The long-awaited Internet book store, which opened Monday in the U.S., draws upon a portion of the 15 million printed books that Google has scanned into its computers during the past six years.
About 4,000 publishers, including CBS's (CBS) Simon & Schuster, Random House and Pearson's (PSO) Penguin Group, are also allowing Google to carry many of their recently released books in the new store.
Those publishing deals will ensure that most of the current best sellers are among the 3 million e-books initially available in Google's store, says Amanda Edmonds, who oversaw the company's partnerships. Millions more out-of-print titles will appear in Google's store, called eBooks, if the company can gain federal court approval of a proposed class-action settlement with U.S. publishers and authors.
The $125 million settlement has been under review for more than two years. It faces stiff opposition from rivals, consumer watchdogs, academic experts, literary agents and even foreign governments, which worry that Google would get too much power to control prices in the still-nascent market for electronic books. Amazon.com, which started its business as a seller of books over the Internet, is among the competitors trying to squelch the settlement. The U.S. Justice Department has advised the judge overseeing the case that the settlement probably would violate antitrust and copyright laws.
Google Books Don't Work on Kindle
Books bought from Google's store can be read on any machine with a Web browser. There are also free applications that can be installed on Apple's (AAPL) iPad and iPhone, as well as other devices powered by Google's own mobile operating system, Android.
But Google's eBooks can't be loaded on to the Kindle.
Electronic books are expected to generate nearly $1 billion in U.S. sales this year and climb to $1.7 billion by 2012 as more people buy electronic readers and computer tablets such as the iPad, according to Forrester Research. The research group expects a total of 15 million e-readers and tablets to have been sold in the U.S. by the end of the year.
Google believes it's already offering the broadest selection of digital titles in the world, and it plans to keep adding to the inventory if it can gain the necessary copyright clearances. The company, based in Mountain View, Calif., believes it eventually will be able to make electronic copies of the estimated 130 million books in the world. It's also planning to start selling books outside the U.S. next year.
Google's eBooks store, originally to be called Editions, has been in the works for more than a year. The company already had been showing books no longer protected under copyright in their entirety and displaying snippets of other titles through its widely used search engine.
Google: A Friend to Publishers?
The company is trying to position its new sales outlet as an ally to publishers, merchants and consumers looking for alternatives to Amazon's electronic book store, which feeds Amazon's hot-selling Kindle, but not other e-readers, including Barnes & Noble's Nook.
Google's e-books will work on the Nook, Sony's (SNY) Reader devices and practically every other e-reading device except the Kindle. Google achieves this with the help of Adobe's (ADBE) copy-protection system for e-books. That system is already used by public libraries and smaller online bookstores, but hasn't seen much interest from the major players. Amazon.com, Barnes & Noble (BKS)and Apple all have their own copy-protection systems.
Google plans to offer sharp discounts on many of its e-books but it will still pay publishers 52% of the list price for sales made on its site, unless another arrangement has been negotiated with an outside agency. The formula means that even if Google elects to sell a book with a $10 list price for $6, the publisher would still be entitled to $5.20.
Forrester Research analyst James McQuivey described Google's latest effort as a "game expander" rather than a game changer.
The growing embrace of digital sales by the publishing industry is expected to result in the closure of hundreds more book stores during the next few years, adding to a media mortuary of music and video merchants killed by electronic distribution.
Google's announcement comes on the same day that activist investor William Ackman, who owns a 37% stake in Borders Group Inc., offered to finance a Borders-led takeover bid for rival bookseller Barnes & Noble. If successful, it could ultimately lead to closures of overlapping stores.
Giving Book Stores 'A Fighting Chance'
In a move that could delay closures of other retailers, Google is allowing independent book stores to sell its inventory through their own sites. More than 100 book retailers in 36 states already have agreed to team up with Google. They include Powell's in the Portland, Ore., area and online-only merchant Alibris.com.
Opening the door to book merchants who can't afford to invest heavily in technology could help some of them survive the digital transition, McQuivey said. "At least this gives them a fighting chance."
Although Google expects the lion's share of its eBooks revenue to be funneled to its partners, its portion of the sales could help the company develop another way to make money besides the Internet ads that bring most of its income. The availability of eBooks also could help boost advertising sales by giving people another reason to come to Google's website.
Google shares edged up $5.36, or nearly 1%, to close Monday at $578.36.
To allay concerns that it will exploit the dominance of its Internet search engine to spur e-book sales on its own site, Google plans to include links to several other places where people can buy a book mentioned in a search request. And when visitors come to the book section on Google's website, they will be asked if they are interested in buying or just doing general research.