A Few Thoughts On The AAP-Google Settlement

One of the lingering questions about last week’s settlement between Google and the Association of American Publishers is why now after seven years of litigation?  The easy answer is both sides simply got tired of the fight.  I think there is more to it than that.  Even though the terms of the settlement are confidential, there are a few known elements.  One is that the publishers can opt out of selling through the Google Play Store.  Another is that Google will supply copies of scanned works to the publishers for possible sale through other vendors.  The benefit to the public is that a publisher can now offer back catalog items for sale as e-books.  None of this explains the “why now” question.

I think the settlement represents a strategic decision by the publishers to create an alternative distribution system as a counterweight to Amazon.  Google is perfect for this role.  The settlement required give and take between the publishers and Google which is not the relationship they seem to have with Amazon.  The lawsuit filed against Apple and several publishers filed by the Department of Justice at least indicated that Apple did not want to compete against Amazon on price, hence the most favored nation clause in the agency contracts between the parties. 

Google, on the other hand, has very deep pockets and a very deep reach with public.  It’s also a company that is known to experiment with concepts and ideas without worrying too much about the ultimate cost.  As Apple would prefer not to compete on e-book prices, Google may be more than willing to do so.  I think the publishers would be delighted if Google took market share away from Amazon much like the record labels hoped Amazon and Wal-Mart would take market share away from Apple in music sales.  None of this could happen with Google as an adversary.  The recent settlement makes Google not only a partner, but a compliant partner.  It has a viable ecosystem through Android devices and the Nexus 7 tablet.  Unlike Microsoft and Barnes & Noble, Google has a relationship with consumers that go beyond its store. 

The market, it seems might not be so completely foreclosed to Amazon as the publishers feared.  I believe the development may undermine their argument that adopting the agency model and MFN clauses was necessary to prevent Amazon from gaining a monopoly.  Getting Google into the market in a big way seems to be a perfectly legal alternative.  None of this may address the publishers’ concern that e-book pricing is too low.  As the song goes, you can’t always get what you want, but you get what you need.  Right now the publishers need a viable alternative to Amazon.  Google may be their best bet.  [MG]