The eBook story is simple: Google will offer a device agnostic scheme that allows consumers to buy and download content from either Google’s eBokstore (more than three million titles with “hundreds of thousands” for sale) or from one of the search giant’s partners (Powell’s, Albris, etc…). Their digital content on the Google online store will be powered by Google’s eBook infrastructure.

Google will deploy whatever model a publishers selects: agency model with fixed pricing or wholesale retail with suggested pricing and fixed margins. Keep in mind, Google will be competing with its partners, but it also contends its partners can add quite a bit of their own brand and value alongside the bookstore. As both an arms dealer and arms retailer, Google puts itself in the rare position to get a piece of every transaction that flows through its pipes.

Google has licensed Adobe’s ACS4 DRM,which means the content can be read on e-ink based black and white devices aside from Amazon’s Kindle which uses its own proprietary DRM. Google will have an eBook application for the iPad, Android devices (but of course) and presumably ever other flavor of device platform on the horizon that supports a web browser. Consumers can access their books (and presumably later, newspapers and magazines) from any device simply by entering their Google account and download the appropriate app or, in the case of a e-ink reader, side load the content using Adobe Digital Editions.
A few issues to note: books purchased prior to the launch of Google’s eBookstore cannot be transferred to the cloud. So, a book purchased from Barnes and Noble for the Nook cannot be deposited in the Google cloud due to DRM issues which tie content to devices. Books purchased from Google will be paid for using Google Checkout which, while having millions of users has not been a popular payment service when compared to the payment experiences of Paypal or iTunes.

While Google’s pending case over unauthorized use of copyrighted material has an impact on its eBook launch (settlement would add millions of new titles to the content tank), the negative PR Google has suffered from its prolonged battle with publishers will require some marketing and goodwill spin to prove themselves a friend rather than foe.

The big picture: The eBookstore launch and parallel efforts with Google TV must be viewed as companion efforts to establish a cloud-based media storefront. Add in the purchase of Widevine (multiplatform DRM and content optimization platform) and you see the formation of two content services with the ability to share customer behavioral information, advertising targeting and a device agnostic distribution engine. A book purchased by a consumer on the wine regions of France could likely result in the delivery of a TV clip, pushed to a user via Google TV, on a related topic complete with targeted advertising. User behavior data collected and collated across Google’s content services and Google’s search engine creates a scary scenario of cross-media dominance.

The fruition of Google’s media cloud plans likely will lead to positioning of competitors in this rarified space: Apple, Amazon and perhaps Microsoft. A few of the major CE companies who have devices across the content consumption landscape—Sony and Samsung to name a few—will want a piece of the media cloud either through ownership or partnership. It can be profitable to sell a consumer a TV set or e-reader, but far more profitable to have that device owner come back and use your storefront as a content hub.

Certainly a pressing question is how Google’s entry into the eBook distribution space impacts Amazon. Google and the Seattle-based giant etailer have similar positions in that they own large pieces of the e-book value chain. Amazon is in the device business as well, but its proprietary stance seems close to being a major liability. This leads Amazon with some pragmatic choices: move to the ePub/Adobe DRM standard or get out of the device business. With assets that go beyond books (movies, music, shopping) it’s much more reasonable to expect Amazon to remain in the device space, adopt open standards and even come out with a tablet device that has cross-media capabilities and some sort of location-based shopping capabilities.

Possibly, Google’s eBook service will not emerge out of the gate like a bolt of lightning. The market of content supply and consumer demand is unstable, fraught with battles between proprietary stakeholders. Google can patiently sit back and wait for consumers to demand open, portable standards and raise its hand as the device-neutral, consumer-friendly answer. Sounds like a good position in this ever-changing space.

Film rentals are a natural progression for YouTube and hardly a major surprise, given the number of competitors that range from Netflix to Apple TV, and clearly not part of a first-mover strategy. The areas of filmmaker control over pricing, rights and rental windows is a market differentiator but is it enough to evoke more than a tremor in the consumer media marketplace?

The answer requires a broader view of Google’s media cloud strategy. Simply put, it is Google’s intention to become the leading distributor of consumer-oriented content—books, newspapers, magazines TV, movies and (perhaps) music. All content will be stored in Google’s cloud and distributed—primarily through a browser interface—to any device associated to a individual consumer ranging from Smartphone to tablet to televisions via a set top box. Google will provide the tools for varied monetization schemes in a revenue sharing model as well as seamless integration into the leading search engine.

The key consumer-facing components of this cloud strategy are YouTube (all things TV, film and video) and Google Editions (all things print). As YouTube rentals unfold, you will be able to see a set of attributes that show elements of this cloud strategy: the rental service will likely expand to include distribution to mobile platforms and OTT TV platforms on which YouTube already have a presence (i.e. Apple TV, Boxee, Wii, PS3) with such features as enhanced search and discovery via closed captioning/auto speech recognition.

Google’s media strategy is geared to take dead aim at Apple. Both companies (along, perhaps with Amazon) will likely become the future archetypes for successful media titans with an emphasis on friction-free, content agnostic, multiplatform monetization. At this point, it’s an interesting blueprint; the devil will be in the details.

So why should you care? For starters, Living Stories amounts to a template or interface that fits nicely into a publisher’s content management system. With a move toward open source CMS, (i.e. Drupal) the area of third-party development of interactive templates that seamlessly work with existing workflow could be a godsend. It’s a safe bet that Google and other developers are able to take a more innovative approach to content presentation than either a newspaper or its CMS vendor. It’s also a safe bet that a CMS template designed by Google will be metadata friendly leading to easier SEO.

Bigger picture, think news on mobile devices. As Google rolls out its media cloud strategy (more on that in subsequent research reports), it’s easy to imagine it hosting a giant CMS in the cloud with templates built by eager developers. Logically, in a cloud world that is device agnostic, many of those templates will be well suited for mobile devices (no doubt developed with HTML 5).

What’s in it for Google? Well, there’s advertising as in each template comes complete with some ad avails easily populated with contextually aware ads. Also imagine Google charging for these CMS-ready templates, becoming the cloud app store for media companies.

All of this presupposes Google is able to convince newspapers that it’s a publisher’s friend and not a doer of evil to the news world. If Google’s media cloud plan works (and on paper, it looks frighteningly solid), the company is positioned well beyond the search space for the next several years

To be fair, Kindle has a large number of public domain books it has wrapped in  its proprietary .azw DRM, but again we’re talking walled garden.

Here’s what I like about the Nook:

Freedom to buy books from multiple sources as well as read library books: The book I downloaded from my public library (in secure PDF) was easily transferred to the Nook using Adobe Digital Edition software. When connected to your PC via USB, the Nook shows up as a device in the software, and from there, it’s a simple drag and drop to the device.

The Daily: The first tab on the color-screen menu is called “The Daily,” a nice little what’s new page with some sort easy and commentary from such authors as Dave Barry and Steve King. This is just one of the little surprises that give the Nook its personality.

The ability to loan books: with The Nook, readers can loan anyone with either Nook or Barnes & Noble software on their desktop or smartphone, a book for 14 days. Not all books can be loaned (the titles are chosen by publishers) and one book cannot be lent to the same person twice. When a book is lent, it will show up in the recipients’ “the daily” section.

The mutlichannel experience: While not in place yet, bringing your Nook into a Barnes & Noble store should result in a few surprises. The Nook will automatically connect to B&N’s free AT&T wireless and present special book offers as well as other in-store special (i.e., free coffee at the B&N coffee bar).

The navigation buttons: In this case, I am referring to the page turning buttons alongside the e-reading window. They are nicely recessed and have small raised bumps to allow you to push without looking directly at the buttons.

Here’s what I am still pondering about the Nook

The color screen: At first, I found the color screen distracting because it interfered with the reading experience in the e-reading window above.  The color screen goes dark after 30 or so seconds and becomes a navigational tool meaning you can swipe the screen to turn pages. I found the swiping on the color screen to be less responsive than what I am used to on my iPod.

Device synching: Perhaps and early bug, but the book synching between my Nook and my desktop PC e-reading software does not work. I know a software update for the desktop and iPhone app is being planned.

Here’s what I don’t like about the Nook

Newspaper e-reading: Like all other dedicated e-readers, the newspaper experience is not very good. The content is rendered in ePub, so it looks slightly better than the Kindle, but not enough to be of significant interest.

Odd navigational features: Some of the reading navigation such as up and down arrows and opening content take place in the lower color window. I find it awkward; there should be some sort of controller by the e-reading window to handle those functions.

In reality, the battle is not an all-out war as the Kindle is in ready supply and Barnes & Noble is fulfilling pre-orders; you cannot walk into a Barnes & Noble retail store and buy one just yet. Once the Nook is on the shelf in its close to 800 B&N stores, a number of other e-readers will be in retail channels (such as the Alex) or close to shipping. With that in mind, it will be interesting to see how the Nook does when there are other e-readers on the market that have similar features (two screens) and support ePub. Clearly, the Nook will have a window of opportunity, but just how big that window is remains to be seen.

In homage to the late Paul Harvey, here’s the rest of the story: Google’s forthcoming cloud/content distribution plans dubbed Google Edition suggests a portable, secure storage locker for an individual’s e-books that is accessible across a number of devices surely can extend to news publishers. That virtual storage locker also could contain newspaper and magazine content. As Google develops rich content applications, built in HTML5, for cloud content consumption, a few innovative newspaper readers must be in the works. Google is primed to support any sort of content application it builds or distributes with a variety of business models (ads, ala carte, and subscription) so the company that does not evil hopes to show publishers it is their friend.

The message is clear: if you want to block you content from the most powerful search engine on earth, be our guest. Want to build your own platform for distribution or work with any number of nascent partners (ala Journalism Online) to build paywalls, go right ahead. Google is betting these efforts will fail and that via Google Edition it will play a major role in the content distribution business. At that point, Google no doubt feels newspapers (along with magazines) will line up behind book publishers to ride the cloud into future profitability.

Amazon proudly boasts that the Kindle was its leading product choice during the early shopping season. One has to wonder how forthcoming Amazon is in telling buyers they can only buy books from Amazon.com (that is without illegally jailbreaking book files) and that most books available for free from public libraries will not work on the device. And while Amazon has added PDF support to the Kindle via a firmware upgrade, it will not read Adobe ACS4-encrypted PDFs (which is what most libraries utilize). Those issues aside, the Kindle won’t be facing much competition for those looking to ride the early wave of standalone device e-reading.

Even with Kindle winning a one-horse e-reading retail race, it will be a hollow victory. For starters, a number of “enhanced” e-readers, such as the Alex, will be announced at the 2010 CES show in early January. These Android-powered enhanced readers divert from the pure standalone category by offering a second screen for viewing videos and even web content to provide developers a more fertile platform for value-added book applications. Also consider Google Edition and its cloud-based approach to manage all of a reader’s book content and provide access across all devices. If successful, Google flattens the device opportunity and could force the Amazons of the world to be “Google Edition” friendly. And then we must consider the moving target that is the launch of the alleged Apple Tablet. The rumor mill’s magic 8-ball now says second half of 2010 for an Apple Tablet launch. In the meantime, Creative, Dell, Microsoft and most of the Taiwanese PC manufacturers have an e-reader, enhanced e-reader, tablet or netbookish device on the drawing board.

The simple caveat emptor (let the buyer beware) seems like the watchword for those currently shopping for e-readers. What seems cool today could be a paperweight next holiday season. Publishers must not lose faith in the digital opportunity despite the market cacophony; pushing for open standards and creative value-added e-reading applications should be the publishing world’s  immediate course of action.

As Yahoo learned with Yahoo Answers, presenting algorithmic search results with those offered by real-life humans is a challenge. That same challenge exists in blending algo results with those from Twitter and Facebook. As more content sources begin to become part of a one-box search experience, presenting them to consumers in a navigationally simple UI, will take the search world 10 blue links to 100 blue links. Lastly, I can see the merits of digging meaningful nuggets out of Twitter but still don’t understand what Facebook updates provide as value-add to search results. When I type in the search query “health clubs” do I really want to know that someone on the other side of the globe is at his health club? As my teenaged daughter would say, that’s TMI.

Playing the speculation game, here are some thoughts:

*Barnes and Noble is launching a device because it wants to flex its bricks and mortar book retailing muscles by having a device it can sell in its more than 770 retail stores in the U.S. and Canada giving it first-mover advantage in that area. B&N circa 2009 is as much a lifestyle shop (complete with Starbucks coffee bar, comfy chairs, Muzak 2.0 and WiFi) as a bookstore, so it may be a suitable early-adopter environment to peddle a gizmo that most consumers have not even seen. No matter how powerful and global Amazon’s aspirations are, they remain solely an online merchant and an ebook reader just may be the sort of device that has to be seen to be sold.

*Barnes and Noble is trying to to gain additional traction for the .pdb book format is supports. That’s a bit of a long shot because no other devices other than the upcoming Irex support that format. It is possible, but not likely, that B&N will announce .epub support with its new device.

*Barnes and Noble, in offering a wireless device allegedly powered by Android will somehow bring Google to the ebook device wars just as a number of carriers (T-Mobile) and handset manufacturers (Motorola) have in the cell phone space. What would that mean? Certainly it could be a preemptive shot at Apple whose Apptab is not slated for release until Q1 2010 thus missing the 2009 holiday retail rush.

Also worth pondering is which carrier would join B&N to power its new device (which has received FCC approval)? I believe the smart money is on Verizon who would love to counter AT&T’s win with Amazon in being the carrier of choice for its new international Kindle.

This is one rumor that, if brought to fruition, will benefit consumers. The new B&N device will almost certainly be priced lower than any Kindle and perhaps even lower than Sony’s $199 ereader. B&N may be able to take a major hit on the device if it can use it to 1) provide uplift in sales in its retail stores 2) bundle a book club with the gadget 3) get some cost and channel support from a wireless carrier partner.

All of this speculation is interesting save for the .pdb support. If the new B&N device offers a format that is not supported by any other fixed device (I tried putting a B&N download on my format agnostic Astak EZReader and was foiled) then perhaps we’re right back where we started. A device Tower of Babel that is reminiscent of beta vs VHS.

At the same time, that hope is somewhat pinned to a company who has yet to publicly show its cards in the e-publishing space: Apple. Apple is rumored to be launching a tablet in 2010 that will functionally act as an e-reader but there are no details about launch time, 3G partners, publishing partners, and so on. Nonetheless, 65 percent of those surveyed say that Apple will produce and e-reader that will impact the publishing market. Amazon was second with 62% and the Plastic Logic hype machine landed 13% of those surveyed putting them in fourth place behind Sony with 25%.

And now for the news that indicates that while the e-distribution opportunity is strong, its successful implementation is (optimistically) more than a year away: More than half of publishers surveyed see a business model that includes a mix of advertising and subscription. Such a statement shows that there will be lots of experimentation in the next year with patience required from publishers to gather the answers needed to make decisions that resonate with consumers. At this point in their evolution, publishers know time is not on their side and the need for revenue has long since expired. Patience may be a luxury publishers cannot afford. Also in play are retail prices for e-reading devices and the role service providers (AT&T, etc..) will play in supporting the channel from a distribution as well as underwriting perspective. Could AT&T defray some of the device cost for folks who bought an e-reader armed with two years of 3G service (as they are doing with netbooks)?

Net net: as the e-reading market goes through a major shakeout related to devices, formats, hardware, software and business models, the timing couldn’t be more perfect. The future, at least for consumers, should hold a 2010 holiday season where e-readers (priced at about $199) are the must-have gift. Until then, early adopters can knock themselves out.