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November 6 - November 13, 2008 Edition

Google Settlement
Has A Few Unseen
Wrinkles for Authors

Authorlink Analysis

The $125 million settlement between Google and a class-action group headed by the Author’s Guild and Association of American Publishers, at first glance looks like the perfect dream for authors. After a five-year court battle against Google, authors and publishers may at last see some compensation for books initially scanned without permission by the search mogul.

That’s the good news. However, a closer look at the 323-page legal tome gives rise to some questions that publishers, authors and their agents may want to answer before unreservedly embracing the Google Book Search program.

The plan has been eyed cautiously by a few U. S. publishers and booksellers. The most adamant reaction came from the German booksellers and publishers association, The Boersenverein. The group has warned that the agreement is a Trojan Horse which "will enable Google to achieve worldwide control of knowledge and cultural." The Boersenverein Chief Executive Alexander Skipis said the American model in the name of cultural diversity is “out of the question for Europe.” He said the new model contradicts “the European ideal of “diversity through competition.”

The settlement, announced October 28, and now pending the approval of U.S. District Court for the Southern District of New York, would greatly expand the amount of copyrighted material that Google can display online for free. Instead of the brief snippets from in-copyright works currently displayed by Google, the settlement would allow the search giant to make 20 percent of the text of a book available without charge for online viewing.

The plan calls for three different types of transactions: consumer sales, subscription sales(such as universities), and library use. The libraries can offer free access to all digitized books from a single computer within each library location.

In addition to out-of-copyright books, entire in-copyright works whose authors or publishers (rightsholders) opt in to the program, will now be available for sale online. In-copyright books will be available for a fee through subscription-type users such as universities, and will be offered for free through libraries.

All of these plans will be overseen by a newly-established, not-for-profit Book Registry composed of representatives from publishers, authors and libraries. Names of those who will sit on the Registry’s board of directors have not yet been made available. Google is contributing $125 million to the effort, some of which will be used to pay authors for prior unauthorized digitizing (about $60 per author). A whopping $30 million will be paid to lawyers. The remaining funds will be used to establish the Book Registry.

The Book Registry, it seems, will become a sort of super agency for the management of digital rights. So far, its activities are related to Google. However, the Registry is poised and well funded to easily become the overseer of content usage through any digital channel. The existence of the Registry may raise some interesting questions for entities like the Association of Authors Representatives, who heretofore have been overseers of an author’s digital rights.

The Registry will have equal representation of the Author Sub-Class and the Publisher Subclass on its Board of Directors, with each act of the Board requiring a majority of the directors, with such majority including at least one director who is a representative of the Author Subclass and one director who is a representative of the Publisher Subclass

The Registry also has the right to use any unclaimed funds and public domain funds lying dormant for five years to pay its own Registry operating expenses.

The good news is this: authors and publishers will at last receive a small share of net online sales of their digitized work. They will also receive a share of the advertising revenues generated from the book search pages, in an amount yet determined by Google. Google will provide links to online stores such as Amazon.com where consumer can purchase hard copies of books.

The announced publisher or author share of consumer sales is 63%, while Google retains 37%. Sounds good. But there’s some fine print in the massive legal document that everyone in the industry should study.

According to David Drummond, senior vice president of Google, there will be two kinds of payments. First there are payments for Google search samples (the price for which is purportedly set by the rightsholder), and the other payment is an as-yet-determined percentage of revenues from subscriptions.

The 63%, however is not what the author or publisher will actually take home. First, the rightsholder must pay the Book Registry a $200 “inclusion” fee for the privilege of being listed (or not listed) in the database Google uses for its searches and price setting. Can that be right, or are we misreading something? In addition, the Book Registry plans to take another 10-20% of the 63% to cover its “administrative costs, which whittles the publisher/author’s income down to 43%, less the inclusion fee.

The search giant also gets to charge 10% in operating costs off the top of the selling price before “net purchase revenues” are calculated. See item 1.87 in the agreement. We hope we have correctly interpreted the convoluted legal language here. Google gets to set discounts for advertisers, which in turn affects author compensation.

So, does anyone out there know the actual cost to the author of having two “middle men” (Google and the Book Registry), each taking cuts of revenue?

Google can­with the sanction of the Book Registry­set discounts deeper than the author may intend. For example, a $7.99 book may not net the 63% sum of $5.03 at all (especially after all fees are deducted). If Google decides to deep discount the book, to, say $1.99 that 63% share is whittled down to $1.25. We have seen this sort of deep discounting before--on Amazon.

The point is this: We need to thoroughly understand what the publishing industry is signing authors up for­as good as it may sound. Yes, the author or publisher can set a retail price through the Book Registry. Certainly $1.25 would be more than an author might get paid before the settlement was reached. But who really is in control?

The settlement grants Google the nonexclusive right to digitize all books and inserts (such as a book introduction) obtained by Google “from any source (whether obtained before or after the Effective date).

Under the agreement, there’s a question about who determines in-print and out-of-print status of a book? The agent? The publisher? Actually, Google determines the classification. And if the rightsholder doesn’t agree, he or she must go through the Book Registry to lodge a complaint. The Registry oversees all rightsholder requests and complaints, including any disputes about blocking the book for display on Google.

Particularly interesting is this clause: (iii) Limitations on right to Remove . Here’s how we read this one. If a person wants to remove his/her book under Section 3.5(a)(i)(Right to Remove), the person has 27 months from the Notice Commencement Date (whatever that means). Thereafter, requests will be honored only if the book has not yet been digitized. If the book has been digitized, the rightsholder can request exclusion from Display Uses, under Section 3.5(a)(i) (Right to Remove). We also see that the “Exclusion from Library Digital Copy” provision means the rightsholder cannot exclude the book or insert, such as a book introduction. We assume that this means certain indexing and snippets will still be available in libraries no matter whether the rightholder has requested removal or not. Perhaps the lawyers can explain.

If a book has an “insert,” such as an introduction, the rightsholder for that insert can exclude the insert from Display, in the same way the author or publisher can exclude the work.

Interestingly, even books that have been “removed” or “excluded” by the rightsholder can still be displayed and sold by Google to institutional subscribers for a period of ten months.

Authors and publishers who do not set the retail price of their books will have the prices set for them by Google algorithms.

Authors who are part of the Google lawsuit settlement will have their books placed in a “Controlled Pricing Bin” that will determine what percentage the rightsholder receives.

Here are the percentages to be paid by Google to rightholders based on Settlement Controlled Prices of the books.

Consumer Purchase in the Pricing Bins will be: 5% ($1.99), 10% ($2.99), 13% ($3.99), 13% ($4.99), 10% ($5.99), 8% ($6.99), 6% ($7.99), 5% ($8.99), 11% ($9.99), 8% ($14.99), 6% ($19.99) and 5% ($29.99).

The Guild and AAP have estimated that authors who are part of the class action suit will get up to about $60 each.

Finally, Google’s right to have access to data about a book or insert will not expire with the term of the US Copyright to the material.

In making the historic announcement last week, Richard Sarnoff, chairman of the Association of American Publishers said “This historic settlement is a win for everyone. From our perspective, the agreement creates an innovative framework for the use of copyrighted material in a rapidly digitizing world, serves readers by enabling broader access to a huge trove of hard-to-find books, and benefits the publishing community by establishing an attractive commercial model that offers both control and choice to the rightsholder.”

Holders worldwide of US copyrights can register their works with the Book Rights Registry and receive compensation from institutional subscriptions, book sales, ad revenues and other possible revenue models, as well as a cash payment if their works have already been digitized.

We hope that when the plan is further refined, it will deliver what it promises, without creating a mud hole for authors and publishers underneath a huge new profit center for Google.

The reader of this article can search within the actual agreement for phrases we’ve included in this article to determine the facts for himself/herself. Authorlink welcomes comments and corrections to dbooth@authorlink.com .

About the Authors Guild

The Authors Guild, representing more than 8,000 authors. For more information, visit www.authorsguild.org.

About the Association of American Publishers

The AAP is the national trade association of the US book publishing industry. AAP’s more than 300 members include most of the major commercial publishers in the United States, as well as smaller and non-profit publishers, university presses and scholarly societies. For further information, see www.publishers.org.

About Google Inc. and Google Book Search

Google’s search technologies connect millions of people around the world within formation every day. Google Book Search was launched in 2004, and today enables the full text searching of more than a million books online. More than 20,000 publishers and 29 libraries around the world currently work with Google to market their books through the service. Google is headquartered in Silicon Valley with offices throughout the Americas, Europe and Asia. For more information, visit www.google.com and http://books.google.com.