Google Editions defies digital economics

Google today announced it will enter the e-book distribution business with a service, Google Editions, which will sell electronic copies of as many as 500,000 books offered by traditional publishing houses. The service is amazing, because the company has found a way to increase the retail distribution cost of e-books relative to paper books. Think about this—the zero cost copy of an e-book will be the basis for Google keeping substantially more, as a share of list price, to deliver a Google Editions e-book through a third-party retailer than buying directly from Google.

It may seem attractive to retail partners, which will purportedly include Amazon, Sony and Barnes & Noble, but even they’ve got to be scratching their heads about the added overhead Google built into its pricing scheme. An e-book purchased from Google Editions will list for the same price as the same book offered by a publisher through Amazon or Sony, for example, and Google will pay the publisher 63 percent of the list price. But, if the book is purchased in Amazon Editions format through Amazon or Sony, publishers will only get 45 percent of the list price.

Google said it will share the additional 18 percent with the retailer, though “most” of that 55 percent reportedly will go to the retailer. My guess is that by “most,” Google means the retailer will get 25 percent and Amazon 20 percent, or some approximation of that split. This seems a concession to make sure the Google Editions format books are carried by retailers.

Let’s break that down. For a bestseller, which the market has decided should be priced at $9.99, the publisher will earn $6.29 when Google Editions sells a copy. When that same Google Editions e-book is sold through a third party, the publisher will earn only $4.49. Intermediaries increase their share of revenue, even though they’ve taken on no inventory risk.

Publishers get 63 percent for selling directly and 45 percent for a Google Edition book sold through a third-party retail site. It defies all the economic logic of digital distribution. The likelihood that Google will really get more e-books from publishers on those terms compared to those offered by Amazon, Sony or Barnes & Noble to the same population of publishers strains credibility. But, we shall see.

More bad news: DRM

While the Google Editions e-books will be readable in a browser, they will not be unencrypted. Google makes clear that books will come with DRM, because they have created a way to let readers access files when not connected to the Net but without the ability to share those books with others. Books will be tied to a Google account, just as GMail, Google Docs and other services.

The retailers, all of whom have introduced proprietary e-readers and, except for Sony, which offers ePub formatted e-books, should be Continue reading

Amazon strikes UofMichigan reprints deal

Amazon’s BookSurge print-on-demand (POD) service has agreed to make up to 400,000 out-of-copyright titles in the University of Michigan library system available for sale as reprinted POD books.

“This agreement means that titles that have been generally unavailable for a century or more will be able to go back into print, one copy at a time,” Paul N. Courant, U-M librarian and dean of libraries said in a statement. Books will be produced in softcover and delivered directly to buyers by BookSurge. Interestingly, books scanned as part of the library’s Google Book partnership will be made available through the Amazon service—the “war” anticipated by so many is merely an early skirmish to establish the terms of partnership in different fulfillment settings, if you ask me.

This is a phenomenally interesting announcement, since it anticipates a completely new market for out-of-copyright books and, potentially, library revenues. POD systems are, as I’ve explained elsewhere, more likely to be offsite services that fulfill orders than to be located at bookstores or libraries. The economics and the practicality of serving more than a few customers an hour in high-demand times make this clear.

With a library of 400,000 books, the typical sales for any given title will be ones and twos a year, but could, as U of Michigan director of scholarly publishing Maria Bonn said in the press release, reach 100 copies for “bestsellers.” The prospect of so many older books being available again makes my bibliophilic skin tingle and shows that digitization is also a path to increased paper-based reading.

UPDATE: In related news, Harvard University Press seems to be headed toward distributing e-books on Scribd.

PW to host Google Settlement webinar

I’ll be listening in when Publishers Weekly‘s Jim Milliot, AAP board members Richard Sarnoff (Bertelsmann) and John Sargeant (MacMillan), and the Authors Guild talk turkey about the Google Books Settlement on July 29 at 2 PM Eastern time. The conference call will be held online, you can sign up here.

Nokia’s Symbian gambit

Nokia today announced via Twitter that it will not make a smartphone based on Google’s Android operating system. This is significant because it shows that hardware makers are concerned about losing control of their relationship with customers.

Symbian, Nokia’s favored OS—it has slowly acquired the company that develops the OS since joining it as a partner in the mid-90s—will remain Nokia’s focus. It prevents Google from claiming a direct relationship with Nokia’s customers through the OS, meaning Google will have to invest in a Google Books for Symbian application (it has various apps for Symbian already), or partner with Nokia, to gain access to Nokia smartphone users who want to buy or read ad-supported e-books.

UPDATE: Analysts say Nokia is doomed, will lose out to Apple in two years. Rumors of Nokia’s death have run rampant before. The question remains whether it will stay at the forefront in its relationship with customers. Apple mastered that challenge with the App Store, Nokia’s not in the position to do the same.

Feds digging into Google Books settlement

GbookslogoThe U.S. Department of Justice will investigate the Google/Authors Guild/Association of American Publishers book settlement to determine if it violates federal antitrust laws. I suspect that the result will be a compromise that allows future negotiations of royalties by rights holders (authors and publishers) with Google. The current agreement, which rights holders must decide to conform with, or opt out of, by Septmeber 15, 2009, locks in all participating authors to a 63 percent share of revenue generated by Google.

The BBC provides quotes from Google’s response:

“The Department of Justice and several state attorneys general have contacted us to learn more about the impact of the settlement, and we are happy to answer their questions,” Google said in a statement.

“It is important to note that this agreement is non-exclusive and if approved by the court stands to expand access to millions of books in the US.”

The settlement applies only to books published before the agreement was announced on January 5, 2009 and stems from Google’s scanning of hundreds of thousands of books without the rights holders explicit permission.

The preemptive royalty agreement, I believe, will be the focus on the federal interdiction, since it has the primary material impact on rights holders after the close of the opt-out window. The scanning will go forward under a different agreement.

Locking participants into terms of business is similar to the behavior of a cartel, which is why that will become the fulcrum of any change demanded by the DOJ.

Here is the Google-sponsored FAQ on the agreement.

Google Books add word frequency analysis

Word FrequencyInside Google Book Search‘s Diego Puppin, a software engineer at Google, writes about a new addition to the book summary for some of the books at Google Books: “As with the other features on the Book Overview page, the word cloud is meant to offer a new way to explore our catalog. If you are trying to learn about Italian art, a search in our index will find many good books on the Renaissance period. Use the cloud of common terms to tell what each book is about.”

Word frequency is an interesting way to present the content of a particular work and could help people searching for specific information determine whether a book’s worth their time. Because many of the most useful nuggets of information are found in isolation, an odd connection or quote offered by a writer, the word count could also mislead readers into thinking that a book must be largely about a topic in order to be useful. Summaries cut both ways.

As a tool for understanding differences between books and their times, however, word frequency is extremely interesting, as Puppin notes. Mario Alinei did groundbreaking work on analyzing the transformation of Italian over decades in the 1960s. There are also interesting tools for surfing word frequency generally, across all language or within any text. For example, WriteWords, a Britsh site, is one of many lets visitors paste text into its site and returns a word frequency analysis of the text. A long-time favorite of mine is WordCount, a nicely executed navigable presentation of the instance of words in English based on an analysis of the British National Corpus, a 100-million word collection of writing and spoken examples of English.

Google Book Search adds features

Inside Google Book Search, in a posting by Google Books Product Manager Brandon Badger, debuts a set of new features in Google Book Search. My favorite, the ability to embed a preview of a book or a link, such you see above or as the link following for Page 28 of A Catalogue of Books Printed in the Fifteenth Century Now in the Bodleian Library .

The linking code has been on the site for a while, though I believe it only pointed to a book, not a location in the book. Google has published a developers API for supporting embedded book previews.

Improved search and presentation features, such as drop-down menu for navigating to chapters within a book and a plain-text view, are also new. The online view of a book also now supports turning pages within the book rather than just scrolling down (your option, which is what I was saying the best approach is earlier today).

Financial Times: Google’s railroading cartel

The Financial Times‘ Lex column (registration at site required, but free) makes the rhetorical point:

Imagine that in the 19th century the company furthest advanced laying US railroads was given the right to build all future rail lines. The public might have gained from the new services, but ultimately been left at the whim of a powerful monopoly. Now take the deal between Google and the publishing industry to create a digital market for out-of-print books – some 40 per cent of all those ever published. However laudable such a goal that may be, it raises anticompetitive issues too.

The article lays out clearly and simply why the Google Books deal with libraries is flawed. Rather than creating and exception to existing copyright and intellectual property restrictions, the outcome of the legal confrontation should be a general and open system for any company that wishes to scan books under terms acceptable to authors or other rights holders.

The deal is based on a scenario that is too good to be true. Google is only here to help, the company says, yet is it sweeping up rights that could be abused. Readers face a potential future where, because it is impractical to compete with Google, other e-book providers simply don’t try, giving Google free reign to raise prices on access to books, whether one at a time or through an all-you-can-read subscription service. It could choke off libraries’ access to these books, because Google circumvents their relationship with the reader or raises institutional prices too high.

For free culture activists, it should be clear that the settlement in effect grants Google a degree of control over access to library collections it has scanned that is functionally similar to holding a renewed and extended copyright on the works.

It is also questionable whether the potential for advertising in library-accessed books is a good idea, since it commercializes what had been a public good and, potentially, creates a commercial filter based on advertisers preferences for certain ideas and information. If faced with reading an uncontroversial history of, say, the Iraq War, which is free at the library through Google Books and one that, because it has no ad revenue support carries a fee, the least-privileged in society would probably opt for the free choice. That’s a kind of commercial Big Brotherism we need to engineer out of e-libraries.

The takeaway: Google is being granted a cartel position in the intellectual marketplace, which the FT believes is bad for competition. “Google’s ingenuity does not give it the right to surround itself with an impregnable digital moat,” the column concludes.