Google's printing deal is revolutionary

Allister Heath
GOOGLE has come in for a lot of flak from publishers, some of it justified. But if you want to understand why it remains an exceptional company, there is no better place to start than with its latest deal. <br /><br />Over the last seven years, Google has scanned 2m out-of-print books from libraries and made them available and searchable on the web. But now any store that purchases the Espresso Book Machine &ndash; made by Google&rsquo;s partner, On Demand Books &ndash; will be able to print these off as and when customers require them. The machine, which looks a bit like a photocopier, costs &pound;85,000 and&nbsp; can print a proper, high quality 300-page book in four minutes at a production cost of well under &pound;2. <br /><br />So imagine the scene: a consumer pops into a bookshop, searches a database and finds a book that interests him. But because his tastes are so unusual his choice is out of print. Fortunately, it is one of those scanned by Google &ndash; and a few minutes later the consumer walks away happy. <br /><br />Any bookstore that installs this machine would suddenly increase its stock by an almost unimaginable amount. One can also see a day when all books ever published are available in this way, creating a perfect on-demand supply and making accessible the entire opus of human knowledge and literature. <br /><br />It is imperative that copyright issues are sorted out as soon as possible and that a mechanism is found to allow companies that are willing to digitise old books in this way to do so without destroying intellectual property rights. Revenues need to be shared fairly. But it is fascinating that the world&rsquo;s top internet firm has decided to enter the old-fashioned book printing business &ndash; and to rejuvenate the industry in the process. <br /><br />As Rupert Murdoch rightly argued earlier this week, electronic paper on hand-held readers will be a large part of the future for newspapers (Sony&rsquo;s venture in this area is based on a better business model than Amazon&rsquo;s Kindle, by the way). <br /><br />But what Google&rsquo;s deal also shows is that the era of paper media is far from over &ndash; something which this newspaper, which distributes more than 100,000 copies a day in London, has always firmly believed. <br /><br />The key is to offer products that readers want, where they want them, at the right price (which in some cases is zero). It is because it understands this that Google is such a great firm.<br /><br /><strong>FEARBEST REGULATOR</strong><br />IT makes sense for the FSA not to allow Lloyds to quit the asset protection scheme completely unless it raises over &pound;20bn in fresh capital. But while everybody now understands that financial institutions must hold more capital, few realise that banks used to be much more prudent before global rules were introduced. One hundred years ago, European banks&rsquo; average capital was around 25 per cent of the cash advanced to them, even though &ndash; or perhaps because &ndash; they were entirely unregulated. Yet the Basel I accord of 1988 required banks held a capital base equal to just 8 per cent of their risk-weighted assets. <br /><br />The lesson is not that we need to go back to early 20th century levels of capital (though over the next few years it would be good if banks held at least 10 per cent and in some cases much more). It is that when banks are scared that nobody will bail them out, they always act more prudently.<br /> <br />