing Decision 355. Apple_AIIA01276447 - 2007-10 iPod touch, software bundle Decision 356. Apple_AIIA01276570 - 2007-10 iPod touch, software bundle, iPhone Decision 357. Apple_AIIA01276584 - 2007-11 iPod touch, software bundle, iPhone Decision 358. Apple_AIIA01276598 - 2007-12-03 iPod touch, iPhone Decision 359. Apple_AIIA01276612 - 2008-01 iPod touch, iPhone Decision 360. Apple_AIIA01278046 - 2008-02-01 iPod shuffle Decision 361. Apple_AIIA01276714 - 2008-03-01 iPod shuffle, iPod touch Decision 362. Apple_AIIA01276791 - 2008-08 iPod touch, iPod classic, iPod nano Decision 363. Apple_AIIA01276935 - 2008-12 iPod shuffle Decision 364. Apple_AIIA01277156 - 2009-02 iPod shuffle Decision Data 365. Upgrades by month (version 1).xlsb - For US Units and Revenue for Upgardes by month Since January,2009 to 17th October,2010 366. AIIA_US iPod Sales_Family Level_Direct-Indirect-OEM.xlsx 367. US Sales_iPods_Direct_Indirect_OEM_FY02-FY10 368. NPD_DigitalOnlyJuly06_Dec11.xlsx 369. NPD_PhysicalandDigital_July06_Dec11.xlsx 370. NPDMP3Aug07Update.xls 371. NPDMP3October2005Update.xls 372. NPDUSMP3April2009.xls 373. NPDUSMP3July2010.xls 374. NPDUSMP3June08Update.xls 375. NPDUSMP3PriceBandJuly2010.xls 376. BDF percentages to apply to reseller data.csv 377. rslr_rc_data.sas7bdat 378. IpodClassic2002Q1v3.txt 379. IpodClassic2002Q2v3.txt 380. IpodClassic2002Q3v3.txt 381. IpodClassic2002Q4v3.txt 382. IpodClassic2003Q1v3.txt 383. IpodClassic2003Q2v3.txt 384. IpodClassic2003Q3v3.txt 385. IpodClassic2003Q4v3.txt 386. IpodClassic2004Q1v3.txt 387. IpodClassic2004Q2v3.txt 388. IpodClassic2004Q3v3.txt 389. IpodClassic2004Q4v3.txt 390. IpodMINI2004Q2v3.txt 391. IpodMINI2004Q3v3.txt 392. IpodMINI2004Q4v3.txt 393. RecordCheck_Ipod Sales.xlsx 394. IpodMini2005Q1.txt 395. IpodMini2005Q2.txt 396. IpodMini2005Q3.txt 397. IpodMini2005Q4.txt 398. IpodMini2006to2011Q1.txt 399. IpodShuffle2005.txt 400. IpodShuffle2006.txt 401. IpodShuffle2007Q1.txt 402. IpodShuffle2007Q2.txt 403. IpodShuffle2007Q3.txt 404. IpodShuffle2007Q4.txt 405. IpodShuffle2008Q1.txt 406. IpodShuffle2008Q2.txt 407. IpodShuffle2008Q3.txt 408. IpodShuffle2008Q4.txt 409. IpodNano2005.txt 410. IpodNano2006Q1SC2.txt 411. IpodNano2006Q1SR3.txt 412. IpodNano2006Q2.txt 413. IpodNano2006Q3.txt 414. IpodNano2006Q4.txt 415. IpodNano2007Q1SC2.txt 416. IpodNano2007Q1SR3.txt 417. IpodNano2007Q2.txt 418. IpodNano2007Q3.txt 419. IpodNano2007Q4.txt 420. IpodNano2008Q1SC2.txt 421. IpodNano2008Q1SR3.txt 422. IpodNano2008Q2.txt 423. IpodNano2008Q3.txt 424. IpodNano2008Q4.txt 425. RecordCheck2 - Copy.xls 426. RecordCheck2.xlsx 427. IpodShuffle2009.txt 428. IpodShuffle2010.txt 429. IpodShuffle2011.txt 430. IpodTouch2008Q1.txt 431. IpodTouch2008Q2.txt 432. IpodTouch2008Q3.txt 433. IpodTouch2008Q4.txt 434. IpodTouch2009Q1.txt 435. IpodTouch2009Q2.txt 436. IpodTouch2009Q3.txt 437. IpodTouch2009Q4.txt 438. IpodTouch2010Q1.txt 439. IpodTouch2010Q2.txt 440. IpodTouch2010Q3.txt 441. IpodTouch2010Q4.txt 442. IpodTouch2011Q1.txt 443. IpodTouch2011Q2.txt 444. IpodTouch2011Q3.txt 445. IpodTouch2011Q4.txt 446. IpodClassic2011Q3V2.txt 447. IpodNano2011Q3V2.txt 448. IpodShuffle2011Q3V2.txt 449. IpodTouch2011Q3V2.txt 450. price_group_MISC.csv 451. price_group_1.csv 452. price_group_7.csv 453. price_overirde_12.csv 454. price_overirde_code14.csv 455. SFI_791971_1_PriceOverrideReasonDesc.xls 456. AppleDataExtract_iPod BDF Accruals from 2001 to 2011.csv 457. RetailerCodeNames.csv 458. RetailerCodeNames_2.csv 459. 2002_Ipod_Sales 460. 2003_Ipod_Sales 461. 2004_Ipod_Sales 462. 2005_Ipod_Sales 463. 2006_Ipod_Sales 464. 2007_Ipod_Sales 465. 2008_Ipod_Sales 466. 2009_Ipod_Sales 467. 2010_Ipod_Sales 468. 2011_Ipod_Sales 469. 2002-2004_Ipod_Sales 470. 2005_Ipod_Sales 471. 2006_Ipod_Sales 472. 2007_Ipod_Sales 473. 2008_Ipod_Sales 474. 2009_Ipod_Sales 475. 2010_Ipod_Sales 476. 2011_Ipod_Sales 477. AppleDataExtract_iPod BDF Accruals from 2001 to 2011.xls 478. AIIA_iPod-OEM_HP.xls 479. RetailerCodeNames.xls 480. NPDUSMP3May2009.xls 481. NPDUSMP3July2010.xls 482. 2000-2007 (NPD data).xls 483. ~5844701.xls 484. BDF percentages to apply to reseller data.csv 485. Merged iPod features and costs_direct sales.csv 486. Merged iPod features and costs_direct sales_CKD.csv 487. 2002_Ipod_Sales to 20011_Ipod_Sales 488. Merged iPod features and costs_CKD.csv 489. AIIA - US iTS P&Ls_Q3FY03-Q4FY10 490. iTunes Music Store P&L Data NPD Monthly Trend Reports 491. Apple_AIIA00109997 492. Apple_AIIA00485090 493. Apple_AIIA00489689 494. Apple_AIIA 00127123 495. Apple_AIIA00129531 496. Apple_AIIA00135174 497. Apple_AIIA00358751 498. Apple_AIIA00358724 499. Apple_AIIA00358776 500. Apple_AIIA00358791 501. Apple_AIIA00358816 502. Apple_AIIA00358856 503. Apple_AIIA00358883 504. Apple_AIIA00431268 505. Apple_AIIA00485090 506. Apple_AIIA00489689 507. Apple_AIIA00505446 508. Apple_AIIA00511004 509. Apple_AIIA00536766 510. Apple_AIIA00555045 511. Apple_AIIA00559475 512. Apple_AIIA00621881 513. Apple_AIIA00625999 514. Apple_AIIA00630064 515. Apple_AIIA01085453 516. Apple_AIIA 00649138 517. Apple_AIIA00733250 518. Apple_AIIA00743040 519. Apple_AIIA00972703 520. Apple_AIIA01061216 521. Apple_AIIA01083128 522. Apple_AIIA01083366 523. Apple_AIIA01110277 524. Apple_AIIA 01121207 525. Apple_AIIA01121373 526. Apple_AIIA01279027 527. Apple_AIIA01326081 528. Apple_AIIA01326098 529. Apple_AIIA01326113 530. Apple_AIIA01326130 531. Apple_AIIA01326147 532. Apple_AIIA01326164 533. Apple_AIIA01326181 534. Apple_AIIA01326198 535. Apple_AIIA01326300 536. Apple_AIIA01326266 537. Apple_AIIA01358885 538. Apple_AIIA01358902 539. Apple_AIIA01358919 540. Apple_AIIA01358970 541. Apple_AIIA01358987 542. Apple_AIIA01358953 543. Apple_AIIA01358963 544. Apple_AIIA01359004 NPD Music Retail Shares 545. Apple_AIIA00167793 546. Apple_AIIA00187687 547. Apple_AIIA00188105 548. Apple_AIIA00189930 549. Apple_AIIA00327772 550. Apple_AIIA00429468 551. Apple_AIIA00662062 552. Apple_AIIA00678009 553. Apple_AIIA00725368 554. Apple_AIIA00946216 555. Apple_AIIA00946224 556. Apple_AIIA00946391 557. Apple_AIIA00946640 558. Apple_AIIA00946649 559. Apple_AIIA00946675 560. Apple_AIIA00960247 561. Apple_AIIA00960296 562. Apple_AIIA00960300 563. Apple_AIIA00960340 564. Apple_AIIA00962442 565. Apple_AIIA00965666 566. Apple_AIIA00965893 567. Apple_AIIA00966687 568. Apple_AIIA00967103 569. Apple_AIIA00968523 570. Apple_AIIA00968532 571. Apple_AIIA00968691 572. Apple_AIIA00968757 573. Apple_AIIA01205535 574. Apple_AIIA01205543 575. Apple_AIIA01205576 576. Apple_AIIA01205585 577. Apple_AIIA01205587 578. Apple_AIIA01205590 579. Apple_AIIA01205610 580. Apple_AIIA01205623 581. Apple_AIIA01206292 582. Apple_AIIA01206330 583. Apple_AIIA01208708 584. Apple_AIIA01208710 585. Apple_AIIA01208997 586. Apple_AIIA01233725 NPD Surveys 587. Apple_AIIA01309399 588. Apple_AIIA00178974 589. Apple_AIIA01309615 590. Apple_AIIA00945746 591. Apple_AIIA00964631 592. Apple_AIIA00178967 593. Apple_AIIA01217873 594. Apple_AIIA00968565 595. Apple_AIIA01309456 596. Apple_AIIA00952642 597. Apple_AIIA00481774 598. Apple_AIIA00945746 599. Apple_AIIA00948134 600. Apple_AIIA00952622 601. Apple_AIIA00957936 602. Apple_AIIA01214028 603. Apple_AIIA01215207 604. Apple_AIIA01215317 Apple Marketing Requirements Documents (MRDs) 605. Apple_AIIA01333844 606. Apple_AIIA00989705 607. Apple_AIIA00989713 608. Apple_AIIA01052191 609. Apple_AIIA01054705 610. Apple_AIIA00982117 611. Apple_AIIA00989717 612. Apple_AIIA00114451 613. Apple_AIIA00984872 614. Apple_AIIA01055013 615. Apple_AIIA00115742 616. Apple_AIIA01337461 617. Apple_AIIA_B_001604 618. Apple_AIIA01068163 619. Apple_AIIA01064431 620. Apple_AIIA01067923 621. Apple_AIIA01337470 622. Apple_AIIA01063781 623. Apple_AIIA01068809 624. Apple_AIIA01057554 625. Apple_AIIA01066740 Public Books and Articles 626. Apple Press Releases relating to iPod, iTunes, iTunes Music Store or iTunes Store, iPad, Apple TV, & iPhone 627. Joshua D. Angrist and Jörn-Steffen Pischke, Mostly Harmless Econometrics: An Empiricist’s Companion. March 2008 628. Jobs, Steve, “Thoughts on Music”, February 6, 2007 629. Brad Stone, “Want to Copy iTunes Music? Go Ahead, Apple Says.” New York Times. January 7, 2009 630. Mitchell Hall, “Apple iTunes going DRM-free.” The National Business Review. January 7, 2009 631. Smith, Tony, "Apple plugs PyMusique iTunes 'hole.'" The Register. March 22, 2005, http://www.theregister.co.uk/2005/03/22/apple_blocks_pymusique/ (accessed May 30, 2013) 632. “Apple cuts iTunes pricing, eases copy protection.” NBCNews.com. January 6, 2009 633. Brent Schlender, “How Big Can Apple Get?” Fortune Magazine. February 21, 2005 634. Tony Smith, “Downloading digital music - Majors and minors, players and platforms, lawsuits and licenses.” The Register. December 24, 2004 635. “FairPlay – QTFairUse,”, Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/FairPlay, (accessed May 28, 2013). 636. “FireWire vs. USB 2.0.” Q Imagining Technical Note 637. “Apple iPod shuffle 2nd Gen (Silver) 1 GB Specs.” EveryiPod.com. Accessed: May 28, 2013 638. “iPod: Not Just iCandy.” PCMag.com Accessed: May 28, 2013 http://www.pcmag.com/article2/0,2817,19362,00.asp 639. “iTunes strips songs' copy protection.” Boston.com January 7, 2009 Accessed: May 28, 2013 www.boston.com/business/technology/articles/2009/01/07/itunes strips songs copy protecti on/# 640. Levy, Steven, The Perfect Thing: How the iPod Shuffles Commerce, Culture and Coolness. Simon & Schuster Paperbacks. New York, NY 2006 641. Katie Dean, “Listen Up: Songs Now 79 Cents.” The New Yorker. May 28, 2003 642. Richtel, Matt, “TECHNOLOGY; Apple Introduces What It Calls an Easier to Use Portable Music Player,” NY Times, October 24, 2001, http://www.nytimes.com/2001/10/24/business/technology-apple-introduces-what-it-calls-aneasier-to-use-portable-music-player.html (accessed 9/25/2012) 643. “New & Noteworthy: New Apple retail stores to open; LCD rackmounts; Apple slams Microsoft proposal; more” CNET News November 28, 2001 644. Copeland, Michael V., “Unlocking the iPod: If you want to buy content for Apple's iPod, you have to go through iTunes. Navio Systems is hoping to change that.,” Business 2.0 Magazine (downloaded from CNN Money.com), May 22, 2006. http://money.cnn.com/2006/05/22/technology/business2_launchpad0522/ (accessed May 28, 2013) 645. Bell, Ian , “RealNetworks Snaps Apple’s iPod Exclusivity”, Digital Trends, July 26, 2004, http://www.digitaltrends.com/gadgets/realnetworks-snaps-apples-ipod-exclusivity/ (accessed accessed May 28, 2013). 646. “Publication 946, How to Depreciate Property.” Internal Revenue Service. 2012 647. Tony Smith, “Real '49c a song' promo pushes downloads to 3m.” The Register. September 9, 2004 648. Peter Cohen, “RealNetworks' Harmony promises iPod compatibility.” PCWorld. July 26, 2004 http://www.macworld.com/article/1035237/harmony.html (accessed May 28, 2013) 649. Borland, John, "iTunes hack disabled by Apple." CNET News. March 21, 2005, http://news.cnet.com/Apple-disables-iTunes-hack/2100-1027_3-5628616.html#addcomm (accessed May 30, 2013) 650. “The SURVEYREG Procedure: Syntax.” SAS/STAT(R) 9.22 User's Guide Accessed: June 19, 2013 support.sas.com/documentation/cdl/en/statug/63347/HTML/default/viewer.htm#statug_sur veyreg_sect006.htm 651. SAS/STAT(R) 9.2 User's Guide, Second Edition, “FREQ Statement”., Available at http://support.sas.com/ documentation/cdl/en/statug/63033/HTML/default/viewer.htm#statug_reg_sect011.htm 652. Tim Lambert, “Why You Need to Correct for Clustering - Deltoid.” Science Blogs. September 10, 2003 scienceblogs.com/deltoid/2003/09/10/cluster/ 653. Tony Smith, “Sony opens US music download store.” The Register. May 4, 2004 Accessed: May 29 2013 http://www.theregister.co.uk/2004/05/04/sony_connect_us/ 654. Mariano, Gwendolyn, "Listen.com to tune in new music service," CNET News, December 2, 2001, http://news.cnet.com/Listen.com-to-tune-in-new-music-service/2100-1023_3-276476.html (accessed July 16, 2013) 655. Benny Evangelista, “Music firms open online services, but will fans pay?” San Francisco Chronicle. December 3, 2001 Accessed: May 30, 2013 656. Evangelista, Benny, "Industry starting to endorse Net music / Listen.com to offer songs from all five major labels," Listen.com, July 1, 2002, http://www.sfgate.com/business/article/Industrystarting-to-endorse-Net-music-2801248.php (accessed July 16, 2013). 657. CNET Staff, “New & Noteworthy: CNET Reviews,” November 28, 2001, http://reviews.cnet.com/8301-13727_7-1036303-263.html (accessed 9/25/2102). 658. Kahney, Leander “The Cult of iPod,” San Francisco, CA: No Starch Press, Inc. (2005), p. 3 659. 2006 PC World Innovations Awards,” PR Newswire, January 4, 2006, http://www.prnewswire.com/news-releases/2006-pc-world-innovations-awards-winnersunveiled-53127872.html (accessed July 16, 2013). 660. Bajarin, Ben, “Why Competing with Apple Is So Difficult,”Time Magazine. July 01, 2011Accessed: July 18, 2013 http://techland.time.com/2011/07/01/why-competing-with-apple-is-sodifficult/#ixzz2ZN8itJ6i 661. “iPod Mini,” Wikipedia, The Free Enclyclopedia, https://en.wikipedia.org/wiki/IPod_Mini (accessed July 16, 2013) 662. Drew Turner, Daniel, “Apple hits $1 Billion in Profit for 2005,” eWeek, October 10, 2011, http://www.eweek.com/c/a/Apple/Apple-Hits-1-Billion-in-Profit-for-2005/ (accessed July 16, 2013) 663. “Closed Platform,” Wikipedia, The Free Enclyclopedia, http://en.wikipedia.org/wiki/Closed_platform (accessed July 17, 2013). 664. Bloomberg Businessweek, "RealPlayer: Master Music Manager," May 25, 2005, http://www.businessweek.com/stories/2005-05-25/realplayer-master-music-manager, (accessed May 28, 5/28/2013) 665. )"Managing Music with Windows Media Player," PCUG, http://www.pcug.org.au/pcug/training/upcd02dm01/dmLesson01Media%20Player.pdf, January 17, 2004 (accessed May 28, 2013) 666. Ku, Andrew, "Dell's Digital Jukebox 20 - Music, the Dell Way," AnandTech, June 20, 2004, http://www.anandtech.com/show/1354/9 (accessed June 4, 2013) 667. Boswell, Wendy, "Manage your music with Winamp," Lifehacker, July 8, 2007, http://lifehacker.com/276000/manage-your-music-with-winamp (accessed May 28, 2013) 668. Sauners, Gareth J M, "Anapod - transfer files to your iPod via Explorer," November 19, 2007, http://blog.garethjmsaunders.co.uk/archives/2007/11/19/anapod-transfer-files-to-your-ipodvia-explorer/ (accessed May 28, 2013) 669. Ulrich, Adrian, "Gnupod; Manage your iPod," GNU, last updated September 20, 2007, http://www.gnu.org/software/gnupod/gnupod.html (accessed May 28, 2013) 670. "How to Use the EphPod IPod Manager," eHow, http://www.ehow.com/how_2145859_useephpod-ipod-manager.html (accessed May 28, 2013) 671. “Napster,” Wikipedia, The Free Enclyclopedia, http://en.wikipedia.org/wiki/Napster (accessed July 16, 2013) 672. Kravitz, David, “Dec. 7, 1999: RIAA Sues Napster,” Wired, December 7, 2009, http://www.wired.com/thisdayintech/2009/12/1207riaa-sues-napster/ (accessed July 16, 2013) 673. Tyson, Dan, “The 25 Worst Tech Products of all Time,” PCWorld, May 26, 2006, http://www.pcworld.com/article/125772/worst_products_ever.html (accessed July 16, 2013) 674. “iTunes Store,” Wikipedia, The Free Enclyclopedia, http://en.wikipedia.org/wiki/ITunes_Store (accessed July 16, 2013) 675. Lewis, Peter, “Product of The Year Apple iTunes Music Store,” Fortune Magazine (downloaded from CNN Money), December 22, 2003, http://money.cnn.com/magazines/fortune/fortune_archive/2003/12/22/356108/ (accessed July 16, 2013) 676. U.S. Department of Justice, Interoperability Between Antitrust and Intellectual Property, Thomas O. Barnett Presentation to the George Mason School of Law Symposium Managing Antitrust Issues In a Global Marketplace, Washington, D.C., September 13, 2006, http://www.usdoj.gov/atr/public/speeches/218316.htm (accessed July 16, 2013) 677. CNET News, “Real offers new tech, song store,.” January 7, 2004, http://news.cnet.com/21001027-5136275.html (accessed July 16, 2013) 678. ArsTechnica, “Amazon’s MP3 store brings more DRM-free music at lower prices than iTunes Store.” September 25, 2007 679. “Amazon to Sell Warner Music Minus Copy Protection.” NY Times. December 28, 2007 680. “Sony Joins Other Labels on Amazon MP3 Store.” NY Times. January 11, 2008 681. Antone Gonsalves, “Amazon Adds Fourth Major Record Label To DRM-Free Music Store,” Information Week, January 10, 2008 682. “Application Store,” The Free Encyclopedia, http://en.wikipedia.org/wiki/Application_store (accessed July 16, 2013) 683. Dalrymple, Jim, “iPod DRM faces another reverse-engineering challenge,” PCWorld, November 22, 2005, http://www.macworld.com/article/1048070/ipoddrm.html (accessed June 17, 2013) 684. Healey, Jon. “Napster and Rhapsody compete for headlines,” Los Angeles Times. September 20, 2006 http://opinion.latimes.com/bitplayer/2006/09/ (accessed June 17, 2013) 685. Bernoff, Josh, “Apple iTunes Jump-Starts Windows Digital Music,” Forrester Research, Inc., October 17, 2003 686. Leonard, Devin, "Songs In The Key Of Steve Steve Jobs may have just created the first great legal online music service. That's got the record biz singing his praises." Fortune Magazine, downloaded from CNNMoney.com, May 12, 2003 http://money.cnn.com/magazines/fortune/fortune_archive/2003/05/12/342289/ (accessed May 28, 2013). 687. John Berra, Walled Garden or Open Field?, Automation World, Feb. 2, 2012 688. Hee-Yeon Cho, Choon-Sung Nam, Dong-Ryeol Shin, 2010 International Conference on Electronics and Information Engineering (ICEIE 2010), pg. V2-141 689. Roland M. Müller, A Comparison of Inter-Organizational Business Models of Mobile App Stores: There is More than Open vs. Closed, Journal of Theoretical and Applied Electronic Commerce Research, Vol. 6, Issue 2 (Aug. 2011), pg. 72-73 690. Gobry, Pascal-Emmanuel, “How Amazon Makes Money From The Kindle,” Business Insider, October 18, 2011, http://www.businessinsider.com/kindle-economics-2011-10 (accessed July 16, 2013) 691. Akasie, Jay, “With New Kindle, Bezos Proves Ecosystems Matter More Than Hardware,” September 7, 2012 http://www.minyanville.com/sectors/technology/articles/amazon-newkindle-amazon-kindle-family/9/7/2012/id/43794 (accessed July 16, 2013) 692. “Closed Platform,” Wikipedia, The Free Enclyclopedia, http://en.wikipedia.org/wiki/Closed_platform (accessed July 17, 2013) 693. “MP3 Software Review”, 10TopTenReviews, http://mp3-software-review.toptenreviews.com/ (accessed June 10, 2013) 694. “Music Management software,” CNET, http://download.cnet.com/windows/musicmanagement-software/ (accessed June 10, 2013) 695. Levine, Robert, "Unlocking the iPod; Jon Johansen became a geek hero by breaking the DVD code. Now he's liberating iTunes - whether Apple likes it or not." Fortune Magazine, downloaded from CNNMoney.com, October 23, 2006, http://money.cnn.com/magazines/fortune/fortune_archive/2006/10/30/8391726/ (accessed May 28, 2013) 696. Gannes, Liz, “DVD Jon Fairplays Apple,” Gigaom.com, October 2, 2006, http://gigaom.com/2006/10/02/dvd-jon-fairplays-apple/ (accessed May 28, 2013). 697. “PyMusique,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/PyMusique (accessed May 28, 2013) 698. Borland, John, “RealNetworks rekindles iPod Tech Tussle,” CNETNews, April 26, 2005, http://news.cnet.com/2100-1027_3-5685286.html (accessed May 28, 2013) 699. Brian S. Hall, “The Apple Walled Garden is Grounded in Old Fashioned Product Superiority,” Techpinions.com. March 4th, 2013 http://techpinions.com/the-apple-walled-garden-isgrounded-in-old-fashioned-product-superiority/14796 (accessed July 18, 2013) 700. Graham, Jefferson, “Real says digital song sale doubled market share,” USA Today, September 09, 2004, http://usatoday30.usatoday.com/tech/techinvestor/corporatenews/2004-09-08real_x.htm (accessed July 2, 2013) 701. Jemima Kiss, “How Big Is the iPod Installed Base?” Guardian, September 9, 2009 (reporting discussion with executive at Forrester Research) 702. Larry Dignan, “Tablet Replacement Rates: More Like an MP3 Player than PC,” ZDNet January 4, 2011 (reporting a Forrester Research study) 703. “Mobile Phone Lifecycles,” GSM Association, 2006 (reporting that about half of phone sales are replacements and that the replacement rate is about 18 months) 704. “The Life Cycle of a Cell Phone,” U.S. Environmental Protection Agency, 2005 (reporting cell phone replacement rate of 18 months) 705. John Paczkowski, “I Got a Fever, and the Only Prescription is… More iPhone!” All Things Digital, June 25, 1010 (reporting that the replacement cycle for iPhones is 14.7 months) 706. Victor H., “Americans Replace Their Cell Phones Every 2 Years, Finns – Every Six, a Study Claims,” Phonearena.com, July 11, 2011 707. Griliches, Zvi, “Hedonic Price Indexes and the Measurement of Capital and Productivity: Some Historical Perspectives,.” NBER Working Paper 2634 (June 1988) 708. “Choosing the Correct Weight Syntaxis,” Carolina Population Center at the University of North Carolina at Chapel Hill, http://www.cpc.unc.edu/research/tools/data_analysis/statatutorial/sample_surveys/weight_ syntax (accessed June 20, 2013) 709. William H. Greene, Econometric Analysis, 7th Edition, Prentice Hall, 2012, Chapter 11. See also Joshua Angrist and Jorn-Steffan Pischke, Mostly Harmless Econometrics, Princeton University Press, 2009, Chapter 8, “Clustering and Serial Correlation in Panels 710. “Proving Antitrust Damages: Legal and Economic Issues”, ABA Publishing, Second Edition, 2010 711. "Apple offers variable pricing, more DRM-free music on iTunes," Los Angeles Times, Janaury 6, 2009, http://latimesblogs.latimes.com/technology/2009/01/apple-blinks-st.html (accessed June 28, 2013) 712. Burnette, Ed, "Apple iTunes goes all DRM free, with three price tiers," ZDNet.com, http://www.zdnet.com/blog/burnette/apple-itunes-goes-all-drm-free-with-three-pricetiers/702 (accessed June 28, 2013) 713. McLean, Prince, "iTunes Store goes DRM Free, offers over-the-air downloads," Apple Insider, January 6, 2009, http://appleinsider.com/articles/09/01/06/itunes_store_goes_drm_free (accessed June 28, 2013) 714. "iTunes Store and DRM-free music: What you need to know," MacWorld, http://www.macworld.com/article/1138000/drm_faq.html (accessed January 7, 2009) 715. Kennedy, Peter E., “Estimation with Correctly Interpreted Dummy Variables in Semilogarithmic Equations,” The American Economic Review, Vol. 71, No.4 (Sep., 1981), 801. 716. “iTunes version history,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/ITunes_version_history (accessed June 25th, 2013) 717. Mook, Nate, “Apple Blocks iTunes DRM Hack.” BetaNews. March 21, 2005 http://betanews.com/2005/03/21/apple-blocks-itunes-drm-hack/ (accessed July 18th, 2013) 718. “emusic,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/Emusic (accessed May 28, 2013) 719. “Kazaa site becomes legal service,” BBC News, http://newsvote.bbc.co.uk/mpapps/pagetools/print/news.bbc.co.uk/2/hi/technology/522040 6.stm (accessed 5/28/2013) 720. “Encyclopedia: Kazaa,” PCMag.com, http://www.pcmag.com/encyclopedia/term/45734/kazaa (accessed 5/28/2013) 721. “LimeWire,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/Limewire (accessed 5/28/2013) 722. “Morpheus (software),” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/Morpheus_(software) (accessed 5/28/2013) 723. “National Geographic unveils World Music downloads service,” PC Pro.co.uk, http://www.pcpro.co.uk/news/90308/national-geographic-unveils-world-music-downloadsservice (accessed 5/28/2013) 724. “iPod,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/Ipod (accessed 5/28/2013) 725. “iTunes,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/Itunes (accessed 5/28/2013) 726. “iTunes Store,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/Itunes_Store (accessed 5/28/2013) 727. “Apple TV,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/Apple_TV (accessed 5/28/2013) 728. Associated Press, “RealNetworks: Files Play on IPod,” Wired Magazine. July 25, 2004 http://www.wired.com/science/discoveries/news/2004/07/64341 (accessed 7/17/2013) 729. Eric Dahl, “The Playlist: Legal Digital Tunes Go P2P,” PCWorld, April 9, 2004 http://www.pcworld.com/article/115553/article.html (accessed 7/17/2013) 730. “iPad,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/iPad (accessed 5/28/2013) 731. “iCloud,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/iCloud (accessed 5/28/2013) 732. Haire, Meaghan, “A Brief History of the Walkman,” Time Magazine. July 01, 2009 http://www.time.com/time/nation/article/0,8599,1907884,00.html (accessed 5/28/2013) 733. Simcoe, Robert J., “The Revolution in Your Pocket: FIFTY YEARS AGO A TRANSISTOR RADIO CALLED THE TR1 STARTED THE REMAKING OF THE WORLD BY SEMICONDUCTORS,” Invention & Technology Magazine Fall 2004 Volume 20, Issue 2. http://web.archive.org/web/20081203130622/http://www.americanheritage.com/articles/ma gazine/it/2004/2/2004_2_12_print.shtml 734. Smith, Tony, “Ten years old: the world's first MP3 player. Who remembers the MPMan F10 now?” The Register. March 10, 2008 http://www.theregister.co.uk/2008/03/10/ft_first_mp3_player/ (accessed 7/17/2013) 735. Cohen, Peter, “PyMusique Author Hacks Apple's ITunes Fix,” PCWorld. March 23, 2005 http://www.pcworld.com/article/120146/article.html (accessed 7/17/2013) 736. “Pandora Radio,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/Pandora_Radio (accessed 5/28/2013) 737. Perez, Juan Carlos, “Sony Spins New Online Music Store,” PCWorld. May 5, 2004 http://www.pcworld.com/article/115995/article.html (accessed 5/28/2013) 738. “Amazon.com Launches Public Beta of Amazon MP3, a Digital Music Store Offering Customers Earth’s Biggest Selection of a la Carte DRM-Free MP3 Music Downloads,” Business Wire. September 25, 2007 http://www.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId =20070925005710&newsLang=en (accessed 7/17/2013) 739. Stone, Brad, “Sony Joins Other Labels on Amazon MP3 Store,” New York Times. January 11, 2008 http://www.nytimes.com/2008/01/11/technology/11sony.html?_r=1&adxnnl=1&ref=technolo gy&adxnnlx=1366826676-ymmK7p9HEqdahXynzAiDzA& (accessed 7/17/2013) 740. “Old Version of iTunes,” OldApps.com http://www.oldapps.com/itunes.php?old_itunes+4#changelog (accessed 7/17/2013) 741. Appleyard, David, “iTunes 4.8 Released,” Gigaom. May. 9, 2005 http://gigaom.com/2005/05/09/itunes-48-released/ (accessed 7/17/2013) 742. AppleInsider Staff, “Apple releases iTunes 7.1, QuickTime 7.1.5, more,” Apple Insider. March 5, 2007 http://appleinsider.com/articles/07/03/05/apple_releases_itunes_71_quicktime_715_more (accessed 7/17/2013) 743. AppleInsider Staff, “iTunes 7.3 supports iPhone, adds Apple TV photo streaming,” Apple Insider. June 29, 2007 http://appleinsider.com/articles/07/06/29/itunes 7 3 supports iphone adds apple tv photo _streaming (accessed 7/17/2013) 744. Dalrymple, Jim, “Apple releases iTunes 8.1 update,” MacWorld. March 11, 2009 http://www.macworld.com/article/1139330/itunes.html (accessed 7/17/2013) 745. Hugh Hurt, “EMI's Last-Ditch Effort: DRM-Free Music.” Wired. April 3, 2007 Accessed: May 28, 2013 http://www. wired.com/entertainment/music/news/2007 /04/emi_business0403 746. Richard MacManus, “EMI Music DRM-free: What It Means For The Online Music Industry.” ReadWrite.com April 2, 2007 Accessed: May 28, 2013 http://readwrite.com/2007 /04/02/emi_music_drm_free 747. Candace Lombardi, “iTunes goes DRM-free with EMI.” CNET News. May 30, 2007 Accessed: May 28, 2013 http://news.cnet.com/iTunes-goes-DRM-free-with-EMI/2100-1027_3-6187457.html 748. “EMI Music Launches DRM-Free Superior Sound Quality Downloads Across Its Entire Digital Repertoire.” April 2, 2007 Accessed: May 28, 2013 http:/ /shaungroves.com/2007 /04/emi -drmpress-release/ 749. “Apple to End Music Restrictions.” BBC News. January 7 2009 Accessed: May 28, 2013 http://news.bbc.co.uk/2/hi/technology/7813527.stm 750. “SharpMusique.” Wikipedia. Accessed: May 31, 2013 http://en.wikipedia.org/wiki/PyMusique 751. Eric Bleeker, “1 Acquisition Apple Doesn't Want to See: Samsung Buying Pandora.” The MoHeyFool. March 3, 2013 Acessed: March 5, 2013 http://www.fool.com/investing/general/2013/03/03/1-acquisition-apple-doesnt-want-to-seesamsung-buy.aspx 752. “The History & Future of Real Networks,” Internet Video Magazine. Accessed: May 11, 2013 http://internetvideomag.com/Articles-2004/022324Real.htm 753. Adrian Covert, “A decade of iTunes singles killed the music industry.” Fortune Magazine. April 25, 2013 http://money.cnn.com/2013/04/25/technology/itunes-music-decline/index.html (accessed 7/17/2013) 754. John Borland, “Cell phones heading into iPod territory” CNET News. July 1, 2004 Accessed: April 23, 2013 news.cnet.com/Cell-phones-heading-into-iPod-territory/2100-1041_35254146.html 755. John Borland, “Cell phones take iPod challenge,” CNET News. November 12, 2004 Accessed: April 23, 2013 news.cnet.com/Cell-phones-take-iPod-challenge/2100-1039_3-5449095.html 756. John Borland, “iTunes ushers in a year of change,” CNET News. April 26, 2004 Accessed: April 23, 2013 news.cnet.com/iTunes-ushers-in-a-year-of-change/2100-1027_3-5199227.html 757. John Borland, “Music moguls trumped by Steve Jobs?” CNET News. April 15, 2005 Accessed: April 23, 2013 news.cnet.com/Music-moguls-trumped-by-Steve-Jobs---page-3/2100-1027_35671705-3.html 758. Ryan Naraine, “Music Store Embedded in New RealPlayer 10,” InternetNews.com. January 07, 2004 Accessed: May 30, 2013 http://www.internetnews.com/ecnews/article.php/3296171/Music+Store+Embedded+in+New+RealPlayer+10.htm 759. Marc Ferranti, “RealNetworks Puts Harmony on any Player.” IDG News Service. July 26, 2004 http://www.techhive.com/article/117062/article.html (accessed 7/17/2013) 760. Colin Cameron and Douglas L. Miller, “robust Inference with clustered Data,” in Handook of Empirical Economics and Finance, edited by Aman Ullah and David E. A. Giles, CRC Press 2011 761. Kennedy, Peter, “A guide to Econometrics,” Second Ed. 762. Daniel L. Rubinfeld, Quantitative Methods in Antitrust, in 1 ISSUES IN COMPETITION LAW AND POLICY 723 (ABA Section of Antitrust Law 2008) 763. “7 Digital About Us,” http://about.7digital.com/ (accessed 7/17/2013) 764. “7digital,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/7digital (accessed 7/17/2013) 765. Clegg, Dean, “Addictech,” http://www.trademarkia.com/addictech-76553281.html (accessed 7/17/2013) 766. Hanlon, Tim, “digiwax = DRM-free MP3 + Vinyl,” Gizmag. May 15, 2007 http://www.gizmag.com/go/7269/ (accessed 7/17/2013) 767. “Amazon MP3,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/Amazon_MP3 (accessed 7/19/2013) 768. “Amie Street,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/Amie_Street (accessed 7/19/2013) 769. “Google Play,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/Google_Play (accessed 7/19/2013) 770. “Arkade Overview,” http://www.arkade.com/content/Bottom+Banner/Arkade+Overview (accessed 7/19/2013) 771. “Artistxite About Us,” http://artistxite.com/us/magazine/staticabout/8280/About-Us.html (accessed 7/19/2013) 772. “ArtistXite,” http://musowiki.net/index.php/ArtistXite (accessed 7/19/2013) 773. “WWW.ARTISTXITE.COM,” http://website.informer.com/artistxite.com (accessed 7/19/2013) 774. “Bandcamp,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/Bandcamp (accessed 7/19/2013) 775. “Bandcamp Terms of Use” http://bandcamp.com/terms_of_use (accessed 7/19/2013) 776. “Beatport,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/Beatport (accessed 7/19/2013) 777. “Bleep.com” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/Bleep.com (accessed 7/19/2013) 778. “About Boomkat” http://www.boomkat.com/about/ (accessed 7/19/2013) 779. “Boomkat - Your independent music specialist,” http://www.webwiki.com/boomkat.com (accessed 7/19/2013) 780. “BuyMusic,” Wikipedia, The Free Encyclopedia, http://en.wikipedia.org/wiki/BuyMusic (accessed 7/19/2013) 781. Graham, Jefferson, “BuyMusic's downloads strike a sour note,”USAToday. July 28, 2003 http://usatoday30.usatoday.com/tech/news/2003-07-28-buymusic_x.htm (accessed 7/19/2013) 782. “iTunes Music Store vs. BuyMusic.com,” http://www.underconsideration.com/speakup/archives/001534.html (accessed 7/19/2013) 783. “CD Baby – About Us,” http://www.cdbaby.com/About (accessed 7/19/2013) 784. “CD Baby,” Wikipedia, The Free Encyclopedia http://en.wikipedia.org/wiki/CD Baby (accessed 7/19/2013) 785. “Cdigix,” Wikipedia, The Free Encyclopedia http://en.wikipedia.org/wiki/Cdigix (accessed 7/19/2013) 786. Young, Jeffrey R., ” Cdigix Ceases Operations, Citing Poor Economy,” The Chronicle of Higher Education. February 12, 2009 http://chronicle.com/blogs/wiredcampus/cdigix-ceasesoperations-citing-poor-economy/4528 787. “About Classical Archives,” http://www.classicalarchives.com/about.html (accessed 7/19/2013) 788. “Classical Archives ,” Wikipedia, The Free Encyclopedia http://en.wikipedia.org/wiki/Classical_Archives (accessed 7/19/2013) 789. “Digital-tunes Homepage” http://www.digital-tunes.net/ (accessed 7/19/2013) 790. “Underground music service Digital Tunes launches! “ PRLEAP.COM April 27, 2007 http://www.prleap.com/pr/73840/ (accessed 7/19/2013) 791. “Discogs,” Wikipedia, The Free Encyclopedia http://en.wikipedia.org/wiki/Discogs (accessed 7/19/2013) 792. All documents and other information, including information from various websites, as listed or cited in the report or the footnotes, exhibits, and appendices thereto Appendix C: Collection of iPod Characteristics 1. The iPod characteristics research was initiated based on the list of order numbers (also called “MPN” or “Product Identifier”) provided in the direct sales and reseller sales transaction data from Professor Noll’s latest declaration backup materials. The order numbers were then individually searched online, and the available characteristics from all sources consulted were collected. For example, by searching order number “M8737LL/A” online, we collected information from sources such as“support.apple.com”, “everymac.com”, and “amazon.com”. The list of characteristic variables is a result of the union of the information collected from the different sources. 2. The full list of sources consulted includes Apple.com, Apple Price Documents (provided by client), Everymac.com (also known as “everyipod.com”), abt.com, amazon.com, bestbuy.com, brokerbin.com, buy.com, cdw.com, cnet.com, collegestoreonline.com, cowboom.com, ebay.com, facebook.com, falabella.com, flash-memory-store.com, ipodused.com, lowerpricestoday.com, milo.com, model spec, mp3-players.toptenreview.com, nexttag.com, onyougo.com, outlet.amazonwebstore.com, overstock.com, pacificgeek.com, partnumber.org, pcsuperstore.com, personafile.com, pricecheck.co.za, pricegrabber.com, reviewindex.net, shop.com, shop.neobits.com, techforless.com, Todoclon.com, toolowtogo.com, topperise.ch, warrantylife.com, wikipedia, youfindit.ca. 3. After the search of characteristics was completed for all order numbers, we compared and consolidated the information from various sources for each order number to obtain the order number level data. We first ranked the sources for a given order number depending on its reliability and the completeness of its information (referred to as “the ranking process” below). Reliability is determined by degree of consistency between the information reported by the source and Apple.com. Apple.com is considered the most reliable source, and all characteristics available on the Apple site were used for in constructing our characteristics dataset. However when information for certain characteristics or order numbers was not available on Apple.com (e.g., “discontinued dates”), we would refer to everymac.com as our second best source for characteristics since it has the most comprehensive technical specifications for most iPods, and its information is consistent with that on Apple.com when the latter is available. With these two sources (apple.com and everymac.com), we were able to collect information on the characteristics for most models across all iPod families. 4. We further compared characteristics of the order numbers within the same iPod family to collapse the information from the order number level to the family level. Order numbers within the same family should have the same characteristics. Through comparison, we resolved differences in characteristics by cross-checking the information against the comparable iPod description in the corresponding Apple press release. For example, suppose “order No. 123” and “order No. 321” belong to the same iPod family. We checked their characteristics for internal consistency and also for consistency with the description on the Apple’s product launch press for the respective family. If all sources agree, we use the characteristics for the family. If not, we adopt the information from the Apple press release when available. There are a few models for which some characteristics are not reported by Apple. In that case, we repeat the ranking process and use the information from the most reliable source. When using information from sources other than Apple.com, we verified the data by crosschecking multiple other sources. For example, if Apple.com does not report the battery life for iPod X and everymac.com reports 8 hours, we verified the data against a third reliable source such as “Amazon.com” or “CNET review,” if possible. 5. Final results are compared with the characteristics provided in Professor Noll’s latest declaration backup materials. The non-trivial differences between the two datasets are summarized in the table below. (In making this table, we exclude, for example, a difference in product width due to rounding – 2.43 inches vs. 2.4 inches.) Appendix D Additional Regression Results HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL HIGHLY CONFIDENTIAL 1 2 3 4 5 6 7 8 9 Robert A. Mittelstaedt #60359 ramittelstaedt@jonesday.com Craig E. Stewart #129530 cestewart@jonesday.com David C. Kiernan #215335 dkiernan@jonesday.com Amir Q. Amiri #271224 aamiri@jonesday.com JONES DAY 555 California Street, 26th Floor San Francisco, CA 94104 Telephone: (415) 626-3939 Facsimile: (415) 875-5700 Attorneys for Defendant APPLE INC. 10 UNITED STATES DISTRICT COURT 11 NORTHERN DISTRICT OF CALIFORNIA 12 OAKLAND DIVISION 13 14 15 THE APPLE iPOD iTUNES ANTI-TRUST LITIGATION. Case No. C 05-00037 (YGR) [CLASS ACTION] 16 DECLARATION OF DR. KEVIN MURPHY 17 18 19 20 21 I, Kevin M. Murphy, Ph.D submitted my Amended Expert Report in the above-captioned matter on August 19, 2013, with supplemented exhibits served on November 11, 2013. The report and corrected exhibits are true and correct and based on my own personal knowledge. 22 I declare the forgoing is true and correct to the best of my knowledge and belief. 23 Executed this 19 day of December, 2013 in Mokena, Illinois. 24 25 26 Kevin M. Murphy, Ph.D. 27 28 -1-

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.


Why Is My Information Online?