"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)
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 -
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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 -
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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
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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
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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).
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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
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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
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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.
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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
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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.
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‘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).
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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.
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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
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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
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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).
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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
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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
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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
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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
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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
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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
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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.’”
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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).
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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.
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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.
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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).
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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.
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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).
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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.
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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
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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.
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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
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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
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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
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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).
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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).
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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
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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
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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
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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.
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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.
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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.
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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.
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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.
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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-
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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.
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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
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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.
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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.”
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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
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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.
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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
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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.
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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.
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, 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.
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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
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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
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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
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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.
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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.
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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.
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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
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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
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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
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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
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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.
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UNITED STATES DISTRICT COURT
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NORTHERN DISTRICT OF CALIFORNIA
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OAKLAND DIVISION
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THE APPLE iPOD iTUNES ANTI-TRUST
LITIGATION.
Case No. C 05-00037 (YGR)
[CLASS ACTION]
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DECLARATION OF DR. KEVIN
MURPHY
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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.
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I declare the forgoing is true and correct to the best of my knowledge and belief.
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Executed this 19 day of December, 2013 in Mokena, Illinois.
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Kevin M. Murphy, Ph.D.
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