Google Inc (GOOG) Faces New Competitor as Publishers Join Forces

Pearson Plc (NYSE:PSO) and Bertelsmann A.G. agreed today that the two would combine their book-publshing operations, Random House and Penguin respectively, in a joint venture, to be called Penguin Random House.

“The combination of Penguin and Random House would create a book-publishing powerhouse responsible for roughly a quarter of global English-language consumer book sales,” writes the Wall Street Journal. “The joint venture… will create a publishing giant that will have more heft at a time when the book business is being rocked by the rise of online retailers and e-books,” like Amazon.com Inc. (NASDAQ:AMZN), Apple, and Google Inc. (NASDAQ:GOOG).

“Together, the two publishers will be able to share a large part of their costs, to invest more for their author and reader constituencies and to be more adventurous in trying new models in this exciting, fast-moving world of digital books and digital readers,” said Marjorie Scardino, Pearson’s chief executive. In other words, the cost-savings will enable the publishers to compete more effectively, but there is more to it than that.

Earlier this month, Google Inc. (NASDAQ:GOOG) reached a settlement with several book publishers, Pearson included, “allow publishers to choose whether Google digitizes their books and journals,” writes the New York Times. “The deal allows publishers to choose whether to allow Google to digitize their out-of-print books that are still under copyright protection. If Google does so, it will also provide them with a digital copy for their own use, perhaps to sell on their Web sites.”

The litigation began several years ago when e-books were still in their infancy, and long before Amazon.com Inc. (NASDAQ:AMZN) Kindles and Apple iPads, and it doesn’t solve some of the issues Google Inc. (NASDAQ:GOOG) has faced with authors. But, as explained by the New York Times, “under the settlement, publishers get the benefit of Google digitizing out-of-print books that they might not otherwise have turned into e-books. Meanwhile, Google can expand the library of e-books it sells to consumers.”