Tuesday, August 25, 2009

Melbourne Writers Festival: Panel on Parallel Importation

This MWF panel brought together Allan Fels (ex ACCC), Gabrielle Coyne (Penguin), Sandy Grant (Hardie Grant), David Vodicki (music industry) and me to discuss the issues under the chairmanship of Mark Davis from Melbourne Uni.

It was an enjoyable night, but predictably frustrating. There were about 50 people in the audience.

Here are some of the claims that were made and my responses to them. There simply wasn't time on the night to go into any depth, so I'll do that now.

1. It might be true that, technically, territorial copyright (TC) wouldn't be affected by the abolition of the parallel importation restrictions (PIRs), but the reality of it would be thoroughly subverted.

Henry Rosenbloom made this point and claimed that my separation of TC and the PIRs is a 'distinction without a difference'. Well this simply doesn't hold water. It's a neat side-stepping of the issue. For TC to be subverted booksellers would have to source a significant percentage, if not all, of their foreign-originated books from overseas wholesalers rather than from local publishers. It implies a number of things: a) that local publishers would not be able to profitably compete with overseas sources of supply; b) that, even if they could, booksellers wouldn't order from them.

Both these contentions are rubbish. Both Dymocks and Kinokuniya (the only two booksellers arguing for an open market) have repeatedly said local sources of supply are by far their preferred option, all other things being equal. It is far less expensive, far more efficient and makes inventory management far easier. But publishers must come to the party and make their offering competitive. The days of sitting back and hiding behind antiquated regulations are long gone. What is wrong with asking publishers to be competitive? Everybody benefits if they are.

2. The Productivity Commission's (PC) pricing analysis, which shows Australian prices at current exchange rates to be 30% higher than US prices of similar editions, and 50% higher than the cheapest US editions, is deeply flawed for two reasons: if the average exchange rate over the last 10 years of 0.69c is taken into account the price differential evaporates; and no account has been taken of the freight costs to ship books from the US to Australia.

As I've said before in this blog the PC's pricing analysis is one of the best things in their report. Publishers ought to do themselves and the whole debate a favor and accept it. They should also stop hiding behind the absurd ten-year average exchange rate argument. The average over the last five years is 0.79c. Today it is 0.83c. The facts here are simply incontestable. As for the freight argument this has no substance. Airfreight to Australia from the US costs about 5% - 10% of the average retail price, depending on the volume of the shipment and it's weight. Furthermore, and this is a key point, airfreight costs are part and parcel of overall trading terms negotiations with overseas principals. The higher the freight the deeper the purchasing discount, which is why Australian publishers normally get sweeter discounts from their US suppliers than their colleagues in either Canada or Britain. The same goes for shipments from the UK.

The fact that local publishers get this decided advantage from their overseas principals is precisely why retail booksellers, who will get a far worse deal on freight from the overseas wholesalers, would prefer to buy locally. Why would a bookseller pay for the freight when the publisher can much more easily absorb it, and therefore price competitively?

3. Publishers will find it hard to sell export rights to Australian titles because the buying publisher will demand a non-exclusive right to re-export their edition back to Australia, given the new open-market status of this territory.

This is an exquisite piece of illogicality! The Australian publisher obviously holds exclusive Australian rights under the contract with the author, so it's logically impossible to sign any non-exclusive deal with anyone else. As well, the only way the UK or US edition can come back to Australia is via a UK or US based wholesaler. In that case no contract is necessary.

But the root of this confusion lies in the term 'open market', which British and American publishers universally think of as a market for competing editions, all operating on a non-exclusive basis. Australia won't be like this, as I've explained in my last post. It would be more accurate to describe Australia, if the PIRs are abolished, as a 'deregulated market' where booksellers can parallel import in the hard cases.

It will be up to Australian publishers to explain these realities properly, and positively, to overseas publishers. Dopey notions need to be solidly and politely whacked.

4. Virtually the whole industry considers the PC report poison, therefore it must be!

I refuse to give this comment any credibility by spending time refuting it! We are really at the bottom of the barrel here.

5. Economic rationalism has no place in the world of books and culture. The PC report should be ignored by any government seriously interested in preserving and developing Australian writing, literature and identity. Slightly lower prices are absolutely no substitute.

Where do you start with this one? If the whiff of elitism doesn't turn you off then the cultural bunker mentality should. How dare any mere economist encroach on our pristine, privileged terrain? This stuff is straight out of the 80's. Surely we've got beyond it. By all means attack the economists' arguments, assumptions, methodologies and recommendations, but don't embarrass everybody by claiming they have no right. Ugh!