Hidden costs in cheaper books

Abstract

Factors other than market efficiency need to be considered when we contemplate change, writes Jenny Stewart in the Canberra Times NOT LONG AGO, the Productivity Commission released its final report on a very vexed question. The question was, should the provisions of the Copyright Act, which currently prevent overseas editions of Australian-published works from being imported into Australia, be repealed? These provisions, known as parallel import restrictions, give a degree of assistance to Australian publishers, authors and printers, which they would not have without them. If you’ve been following the debate, you’ll know that it has been impassioned and, at times, bitter. Booksellers (notably the larger chains such as Dymocks) have campaigned strongly to have the restrictions removed. Smaller, independent booksellers have argued that they should be retained. Authors, including some of our most notable, have argued vociferously that the restrictions should stay. Publishers, particularly the smaller, Australian-based ones, have been even stronger in their views. The Australian Publishers Association, in a memorable phrase, said that “Abolishing parallel restrictions outright … risks Australia becoming an international remainder bin,” with reductions in their potential royalties for Australian writers, and a diminished capacity for publishers to foster local talent. As a writer and reader myself, I have been following these arguments and counter-arguments, many of them made in the course of the review process, with interest. The Productivity Commission’s job is to submit these arguments to rigorous analysis, which means (from the Commission’s point of view) an assessment of the benefits and costs of change. When it did these calculations, the Commission came to the conclusion that, overall, the benefits to consumers of lower prices outweighed the costs to producers, although the Commission was careful to note that change provided opportunities for prices to fall, not the certainty that they would do so. After some wavering in its draft report, the Commission ended up recommending that the restrictions be removed, but not before support for writers and publishers had been reviewed. The final decision, of course, rests with the Rudd government – as ever with this ideologically complex outfit, it is a bit difficult to predict which way it will jump. If, like me, you are an avid reader, you may think that the restrictions should go. Cheaper books sounds like a good deal for us all. But if (like me) you also care about Australia’s cultural and associated industries, you will be a bit more wary of change. The producers’ arguments are difficult for laypeople to understand, so let me give you some examples. A few weeks back, I bought (at a very competitive price) an Australian-published edition of Alain de Botton’s Pleasures and Sorrows of Work. Mr de Botton, of course, is a UK-based writer, whose agent would have sold to the publisher, Hamish Hamilton, a bundle of contractually-defined territorial rights, including the right to publish the book in Australia. As a result, the Australian edition was published by Penguin in Australia, and printed by an Australian printer (McPherson’s), based in Maryborough in rural Victoria. If the restrictions on parallel imports into Australia were to be removed, my copy of Mr de Botton’s book would, almost certainly, not have been printed in Australia. Why not? Because the original publisher would have simply supplied the UK edition direct to Australian booksellers. At the moment, it could not legally do this, because the restrictions on parallel importation mean that, where the Australian rights have been sold, only the Australian edition can be sold in Australia. But this restriction does not last in perpetuity – the law says that if the Australian rights-holder has not produced the work within 30 days, then retailers may import the book from overseas. This means that the Australian publisher has to produce the book quickly, which means, in turn, that an Australian-based printer is usually engaged to do the work. Some of Australia’s best-known printers would lose a large chunk of their business if the law were to change – and the loss would represent significant collateral damage, with impacts (in a number of cases) in hard-pressed regional Australia. Let’s take another example. Let’s say you are an Australian author (like Tim Winton, or Nick Earls or Kate Grenville) whose career started in Australia (and was nurtured in Australia), but whose books now command significant international sales. You also stand to lose quite a bit, because you have lost part of what you previously had to sell – that is, the right to licence a publisher to publish and sell your book, exclusively, in Australia. You might continue to deal with your Australian-based publisher, but you (and the publisher) will earn less from Australian sales than would otherwise have been the case, because when the US rights are sold, a cheaper US edition of the same book can easily be imported back into Australia. Unless your sales at the cheaper price increase astronomically, you will be significantly worse off. (This is because your return per book depends upon the price at which it is sold). Will you keep writing books? Yes, because that is what you do, but you will probably need more public support in the form of grants and fellowships than you currently get, and you will need it for longer, in order to maintain your income. Most writers would much rather live from their sales to individual members of the public, than from the public purse. A third example shows what happens to independent Australian publishers who buy rights on the international market, to publish and sell books in Australia. Text Publishing, in Melbourne, has made a practice of doing this, and in so doing, has been able to prosper by selling particular works of selected overseas authors. Companies like this face a much more uncertain future, because they cannot be as sure as they are at the moment, of recouping their investment. That means they have less to spend on finding and developing new Australian talent. Australian publishers have a tough enough job surviving as it is, without making it even more difficult for them to do so. Critics of the status quo will tell you that when parallel import restrictions were removed in the music industry in 1998, CDs of Australian artists continued to be produced. But books and musical acts are different. Musicians receive a royalty payment (or should do) each time their recording is played for public consumption. There is no equivalent of this for writers. But it’s the longer-run opportunity costs that are the point here. If we want our best writers to be internationally known, we have to support their development, while they are relatively unknown, here in Australia. I, for one, would rather that that support took its current form, with quite marginal additional costs to consumers of books, and associated benefits to a wide range of players, than that Australian taxpayers as a whole footed the bill in the form of larger grants, prizes and fellowships, or in the case of publishers, special subsidies (if they are lucky). The supposed ‘efficiency’ of direct support does not take into account the way investment in our cultural industries actually works, nor, because budgetary support can be withdrawn or reduced at any time, does it offer any assurance for the future. Finally, if you are wondering what other countries do about these issues, here’s a rough sketch. The Canadians maintain parallel import restrictions in their Copyright Act for music as well as for books. They understand only too clearly the dangers to their culture of unrestricted access to their market by the Americans next door. For their part the Americans, like the British, continue to restrict parallel imports of books. Why we Australians should be so reluctant to support our own artists and artisans in the same way, even in a much-diluted fashion, is beyond me. • Jenny Stewart is Professor of Public Policy in the University of New South Wales at the Australian Defence Force Academy. This article first appeared in the Canberra Times. Photo: Pali Rao/ iStockphot