The Google settlement and unanswered questions, particularly about the windfall

Posted by Mike Shatzkin on April 16, 2009 at 4:41 am · Under Authors, New Models, Print-On-Demand, Publishing, Supply-Chain

Michael Cairns and I have both been frustrated with most of the conversation surrounding the Google Book Search settlement. The principal concerns of most of the participants in the dialogue seem to be:

1. Has Google unfairly captured a monopoly on some content?

2. Has the “class” of “orphan authors” been dealt with fairly, since they aren’t really “represented” in the negotiations?

3. If this case doesn’t adjudicate questions of “fair use”, does that ipso facto mean that a settlement is a bad idea?

4. Can any settlement of broad public-interest questions about copyright and use be legitimately resolved in any way other than through legislation, since, after all, copyright rules are created through legislation?

We believe it is unfortunate that the attention has been focused there because there are some very real commercial questions that we think need answers to fully appreciate the practical implications of the settlement. We’ve been doing our best to build a model of what revenue will be and where it will go. Trying to do that makes it very clear how much important detail has been omitted from the debate we’ve heard so far (and we’ve both heard a lot of it.) Here’s a starter list of questions that need answers to forecast this business which we hope that people more familiar with the terms of the settlement than we are might be able to answer for us.

By far the most significant questions we have concern how the revenues are divided, and these are significant questions because the preliminary financial projections we have done indicate that this database of content will produce hundreds of millions of dollars for Google and BRR.

1. We understand that revenue flows from the books in the database to Google and then 63% of that to the BRR. Are there any rules set yet about what BRR can keep of these revenues for its own operations before it passes on the remainder to rightsholders? We might logically assume that BRR would require a diminishing percentage as revenues rise, but we wonder how those controls will be established.

2. We understand that future orphan claims can be compensated going back five years from the time of the claim. That suggests that the BRR has to hold the orphans’ money in escrow going back five years. The key question we have not heard discussed is: what happens with the money older than five years? We’ll expand on that below.

3. How is the allocation of revenue determined for the copyright owners in the database? Are they paid by the amount of content in the database? Or by the number of pages viewed of their work in the databases licensed? Or on some other basis? Or is that something still to be determined by the BRR?

4. We believe that any sales costs Google incurs, such as hiring another organization to help them sell licenses, would come out of Google’s 37%. Is that correct, or can Google deduct sales costs before dividing the money?

And we have a bunch of questions to which the answer might be, Book Rights Registry (BRR: the entity with a Board of eight — four from the AAP and four from the Writers Guild — that can therefore deadlock) just decides. We want to know if there are any barriers or constraints on any of the following within the terms of the settlement.

5. We know that the database will have greater value and greater use if it is curated and merchandised. Is there a plan for this? Is there even a concept for how a third party could be compensated for doing this curation and merchandising?

6. We see opportunities for services & solutions providers such as SharedBook and to add value by providing the ability for customization, personalization, and annotation of the IP and then perhaps to have the end product sold both as a book and as an ebook. Is this a deal that BRR would just be free to make on whatever terms they deemed appropriate?

7. Does BRR get to retain a larger percentage of revenues for ‘home-grown’ product initiatives such as the ones we are describing? This revenue doesn’t come from Google like the institutional licensing and ebook sales money does, so does Google still get its full 37%?

8. To leverage non-database (non-Google) revenue opportunities we see three primary functions that need building: a storefront, an assembly technology (which could be much simpler than SharedBook: what if you wanted to put five Dickens novels together and print them?), and actual printing and delivery. Do we assume that BRR is free to put these capabilities together however it likes? Could it grant this as a sublicensed monopoly to Amazon or Ingram or Barnes & Noble?

9. We puzzle over the pricing of POD. May we assume that BRR would be free to pursue any model? We can see two immediately: one is that BRR gets a percentage of the book’s retail (or wholesale) price and the other is that BRR charges a flat rate for the book content and the packager-reseller then charges whatever they want for the resulting book. Is BRR free to make these deals as it likes?

At the core of the important discussion about the settlement which has not occurred is the question “what happens to the money the orphan books earn?” If it is divided among all the opters-in, which seems at least as reasonable as letting BRR just keep it, then there is a huge potential windfall to the copyright holders who stay in this database. That has not been mentioned by anybody (as far as we know). By consensus, 5 million of the 7 million books that are going to earn many tens, if not hundreds, of millions of dollars annually are orphans so, by definition, they have no copyright owner to pay! Either BRR keeps the money or they give it to the contributors to the database.

Not to have discussed this strikes us as a startling omission. Somebody gets a windfall much larger than the one going to Google. Who is it?

This post is an intellectual joint effort with Michael Cairns, who did a very helpful editing job on the first draft as well.

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Mike Shatzkin

Delete.
Mike
--------------------
Mike Shatzkin
http://idealog.com/blog
mike@idealog.com
Founder & CEO
The Idea Logical Company, Inc.
Co-founder: Filedby, Inc.
212-758-5670

bowerbird

mike said:
> You say Google is trying to
> get rich on controlling the content market.
> I think that’s ridiculous.

you put ridiculous words in my mouth,
and then call 'em ridiculous. how clever.

that's not even _close_ to what i said.
it's not just _ridiculous_, it's _stupid_.

what i said is that it would be _foolish_
for us to give google the legal right to
charge whatever it decides on content
over which it has an effective monopoly.

and that's what this "settlement" does.

i also suggested you look at pages 49
and 50 of the settlement, where we see
google will be charging $29.99 for some
of these print-on-demand books (which,
remember, cost a-penny-a-page to print),
but you didn't address _that_, did you?
it's stupid to let google charge that price.

but that's what this "settlement" does.

i also asked you to ponder the situation
where google will insinuate itself in the
nooks and crannies of every university,
with detailed knowledge about exactly
what pages of what books every person
in that university has summoned up,
and -- oh yeah -- the university _pays_
google well for this special relationship,
but you didn't address _that_ either...

but that's what this "settlement" allows.
indeed, google can say it _requires_ it!

no, you address only the smallest of the
issues that i brought up -- the orphans.

yet even with that very narrow focus,
you manage to _miss_ the main point,
and twist it into something "ridiculous".

so here's my main point in that focus:

even if it was a wise decision to _grant_
that effective monopoly -- and it's not,
but even if it was -- it would be stupid
to couple it with a legal right to charge
whatever price google decides to charge.

_whether_they_use_the_ability_or_not_,
it's stupid to give it up in the first place.

but plenty of people are _plenty_stupid_
on this matter, or so it would seem, since
plenty of people support the "settlement".

(and yes, mike, i did notice that you are
one of the people who is questioning it.)

do i think google will make many sales of
the orphan books? of course not, silly...
those books already exhausted themselves
commercially, which is why nobody bothers
to even claim ownership of 'em any longer.

at any rate...

sharpen up your reading comprehension,
and then go back and actually read what
i wrote, and you will see that i'm saying
that google will "get rich" by doing some
deep analyses on the immense text-base
of which these orphan books constitute
only a very small part. specifically, i said
google will wire an "electronic brain" that
"reveals amazing vectors of enlightenment."

now, do i begrudge google and its ability
to do those deep analyses to attain those
"amazing vectors"? heck no! more power
to them, and to their intelligent vision too!

_that_ is how they will "get rich", and they
will _deserve_ their riches for those vectors,
especially since they "took the risk" of taking
on the expense to _create_ that big text-base.

but here's the question: do we, as a society,
benefit from having this "immense text-base"
under the sole control of one private company?

or would it be better if everyone had access,
so as to discover "vectors of enlightenment".

i believe the answer to that is pretty obvious.

our cultural heritage and accumulated wisdom
belongs to _all_of_us_ -- _collectively_ -- and
we shouldn't let a small private entity seize it,
and sell us back the results obtained from it...

we must _require_ it be _shared_collectively_.

which is why we need to rebate google's costs.
it wouldn't be fair to have them shoulder all of
the costs and then make 'em share the product.

but, on the other hand, it would be very stupid
to let them hoard this resource simply because
they had the brains and the money to create it.

but, again, if this "settlement" goes through,
society will have essentially forfeited the option
to have a society-wide free-and-open text-base.

and _that_ is the problem here, mr. shatzkin.

each one of the orphan books is a small cog.
each public-domain book another small cog.
each copyrighted book is another small cog.

and google will _cumulate_ all the small cogs,
and combine 'em with all the other information
it has -- the content on the web, including the
valuable meta-content like links and trends --
and the resultant text-base will be _awesome_.

and the output from its analyses will _boggle_.

and it'll be in the hands of one private company,
which can then charge us through the nose for it.

and then we'll look back at this settlement, and
we will say "that's how they built the small cogs
into a big machine, and we _let_ them do it, and
that was a huge mistake, because it gave google
too much power, and we shouldn't have done it,
we should've required that the commons of our
collected culture and wisdom remained public."

_that_ is what i am saying, mike.

now, if you want to disagree with that, _fine_.
just put _your_ prediction on the record, mike.

so people can come back in 5 years, then in 10,
and again in 20, and see which of us was "right".

-bowerbird

Mike Shatzkin

First of all, if I mischaracterized your position, it was unintentional. Since you've made it clear that you think I'm a bit dim, you should have no problem assuming incapability not bad will in those circumstances.

I am not inclined to engage with people who are long-winded and who have a habit of being gratuitously nasty and belittling. You are both. As both the writer and editor of this blog, I am making the executive decision that the people who read it may have the same preference. So this is as far as I go with this thread. I'm not in business to give you an open-ended forum.

But since you want a prediction, here's mine.

If the settlement is approved, Congressional action will follow shortly thereafter. And because the settlement will help frame the issues and because we have intelligent leadership in the White House (although I don't know how much they've thought about these issues), there is at least a slim chance that what Congress does will be constructive. That will be a first in my lifetime if it happens.

If the settlement is NOT approved, we will continue to get NO action, except what we always get, which is the occasional extension of copyright protection for corporate interests big enough to push for it.

I don't disagree with what the thrust of what you describe as desireable. But your argument suggests that the sett lement would be The Last Word. I don't believe that. I think the settlement, if it is approved, puts a lot of wheels in motion.

You're a smart guy, bowerbird. I'm glad to have your intellectual contributions. If they're brief and if they're respectful. Otherwise, I'm going to delete them. From this point on.

bowerbird

mike said:
> But I think getting Congress to act
> so constructively here is a pipedream

i see your point. and i think it's sad. even tragic.

when some banks are "too big to fail" even though
what they have done is positively _evil_, but yet
we're willing to let a private company come in and
scoop up all the cultural heritage and accumulated
knowledge and wisdom contained in our libraries,
and then _sell_ it back to us, we're in trouble, mike.
we're in _big_ trouble, and the sh*t is way too deep.
and if we don't kick and scream and simply _refuse_
to let this immense injustice occur, we fail our future.

we cannot let this pass by. we simply cannot.

> Google’s interest here is search, not content sales.

you're being far too myopic.

google's interest is neither _search_ nor _sales_.

their interest is the immense bed of possibilities
that underlie this huge text-base of our culture...

their interest is wiring up a huge electronic brain,
one that reveals amazing vectors of enlightenment.

to compare this to "search" is to view our airlines
as the modern-day equivalent of the wagon-trains.

nonetheless, the #1 rule of business is fairly strict:
you have to make money, continuously, to exist...

so google will find ways to make money. this is one.

> Their business model is not to make money
> selling content; there isn’t enough money
> in that game to interest them.

you seem to be forgetting they have a monopoly...

as long as there is any inelasticity at all in the market,
google can set the prices whereever it wants... so it is
simply misguided to say "there isn't any money there".

the truth? you have no clue how much money is there.
but you can bet dollars to donuts that _google_ knows.

how many colleges are going to be able to resist paying
whatever google demands for getting in to their system?

what choice will a college have? to fund their own library?
yeah, right... it'll cost just as much, and be half as good.

now maybe, on the one hand, you might say, "well then,
google is charging a fair price, or colleges could compete."

except that that argument ignores the fact that google
_got_ all its material from libraries in the _first_place_!

it's a very good trick, it is. get something from someone,
and then sell it back to them. nice work, if you can get it.

and google used some slick lawyering to make sure that
the libraries where it got its content couldn't turn around
and form a consortium that would compete against google.

(exactly like they used slick lawyering in the "settlement".
and, just like those earlier contracts, we won't know what
google's lawyers did until some truth dawns in the future.)

> So I think your fear is misplaced.

i don't have any "fear"... google is just the _new_ master
who's overthrowing the old master (i.e., the corporations).

it doesn't matter if it's peter or it's paul who rips me off,
i'm ripped off either way. and indeed, i think that google
is likely to be a much better master than the corporations.

the corporations can't see past their next quarter, whereas
google groks the potential of a mass of our cultural heritage.

if i am going to be a serf under one of these regimes, it is
extremely clear to me which one of the two that i'd choose.

but why do i need to be a serf at all?

-bowerbird

Mike Shatzkin

You say Google is trying to get rich on controlling the content market. I think that's ridiculous. Let's take a look at this one in a couple of years and see a) whether content sales amount to a pimple on the butt of Google's revenues and b) whether they have indeed pushed up the prices people pay for content. Seems like we have a pretty straightforward difference of opinion here about which time will certainly tell.

bowerbird

mike said:
> I am not aware that we know
> how much the orphan books will cost.

telling, is it not, that it's something many of us do not know?
so presumably, we'd be handing google a blank check on this?

look at pages 49 and 50 of the "settlement" for the shake-down.

but, intellectually and in your gut too, you well understand that
a monopoly doesn't have any incentive except to raise the price,
right? i mean, you _do_ understand that, right? pretty obvious.

> Can you be more specific as to what you would want Google to do?

i don't particularly care what google does.

i want the federal government to act to declare eminent domain on
the orphans. i want them to compensate google for the scan costs,
and -- after allowing some time for "ownership claims -- put all the
true orphans online, in the public domain, cost-free, for all to use,
most specifically including other search engines.

i'd let any company do print-on-demand for the orphans.

and i would do the same for all the public-domain titles...

in addition, i'd offer attractive buy-outs for in-copyright works too,
attractive enough that the "owners" would find it more appealing
to take the for-sure buy-out money than "possible" yearly royalties.

we could do all this with a few billion dollars, a drop in the bucket
compared to the bail-outs we gave to the financial industry crooks.

i am convinced this would give us a needed intellectual jumpstart
-- the possibilities underlying this text-base are mind-boggling --
not to mention imbibing us with a solid cultural history foundation.

we all know that -- in the world of tomorrow -- you will either be
_in_ the jetstream and available freely in cyberspace _or_else_
you will be invisible, totally and completely, and we know that
nobody at all will choose to be totally and completely invisible,
so let's just get on with the transition to the way things will be.
we're just wasting time with all this "who owns what?" bullcrap.

> You want them to give the orphan books away
> in the same manner they are the public domain books?

after rebating google for the costs of the scanning, yes. indeed,
i would also rebate their scan-costs for the public-domain books.
i would also factor in a healthy profit on their costs, and send 'em
a _very_ nice thank-you note and some expensive swiss chocolate.

i might also pass a few laws giving them "the benefit of the doubt"
on any copyright cases where they were being challenged in court.

let's be fair.

google got us off-and-running when we were completely paralyzed.
good for google, and good for us too. so let us be _fair_ to google.
which doesn't mean letting them be unfair to us... or evil either...

-bowerbird

Mike Shatzkin

There's a lot to agree with here. But I think getting Congress to act so constructively here is a pipedream: not undesireable, just impossible. Every time Congress has touched copyright in my lifetime, they've made things worse. Perhaps the so-called "Google monopoly" will be the spur to release orphans.

My solution would be short-term copyright, with renewals that cost something reasonable ($100?) to discourage squatting but to allow creators who are making money to continue to. It sounds like we wouldn't be so far apart on that one.

Google's interest here is search, not content sales. Their business model is not to make money selling content; there isn't enough money in that game to interest them. So I think your fear is misplaced.

What you (and publishers and authors) should fear is that they'll do their best to make as much content FREE as they possibly can. That's their business, and it isn't particularly helpful to the businesses of people that sell content. But, then, selling content won't be much of a business for very much longer.

Eric Hellman

After more study of the agreement and some of the appendices, I wrote up some observations at http://bit.ly/lBHSD

I concluded that I needed a new word for what Google gets vis-à-vis Orphan works: a murkopoly.

Mike, thanks so much for this excellent discussion!

Mike Shatzkin

Your observations add a lot of value. IANAL either, and it would have bent my brain to try to play on TV the way you just did. I would urge everybody who wades through all these posts to also look at yours. It further defangs the notion that Google is eliminating all other orphan IP exposure through this settlement, even before the legislative action I believe could well follow this settlement, if approved.

bowerbird

where the money for the orphan books is going
is one important question that's being ignored...

another one, though, is why the price for those
orphan books will be so out-of-sight expensive...

google is leaving a lot of questions unanswered,
even unasked... and it's not because they don't
know that those questions are important. nope,
it's because google knows they _are_ important.
and the less we understand, the easier it is for
google to cheat us, which is what they are doing.

using these dead authors to rob the public is
despicable; google should be ashamed of itself.

i cheered google, from the outset, loud and proud,
because they were spending money to do the job...

but now they've turned it into a smash-and-grab,
and i'm sickened by their greedy new behavior...

-bowerbird

Mike Shatzkin

I am not aware that we know how much the orphan books will cost. Can you be more specific as to what you would want Google to do? You want them to give the orphan books away in the same manner they are the public domain books?

Eric Hellman

I left a comment over on the bits Blog, and now I'm starting to get worried I got something wrong. Is there or isn't there a monopoly for google for use of works that are not claimed? My reading of the settlement agreement says the BRR (with consent of its board) CAN grant the same licenses to other parties that Google has, respecting the MFN clause, but now I'm remembering someone at the Columbia conference saying that the BRR can only do that for claimed works, which would leave the unclaimed works for Google to use exclusively. Am I dreaming?

Mike Shatzkin

As I understand it, the BRR can make deals for the claimed works within the limits allowed by the claimants. But only Google is relieved of potential statutory liability on the orphan works so anybody else doing anything would have to take a real risk. Theoretically, the risk diminishes after many of the orphans are cleared by claims, but the risk is not eliminated. In addition, any further deals for the orphans beyond what is clearly stipulated as allowable for Google in the settlement would have to be approved by the BRR board, which includes publishers and authors. Authors have an inherent interest against allowing exploitation of the orphan works because they introduce competition which otherwise doesn't exist for currently written and published books.

James H. Byrd

It is fascinating how the Internet is changing the way we view intellectual property. I'm also involved in software development, and what has happened with the Open Source movement is similar to what we are seeing now with publications.

As information becomes cheaper and easier to transport and deliver, more people are arguing for the removal of any copyright "protection" (as you prefer to put it). People who develop intellectual property should just do it out of the goodness of their heart and for the betterment of mankind.

That's a wonderful sentiment, but it only makes sense if NOBODY charges for ANY IP. But, as you suggest, just getting a warm and fuzzy may not be sufficient reward for IP creators to dedicate the time and energy necessary to produce something in the first place.

I guess my point, and my main concern, is that as long as we have the legal concept of copyright, there's no such thing as an "orphan" work. Until the copyright runs out, the content should be protected whether or not the copyright holder (or his/her assigns) can be reached. That may mean that less IP is available to the public, but heck, there's lots more where that came from!

Mary Murrell

Mike -- Eric is right to correct me above. The unclaimed funds go to the Book Rights Registry and thus to the rightsholders who have come forward. Google is out of the loop at that point. I slipped there, sorry.

James H. Byrd

One thing that is interesting to me about this whole topic is the concept of intellectual property becoming part of the public domain in the first place. As soon as you author something and make it public, you have effectively "given it away" to the world at large. Sure, you get protection for a limited time so you can be the primary beneficiary of any revenues generated by that intellectual property, but that is just a matter of convention, and it is often ignored (plagiarism is rampant on the Internet).

It turns out that copyright is a privilege, not a right. Our legal system created that privilege for us. Looking at it that way, if you care about holding on to your copyright, you have to fight for it within the system that created the protection in the first place.

Whether I think Google Book Search is a good idea or not, it is a true threat to every author and publisher's copyright privileges. If you ignore the threat, it won't go away, but your copyright privilege might.

Mike Shatzkin

I guess I see your position as the polar opposite of the "it all should just be free" crowd. So I'm in the middle of the road! (A strange place for me...)

I'm all for copyright protection for some reasonable period of time to protect the financial interests of an IP creator and an IP investor. But I take the view that copyright should a) have to be renewed fairly frequently (every five years, maybe?) and b) should cost something (doesn't have to be a lot: maybe $100?) so that people can't just "squat" on copyrights permanently.

I am guided by commercial practicality and public interest. There is no commercial practicality to eliminating c/r protection. And there's no public interest to burying intellectual property.

Mike Shatzkin

I see copyright as a device created by government to serve a public purpose. Or at least initially it was intended to serve a public purpose. The net changes in US copyright law in my lifetime have served private interests much more than any public purpose. Copyright confers the protection of the government on intellectual property. There is no inherent requirement that this be done. I'd agree with you that c/r is not a "right", but I'm not sure it is a "privilege" either. It is a "protection" that would presumably encourage both creators (authors) and investors in creation (publishers) and, without which, there would be less IP available to the public.

Joy Butler

Your readers might find useful my 10-page annotated summary of the proposed Google Book Settlement Agreement. It is available at http://www.joybutler.com/googlesummary.pdf

The post and comments raise many good points. I can address the 63 percent versus 70 percent issue. Sections 2.1(a) and 4.5 (a) of the settlement indicate that authors/publishers receive 70% of net revenues. As part of getting to net, Google takes 10% off the top for its operating expenses. That's how we get to 63% (i.e., 70 percent minus (10 percent of 70 percent) = 63 percent). You should also note that while Google will pay $34.5 million to launch the Book Rights Registry, the ongoing administration, operations, and tax costs for the Registry will be deducted from the authors and publishers’ 63 percent of revenue. That's in Section 4.2 of the Plan of Allocation.

The annotated summary tracks my complimentary teleseminar, “What the Google Book Settlement Means for Authors and Publishers”. You can find more details about the annotated summary and the teleseminar replay at http://tinyurl.com/dk6w68

- Joy Butler, Attorney and Author of The Permission Seeker’s Guide Through the Legal Jungle.

Mike Shatzkin

Experience has shown that no number of commentaries on this settlement is too many. Thanks for adding yours.

Mary

Eric, yes, you're right. I should have said "to the brr."

James Gleick

"2. Has the “class” of 'orphan authors' been dealt with fairly, since they aren’t really 'represented' in the negotiations?"

As someone who represented authors in the negotiations, I would like to say that I believe I represented "orphan authors," too--whatever is meant by that, exactly.

The people who are advocating legislation to deal with what they call the "orphan works problem" define those as works for which the rightsholder no longer exists, or cannot be found. In such cases, they believe the works should revert to the public domain.

But there are many authors and rightsholders who DO exist and are just difficult to find. Until now, they have had no reason to come forward to claim their rights in works that are out of print and producing no revenue. The settlement will change that. It's what the Book Rights Registry is for.

So I believe that the settlement is a SOLUTION to the orphan works problem, both from the point of view of people who want to use unclaimed work and from the point of view of authors of works that have lain dormant. For the first time, the Registry will have a database of all these works, and rightsholders will have a place to go to claim any money that is being made. The TRUE orphans, for which there really are no interested rightsholders, will finally be identified.

Mike Shatzkin

You're the first "famous" author to comment on my blog. Welcome!

I have no quarrel with what you say but I don't think it is a "final answer." After the $60 incentives are promoted and a variety of formerly-orphaned works have their parents declare themselves, there will still be something north of 3.5 million, maybe north of 4 million, books seen as under copyright and still unclaimed. I would agree that the BRR effort would tend to have smoked out anybody alive and sentient, but there is still a nasty statutory penalty ($150,000?) hanging over the head of any publisher who decides to publish an orphan SHOULD the c/r owner subsequently show up. And the BRR won't have the right to license that material without the consent of the Board.

As a writer, James, how will you feel about that? After a year or two, would you advocate your AG representative (or maybe you'll be one!) voting to enable the BRR to license those orphans for POD or reprint (which would have to be back to Google, I guess, because they're the only ones protected)? Would you support legislation that liberated those orphans to compete with your next book, and the next book of your fellow writers?

I think your last paragraph would be more accurate if you said the settlement "begins to address the orphan works problem." I think it is a stretch to call it a "SOLUTION."

Eric hellman

I found the 63% in 2.1(a). It's 90% of 70%. Weird. But the "10%" for Google's operating cost" makes it clear that we're talking about gross, not net.

Eric hellman

Mary's right that subscription revenue will not end up at charities, but I don't see how it can be concluded that unclaimed subscription revenue would go back to google.

Eric

Mike Shatzkin

Eric,
I have gone back to the documents too (which I had really hoped to avoid; I had been counting on smart people who love detail and minutiae to guide me through this in a trustworthy way...) As I read the Attachment C Plan of Allocation, it seems to me that a) the $60 per title Google is paying is a down payment on $200 a title that can be earned as an inclusion fee and b) if there are overages available, those seem to be divided among opters-in with no additional cut to Google. So it looks to me like you're right. Charity gets none of this money, but Google doesn't either. The opters-in do! (if there IS any such money...)

Eric hellman

Mike,

Where does the 37% number come from? The settlement agreement has 30/70 splits, but I can't find 37 anywhere.

Eric

Mike Shatzkin

I'd have to ask others about that, but I'm quite sure that 63-37 is the split between Google and BRR. And I just got off a very long call with somebody intimately involved in the negotiations where we used that number. I'm working only with secondary sources, but good authorities.

Mary Murrell

Mike,

Your comment above (relayed from Michael Cader) is mistaken. The Settlement, in section 6.3 a (ii), specifies that "unclaimed funds" from the institutional subscription revenue will be distributed to Google and the rightsholders who have come forward to claim works. And, of course, the bulk of the revenue will come from the institutional subscriptions.

The charity provision is in section 6.3 a (i) and it pertains to revenue from "non-subscription revenue" -- from ads, individual purchases, and print-on-demand (which will be much less). Further, these funds go to charity only after a significant portion has been skimmed off.

Something will go to charity, but it's no windfall.

Mike Shatzkin

Mary,
Wow. I'm now hoping I didn't misunderstand Cader, but that's what he gets for the kindness of telling me what I should have known in a private email instead of posting a comment to my blog.

So we're back to the windfall. If the opters-in are getting 63% of the orphans' money, that's a huge incentive to opt-in, isn't it? Funny we haven't heard anything about that.

Thank you for this clarification. And I must say I still find it amazing that this significant financial aspect of this so-much-discussed subject has been the subject of so little conversation!

James H. Byrd

Thanks for continuing to research this issue, Mike. As a self-publisher who consults with self-publishers, I appreciate your efforts and look forward to each new revelation. I'm concerned about the future potential for the work of self-published authors to slide into the "orphan" category, should those authors fail to be diligent about making it easy for people to contact them about their material.

Personally, I think the greedy policy of "if we can't get in touch with you, you lose your copyright and we can sell your stuff without compensating you" is essentially theft. My respect for Google as an organization has taken a hit over this matter.

Mike Shatzkin

Thanks for the comment.

Unfortunately, I think any resolution of the orphan books challenge -- and let's remember that Google may have scanned 5 MILLION of them -- is going to require the "negative option" aspect you don't like. The only other "workable" solution would be to shorten copyright term. If we took it back to, say, the 56 maximum years it was 50 years ago, then everything pre-1953 would be clear now and each year we'd add a year of stuff. It we don't do something like that, then we have to do something to liberate books for which there is (apparently) nobody to consult. It is almost impossible to distinguish among the authors who are dead and those who are just "sleeping." So whether Google does it or Congress does it or some other combination of players does it, the process of freeing the orphans will inevitably also "liberate" some stuff that's owned.

It is important to remember that c/r owners can declare themselves at any time. There is no time limit on that at all.

Mike Shatzkin

I have received an offline reply from Michael Cader who has provided some answers. As to where the windfall goes, the answer is "charity." Quoting from Michael quoting the settlement language:

"The Registry shall choose not-for-profit entities described in Section 501(c)(3) of the Internal Revenue Code that directly or indirectly
benefit the Rightsholders and the reading public, and will include entities that advance literacy, freedom of expression, and/or education, and, for avoidance of doubt, will not include the Authors Guild, the Association of American Publishers or other trade organizations."

On the second set of questions, Michael makes it clear that the settlement requires permission of rightsholders to do anything but the clearly stipulated deals. But since most of the value in the database is in orphans where there are no (declared) rightsholders, that would seem to leave the Registry a) free and clear to do deals and b) since the money after "cost" would go to charity, that would leave BRR and its managing Board with very little incentive to control costs.

I want to emphasize that I am not opposed to the settlement. I'm just trying to understand it.

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The Google settlement and unanswered questions, particularly about the windfall

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