Apple’s late CEO, Steve Jobs, struck a deal with the publishers in early 2010, that shifted the retail sales model from a “wholesale” model, such as was in force with Amazon.com Inc. (NASDAQ: AMZN) to an “agency” model, under which Apple would receive 30% of the retail price based on a price for the e-book set by the publisher. The deal also included a requirement that none of the publishers sell e-books to any other company at a price lower than the publishers charged Apple.

Amazon had acquired e-books under the wholesale model, and sold them at a steep discount in order to drum up business for its Kindle e-readers. The publishers believed that such discounting would lead to a severe loss of revenue, in much the same way that Apple had chopped the revenue of the music companies.

According to the WSJ, the CEO of Barnes & Noble Inc. (NYSE: BKS) gave a deposition to the US DoJ “ in which he testified that abandoning the agency pricing model would effectively result in a single player gaining even more market share than it has today.”

The DoJ’s position is that the agency model is anti-competitive and results in higher prices for consumers. A settlement of the potential suit is possible, but no such deal is close according to the WSJ’s sources.

Paul Ausick

Washington Mutual shareholders and creditors set a deal that could allow an exit from bankruptcy. (Reuters)

The policy meeting of the Federal Reserve could end with no actions at all. (Reuters)

Low availability of water makes it a profitable investment for many global financial organizations. (Reuters)

AT&T (NYSE: T) may try to change its plan to buy T-Mobile due to government resistance. (Reuters)

Another MF Global official says he does not know what happened to $1 billion of the firm’s money. (Reuters)

Jive Software will post its IPO slightly above the expected range. (Reuters)

Deutsche Boerse and NYSE Euronext (NYSE: NYX) will offer more concessions to close a merger deal. (Reuters)

Martin Marietta (NYSE: MLM) makes an offer of $4.8 billion to buy Vulcan Materials (NYSE: VMC). (Reuters)

Apple (NASDAQ: AAPL) softens its approach to selling its iAd inventory as Google (NASDAQ: GOOG) has had success in the mobile ad market. (WSJ)

The euro reaches a 10-month low. (WSJ)

McDonald’s (NYSE: MCD) begins delivery services in Asia. (WSJ)

Bank of America (NYSE: BAC), JPMorgan Chase (NYSE JPM) and Citigroup (NYSE: C) try to settle charges of mortgage fraud. (WSJ)

Pfizer (NYSE: PFE) increases its dividend and share buyout. (WSJ)

Italian unions stage strikes because of austerity plans. (WSJ)

Novartis’s (NYSE: NVS) multiple-sclerosis pill Gilenya has safety problems. (WSJ)

Diamond Foods (NASDAQ: DMND), faced with accounting problems, will delay its next quarterly filing. (WSJ)

LSE says it will buy the remaining 50% stake in FTSE that it does not already own from Pearson (NYSE: PSO). (WSJ)

The share of U.S. income earned by the top 1% dropped to 17% in 2009 from 23% in 2007. (NYT)

Experts prepare in case Greece leaves the eurozone. (NYT)

Google’s buyout of Motorola Mobility (NYSE: MMI) is delayed by EU authorities. (NYT)

Newspaper chain Lee Enterprises (NYSE: LEE) files for Chapter 11. (NYT)

Some EU-based banks are selling their most valuable assets as regional debt weighs upon their balance sheets. (Bloomberg)

Douglas A. McIntyre

• GlaxoSmithKline (GSK) Started as Buy at Jefferies.
• JPMorgan Chase (JPM) Started as Buy at Goldman Sachs.
• Leap Wireless (LEAP) Raised to Outperform at Baird.
• Morgan Stanley (MS) Raised to Buy at Goldman Sachs.
• Nautilus (NLS) Raised to Neutral at Merriman Curhan Ford.
• Pearson (PSO) Raised to Neutral at JPMorgan.
• PETsMART (PETM) Raised to Buy at Goldman Sachs.
• Total (TOT) Raised to Buy at Bank of America Merrill Lynch.

Jon C. Ogg
January 26, 2009

• Alcatel-Lucent (NYSE: ALU) Cut to Equal Weight at Morgan Stanley.
• Bio-Reference Labs (NASDAQ: BRLI) Cut to Perform at Oppenheimer.
• Gap Inc. (NYSE: GPS) Cut to Hold at Citigroup.
• General Dynamics (NYSE: GD) Cut to Neutral at Goldman Sachs.
• Patriot Coal (NYSE: PCX) Started as Sell at Citigroup.
• Pearson (NYSE: PSO) Cut to Sell at Goldman Sachs.
• PepsiAmericas (PAS) Cut to Sell at Goldman Sachs.
• PetroChina (NYSE: PTR) Cut to Neutral at JPMorgan.
• Posco (NYSE: PKX) Cut to Neutral at Goldman Sachs.
• Rio Tinto (NYSE: RTP) Cut to Hold at Deutsche Bank.
• Rockwell Collins (NYSE: COL) Cut to Sell at Goldman Sachs.
• Wright Express Corp. (NYSE: WXS) Cut to Neutral at JPMorgan.

Jon C. Ogg
January 9, 2009

U.S. colleges, universities and other organizations will be able toaccess subscriptions for online access to collections from some of theworld’s most renowned libraries. Millions of out-of-print books will now be accessible atdesignated computers in U.S. public and university libraries.

What is interesting here is that Google is compensating authors andpublishers via a newly created independentand non-profit book rights registry.  Google will make paymentstotaling $125 million to establish the registry and resolve existingclaims from authors and publishers.

The members of the Association of American Publishers whichhad been involved in suing Google over this in 2005 before were asfollows:

• The McGraw-Hill Companies, Inc. (NYSE: MHP);
• Pearson (NYSE: PSO) units Pearson Education, Inc. and Penguin Group; 
• John Wiley & Sons, Inc. (NYSE: JW-a);
• and CBS Corporation (NYSE: CBS.A and CBS) unit Simon & Schuster.

The settlement is subject to court approval, but this will resolve thatlegal battle.  Keep in mind that this is not an effort to publish newreleases for free on the internet, but it means that the public is going to be able to have much deeper access to books which are in print and out of print at no cost. 

This should also create an environmentwhere traders wished that the local governments could bandtogether and spin-off the public libraries into a large publicly tradedstock company.  That way they could short sell it.

Jon C. Ogg
October 28, 2008

• Constellation Energy (NYSE: CEG) Downgraded to Underperform at Jefferies.
• Fidelity National (NYSE: FIS) Cut to Perform at Oppenheimer.
• Fiserv (NASDAQ: FISV) Cut to Perform at Oppenheimer.
• Genentech (NYSE: DNA) Raised to Overweight at Lehman.
• KBW (NYSE: KBW) Cut to Market Perform at FBR.
• Nike (NYSE: NKE) Cut to Neutral at HSBC.
• Pearson plc (NYSE: PSO) Cut to Sell at Deutsche Bank.
• Satyam Computer Services (NYSE: SAY) Cut to Equal Weight at Morgan Stanley; Cut to Underperform at Credit Suisse.
• Sherwin Williams (NYSE: SHW) Cut to Sell at Goldman Sachs.
• Sierra Wireless (NASDAQ: SWIR) Target cut to $20 from $25 at CIBC.
• Stanley Works (NYSE: SWK) Cut to Hold at Deutsche Bank.
• Werner Enterprises (NASDAQ: WERN) Cut to Sell at UBS.
• WIPRO (NYSE: WIT) Cut to Underperform at Credit Suisse.

Jon C. Ogg
July 21, 2008

But, the most important thing Mr. Murdoch said in his current trip to Australia is that "he was also planning to boost the numbers of subscribers to the Wall Street Journal’s Web site more than tenfold by making access free."

"We are studying it and we expect to make that free, and instead of having 1 million (subscribers) having at least 10-15 million in every corner of the earth," Murdoch added.

So, the mogul will assume that he will lose his one million subscribers who pay about $79 a year to get the paper online. But, with over 10 million or more daily readers, Murdoch must believe that he will pick up tons of new advertising. He recently bought Dow Jones (DJ) the Journal’s owner.

The effects of Murdoch’s decision could send a huge wave through the financial content business, threatening to take ad revenue from online versions of the New York Times (NYT), Pearson’s (PSO) Financial Times as well as the huge and profitable money sections of portals like MSN (MSFT) and Yahoo! (YHOO). In other words, it could change the dynamics of where online financial advertising is placed and which properties make money.

Murdoch has the instincts of a riverboat gambler. He may not win this hand, but he stands to do a lot of damage to the competition.

Douglas A. McIntyre

Industry observers might argue that the Financial Times and its FT.com stable mate have the
advantage of serving a rarified market because the paper covers global finance. But, the
competition in that market is keen with Dow Jones (DJ) playing in paper and online, and
firms like Reuters improving their web operations.

One trend that content companies may have failed to notice is that better writing and
better analysis can catch and hold a large audience. In the US the industry needs to
look no further than the high-end blog like TechCruch which has a huge readership and
spends virtually nothing on marketing. It has readers because it has stories that readers
must read.

In a conversation today with Ien Cheng, managing editor and publisher of FT.com, he made it clear
that the paper and the website offer products that readers cannot get elsewhere. The
company will not devalue this content by offering all of its services
to the reader for free. Instead, it is improving those services and making the paper and online
edition even more attractive.

Some significant portion of that plan must be working. Mr. Cheng says that FT.com monthly
unique visitors are up 70% over the last year to 6.3 million. Page views have jumped 50%
to 48 million per month

To keep the readers coming back and to build their ranks, FT.com is launching an enhanced
market data sight. The product will include interactive charts, intraday currency data,and
better portfolio tools among other things. The website is also moving some of its
more well-known columnists to its blogging community. Mr. Cheng’s theory is that readers
would like to see the work of these writers. Publishing their views more often will be a
magnet for repeat visits.

The new program is not without a marketing plan. FT.com already has traffic arrangements
with several of the large portals, and it now offers 30 stories a month per user for free.

Mr. Cheng says that much of the philosophy behind all of this work is that better analysis
and speed to market with news can trump pure size and scale. In the arena of global
business reporting it would be hard to quarrel that the FT is not in the first tier,
but the company does not feel it is at a disadvantage by being smaller than Mr. Murdoch’s
new Dow Jones/News Corp (NWS) financial information empire. Being nimble can best being massive.

When asked why the FT.com should simply not move to a "free content", ad supported model,
Mr. Cheng had a response that might prove educational to others in the content business.
He does not have to. Traffic to FT.com is growing despite the fact that a full online
subscription requires a payment. FT.com believes that it can enjoy the best of both worlds.
Mr. Murdoch may prove him wrong if the WSJ.com becomes an entirely free product.
That still remains to be seen.

FT.com and The Financial Times do have greater resources than many papers, but certainly
no more than The New York Times, Washington Post (WPO), or Gannett. The UK company may have
decided to use its fire power more wisely, and indications are that the approach is a
success.

Mr. Cheng promises more innovation at FT.com next year. He may want to hold the calls
from other newspaper companies who would like to stop by and benchmark his plans.

The FT Group is part of Pearson plc (PSO)

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com.

The FTSE is off .5% to 6,187. Barclays (BCS) is down 2.4% to 596.5. Pearson (PSO) is down 1.5% to 737.5.

The DAXX is off .3% to 7,468. Deutsche Bank (DB) is off 1.3% to 90.48. Siemens (SI) is down 1% to 89.8.

The CAC 40 is off .9% to 5,542. BNP Paribas is down 2% to 76.95. AXA (AXA) is down 1.6% to 29.33.

Data from Reuters

Douglas A. McIntyre

Reuters writes that GE (GE) plans to sell its WMC mortage unit.

Reuters reports that Boeing’s (BA) orders for the year still trail Airbus’s.

Reuters also reports that shares in Target (TGT) rose sharply after news that a corporate raider had taken a stake.

Reuters also writes that the head of Google (GOOG) said that Facebook will probably stay independent.

The Wall Street Journal writes that the CEO of Jones Apparel (JNY) stepped down as the company is looking at options in a tough clothing environment.

The Wall Street Journal also reports that the Financial Times (PSO) and CNBC (GE) are considering sharing editorial resources.

The Wall Street Journal reports that the CEO of Westwood One (WON) has left as the company is in the midst of negotiations with CBS (CBS) over a management contract.

The New York Times reports that Chinese cars are quietly entering the European market.

The FT writes that Google (GOOG) faces a lawsuit from an Australian goverment agency which says it does not distinquish enough between search results and text ads.

Barron’s writes that a Bank of America research upgrade sent Intel (INTC) shares up sharply.

Douglas A. McIntyre