Wednesday, July 15, 2009

The Productivity Commission's final report.

In the Commission’s view, while removal of the PIRs should see an increase in imported books where these represent better value, it is probable that most Australian publishers, including the major publishing houses, would generally adapt to the new regime, that Australian stories and content will continue to be demanded and that talented and marketable Australian authors would continue to be widely published. Any pressure for contraction would also be ameliorated to the extent that subsidy arrangements were made more effective. (Report, p XX111)

In its long, frequently repetitive, constantly frustrating, badly structured and often poorly written final report released yesterday the Productivity Commission has finally seen the light, reverted to its true free market economic self, and made some core recommendations that make absolute sense, both for the industry and the nation.

The recommendation to totally abolish the import restrictions rather than tinker with them is very welcome. The recommendation to delay the implementation of this reform for three years is disappointing. One year, or even two, would have been sensible.

The recommendation to review and increase direct subsidies for worthy books is utterly unnecessary.

Why is the report constantly frustrating? It continually overstates the 'harm' and 'contraction' that removing the PIRs would bring to the industry, yet makes no attempt to describe, much less measure, this effect. I have always contended that removing the PIRs would be a fairly innocuous thing to do, like 'removing the dingo fence from around suburbia'. Sure, publishers would have to adjust, but publishers are having to adjust to unfolding, significant events all the time - violent currency movements, mergers and acquisitions of themselves and their customers, subverting technologies, and so forth. Adjusting pricing, trading terms and supply practices to compete in a PIR-free market is hardly the stuff of nightmares. Coping with the Red Retail Group (A&R/Borders) is a rather more significant challenge I would have thought. Or coping with the pressure for huge and unwarranted author advances.

Although the commission acknowledges that 'the extent of the pending contraction has often been overstated by those in sectors facing reform', it cedes far too much ground to its opponents by substantially agreeing with them that there'll be a measure of contraction.

The overwhelming and quite possibly, at least in a political sense, fatal weakness of the report is its adamant refusal to confront the confusion and wrong-headedness of most of the submissions sent to it by authors and publishers. The universal claim that this issue is all about territorial copyright and, in Tim Winton's words, the 'brutal assault' on it by reform proponents, has been allowed to go utterly unchallenged. The commission has an annoying habit of assaying opinions and quoting all sorts of views contained in the submissions, but leaves them on the page like stinking turds, uncommented upon and unswept away. It unfortunately hasn't seemed to have grasped that there is a qualitative difference between the PIRs and the reality of territorial copyright, and that abolishing the PIRs in no way renders inoperative the ability of authors to sell and publishers to acquire Australian rights. Prognostications of doom contained in these submissions are therefore quite absurd. By leaving them uncontested the commission has allowed them to still live and breathe and retain their great emotional and political power. This is a huge mistake. Even in the commentary last night and today from journalists and industry players this 'assault on our rights' notion is still being trotted out.

The commission certainly didn't take this live-and-let-live approach to challenges to its pricing comparison methodologies from some parties after its draft report was released. In this final report it has really hopped into them in no uncertain terms. The pricing analysis is one of the best things in the report, and you can sense how jealous the commission is to protect its integrity.

It's clear the commission hasn't really grasped the critical importance of territorial copyright to the whole structure and dynamic of the global publishing industry. It's a foundational concept. There are passing references to the practice of 'price discrimination' in different territories but it's vaguely frowned upon, as supporting 'the segmentation of world book markets'. Hence acknowledging it as a value seems beyond the commission's powers.

Had it believed in it, it would have aimed both barrels at accusations it was out to destroy it, and blown the confusions, misrepresentations and dismal ignorance right away. It has committed a fatal mistake, and left its flanks utterly vulnerable in the highly charged political campaign to come.

There are some real nuggets in this report, but many of them will go unnoticed, unread and unappreciated. They are buried in prose as deadening as a Kevin Rudd speech, and in a wandering narrative structure crying out for sharpness and focus.

Nevertheless, here are some of them:

The contention underpinning much commentary (both prior to and following the discussion draft) — that reform to the PIRs would have little or no impact on book prices and yet would cause a significant contraction in local publishing — is not, in the Commission’s view, sustainable. Among other things, as pointed out in chapter 4, if cheaper, or otherwise better value, books were not available for importation from overseas, removal of the PIRs would have little substantive impact on the industry. (p 1.7)

While the power relationship between local publishers and booksellers would change somewhat were the PIRs removed, the value of local supply relationships to booksellers could add to the natural protection of distance from foreign markets to provide a price margin for local publishers facing prospective competition from foreign editions. (p 5.8)

As such, were PIRs removed, the greatest impact on booksellers might not come from the actual degree to which they shift away from domestic publishers, but rather from their ability to make a choice to shift to overseas suppliers if they were unsatisfied with local sources. The availability of such options would increase the pressure upon publishers to offer competitive prices and conditions, providing the spur for greater efficiencies in domestic publishing and distribution. In this context, the current PIR regime increases the scope for publishers with market power to engage in practices that, while maximising their own returns, in some cases may be detrimental to booksellers, and indeed consumers. (p 5.21)


RachaelMc said...

I've been looking forward to your response to the report all day Peter! Glad to see your thoughts.

Peter Donoughue said...

Hi Rachael!

Hope you're well.


Steve Carey said...

Like Rachael I've been keen to see what you make of it. Must admit I wasn't expecting a literary review!

"The recommendation to review and increase direct subsidies for worthy books is utterly unnecessary." Surely they're there as a blow-softener for the industry?

How long before someone quotes you as referring to many of the objections as "stinking turds"? And when are you going to say what you REALLY think?!

Anonymous said...

My dream outcome: Tim Winton announces that, as an act of protest, he will never write again. David Marr and Kate Grenville join the protest in solidarity.

Peter Donoughue said...

Winton I can do without! I'm still angry over Breath winning the Miles Franklin and Helen Garner's The Spare Room not even being nominated!

I'd forgive Marr anything!