What they did wrong was try to make books more available to individuals, and easy to search. The people crying over this are upset because they feel that their product being more available, easier to find and easier to buy clearly represents a copyright infringement.
Scanning the world's libraries and making the material available is clearly quite possibly one of the most individually empowering acts in history, as it will put far more *good* information into the hands of everyone. This is unacceptable because this is an industry based on artificial scarcity.
As for the exclusivity issue, why is it Google's job to negotiate rights for everyone else? Clearly this is creating a template, and any other business that wants to go through the monumental task of scanning millions of works should have no problem securing the same deal. This is just a smoke screen put up by people who don't want the mass of humanity to have good access to the materials in teh best libraries in the world.
Publishers and most authors *hate* libraries. They *hate* the idea that a book can be read by more then one person, and they *hate* people sharing the ideas from works without paying for the privledge of the knowledge. This is an industry that has been activly hostile to the first sale doctrine, and that has been positivly drooling at the idea that they can sell books to people covered in thick layers of DRM so that they can end the library loophole.
I'm positivly shocked to see most of slashdot actively siding with a group of people who are today celebrating the scuttling of a deal that would make books far more available to the world, and did so for their own anti-intellectual, anti-consumer, pro-drm reasons.