Friday, July 17, 2009

Fiction and Fact on Book Prices

FICTION: 'There is no evidence that prices will come down if the PIRs are removed. The Productivity Commission is typically indulging in discredited free trade theory and tired ideology'.

FACT: Beside the bleeding obvious fact that the new regime hasn't been implemented in Australia so how could there be any evidence, the commission clearly states, on numerous occasions throughout the report, that removal of the provisions will remove the 'upwards pressure on prices'. They don't guarantee or promise or even say that prices will come down. The expectation clearly is that they will, if only as a matter of logic. To use an analogy, if a pool is drained presumably there'll be less drownings in it. Someone could still stick their head in the remaining dregs and do the job, but as a matter of plain common sense I would go out on a limb and say there'll very probably be less death by drowning in the non-water circumstance.

FICTION: 'If you compare Australian prices of imported US titles with their US prices you will see that local prices are not higher at all once the average exchange rate of $0.69 is taken into account'.

FACT: If you conveniently chose an average exchange rate that suits your purpose, well, unsurprisingly, this is true. The APA has selected the past ten years as its time frame. This works only because of the collapse of the A$ in the five year period from 1999 to 2003 inclusive, when, according to RBA charts, the average rate was $0.57. Over the five years since then (2004 to 2008 inclusive) the rate has been $0.79, pretty close to where it is today. Do you see any publishers pricing their imports according to that rate? No. They've had five years to adjust but have chosen not to. The 'ten year average' mightily suits their case.

FICTION: 'Dymocks and the Coalition for Cheaper Books are not really interested in lower prices to consumers but higher profits for themselves'.

FACT: I'll go out on a limb and suggest that Dymocks and the Coalition are probably interested in both. If they can source books at lower prices off shore then that gives them more margin and enables them to be more competitive by passing on some of that margin to consumers. It's called business. It happens right across the economy. It's not original or innovative and it's not rocket science. Now, with the PIRs in place, any price discounting they do to attract customers has to come 100% out of their own margin. They're discounting widely now, so why wouldn't they be motivated to do more of it if they can secure lower purchasing costs? Once again, it's a matter of logic. (The other way to gain more margin is to do what A&R/Borders is doing and mark up everything above recommended retail price. What sort of customer friendly strategy is that? Yet Dymocks, who've never marked up, is copping the flak!)


Sally Murphy said...

"The expectation clearly is that they will, if only as a matter of logic."

Yes, perhaps it would be logical, if it weren't for the fact that when the PIRs were removed in NZ, book prices did not come down. What did come down were the numbers of lcoally produced books.

NZ is the only country where PIRs have been removed - and it has been disastrous for the publishing industry and not advantageous to the reading public, who have not had resultant access to cheaper books.

This is evidence that the Commission has ignored. What is also being ignored is that the US has its own improt restrictions - so having import restrictions has obviously not drive their book prices up.

It is not logical to rpesume prices will come down because there is no evidence that it will happen. The commission even goes so far a sto imply that lower book prices are not a necessary result ot scrapping PIRs.

Anonymous said...

I'm not sure you picked a good example there. As far as I can see, that book may be published by a Random imprint in the States but there's no indication that Random Australia distributes it here -- it's not on the RHA website, and neither Readings nor Gleebooks has it listed. I suspect H of C ordered it directly from the States via ingram or B&T, in which case it was the retailer that set the price ...

However, you can point a finger at Pan Mac with the new China Mielville, The City & the City. 17 pounds doesn't equal A$59.99!

RachaelMc said...

Fair point from Anonymous here. As you know, we have a lot of issues with pricing and our customers (libraries) go for the best price regardless of local or overseas. Availability of the title is also king. But once we take that out of the equation, the problem we have is not so much pricing, but freight. Freight, customs and clearance charges are very real costs and then add in the inbound freight once it reaches our shores so it can get to the customer. Retailers and libraries want the books shipped FIS and many of us have to "suck it up". Are we supposed to pretend freight is free? Where will the freight charges go in an open market situation? Airfreight (speed to market) is not cheap and I bet my bottom dollar transportation costs will be there in the price of the book (as they are now for many book distributors) - so how is the consumer to benefit? OK, you have availability and choice but we can't ignore the freight side of the equation. It won't go away.

BTW Whenever we have raised pricing issues with Random, they've been pretty good at adjusting them. A lot more responsive than other publishers! (I'm trying so hard not to mention names here, it's killing me I assure you!!!) It could be a timing issue or as Anon. says, an import anyway.

Peter Donoughue said...

Thanks Anonymous, you're right. I looked at the price tag and it says 'INGIN', which presumably means Ingram International. So I've removed the example from the posting. Apologies to Random.

Still, the example confirms another issue in this debate, ie, whether publishers have much to worry about in an open market. I've consistently argued 'no'. Local suppliers will always remain the preferred source, as they can price and service (if they chose to) very competitively.

Rachael, you make a very valid point about freight costs, but here again, local exclusive distributors have a decided advantage in that their trading terms with their parent company or agency principal are far sweeter than those on offer to retailers or library suppliers.

Peter Donoughue said...

Sally, you are quite wrong about New Zealand.

The Commission addresses the NZ situation in quite a bit of detail (pp C.4-C.10), and all the analyses I've seen, including the Castalia report commissioned by the APA, are virtually saying the same thing, ie, that there has been no significant impact either way.

To claim that it has been 'disastrous for the publishing industry' is manifestly untrue.

The US regulations work mainly to restrict 're-importation' back into the US of original US editions that were exported to low-priced territories such as Africa and Asia.

Maree Kimberley said...

2 points:
1. The New Zealand Society of Authors submission to the productivity commission stated that it was clear "that a detrimental effect on the publishing industry has been experienced since the introduction of Parallel Importing in NZ.
2. To reduce the issue to all being about price is to miss the real issues anyway. In an economy so concerned about saving jobs, why would the producivity commission propose a change that would lead to massive job losses in the printing & publishing industry? In the SMH Australian Manufacturing Workers Union (AMWU) print division secretary Steve Walsh said the industry would face 500 direct job losses and up to $80 million in lost revenue if the federal government goes ahead with Productivity Commission recommendations on copyright restrictions. That's not even looking at job losses within publishing houses, agents, illustrators etc etc. Just like the big supermarkets 'saving us money' by giving a few measly cents off at the petrol pump when we buy at their supermarkets, the Coalition of Cheaper books claim for the consumers' interest is a sham.

Peter Donoughue said...


Your point 2 about massive job losses in printing and publishing is complete and utter hogwash!

Steve Walsh's views have no basis in fact or logic whatsoever. They are sheer self-serving fantasy, not to mention economically illiterate. If you're going to rely on an argument from authority find someone who has at least applied some measure of thinking and analysis to the issues, and someone who shows they've at least read some well-informed views, including those in the PC's final report.

In fact if there were to be any employment changes at all they would likely be positive. That's what shoving a competitive rod up the arse of a protected industry tends to do.

Throughout this whole debate a shameful level of ignorance has reigned supreme.

George Orwell said that some ideas and opinions were so foolish that you had to belong to the intelligentsia to believe them.

That exquisitely describes the book trade's current delusions.

Peter Donoughue said...


The Mieville hardback is 17.99 pounds currently, so Pan Mac should be selling it at no more than $A44.95. Admittedly the exchange rate dipped savagely in Oct/Noc last year, to 0.41p and perhaps they priced it then, but to still leave that price in place when the rate's been around 0.49p for three to four months is uncompetitive.

Anonymous said...

Could someone enlighten me about the connection between PIR and local industries?

For example, does PIR determine whether a local publisher uses an Australian or an overseas printer?

A non-fiction publisher for which I worked for many years has recently outsourced most of its editing work to Asia. Does PIR stop other publishers' doing the same thing?

In short, how does the retention of PIR stop these things happening?

Peter Donoughue said...

Publishers use local printers to enable them to meet the 30 day rule and to publish 'hot' titles in a more competitive time frame.

Printers have been arguing that, without the PIRs publishers would print off-shore or buy stock from overseas. This is a fallacy. To secure preferred supplier status in an open market publishers will continue to print locally for speed-to-market and suitable format reasons.

Anonymous said...

Two bizarre comments from the protectionist lobby this morning.

`The President of the Australian Campus Booksellers' Association, Graeme Connelly, said bypassing Australian publishers for overseas-sourced textbooks would damage
the book supply chain and impact negatively on students.
"Even if all the quality control problems were overcome and campus booksellers were able to get the right texts a couple of dollars cheaper, they would not know who
else was importing the books and, without being available to return surplus stock, they would have to order very cautiously," he said.'

This like the Australian prawn farmers who argued that allowing prawn imports into Australia would destroy local prawn stocks. Why? Because Australian prawn farmers would buy imported prawns as feed for their own stock and the awful diseases in the imported prawns would wipe out the Aussie prawns.

However, the real doozie is this one:

`CEO of Pearson and Convenor of the APA's Tertiary and Professional Publishers Committee, David Barnett, said imported textbooks from Asian markets would be of variable quality, may be pirated and may not contain the correct digital access components.'

Yep, when all else fails, plays the race card!

`CEO of the Waltzing Matilda Wireless Manufacturing Company, Banjo Rafferty, said imported wirelesses from Asian markets would be of variable quality, may be pirated and may not contain the correct valves."

Peter Donoughue said...

'The big and nasty Asian wholesaler' is one of those scary ideas that regularly get an airing in Australian business discourse. Like the 'Yellow Peril' it belongs deep in the Australian consciousness.

When you care to analyse the practicalities around it you realise what a lame and tiresome piece of crap it is. Thankfully the Commission dropped it from its final report, having endorsed it as a tantalising possibility in its draft.

Local supply is simply GOOD BUSINESS, and will remain so PIRs or no PIRs.