The search leader faces big hurdles as it pursues an online e-book service; chief among them, consumers don't want to curl up with a laptop
Months of gabbing between Google and book publishers appears to be closer to paying off. Since March, Web search titan Google has been trying to strike agreements with major publishers that would give users of the Google Book Search tool access to entire books over the Internet.
Talks have progressed to the point that, on Jan. 18, Google felt confident enough to share with 400 publishers more of its vision for the future of the book. At the industry gathering in New York, Google (GOOG) said it not only wants to let users find and preview books online—as it does now through a test version of Google Book Search—but also to sell access to scanned copies that can be read over the Internet and potentially on portable devices. Google cautions that it's far from revealing details of such a service. "It is something that we have been talking about for quite a while," says Google spokeswoman Megan Lamb. "But we haven't announced what an online access program would entail."
Searching for Partners
Done right, the service could have far-reaching implications for the book publishing industry. But any Google-backed book download service faces a raft of challenges; and comparisons to Apple's (AAPL) iTunes music service that emerged in the wake of the mid-January conference appear hasty.
A big issue to be resolved is which publishers will sign on. Among publishers discussing digital books with Google is Simon & Schuster, which is also talking with other distributors, such as Sony (SNE). Simon & Schuster spokesman Adam Rothberg declined to discuss whether the company was committed to Google's service, saying, "any discussion of our involvement is a bit premature." Publishers already involved in Google's Book Search service, such as Oxford University Press, are also reportedly involved in discussions.
Even if Google does launch the online equivalent of the corner bookstore, it won't quickly have a lot to show for its efforts—at least judging from book downloads to date. In 2005, the last year for which full annual statistics are available, digital copies of books brought in a measly $12 million. That's less than 0.5% of the $25 billion generated by the industry that year, according to the Association of American Publishers (AAP).
Obstacles to Overcome
Given that the digital book industry has only existed for several years, it is understandable that it would make up a small percentage of the overall market. However, the book industry is not showing the same rate of digital sales growth as other industries making the transition from physical to digital copies. Digital song sales grew 65% last year from 2005, reaching 582 million, according to Nielsen SoundScan. There were 32.6 million digital albums sold last year, making up more than 5% of the 588.2 million total album sales.
Several factors are holding back growth of digital books. One is the way they are consumed. Several companies, such as Sony, have recently launched portable devices for reading books and accompanying digital book download services (see BusinessWeek.com, 12/29/05, "Curling Up with a Good E-Book"). About 11,000 titles are available for download onto the Sony Reader, introduced at the end of September, a Sony spokeswoman says. However, the devices have yet to take off, says Pat Schroeder, AAP's chief executive officer. "At this point consumers have not found something that they felt was a really good substitute [for the book]," says Schroeder. As another publishing insider puts it, "We haven't yet had the iPod device of the book."
Another obstacle has been the book industry itself, which has been reluctant to release entire catalogs for download in part because of concerns over how such distribution will affect the bottom line and copyright protections. On Sept. 20, the Authors Guild filed a class action against Google for its plans to scan books in their entirety. The McGraw-Hill Cos. (MHP; owner of BusinessWeek.com), Pearson Education (PSO), Simon & Schuster, Penguin Group, and John Wiley & Sons (JW.A) brought their own suit against the search engine for its online book plans (see BusinessWeek.com, 4/24/06, "Ganging Up on Google").
Hard-to-Break Reading Habits
The publishing industry has proved most interested in online distribution only when it fuels sales of print books. Amazon (AMZN), for example, offers online-only digital books through Mobipocket, which it bought several years ago and exclusively sells online books. Many of the tens of thousands of titles it offers digitally, however, are available only with the purchase of a hardcover book through its main site. Steven Kessel, Amazon's senior vice-president of worldwide digital media, says "selection needs to improve and devices need to improve" before e-books really take off. Amazon doesn't disclose figures on sales or titles available.
Perhaps the biggest hurdle is consumer taste. Consumers are most interested in buying digital titles of books that have information they want to search for or reference, says Kessel. They are less interested in getting page-turners online, says Schroeder, adding that people want to curl up with a book, not the same computer screen they have been staring at during work all day. "For 10 years, everybody has been jumping up and down saying, 'e-books, e-books,'" says Schroeder. "And there will be a market, there is no question. But it is not going to come as fast as people thought, and it is not going to be across the entire spectrum of publishing."