The GBS “Shopping Mall” Vision, Realized

Today, Google launched its new Google eBooks venture, described by the Wall Street Journal as “an extension of Google Books, a book-search site linked to company’s main search engine” that is a strategy to “open up a new stream of revenue outside of online advertising.”

This news – and the Google-speak attached to it – underscores the fact that while Google and its partners in the proposed Google Book Settlement have always tried to wrap the initiative up in altruistic themes like “A Library to Last Forever,” GBS watchers have always known that the settlement was about more revenue and profits for Google.

Reading Ryan Singel’s coverage, we were reminded of the wisdom of Pam Samuelson’s “Google Books is Not a Library” piece in the Huffington Post in response to the Sergey Brin column.  Samuelson clarifies that, “Unlike the Alexandria library or modern public libraries, the Google Book Search initiative is a commercial venture that aims to monetize millions of out-of-print books….”  Samuelson, a law professor at UC- Berkeley , sums up her view this way:  “Anyone aspiring to create a modern equivalent of the Alexandrian library would not have designed it to transform research libraries into shopping malls, but that is just what Google will be doing if the GBS deal is approved as is.”

This “shopping mall” observation is no hyperbole.  You just have to look at all the various ways in which Google can and will monetize on the corpus of books that it is scanning as part of the Google Book Settlement.  From book sales, to advertising alongside Book Search results, to the uncharted (and un-enumerated) territory of “non-display” uses, driving revenue is the priority.

Another kernel buried in the Google-speak is that fact that Google continues to scan books without clear copyright protection at an astounding pace.  We’ve highlighted before that their scanners can handle over 1,000 pages per hour, and Google now reports that they have scanned 15 million books since 2004 – that’s up from 12 million books in February of this year.  This massive scanning campaign is one the greatest advantages that Google enjoys as the world awaits a final court decision on the proposed settlement.  As the Department of Justice has also pointed out, the fact that potential book scanning competitors have decided to follow the letter of copyright law should not give Google a competitive advantage.  But 3 million (or 15 million) books later, here we are.  As Singel reports, a whopping 2.8 million out of the 3 million books available through the Google ebookstore are actually the product of this scanning.

One final word of advice to Google, maybe you should move Google Books and the Google ebookstore where it belongs on your homepage – under the Shopping tab.

EU Investigation Puts GBS Power Grab in Perspective

The European Commission’s Directorate General for Competition announced today that it was opening an investigation into allegations of Google abusing its dominance in online search.

“The Commission will investigate whether Google has abused a dominant market position in online search by allegedly lowering the ranking of unpaid search results of competing services which are specialized in providing users with specific online content such as price comparisons (so-called vertical search services) and by according preferential placement to the results of its own vertical search services in order to shut out competing services,” said the Commission in a press release.

In opening the investigation, the Commission joins other investigations about Google’s use of its monopoly on search to stifle competition in vertical search markets like books.  The Texas Attorney General opened a similar investigation into Google’s search manipulation in September and Harvard Professor Ben Edelman released a study that found that “…Google’s systematic promotion of its own services sharply reduces the space available for others.  And with results systematically featuring listings from Google and its hand-selected partners, there is reason to doubt Google’s promise of unbiased results guided only by relevance.”

Like we saw with the GBS, Google’s own business behavior is uniting a chorus of voices against itself.  A cross-section of voices from around the world including the U.S. Department of Justice, foreign governments, State Attorneys General, authors, independent publishers, libraries, consumer advocates, privacy groups and hundreds of other organizations have united in opposition to the GBS because of its faults on antitrust, copyright and class action grounds.

Akin to Professor Edelman’s report, a report from Technology Review’s Christopher Mims after parsing through University of Chicago Law professor Eric Fraser’s exhaustive paper on the GBS concludes that the GBS means “that under the current settlement, there is no reasonable expectation that a competitor to Google Books will or could ever arise. Because Google will be allowed to set prices more or less in collusion with publishers, this will give Google no effective competitors in this space. Google will be a de-facto monopoly.”

As the evidence against Google mounts, it’s worth revisiting why this is a bad thing for consumers.  Google controls about 70% of the online search market in the United States, and in some other countries, Google’s marketshare is above 90%.  Why does that matter for you?  Because Google controls so much of the online search market, it is the de facto portal to the internet for many users.  Thus, as Google puts it, it has the power to be the kingmaker of the internet, picking winners and losers simply by placing certain results at the top of search pages.

Book search is another vertical market that Google is seeking to dominate.  As GBS objectors from around the globe have stated before, granting Google an exclusive set of rights over millions of books through a flawed class action process that seeks to turn copyright policy on its head and trample individual author’s contract rights – as the GBS seeks to do – is a terrible idea.

Google-Hachette Rumblings

More voices are speaking out on the Google-Hachette deal.  And few seem particularly enthused.

The French author’s association, La Société des Gens de Lettres de France (SGDLF), came out this morning urging its membership to be thorough in their contract dealings with the search giant.

While recognizing that this deal could offer some benefits, the SGDLF highlighted the deal’s potential to weaken the French cultural ministry’s digitization project, announced last year—largely in response to Google’s unlawful scanning efforts.

Sam Edenborough, literary agent of the London-based Intercontinental Literacy Agency, stated that he would “cautiously welcome” the deal in the UK.  Novelist and GBS critic Nick Harkaway is also cautioning the UK publishers:  ”Having run into trouble with the Settlement, they have realized there are other ways of getting what they want.”

Mark Le Fanu, general secretary of the Society of Authors since 1982, is advising authors to pay special attention to details concerning revenue share and if rights can be reacquired “when their work is no longer being sold effectively.”

Google has scanned more than 100,000 French works that are still protected by copyright.

Is Google Turning the Page?

The New York Times today reported on a new agreement that grants Google limited rights to scan out of print publications owned by French publisher Hachette Livre.

Readers will remember that Hachette Livre was among the broad group of authors, librarians, public advocates and government officials that opposed the pending Google Book Settlement. French opposition was prominent from both private and official channels.

While details are scarce and still being finalized, the New York Times’ account points to a new Google strategy that eschews using the class action process to secure a blanket agreement and returning to the old fashioned way of doing business – around a negotiating table.

And while the French publisher is hopeful about their new deal with Google, the old deal still pending before Judge Chin retains the smell of an overripe Camembert.

Mr. Nourry said Hachette retained the right to take legal action against Google over its past book scanning activities, saying “we have agreed to disagree about the past.” He emphasized that the accord announced Tuesday was an “agreement,” rather than a “settlement.”

This turn of events is a welcome change from Google, who until recently was interested in pursuing a “my way or the highway” approach.  Now that we’re seeing that Google can successfully negotiate traditional deals for publishing rights, we have to wonder if they’ll drop or amend the GBS in a similar manner.

Privacy Matters

In the media black hole of last Friday afternoon, Google issued a mea culpa for gathering personal information, passwords and emails from unencrypted personal Wi-Fi networks.

This revelation was far different from the company’s initial response months ago when they assured the public that there had been no illicit data capture.  In the intervening months, the Wi-Spy scandal has drawn broad criticism from state Attorneys General, members of Congress and multiple foreign governments.

Privacy breaches like Wi-Spy, and Google’s lack of transparency in reporting the matter, are exactly the reason why many GBS stakeholders are reluctant to hire the search giant to be the world’s librarian.

Public interest groups have voiced strong privacy concerns about Google’s potential ability to aggregate and market the personal reading habits of the globe.  In an article titled, “Don’t Let Google Close the Book on Reader Privacy,” the EFF’s Cindy Cohn wrote:

“Google is poised to radically expand its book service, monitoring the digital books you search, the pages you read, how long you spend on various pages, and even what you write down in the margins. Google could then combine your reading habits with other information it has about you from other Google services, creating a massive “digital dossier” about you, your interests, and your concerns. With numerous reports of government efforts to compel online and offline booksellers to turn over records about readers, the time is now for Google to pledge to protect reader privacy.”

The New York Library Association has also weighed in on the matter, citing “patron privacy” as one of their primary GBS concerns.

The bottom line is that most readers assume a level of privacy protections and anonymity when they use resources like a public library.  Google has made an aggressive pitch that they can exclusively fill that role, but revelations like Wi-Spy certainly don’t help to convince the public.

More Monopolistic Musings

An approved Google Book Settlement would deliver Google an online market free of competition.

That’s the conclusion of Technology Review’s Christopher Mims after parsing through University of Chicago Law professor Eric Fraser’s exhaustive paper on the GBS.

In distilling Fraser’s work, Mims notes that Google’s decision to copy first and ask forgiveness later means that no other organization can expect to compete on the same terms as those granted through the GBS.

Specifically, Mims reports that:

This means that under the current settlement, there is no reasonable expectation that a competitor to Google Books will or could ever arise. Because Google will be allowed to set prices more or less in collusion with publishers, this will give Google no effective competitors in this space. Google will be a de-facto monopoly. “The parties to the actual lawsuit–Google on the one side and authors/publishers on the other side–all benefit from the settlement agreement because it enables collusive pricing,” Fraser said via email.

Of course this is one of the myriad reasons that the Department of Justice and others opposed the revised settlement.

Meanwhile, while experts like Fraser chronicle monopolistic misgivings about the GBS, the folks at Google continue to crow about their ongoing book scanning.

On Thursday, Google engineering director James Crawford wrote about the project’s success at scanning, “more than 15 million books from more than 100 countries in over 400 languages as part of the Google Books project we started in 2004.”

Ironically, Mr. Crawford speaks to ongoing partnerships with librarians and authors as key to the project’s success.  Unfortunately, we know a few authors, librarians and publishers that would disagree.

The GBS as a Benchmark

In a recent Forbes blog post, Washington Legal Foundation chief counsel Glenn Lammi points to the ongoing Google Book Settlement debate as a prime example of the government stepping in to check questionable online market behavior.

From the post:

DOJ’s inquiry into the Book Search suit settlement remains open, and Judge Chin has yet to rule on whether the settlement is “fair” to the parties.  His ruling, and DOJ’s possible actions in light of the outcome, will be highly instructive for those wishing to determine how government regulators will approach digital commercial behavior – especially by those with market power – in the future.

Lammi pulls highlights from the two Department of Justice filings sent to Judge Chin, noting that their actions helped send the initial deal back for revisions. Specifically, Lammi notes the DOJ’s concerns over Google’s ability to control the online book market if the GBS is approved.

Most importantly for the larger debate on online commerce and antitrust, DOJ expressed its strong concern that the new agreement did “nothing” on the “core issue” of “the ability of Google, and no other entity, to compete in a marketplace that the parties seek to create.”   The brief added, “There is no serious contention that Google’s competitors are likely to obtain comparable rights independently.”  To do so, competitors would have to copy books without publisher or author permission, and then hope a lawsuit (and its settlement) would follow.  Such an approach, DOJ wrote, “is poor public policy and not something the antitrust laws require a competitor to do.”

Clearly, the DOJ is right to be concerned about companies willfully ignoring copyright law as a business model.

That said, the scanning continues while we wait for Judge Chin to hand down his verdict.  By our count, the number of books in Google’s private library is now well into the millions and growing by more than 1,000 pages an hour.  We hope that number that will soon slow thanks to the DOJ’s measured intervention.

Sidestepping Congress

Copyright guru Pamela Samuelson has delivered a thorough analysis of motivations and challenges facing the GBS parties.  Her article, The Google Book Settlement as Copyright Reform, to be published in the Wisconsin Law Review, highlights just how complex and far reaching the settlement is.  The article also demonstrates how the proposal is a vehicle to replacing Congress as the driver of copyright reform.

On the motivation for Google undertaking the book scanning project and risking legal action, Samuelson writes:

Google undertook the GBS initiative not only because it wanted to attract more users to its search engine and supply them with snippets of information contained in the many millions of books it was scanning; it also wanted to make ―non-display uses of the books’ contents for purposes such as fine-tuning its search engine and language translation technologies. As one Google employee has observed, ―the very worst [search] algorithm at 10 million words is better than the very best algorithm at 1 million words. The best way to improve search technologies, he pointed out, is to get more data. It is obvious that books from major research libraries are dense with data.

Google‘s motivation to settle the Authors Guild lawsuit was not just, and probably not mainly, to avert the risk of statutory damage liability, but more substantially as a means to generate revenues from which it could recoup the costs of the GBS initiative. Google is an amazingly innovative and successful company, but thus far, it has been, as Steve Ballmer has put the point, ―a one-trick pony, in that it makes the overwhelming majority of its revenues from search-related advertising.

Eric Schmidt, Google‘s CEO, has said that he likes this pony very much, but he has also been cajoling Google staff to develop new revenue sources. The settlement, if approved, would generate considerable revenues for Google, as it would then be authorized to serve ads against GBS content, most of which it could keep for itself.

Too true, but hardly the same motivation that was described by Sergey Brin in his October 2009 New York Times op-ed that compared the GBS to an eternal library at Alexandria.

To be fair, all parties can agree on the benefits of safeguarding the planet’s literary treasures. But the question has been, and continues to be, is a unilateral project by a for-profit company that side-steps congressional authority an appropriate method of achieving the goal?

The full synopsis of Pamela Samuelson’s paper is below. It should be required reading for all GBS watchers.

An intriguing way to view the proposed settlement of the copyright litigation over the Google Book Search (GBS) Project is as a mechanism through which to achieve copyright reform that Congress has not yet and may never be willing to do. The settlement would, in effect, give Google a compulsory license to commercialize millions of out-of-print books, including those that are “orphans” (that is, books whose rights holders cannot readily be located), establish a revenue-sharing arrangement as to these books, authorize the creation of an institutional subscription database that would be licensed to libraries and other entities, resolve disputes between authors and publishers over who owns copyrights in electronic versions of their books, provide a safe harbor for Google for any mistakes it might make in good faith as to whether books are in the public domain or in-copyright, and immunize libraries from secondary liability for providing books to Google for GBS, among other things.

This Article explains why certain features of U.S. law, particularly copyright law, may have contributed to Google’s willingness to undertake the GBS project in the first place and later to its motivation to settle the Authors Guild lawsuit. It then demonstrates that the proposed settlement would indeed achieve a measure of copyright reform that Congress would find difficult to accomplish. Some of this reform may be in the public interest. It also considers whether the quasi-legislative nature of the GBS settlement is merely an interesting side effect of the agreement or an additional reason in favor or against approval of this settlement.

House Judiciary Subcommittee Takes on Monopolistic Practices

Tomorrow, the House Judiciary Subcommittee on Courts and Competition Policy will explore growing concerns about anti-competitive and monopolistic practices taking place online. We are hopeful that the Subcommittee uses part of the hearing to further examine the threat to online competition presented by the proposed Google Book Settlement.

The hearing, titled “Competition in the Evolving Digital Marketplace,” is an opportunity for members to make inquiries on the anti-trust implications of the proposed settlement. This is not the first time the committee has explored the Google Book Settlement or heard concerns from regulators and consumer advocates about anti-competitive practices from Google. “The committee is right to consider these issues,” said Peter Brantley, cofounder of the Open Book Alliance. “Chairman Henry Johnson brought a healthy dose of skepticism to the Google Book Settlement hearing last fall. He focused on the class, copyright, anti-trust and monopolization concerns that have been voiced by myriad stakeholders, including the U.S. Government, through the Department of Justice. Our hope is that the subcommittee will continue to look at the effects and dangerous precedent that could be set by the proposed Google Book Settlement.”

Other groups including the American Society of Journalists and Authors and the National Writers Union have voiced similar concerns in letters to Rep. Henry Johnson.

We look forward to another examination of the anti-competitive ramifications of the GBS.

Stay tuned…

Betrayal Makes Strange Bedfellows

As the fallout over Google’s net neutrality u-turn continues, more GBS watchers are finding common threads between how the online advertising giant approached its business strategy around books and its decision to cut a deal with Verizon, aka Verooglenet.

Earlier this week, we highlighted Prof. James Grimmelman’s brief but pointed “open letter” to Google.  Today, we are reading with interest Andrew Albanese’s aptly titled article This is Why It’s Hard to Trust Google at Publishers Weekly, who’s been covering the ups and downs of the GBS for quite a while now.  His view is summed up as follows:

“In covering the Google Books settlement I’ve always been struck by how many people seem to deeply distrust Google.  This week, the company gave those critics new ammunition.”

As a Google Book settlement “dis-truster,” we see his point and agree that a community of opposition beyond authors, the Department of Justice and the OBA are beginning to take notice.  Albanese closes the piece this way:

“It’s hard to be upset at corporations for acting like corporations, and what ultimately happens with net neutrality is still in the hands of government. But at the same time, wasn’t Google supposed to be different? Hasn’t Google has pretty much traded on the public’s faith? The Google Book Settlement, for example, was sold almost like a public works project. Yet throughout the settlement debate, critics and opponents of the deal have questioned just how deep Google’s commitment to the public runs. This kind of about-face from Google on net neutrality, and make no mistake, despite Schmidt’s support for what he calls a “public” Internet, this is a major shift, will only add fuel to the fire.

I can already hear the questions: Will the Google books database always be carried on the “public Internet?” Will an upgraded version of the GBS database be offered to premium customers, giving libraries in the well-funded suburbs yet another advantage over libraries in inner cities? If you thought the questions were complex enough for one Internet, Google is now talking about creating another.”

These are serious and even new issues to explore.  While looking at the Verooglenet u-turn’s implications on the GBS debate, a recent press release on the subject caught our eye.  The folks over at the New America Foundation – who have steadfastly promoted the proposed book settlement – had this to say about the Google-Verizon deal soon after media reports began leaking out last week:

During the 19th century a handful of wealthy industrialists dominated steel, oil refining and railroads; striking agreements to receive favorable terms for the carriage of their goods, while subjecting farmers and competitors to unreasonable and excessive charges.

Now, over a century later, history is in danger of repeating itself. After weeks of closed-door meetings sanctioned by the Federal Communication Commission, two of the largest corporations in the communications industry have reportedly negotiated an agreement on network neutrality. Though details of the agreement are not available, its terms are immaterial. It should not be the policy of the FCC to allow the largest companies to write the regulations that will determine the future of the Internet.”

Of course, one of the unnamed corporations is Google – whose CEO Eric Schmidt sits on the Board of the New America Foundation.  We found their allegory to the robber barrons of old reminiscent of the laying out our case against the books settlement:

“In 1871, three powerful railroads secretly approached John D. Rockefeller, proposing an audacious scheme.  The railroads wanted Rockefeller to transport oil over their lines.  More than that, the railroads needed to suppress cutthroat competition among themselves, to raise prices to customers and to protect their markets against new competitive innovations. So the railroads secretly proposed that Rockefeller act as their “evener,” to ensure a stable market division among them.  Through Rockefeller, the three railroads consolidated their market positions and insulated themselves from the rigors of competition.

In aid of their own business interests, the railroads dramatically increased Rockefeller’s market power.  The railroads secretly proposed rate increases to Rockefeller’s competitors and provided hidden rebates to Rockefeller’s own company, making Rockefeller “all but omnipotent in oil refining,” according to one biographer.  Rockefeller seized the opportunity.  At the time he was only one of many competitors in the oil refining market.  But he saw that he could dramatically improve his own competitive position by helping to suppress competition in the rail industry.  …

…The parties before this Court have created in the Google Books Settlement their own modern day version of the South Improvement Company.  Google and the plaintiff publishers secretly negotiated for 29 months to produce a horizontal price fixing combination, effected and reinforced by a digital book distribution monopoly.  Their guile has cleared much of the field in the digital book distribution, shielding Google from meaningful competition.”

It’s quite something when the Google-backed New America Foundation is equating Google with Standard Oil in the same way we did in our brief.  As Albanese writes, “…the company gave those critics new ammunition.”  But the real ammunition, as GBS objectors have known all along, is the truth.

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What Experts Are Saying About the Settlement…

Important Dates

December 14, 2009
Notice begins

January 28, 2010
Deadline for authors to opt out of the settlement

January 28, 2010
Deadline to file objections and/or amicus briefs

February 4, 2010
Deadline to file notice of intent to appear at Fairness Hearing

February 4, 2010
DOJ response

February 11, 2010
Plaintiffs move for final approval

February 18, 2010
Final Fairness Hearing

March 31, 2011
Deadline to claim Books and Inserts

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