Yesterday in Melbourne the Productivity Commission held the first of two round table discussions with the publishing industry about their draft report into the restrictions on the parallel imports on books (PIRs).
This is not the first time this matter has been investigated. In fact, since 1991 there have been no fewer than five investigations. Why is there so much interest in such a seemingly obscure piece of legislation under which the vast majority of Australia’s publishing industry currently thrives?
Principally the concern rests on the belief that anything that restricts competition, such as parallel importation restrictions, is bad. How are they bad? Well according to the productivity commission (and the previous reviews), PIRs might make books more expensive in Australia.
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None of the reviews to date have been able to prove that books cost more in Australia than in the UK or US market. In general there isn’t much difference. But nobody can be sure, because no-one has actually studied the problem properly.
Unfortunately the latest report also fails to tell us if books do cost more here. Although it identifies some of the problems with earlier analyses, the report does little to rectify them. A great many factors influence how much books cost, so attempting to identify what role, if any, PIRs play in price requires careful and sophisticated modelling of all the various factors. The Commission’s analysis, outlined in an appendix, does neither and leaves us none the wiser. There is no evidence in this report that PIRs cause prices to be higher and no evidence that removing them will lower prices. If the price differential is the crux of the argument, isn’t it worth paying a statistician to do the modelling that would control for all these other variables and answer the question properly once and for all?
But the Productivity Commission believes that its argument does not actually need figures and hard evidence. According to the report, book prices must be higher under PIRs otherwise they would provide no benefit to local publishers. Thus, either book prices are higher under PIRs and the restrictions should therefore be removed to lower prices, OR book prices are not higher under PIRs and so therefore there is no point in having them. It’s a no-win argument.
The underlying assumption that PIRs must raise prices is untested, unproven and quite probably wrong. Local publishers could easily benefit from PIRs simply because they guarantee them a share of the profits in high-selling books, the proceeds of which (even without any higher prices at all) would otherwise go to overseas publishers. Such certainty of income is essential in a marginal risky business like publishing where the profit margin for most writers and some publishers is often minute.
Indeed, the low profit nature of the publishing industry appears to have escaped the Productivity Commission altogether. Most writers scrape by on a wing and a prayer. Even if, as the Productivity Commission suggests, the effects of their changes will be small, they may damage a large proportion of the industry, driving some writers and publishers out altogether. The report provides no modelling at all of the impact removing PIRs will have on the small returns many authors and publishers receive for their efforts.
The Commission does not seem to have thought through the implications of their recommendations for the vast majority of struggling first-time, midlist or backlist authors who make up the bulk of the industry. Very few writers can dictate terms to publishers about the returns we earn on our books or what format they should be published in, let alone have contracts that protect our Australian idiom. Most barely get paid at all, let alone adequately, for their time. Booksellers earn four times the amount the authors do on each title.
Even if book prices are higher in Australia than overseas, even if that higher price is due to PIRs, there is no guarantee that removing PIRs will lead to lower book prices. The Productivity Commission notes that “overall demand for books appears to be relatively unresponsive to changes in price”. Consumers will be charged what the markets can stand. Wherever the extra change goes, it’s not likely to turn up in consumer’s pockets. More likely the changes will simply see a redistribution of profits from the accounts of authors, local publishers and independent booksellers into the accounts of the large companies who increasingly dominate the retail book market.
The Productivity Commission’s report is riddled with flawed logic, inadequate research, poor methods and dubious conclusions. It even contradicts itself when, towards the end of the report, it acknowledges that neither the UK nor the US can provide a good supply of cheap books, suggesting instead a hypothetical Asian market that doesn’t even exist at present.
So in summary, the Productivity Commission wants to change something that appears to have nothing wrong with it, to a system which may not work, to a supply that doesn’t exist, based on an analysis of an industry that it barely understands. At a time like this, Australia does not need economic decisions to be based on supposition and guesswork. Without hard evidence, there is no justification for change.
And in any case, if abolishing PIRs is such a good idea, why haven’t the much bigger and stronger US and UK markets abolished theirs already?
Dr Danielle Clode is a scientist and a writer. A Rhodes scholar, she has nearly twenty years of experience in research, scientific publishing and tertiary teaching for a wide range of academic, government and non-government agencies. She is also a professional author whose latest book, VOYAGES TO THE SOUTH SEAS, won the Victorian Premier’s Literary Prize for Non-Fiction in 2007.