Timing is everything

Google: Tackling tech monopolies requires perfect timing. As Microsoft’s history shows, it is very difficult to foster competition once a company establishes dominance. So it seems sensible that the more activist antitrust mandarins within the Obama administration might try to take on tech monopolies before they are entrenched. But sniffing around Google’s book digitisation project seems a case of overzealousness. The search company is about halfway through its ambitious goal of putting 15 million books online. About 70 per cent of these are copyrighted, but out-of-print, works. Users can then either read snippets of these tomes or buy on-demand versions of them from Google. The company will also give 63 per cent of the resulting revenue to a foundation set up to compensate authors and publishers.

This settlement is similar to what arose when music first started playing on the radio waves. Instead of having each artist draw up contracts with each radio station, which would have been impractical, a collective representing artists and publishers (ASCAP) did so. It established set rates for each time a song was played, and a market was born. The result was that stations could play music while the content providers got paid. Everybody benefited. True, the potential for harm still exists under such a system. Google's revenue sharing agreement with authors and publishers was the product of a class-action settlement.

Google is the only signatory to the pact. Should rivals like Amazon digitise books, it is highly unlikely they will face a class action suit and emerge with a similar settlement. Without competition, Google might be tempted to one day charge monopoly prices on books. Moreover, the book project may strengthen the company's power in search. Its market share of search is about 65 per cent, and adding areas such as digitised books may increase its dominance.

But it’s easier to argue consumers are being helped rather than harmed by the books project. Establishing agreements with libraries and scanning their books mean hundreds of millions of people outside of university hotspots like Cambridge. Massachusetts now have access to information they didn’t before. Authors and publishers receive additional royalties on books that are out-of-print and have input into price setting. Furthermore, the average prices on books seem fair – on average they’re sold at about $7 a piece.

Weighing how to reward the creators of content without harming the public is difficult, and Google’s book project seems to do it well. One safeguard might be for the Feds to allow rivals to scan books and share revenues on the same basis as Google, should they want to. Taking more intrusive measures would reduce Google’s incentives for taking a risk that ultimately benefits the public.