Digitization and the Demand for Physical Works: Evidence from the Google Books Project

Abstract

Digitization has allowed customers to access content through online channels at low cost or for free. While free digital distribution has spurred concerns about cannibalizing demand for physical alternatives, digital distribution that incorporates search technologies could also allow the discovery of new content and boost, rather than displace, physical sales. To test this idea, we study the impact of the Google Books digitization project, which digitized large collections of written works and made the full texts of these works widely searchable. Exploiting a unique natural experiment from Harvard Libraries, which worked with Google Books to digitize its catalog over a period of five years, we find that digitization can boost sales of physical book editions by 5-8 percent. Digital distribution seems to stimulate demand through discovery: the increase in sales is stronger for less popular books and spills over to a digitized author’s non-digitized works. On the supply side, digitization allows small and independent publishers to discover new content and introduce new physical editions for existing books, further increasing sales. Combined, our results point to the potential of free digital distribution to stimulate discovery and strengthen the demand for and supply of physical products.