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Nov 26, 2015

Publishers try to hold back the tide on parallel imports

Publishers, predictably, want to keep Australia's restrictions on importing books as they are. But savvy customers and e-book sales mean it soon might not matter anyway.

Should Australian booksellers be forced to buy books from Australian publishing houses rather than overseas ones, even if this drives up the price of books? Australia’s publishers still say yes, as they have for a quarter of a century. The issue has been to multiple competition and productivity inquiries, and every time, the industry has fought back.

Currently, Australian publishers bid for the Australian rights to publish books first published overseas, and once they have those rights, any Australian bookstore wanting to purchase commercial quantities of those books is forced to buy from the Australian publisher. This restriction lapses if the publisher doesn’t have copies of the book available within a fortnight, and doesn’t apply to purchasing individual books at the request of customers.

On Tuesday, the government indicated its acceptance of a recommendation from the Harper Competition Review that the current restrictions be removed or relaxed. Since then, Australia’s best-known authors have come out in support of the status quo. Removing current restrictions on importing books available for sale through Australian publishers is “ideological vandalism worthy of the Abbott era”, said Man Booker Prize-winning author Richard Flanagan. Cheaper books weren’t worth it, added Christos Tsiolkas.

The rallying cry has echoes of 2009 — the last time a government seriously tried to remove the current restrictions. Back then, the Australian Publishers Association hired Labor-affiliated lobbying firm Hawker Britton to fight the Rudd government’s intentions. The APA recruited support from Labor premiers and from the Nationals, and lobbied every minister it could find until the policy was abandoned.

Speaking yesterday, Australian Publishers Association chief executive Michael Gordon-Smith cautioned the issue was far from settled.

“Hopefully there’s some way to go before the legislation, and even after that, minds can be changed,” he told Crikey. “Hopefully there will be some understanding that the recommendation is based on an impoverished view of copyright in the public domain, and a simplistic view of how the book industry works.”

The argument from groups like the Productivity Commission is easy to understand. The status quo, as the Harper Review argued, acts as an “implicit tax” on consumers, forcing them to purchase books from Australian publishers over those available more cheaply overseas. Books in Australia are around 35% more expensive (though publishers argue this fluctuates with the exchange rate). The Productivity Commission also argued the restrictions do not act to promote Australian authors, with much of the surplus instead going to overseas publishers.

In an economy that has become increasingly liberalised, the import restrictions seem a hangover of an earlier time, affording the book industry protections not given to other manufacturers.

But such arguments fail to take into account the uniqueness of the publishing industry, argue publishers. Scribe is one of the Australian publishers most reliant on selling local versions of international books into the Australian market. Henry Rosenbloom, Scribe’s founder and publisher, says those who advocate removing the parallel importing restrictions don’t have “any idea what they’re talking about”.

“It offends economic rationalists — it always has. It offends them on economic theory, and they’re not interested in the details.”

The global book industry is dominated by major publishing houses. Rosenbloom says in many cases, they have little interest in Australia, a relatively small market. He says abolishing the rights of Australian publishers to have a first go at publishing many international books will only result in Australia being discounted by these players. “Ironically, this might result in poorer availability and higher cost of books. American publishers could well say, ‘it’s too small a market, we won’t bother with it’.”

A removal of parallel importation laws, Rosenbloom says, would render Australian rights to publication worthless. Scribe could translate, market and sell a book, but then booksellers could purchase remaindered (unsold) copies of the book from an international supplier at a steep discount if the book bombed elsewhere due to lack of marketing.

The issue of remaindered books comes up time and time again in publishers’ submissions. Booksellers, some of whom are advocates for removing the current restrictions, buy books on a “sale or return” basis. If a book is unsold, sellers send it back to a publisher for a credit. Books that do not sell are remaindered — that is, sold at a steep discount, with no royalties paid to the author.

Most Australian publishers publish both original books by Australian authors and a mix of titles first sold overseas (on which the margins tend to be higher). Though there’s no guarantee the profits from overseas titles will go towards Australian works, the internal cross-subsidy no doubt helps keep many publishers in the black.

“If you want to have a business as a publisher, your business has to be mixed,” Gordon-Smith said. As well as publishing Australian stories, publishers will spend time “researching and finding titles sold overseas, buying the rights for those here, and investing in marketing and promotion of those books in Australia”.

The removal of parallel importation restrictions in this context, he says, would take away Australian publishers’ ability to compete with overseas publishing houses. If something is a hit, booksellers would be able to cheaply import remaindered copies. “The local publisher who’s invested in marketing gets no return, and neither does the author.”

But technological change has made the fight over parallel importation ever less relevant to how Australians buy and consume books. Bookstores, forced to buy international books from Australian publishers, have declined in number, with many unable to compete with online companies like Amazon. Readers increasingly buy e-books on an individual basis from overseas, legally side-stepping the current laws (and avoiding GST in the process).

Because of this, publishers argue the current laws are no threat to the availability of books. To compete with marketplace realities, publishers have voluntarily reduced the time period over which they have to secure copies of a book before a local bookseller can buy from overseas (it currently sits at 14 days). But the whole complex argument gets less relevant with every passing year.

When he announced the government’s decision to not to dump the laws in 2009, then-innovation minister Craig Emerson, an advocate of changing them, argued that the whole issue soon wouldn’t matter anyway:

“In the circumstances of intense competition from online books and e-books, the government judged that changing the regulations governing book imports is unlikely to have any material effect on the availability of books in Australia. If books cannot be made available in a timely fashion and at a competitive price, customers will opt for online sales and e-books.”

Publishers argue the removal of parallel importation laws would devastate local publishing, cruel the chances of Australian authors, and strengthen the hand of multinational publishing houses. Given the competitive challenges they have to overcome, their fears may soon come to pass, regardless of the politics.

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6 thoughts on “Publishers try to hold back the tide on parallel imports

  1. wayne robinson

    Is there anyone who still buys carbon based data retrieval units (AKA dead tree books or printed books)? If I want to buy a book by an emerging (or even established) Australian author, I look to Amazon, and in most cases there’s a Kindle edition available for download immediately.

    If not, it might be available through iBooks. Or the publisher will offer an eBook edition as a document (such as Melbourne University Press).

    Unpublished Australian authors can always, if they want, self publish their works, which is the way Andy Weir got attention for his book ‘the Martian’.

  2. Glen

    “American publishers could well say, ‘it’s too small a market, we won’t bother with it’.”

    The twelfth largest country on earth by GDP. Yeah sure, “too small a market”. Roughly similar GDP to California … let’s drop that one too, far too small.

    Plain, simple rent seeking. Go grow some WA potatoes.

  3. MJM

    It’s not the price of the books that concerns me so much as the lousy delivery service. Even when you establish that a book is in print and is available it takes forever to actually have it in your hand.

  4. AR

    WayneR – let’s hear it for the superiority of the portable, solar powered, random access, data storage unit over this elekytrony whizzy stuff.

  5. ken svay

    We all thought that ebooks would spell the end of real books but it seems not. The penetration by ebooks never passed 50% of sales and is now way down. I have a huge collection of real books and I love them but as a traveller I buy mostly ebooks nowadays. I have noticed that the price of ebooks peaked some time ago, I thought that they had become too expensive. Now they appear to be much cheaper, driven by consumer resistance I believe.
    It is heartening to read about the sales figures from Big W, young people are reading more books because parents don’t want their children glued to screens all of the time.
    Hurrah! I am going to Big W tomorrow to buy a Christmas present for my young Chinese mate- a thesauarus. What a grand name for a book.

  6. Benny

    Wayne – think of physical books as carbon sequestration – it’s good for the planet

    Glen – why can I hardly buy anything from Amazon if Australia’s such a valuable market?