E-book fowl play: Penguin CEO frozen out by Amazon

Penguin USA CEO David Shanks was stunned and in disbelief when he learned in 2007 that Amazon was going to sell newly released e-books for $9.99.

“This is the first I’ve heard,” Shanks said he told a reporter who first alerted him of the low price point. “It’s not going to be $9.99.”

Shanks was testifying yesterday at the government’s conspiracy trial against Apple in Manhattan federal court.

The CEO told Justice Department lawyer Mark Ryan the $9.99 price was trouble for the book industry, since hardcover physical books were selling at $25.

Shanks said he was thrilled when he heard Apple was entering the e-book market because the publisher had been selling “virtually” no e-books via its app and needed Apple in order to become competitive.

The Justice Department is accusing Apple of conspiring with five publishers to fix prices of e-books — at about $14.99 at the time.

Apple denies the charge but faces an uphill battle, as each of the publishers have settled their case and could testify against Apple.

Later, under cross-examination, Shanks described how wonderful it was to see kids book “Winnie the Pooh” in color on the iPad, versus in black and white on Kindle.

Snyder is attempting to negate claims that the five biggest publishers conspired with Apple to increase pricing by demonstrating the wide innovation Apple brought to the market by its entry.

If Apple loses the non-jury trial in front of Judge Denise Cote, it could find itself battling several state claims as well as legal battles with book buyers.

Amazon at the time, controlled 90 percent of e-book sales and bought books directly from publishers, then set its own price.

Apple introduced, with the roll out of its iPad, the so-called agency model under which publishers would set their price.

The publishers promised Apple the lowest retail price.

The trial continues today.