Google to be bookseller by summer

Google has confirmed it will enter the retail digital book business, with the launch of an online store called Google Editions by July. Google Editions will also be available as a B2B service, allowing third-party retailers to sell eBooks on their own websites.

There's no word yet of any deals, and a company spokesman didn't elaborate on the question of pricing. Currently the major publishers insist on maintaining their current flexibility with pricing via what's called an agency model, which they hope will preserve their high margins. Apple endorses such an approach to market, even though it leaves "retailers" such as itself scrapping over a smaller pool of potential profits. It's also supported by literary agents who have long-running and lucrative franchises.

Amazon looks at it a different way - it wants to be able to set pricing, and it wants the high margins for itself. Amazon's original slice of the wholesale eBook price was an eye-watering 70 per cent, but after Apple's entry (with a publisher-friendly setup) it's since been forced to cut it back to 30 per cent.

By picking a fight with the book business, Amazon has been taught a lesson in where the power really lies. Publisher Macmillian withdrew rights to its vast catalog in the New Year, and Penguin stopped providing digital eBooks to Amazon a month ago. Apple is happy to work with publishers rather than dictate terms, because it sees it as a two-sided market - Apple makes its revenue from hardware, and content is merely a something that makes the hardware more attractive. Amazon wants both the profits of a traditional distributor and retailer and hardware profits. Something has to give.

You may by now be scratching your head and wondering where Google will make any money, since it doesn't make any money (even indirectly) from Android, and it's not an advertising play.

You're not alone. ®