Google (GOOG) just got into the digital book-selling business, agreeing to open an online store as a part of its $125 million Book Search settlement with the Authors Guild and five major book publishers. Google will set prices with an algorithm and send 63% of all revenue to rights holders, keeping 37% for itself.
The U.S.-only store is designed initially to sell online access to copyrighted, out-of-print books, though newer books could be available for sale if authors and/or publishers allow Google to sell them. Libraries will be able to access the books for free, while college students will be able to sign up for subscription-based access from their dorms.
This puts Google into closer competition with Amazon.com (AMZN), which sells digital copies of books for its Kindle gadget.
What we don’t know: What format Google will offer the books in, whether buyers will be able to download them for offline or mobile use — on an iPhone, or Kindle, for instance — or whether they’ll be printable.
The Wall Street Journal says Google’s top lawyer David Drummond “played down,” the competition with Amazon.com “noting that Google’s main objective is to build a better search product.”
In a separate interview about the news, however, Google cofounder Sergey Brin sounded a more optimistic note, even suggesting Google could expand the store to include more media types:
“I do support this idea that there are definitely high-value pieces of information that people are willing to pay for and buy, and [the payment model] should be up to the individual who produces it. I hope that we can broadly [sic] new model to more media types.”
It’s easy to explain Drummond’s reserve. In April, Deutsche Bank’s Jeetil Patel figured that after investing $300 million in digital product development over the past three years, Amazon sold only $100 million worth of digital books, music and videos.
Others, however, favour Brin’s optimism: Pacific Crest’s Steven Weinstein said in June that he expects Amazon to sell $2.5 billion worth of e-books by 2012. Because all but 1% of Google’s revenues come from PC-based Web search, and the company eventually needs to diversify its revenue sources, we’ll side with Brin.