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Jul 14, 2009

Readers have nothing to fear from the Productivity Commission

“The country’s most articulate lobby” they were called yesterday: the array of writers aligned against deregulation of Australia’s $2.5b book industry. Really? asks Bernard Keane.

“The country’s most articulate lobby” they were called yesterday: the array of writers aligned against deregulation of Australia’s $2.5b book industry.

Well they might be high-profile Australian writers but articulate? Depends what you mean, especially when you’re talking about the Productivity Commission, which this afternoon will release its recommendations on the removal of parallel importation restrictions.

Rarely has there been a greater disconnection between what a Government agency has sought comments on, and what it received. Who knows what the Commission will make of some of the submissions they received.

For example, Peter Carey told them:

Perhaps the people who read Excel sheet are a different cast to those who read literature. They may not be aware that Australian writers for more column inches in the US than even the most craven of our Prime Ministers. These Australian writers, who naturally are not noticed by those who do not read literature, represent us as a sophisticated nation in every corner of the world. In the years when our French ambassador could not speak French our Australian writers were getting front page reviews in Figaro, Le Monde, Liberation.

According to Carey, only people who think “in a colonial way” would support the removal of PIRs, and it amounts to “cultural self-suicide” (in his defence, the tautology was deliberate).

This is Tim Winton, who at least lives in Australia:

In the late ‘80s I came to understand that there were more people interested in reading certain books than were purchasing them. Some of these readers were established buyers of mass market products who were stimulated by curiosity or regional interest or focussed publicity to seek out Australian literary novels. Anecdotally I discovered that some were discouraged by presentation or retail environments that felt foreign or unfriendly. Something about their encounter caused them to feel excluded…

But never mind readers who are just too damn sensitive to survive an unfriendly bookshop encounter. Kaz Cooke thought it might be a matter of life and death:

The introduction to the Australian market of foreign editions of my books would be unfair, if not totally disastrous for my readers, who rely on my books for important medical information – some of it including emergency telephone numbers relevant to the health of their newborn babies and small children, or in the case of pregnant women, to their own physical and mental health.

OK, I shouldn’t mock. These are only some of the many heartfelt views expressed by authors, many of them a great deal more sensible than those above, concerned about both their own livelihoods and Australian culture in the event PIRs are removed.

But, while not suggesting the PC is populated exclusively by Excel-sheet reading colonialists who don’t know their Figaro from their fungibility, little of this stuff would have been of the slightest use. For those who actually bothered to read the PC’s draft paper, the Commission considered some specific issues.

1. What are the costs and benefits of the PIRs.

2. Could the benefits be achieved in a way that involved less cost.

3. How could we accurately assess the costs and benefits.

The PC’s draft recommendation was to limit PIRs to twelve months; remove restrictions on importations when PIR-protected books become unavailable, and allowing booksellers to aggregate individual orders for imported books. And it urged the ABS to collect better data on the industry because accurate analysis was difficult.

Few of the writers making submissions tried to deal with the basic issues considered by the PC. And however much the likes of Carey might rail against Excel sheet readers, the ability to mount a rational, evidence-based argument, or at least not offer a complete non sequitur of a response, should not be considered the province of the illiterate and colonial-minded.

Of those who did try to argue rationally, the lines are familiar from other protectionist debates. As always, it is the industry associations — in this case, the publishers — who marshal the economic evidence for maintaining protection: the jobs saved, the value of the local industry, the need to safeguard copyright (where the similarities with arguments advanced by major studios for regional coding of DVDs is uncanny). The workers themselves — in this case, the authors — argue that their industry has some innate value that should make it an exception from normal economic analysis. This too is familiar, rather like unions arguing the innate value of having a car industry, because, well, just because.

The PC is actually sensitive to arguments about the cultural benefits.

“The dissemination of Australian culture can have a range of social and educational benefits,” it says.

“Although difficult to quantify, cultural externalities constitute a non-market benefit to the community that is currently derived from the PIRs…”

But, the Commission notes, there are also costs – foreign authors are protected in the same way as Australian authors by the PIRs, and the cost of books — particularly in less competitive sectors such as educational books — is higher than it should be (as most students could attest).

And the costs harm a group not represented at all in the 650-odd submissions to the PC: Australian consumers, who as usual in protectionist debates tend to be forgotten about.

The PC’s recommendations should, in its view, preserve the benefits of the PIRs while reducing the costs to consumers, but the lack of information makes its assessment a short-term one: it wants more to see more ABS data.

The lack of data is used by proponents of the status quo to argue, in the time-honoured way of demanding one’s opponents prove a negative, that there is no evidentiary basis to support removal of regulation.

But the Institute of Public Affairs’s Tim Wilson has done some digging and found some relevant data. The first is what happened to CD prices after parallel import restrictions were finally removed in 1998. For years the music companies and prominent bands like Midnight Oil had been warning that the local industry would collapse if PIRs were removed.

But the music industry’s own figures show that both the number of artists receiving royalties and the total amount of payments has increased significantly since the early part of this decade – even while the cost of CDs has fallen dramatically. And that was despite part of the local industry illegally attempting to prevent parallel imports.

What’s the connection between those outcomes and the removal of CD PIRs? And what’s the role of file-sharing in what happened to CD prices, rather than the removal of PIRs? Well, it’s not clear – but what is clear is that for an industry the collapse of which was confidently predicted by opponents of the removal of PIRs, it seems in tolerable health.

Wilson also examined key indicators from the New Zealand publishing industry after the Kiwis removed PIRs. Investment went up. The numbers of New Zealand book publishers, and New Zealand books published, went up. The rate of decline of printing industry jobs was slower than Australia’s. Quibble with the figures if you like, but again they belie the notion of an industry-wrecking reform.

The PC considered alternative measures that might generate the same “positive externalities” as PIRs: a subsidy for Australian authors, or confining PIRs to local authors; it even considered, and rejected, the abolition of PIRs, on the basis that there would be significant adjustment costs, and there was a lack of data about the industry.

There was speculation yesterday the PC would go further than the draft recommendations in its final report, but based on the logic of the draft, it won’t be urging the immediate removal of the PIRs.

In short, the PC has taken a careful and considered approach to PIRs and is likely to adopt a moderate position. The contrast with the hysterical response of authors is remarkable — and all the more so for a supposedly articulate lobby group.

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11 thoughts on “Readers have nothing to fear from the Productivity Commission

  1. Clare Carlin

    Copy of an email sent to B. Keane (NZ info added) today:

    Dear Bernard

    I am an emerging writer. You have ignored my place in the debate on territorial copyright. If we lose territorial copyright for Australia we will crush the ability of new and emerging authors to be supported by Australian publishers. In fifty years there won’t be many Australian authors. No authors = no books. It’s quite simple. What will consumers do then?

    To further explain this aspect I would like to direct you to the submission to the productivity commission by the very articulate Nick Earls who says it all better than I can. I have attached it to this email (so that you can read it in-context) but quote below:

    “Parallel imported copies undercutting the local edition could destroy the local market
    for that edition and send the book out of print. No publisher would order a local reprint
    of a book that could not be priced to beat an imported remainder copy.

    Both the author and the publishing company here – the company that had provided all
    the support to see the book through to its first publication – would suffer. This risk
    would be a serious disincentive towards Australian publishers publishing new
    Australian books, and unearthing new talent.

    Almost every Australian author who succeeds overseas succeeds here first. Either their
    book is published here and succeeds and overseas markets take notice, or they are
    picked up by a publisher or agent here who manages to secure international sales before
    local publication. Typically, Australian publishers build authors over a few books
    before success comes along. That takes faith, it takes commitment, it’s a long-term
    investment and requires a long-term view.

    Publishers will be a lot less likely to go through that process if the price of success is
    having the author’s backlist undermined by imported editions. They will be reticent to
    publish new authors. Risks will be higher, so advances will be lower. Fewer people will
    be able to earn a living as writers. Emerging Australian authors will be forced to try to
    start their careers by competing directly in New York and London at long range and
    without track records. This amounts to a distinct disadvantage.”

    You also talk about the New Zealand industry – Nick has much to say about that:

    “One English-speaking country that has allowed parallel imports for ten years in New
    Zealand, and it is instructive to see how New Zealand publishing is faring.

    NZ Trade and Enterprise’s 2004 report ‘New Zealand Book Publishing: Industry
    Development Issues’ stated that ‘New Zealand publishers face an inherent problem in
    that the domestic market is swamped by imports.’ Children’s publishing, while
    historically seen as a strength, was seen as threatened, with ‘dumping of children’s
    books’ listed by NZ publishers as one of the three most pressing issues they face.

    While NZ educational publishers tend to fare better than others, due to the need for NZspecific
    material for NZ schools, the report says that ‘Trade publishing, i.e. literature
    and other general non-fiction, are the poor relation to education … Competition in the
    New Zealand market from imported books is fierce. Consequently margins are low,
    print runs are short and rapid remaindering is endemic. The reliable sellers are in areas
    such as the coffee table books of landscape photos and books on rugby, where there is
    no direct foreign competition.’ To that might now be added books of Maori tattoos, but
    any publishing industry that can achieve sales success only with an extremely narrow
    range of books that have no export potential is in crisis, both financially and culturally.

    New Zealand’s publishing industry has changed dramatically since parallel imports
    have been allowed. Its capacity to produce great novelists of the calibre of those it has
    produced in the past seems to be seriously under threat. Many of us can name a number
    of great New Zealand writers. I don’t know anyone who can name a New Zealand
    author under fifty. New Zealand talent is no longer coming through in the way it once
    was. I have no doubt that it exists, but it now exists in an atmosphere that denies it the
    opportunities it needs to flourish.

    This is a risk we cannot afford to take here.”

    Your comments in Crikey were mocking, nasty. You used small parts of highly intelligent comments out of context. I have cancelled my Crikey subscription and will donate the remainder of my subscription fee to the State Library of Victoria.

    Clare Carlin

  2. meski

    Clare you can’t take mocking or nasty comments, and you write? I would have thought that reviewers were far worse than anything Bernard threw up today.

    We live and compete in a global market, all of us. You have to work on that basis, whether you produce books, software, or oranges. If you want protection for your output, why should other Australians that produce other items not get similar protection?

  3. Clare Carlin

    Me Ski

    Interesting comment, thank you. I can take it… I just can’t believe Bernard’s lack of support for Australian writers.

    As you obviously know if PIRs were dropped we would not be competing equally. The US and UK – our biggest English language markets- both enjoy the protections we are about to have ripped away.

    We may live in a global market but we do not live in a free market. I am willing to have the conversation about open markets when they really are… until then yes, I agree, protectionism is sometimes necessary.

  4. Bob the builder

    Looks like Tim Wilson and Bob Carr have been chatting.

  5. Michael James

    Here is a re-post from Comments on my article today:

    To Jackie French (1.25pm): I’m on your side! But your point is absolutely correct and this (below) was my second para which, for whatever reasons, was edited out by Crikey. Do you note that Bernard K never mentions this issue? I might be more amenable to a true open and free market in the English speaking markets if the two biggest, UK and USA, did not have similar restrictions.

    “Amongst several key points that some participants, letter writers and bloggers fail to grasp is that Australian authors do not receive any royalties on their books which are remaindered in the US or UK, and such books could be dumped on the Australian market at considerably cheaper prices because the UK/USA publisher has written them off (and the author’s standard contract allows/insists on this condition). American and British authors are protected against such action in their home markets.”

    So I don’t think Claire or Jackie F are whingeing about their books being remaindered and pulped. But if the remainders are sold back in Oz (or anywhere) without a dime of royalty paid to the authors, I believe they have a valid complaint. Neither Bob Carr, Allan Fels, Dymocks or BK have adequately addressed this issue.

  6. meski

    But the rest of us don’t have PIRs or protectionism. If you want to lean on publishers (worldwide) go for eBooks, and sell them direct. No pulping, remaindering, or all that waste. You ‘publish’ as many books as are needed.

  7. Bernard Keane

    What issue do I never mention?

    If it’s that the US and the UK have import restrictions, so what? Just because other countries shackle themselves with protectionism, doesn’t mean we should – especially protectionism where 60% of the benefit actually goes to foreigners as is the case here.

  8. Scott Grant

    So when are we going to get DVD region coding banned?

  9. Michael James

    Bernard (5.31pm). Most countries, certainly the USA, have anti-dumping laws to prevent anti-competitive practices. The PIR is really an anti-dumping law. The big difference between anti-dumping laws for most manufactured goods and the PIR/books is that the manufacturer (and factory workers etc) are still getting paid. With books, the printer still got paid but the author and Australian publisher are not getting anything.

  10. Charles Coulton

    Reading Tim’s article, there seems to be some deliberately obscurationist points of view he has taken on the data. For instance, there are many years (eg: between dec01 and mar 03) which show absolutely no investment in the NZ industry, yet the trend line he has drawn still goes up?? The data may be missing, but it also may represent years of running down capital and underinvestment. The printing business is huge and books are only a very small fraction of it in dollar terms – think of all the pamphlets you receive in the mail, all the billboards, all the other bits of paper flying around our economy, yet his look is at the printing business as a whole and not the books industry, the attempted focus of his argument

    A simple reference check will show that the export data he refers to is mostly not books, but all printed material; indeed his reference actually clearly states that ‘selecting only the subclasses that included books and booklets reduces the 2002 figure to 19.5 million’ – a very clear difference to the $57 million stated in his essay! So are we talking about t-shirts and printed globes being covered under these restrictions as well?? I certainly think not.

    Personally, although I would classify myself mostly ‘liberal’ I never trust anything that the IPA puts out, it usually demands a much closer look: they are about pushing a certain point of view, and, like all thinktanks, should not be trusted to present a balanced (or even reasonable) argument.