Google Readies Its Book Business

As it prepares to become a major digital book seller, Google is striking partnerships with brick-and-mortar stores and trying to dispel concerns.

By Thomas Claburn
InformationWeek
 30, 2009 05:23 H
As it has done with its antitrust road show, Google is reaching out to explain how its plan to make books searchable and sellable online will benefit all concerned. On Thursday evening at the Computer History Museum in Mountain View, Calif., Dan Clancy, engineering director for Google (NSDQ: GOOG) Book Search, is scheduled to discuss his company's book scanning efforts and its ambition to become a seller of digital books.

was introduced in 2004 under the name Google Print. The project involves scanning books, converting the scans to text using optical character recognition technology, and making the scanned books searchable. Publishers and their lawyers sued Google the following year for digitizing books without the permission of copyright holders.

To date, Google has scanned over 10 million books, according to Clancy, including 1.5 million public domain books and 1.5 million books belonging to Google's Book Search partners -- publishers and authors who have agreed to allow Google to index their books in exchange for increased visibility, ad revenue, and sales opportunities.

Last October, Google reached a settlement with the authors and publishers who brought the lawsuit. The settlement awaits approval from the judge overseeing the case. The U.S. Department of Justice is also conducting an antitrust inquiry into the deal.

A fairness hearing to consider approval of the settlement is scheduled for October 7. And the deadline for objections to the settlement is September 4.

The main objections have had to do with privacy -- Google's perennial nemesis -- and ensuring access to scanned material.

Resistance to Google's plan is also being driven by the company's competitors and by the not uncommon sentiment among Google's critics that the company has become an anticompetitive monopoly. For instance, Microsoft, which gave up on its own book scanning project last year, has committed $50,000 to fund several New York Law School projects seeking to delay or modify the settlement.

To counter such salvos, Google has published YouTube video testimonials from Howard University law professors Rhea Ballard-Thrower and Lateff Mtima, as well as Charles Brown from the National Federation of the Blind, to talk about how Google Book Search will expand access to books and knowledge.

Google's relationship with publishers and authors became more complicated in May when the company confirmed that it would begin selling e-books for Google Book Search partners online by the end of the year, a move seen as a challenge to Amazon and its Kindle. If Apple does release a reading tablet, as anticipated, later this year or early next and if that tablet is tied to Apple's iTunes Store for content, then Apple too is likely to see Google Editions -- that's what the book sales program is called -- as a competitor in the digital publishing market.

"We want to build and support a digital book ecosystem to allow our partner publishers to make their books available for purchase from any Web-enabled device," a Google spokesperson said in May.

Clancy stresses that while Google and the authors and publishers who sued may disagree over what constitutes copyright infringement, both sides are willing to put aside their difference to make the settlement work. The company's goal isn't to force anyone to participate, he insists.

"Under the settlement, rights holders have choice, can opt out, can stay in or remove books from index," he said. "It's always been our policy that if people ask us not to scan or index their book, we'll respect that."

Under the settlement, Google (NSDQ: GOOG) will spend $34 million to fund a Book Rights Registry, which will maintain a database of copyright holder information and will oversee the disbursement of at least $45 million in payments to authors for books scanned without permission. It will also handle payments to Google book search partners for Google Editions sold to consumers.

With the settlement costs, Google will have spent over $100 million on its book scanning effort. "This is a very expensive project," said Clancy.

According to Clancy, Google will pay 63% of digital book revenue and will keep 37% for itself. As a point of comparison, Amazon pays Kindle authors a 35% royalty. Google plans to develop an algorithmic pricing model to find the ideal price for Google Editions. Initially, said Clancy, over 50% of titles will be $5.99 or less and over 80% will be $14.99 or less.

Amazon (NSDQ: AMZN) allows authors and publishers to set their own price for Kindle titles, with the caveat that it must be consistent with the price provided to other retailers or wholesalers.

Clancy also said that, in addition to selling digital books online, Google plans to sell Google Editions through brick-and-mortar book stores. He said that Google's retail partners should be able to get a similar cut of the sale price as they do today for printed books. "You should be able to buy one of these digital books anywhere," he said. "We really think it's important that the future of the digital book is an open, competitive space."

The issue of orphaned books -- books with no identifiable rights holder -- won't be a significant one, Clancy insists, given that 97% of book sales are in-print books. And while some parties still want Google to provide a license to use the orphaned books in its index, he says that's beyond the scope of the settlement. "We don't believe the class action construct allows the registry to license works that have not been claimed," he said.

As for the privacy concerns raised by critics, Clancy maintains that Google is committed to user privacy. Yet he was unable to offer a clear commitment because the settlement has not been approved and Google is still working out the details. In principle, he said that Google doesn't want to track people. But any online interaction will leave a record of the user's IP address on Google's servers and that information can sometimes be used to identify a user.

Google, said Clancy, still trying to figure out an IP address retention policy for Google Books. The company, he said, has security requirements under the settlement so IP address information will need to be kept for some period of time to track abuse. "That's something we're evaluating now," he said.

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