The Anti-Amazon Hysteria is Silly and Self-Defeating.

I participated in a lively debate at Melbourne University last night on the topic 'Amazon Will Destroy the Publishing Industry'. I was on the negative side. We won. Here is my contribution:

The book industry's antipathy to Amazon is getting really, really silly. It's descending into farce.

A month ago Amazon launched ‘Amazon Source’, a proposal that allowed bricks and mortar bookstores to sell the Kindle for a small margin and pocket a percentage of the customers’ ebook purchases for two years afterwards. It was a reach-out, a peace offering perhaps, especially given so many independent booksellers around the world are now enthusiastically stocking and selling the Kobo eReader on very similar terms.

Typically, however, the bookselling community went hysterical:

‘We don’t see this new program as being at all credible’ said the CEO of the American Booksellers Association’

‘I wouldn’t want our customers to think that we were doing trade with the bad guys…sleeping with the enemy’ said a bookshop manager in East London.

Others called it ‘disingenuous’, and a ‘Trojan Horse style attempt to gain access to our customers’; ‘a dagger disguised as an olive branch; ‘a Faustian bargain’.

Here in Australia the CEO of Dymocks claimed booksellers would be ‘mad’ to sell Kindles, because they would be enabling Amazon to ‘gain access to their customer’s database’.

Big W has decided to sell the Kindles, but the co-founder of online bookseller Booktopia called them ‘fools’. ‘They’ll sell a single device to someone then they’ll never walk in to buy a book ever again’.

There are strong counter-arguments to all of these outbursts, but frankly, the visceral antipathy to Amazon is tiresome. Way more importantly, it’s quite self-defeating.

There have been many examples in recent years, including empty gestures like ‘Kindle Amnesties’ and supply boycotts. The most notorious of course was the forcing onto Amazon by the large US publishers the deeply flawed Agency model of ebook supply. That cost publishers over $300 million in government-imposed fines. Publishers claimed they did it ‘to enhance competition’. No they didn’t – they conspired to close down Amazon’s uncomfortable disruption and to raise prices.

Let’s list some elementary facts here. Amazon didn't invent the Internet, the web, ecommerce, PC’s, smartphones, or tablets. It didn't write the tax codes under which it operates globally. It didn't invent globalization or disintermediation. It didn't invent the strategy of ‘everyday low prices’ or deep discounting. It wasn’t the first vendor of cloud computing services. It wasn’t even the first online bookseller.

Amazon is simply the consummate expression of the Internet's power and functionality in retail (as Google is in information). Of course Amazon is a ruthless operation. Of course it exhibits no care or concern whatsoever for the health of bricks and mortar retail businesses or the local communities in which they operate. It exploits unsentimentally all avenues open to it to pursue its objectives. But it's only that way because of its 'take no prisoners' focus on customer acquisition and, most importantly, customer satisfaction.

In his review of Brad Stone’s The Everything Store: Jeff Bezos and the Age of Amazon Slate’s Matthew Yglesias writes that ‘Bezos’ core ideas – long-term focus, consumers first – are correct but hardly earth-shattering. But while most companies just pay lip service to this stuff, Amazon stands out by actually doing it’.

Even Amazon's much criticized ‘walled garden’ or ‘private ecosystem’ is hardly original. Apple became the largest and most profitable company in the world because of a similar policy. Walled gardens are a common commercial phenomenon because they work. Open systems also work, as Google has shown with Android.

No one is denying that small independent bookstores are having a tough time of it today, particularly in Australia. Michael Webster from Nielsen Bookscan provided some fascinating statistics at the Independent Publishers Conference a few weeks ago that looked at trade book sales in Australia over the last ten years.

There was steady revenue growth each year up until 2009 when consumer book sales reached $1.3 billion. Then things really started to decline dramatically, by about 8% per year. Frightening stuff.

Total sales in 2012 had slipped back to 2005 levels, a drop of around $300 million dollars. If that trend line continues into 2013, as it certainly appears, then the drop will be close to $400 million, or around 30% in total. Remember, these statistics measure sales made to customers in retail bookstores.

It’s apparent that customers are deserting our bricks and mortar bookstores in droves. There are many theories as to why, but in my view the overwhelming reason is price resistance.

Australians are voting with their feet. They are walking away from the sustained over-pricing by importing publishers over the last decade or so despite the strong dollar. We should have seen prices dramatically fall, by 30% or so, but we didn’t. We saw token falls, that was all.

Amazon’s value proposition was just too hard to resist.

Close to $500 million in sales is currently being bought offshore:  $200 million ebooks and $300 million print books. That amounts to a third of trade book purchases by Australians. These numbers are shocking, but for those of us who were paying attention they’re not really surprising.

In the parallel importation debate in 2009 booksellers broke with a long tradition and sided with publishers to preserve the protections in place that allowed overpricing and underservicing by publishers. It was a classic own goal - an act of self-destruction on a grand scale that continues to this day. And yet they are blaming Amazon.

Our booksellers’ challenge now is not to get righteous and indignant, but to adjust and compete by finding new pathways for their businesses, new ways to appeal to readers who now have far more choices than they've ever had before.

Firstly, they should lobby the government to abolish the parallel importation restrictions so they can buy around at cheaper prices when necessary.

Secondly, regarding Amazon, recognize many if not most of your customers are travelling down that highway, and less often down your high street. Position yourself in Amazon’s slipstream. Amazon Source offers you that opportunity. Welcome the reach-out. Don’t spurn it. Don’t compete with each other to see who can come up with the best anti-Amazon rhetorical blast. The financial terms on offer aren’t perfect so meet with Amazon and argue for a better deal.

When those customers buy a Kindle in your store shower them with all the warmth and affection you can muster. Help them set it up and show them how to use it. They’re in your store! Offer them all the freebies you can afford. Invite them to events. Survey them. You’ll know their reading profile in detail. Yes, they are readers.

And for God’s sake, stop demanding the government clobber book buyers with a GST imposition on low-value imports, given the dollar decline of 15% over the last two years has already made their importing more expensive. Is this being nice to your customers?

It’s time we stopped seeing trivial solutions to major problems.

Why Google's Fair Use Victory Is Absolutely Right

The Google decision handed down by Judge Denny Chin in the US

on Thursday was absolutely no surprise to those paying attention. Last year's HathiTrust decision, in which Judge Harold Baer determined that the librarys' scanned book repository was allowable under Fair Use, meant implicitly that Google's scanning - which made the repository possible - could not but have been Fair Use too. Judge Chin had nowhere else to go.

Predictably the Authors Guild has announced that they will repeal the decision. This is, frankly, about as dumb as it gets. All the arguments against Google's scanning over the years advanced by publishers and authors have been profoundly weak on all levels, and easily demolished if emotions were put aside and minds engaged instead.

Looking back, Google probably profoundly regrets it opted to begin settlement negotiations back in 2005 when authors and publishers first sued. But the financial penalties if it lost were scary indeed - possibly running into billions of dollars.

In plain English here are the basics: scanning is equivalent to bookseller shelving and merchandising in the analogue world, and viewing snippets is equivalent to customer browsing. Just as shelving and browsing are not breaches of copyright law, neither are their digital equivalents. That's really the essence of this issue. It's always been that simple. (Although a Google 'browse' around a particular word or phrase is a search across the whole corpus of twenty million scanned books, not just one or two. It's an 'uber-browse' perhaps!)

The problem is the issue has been enormously complicated over the years because of two things: the litigation initiated by publishers and authors; and the subsequent, very complex and contentious 'Settlement Agreement' negotiated by the parties over a three year period. The Agreement was eventually outlawed by Judge Chin in 2011 because of the effective monopoly status it granted to Google. Google was the privileged partner in the proposed grand remuneration scheme.

Right from the start, blindsided by a vacuous '(but it's MY PROPERTY!') prejudice, publishers and authors could not see what was staring them in the face -  a massive new marketing opportunity being handed to them on a platter. And Google was bearing all the expense!

The overall response to this decision, apart from the delight expressed by Google and its library partners, seems to have been rather muted. Even the Authors Guild seems to be going through the motions. After eight years the issue seems to have lost its power to excite. 

There is a distinct possibility that new book search companies will now emerge, and the issue will become, as it always should have been, the size of the snippets. Some specialized companies, focusing on medical and technical titles for example, will offer entire lines, even short paras, more advanced data mining functionality and more targeted and specific purchase recommendations. 

But at least scanning is now legit.

 

'A Fundamental Cultural Change is Necessary': The Book Industry Collaborative Council's Final Report.

From day one I was cynical about Industry Minister Kim Carr's initiative in 2010 to set up the Book Industry Strategy Group (BISG) to make recommendations to industry bodies and to government about how they could help the book industry grapple with the disruptive, global, technology-led challenges it was confronting. (See my blog post here).

Predictably the Group pleaded for vast sums of money ($50 million or so) to help it along, and even more predictably, the government declined. The government did set up, however, a new temporary body called the Book Industry Collaborative Council, with membership from all sectors of the industry, whose task was to identify strategies and priorities for industry development and reform.

Frankly, I yawned.

But now that I've read the Final Report, released this week, I've changed my mind. Although it's long (250 pages of dense type), it's worth reading very carefully. It could well be the first major report into the Australian book industry that effectively grapples with most of the deep-rooted structural issues besetting it in these times of profound change.

Here's a taste: 'The Council's most significant conclusion is that a fundamental cultural change is necessary right across the supply chain - a change that will allow the industry to prepare for active transformation and to be open to the opportunities that such transformation will bring'.

The transformation is being propelled by 'consumer preferences' and 'technological imperatives', with 'consumers choosing to access and read books in new and rapidly changing ways, expecting speedy delivery and competitive pricing, and using technology to work around territorial systems which restrict access to books in other markets'.

The focus is constantly on the centrality of the consumer, and the need for the industry to adapt. We've never heard this sort of talk before in this generally timid, protection loving industry where we're so ready to adopt a victim posture. 'The way forward for the industry is to be consumer focused - this emphasis is a necessary shift in the industry's outlook'. 'As the forces of globalisation intensify, the Australian industry can no longer rely on the protections previously afforded to it by geographical and territorial boundaries'.

'Bookshops have no choice but to compete with global online retailers'. 'Publishers must adapt their business models to encompass new and evolving format types and routes to market; and libraries are obliged to provide access to electronic as well as print resources'.

I suspect the generally positive, optimistic, reformist and wholly refreshing tone of this report comes from the far wider membership of the Council beyond the usual suspects of publishers, authors and booksellers. Membership included academics, librarians, a lawyer, a telecommunications expert, unions and bureaucrats, and Professor David Throsby, a respected arts industry economist, who chaired. The disruptive changes upturning the industry are identified and described, but never lamented. Traditional hard line publisher and author views, most recently in evidence on the ALRC's copyright reform proposals, have obviously been tempered by more grounded perspectives.

Of course there are things in this comprehensive report I disagree with. For mine it far too frequently refuses to tease out the ramifications of its observations and assessments, but simply surveys the landscape and passes on. (Libraries and ebook lending for example - motherhood 'principles' is all we get.) Perhaps that's because such a diverse group could rarely be expected to agree on fundamental and painful industry-reform recommendations. 

Nevertheless some of the surveys are excellent and very informative, the scholarly publishing one a standout. Also the export one, particularly the specific examples of success. The distribution Expert Reference Group's report is well worth reading if you've not time to read anything else. It grapples with the essence of the supply problem.

There are other parts however that are simply lame, built on hope and aspiration and little else (Industry data collection for example, which used to be called 'statistics'!). 'Roundtables' are a frequent recommendation.

The final and important recommendation to set up a new over-arching body called the Book Industry Council of Australia (re-named by the government this week the Book Industry Innovation Council) to oversee and direct all the implementation plans identified, is simply not going to get off the ground in my humble view. A CEO, a Research/Administrator and a small Secretariat is an expensive step too far. Without any government funding it won't be affordable by participating industry bodies.

A far better way to proceed would be for the APA to appoint a new CEO who had the smarts, the vision and the authority to move its publishing members beyond their traditional mindset - to get the cultural change going - and to take a leadership role across the industry generally, with booksellers and authors, and also libraries and government. It's been many years since the APA has had such a leader, but it is long overdue. Like so many industry associations in this country the official APA voice has reflected the lowest common denominator of its membership. This period has to end.

One final quote I found revolutionary, but it outlines the vision now necessary:

'Ultimately, failure to meet consumer expectations will totally compromise overall commercial viability. To be internationally competitive, Australian firms must be able to match offshore retailers across  three core criteria:

• Speed to market - access to books at a comparable time to when they are available from offshore providers.
• Availability - access to the books consumers want.
• Value - access to books at a price that is comparable to the price they can access them from offshore providers.'

The Days of the Statutory License Are Numbered

Despite the key recommendation of the Australian Law Review Commission in its Discussion Paper, the Statutory License won't be repealed by a future parliament, but it may well fade away. User bodies will in all probability not sign up for further terms or exercise their right to terminate.

As the Copyright Agency correctly points out in its recent submission responding to the ALRC's paper, users, unlike owners, have always been able to opt out of the license and either seek permission for copies they make (beyond fair dealing exceptions) or sign voluntary licenses with individual publishers or even Copyright Agency itself.

For this reason, and also because politicians always melt in the face of concerted opposition from authors and publishers preaching culture and enlightenment, the statutory license will never be legislatively repealed.

But voluntary licenses are the future and the statutory license is coming to an end.

Publishers are antagonistic to the ALRC's recommendation to repeal it and this is understandable, but they invest it with too much significance.

The industry needs to take up the challenge of negotiating voluntary licenses with schools and universities, combining print and digital. This is clearly what the customers want. The statutory license is yesterday's business model based on yesterday's photocopying technology. 

In one real sense the demise of this license should be embraced by publishers, not resisted, because while ever it exists primary relationships with customers via contracts will never have the opportunity to take root and flourish. The more innovative and entrepreneurial publishers will welcome the more competitive landscape.

Despite the years of enriching revenue flows it's time for the industry to wean itself off this print-based one-size-fits-all license. It's deadening it to the possibilities of the future. Sure, revenues will very likely drop in the short to medium term. That's a transitional cost that can't be avoided.

Textbooks are a dying business and everybody knows it. Within possibly five but certainly ten years print will no longer be a major delivery platform. Tertiary texts will die first, then Secondary, then most of the various types of print in Primary. So if over 90% of license revenues currently come from photocopying that is going to radically change.

The educational publishing industry is on the cusp of an extremely disruptive digital revolution that will dwarf what's happening in the trade sector with regard to ebooks. 

The next five or so years will see most educational publishers sign tailored subscription-based licenses with tertiary institutions and premium school customers. They will have the option of using newly developed Copyright Agency voluntary licenses for the rest if that makes sense.

Under these emerging business models publishers will have the freedom to offer comprehensive content offerings - primarily digital but inclusive of print. And the schools will demand liberal free use provisions as part of the deal, particularly involving content distribution in the classroom. Remunerable 'multiple copying' will be a thing of the past and the concept itself deemed quaint. 

Such arrangements are the mainstream future. As content goes digital, primary exploitations (formerly sales of books) and subsidiary 'bits and pieces' (eg photocopying) will collapse into comprehensive content offerings via licenses. 

Despite the claims of some publishers, it is simply not the case that voluntary licensing, either directly with individual publishers or via Copyright Agency, would be too burdensome and involve schools keeping onerous records of each and every copying instance. Sampling across sectors would still happen if parties agreed, and thus the schools' experience of Copyright Agency's voluntary license would be exactly that of the stat license. Of course direct licenses with publishers would require separate administration, but both parties would be aware of the need to keep it simple.

Only a handful of the publisher or author submissions to the ALRC  intellectually grapple with the concept of a voluntary license and how it would work. (How ironic this is considering that when the stat license was first proposed in the mid 70's content owners and an embryonic CAL objected. They pushed for a voluntary licensing regime on the basis that content owners' property should not be expropriated by the state). Such licenses are the main game in the US, the UK, Canada, and many other jurisdictions.

You only have to read the very detailed submissions from the school and university sectors on their experience - highly frustrating - of the stat license in operation to appreciate where the customers are coming from. And customers should never be ignored. Copyright Agency accuses them of misunderstanding how the license works, which I find extraordinary given the nearly thirty years of experience they've had with it.

Publishers have far more to fear than the end of this license. On the horizon, if parliament enacts the ALRC's Fair Use recommendations, which they surely will, are future liberal judicial interpretations which could wipe out huge swathes of income from educational licenses. The stat licence now delivers close to $100 million per year to the industry. This will be more than halved. (Canada in comparison delivered $23 million in 2011  before the liberalisation of their copyright regime last year). No-one can argue that copyright owners haven't had it good in Australia over the last 30 years due to our unique statutory license and the huge success of a smart and aggressive collecting society, CAL.

But now the tide is now turning. Digital is upending everything. The best thing publishers can do is look to the future, not try to preserve the past. While revenues might decline profits will hold up as bookseller discounts and all the substantial costs associated with the legacy of print are eliminated. 

Such is the universal logic of digital.

The ALRC Copyright Reform Proposals.

Wednesday this week was the day a live grenade was thrown at Australia's dated Orwellian Copyright laws. 

It was hurled by the Australian Law Reform Commission (ALRC) in the form of a Discussion Paper which was a long 383 page response to the submissions it had called for last year as part of its brief to report to government on the adequacy of our copyright regime to deal with digital realities, specifically whether content users were getting a fair deal.

There were close to 300 submissions. 

What initially impressed me about the Discussion Paper was its respect for all points of view, even the crazy ones. It was sympathetic, nice, polite and politically neutral at every turn.

But under this guise comes a grenade that will have radical reverberations through all the ways consumers interact with copyrighted material in the 21st century. 

The ALRC has called for a flexible, open-ended Fair Use concept to replace all our current Fair Dealing exceptions, thus freeing them from the tightly prescriptive shackles that make them so frustrating and limiting for most users currently; and it's also, amazingly in my view, called for the repeal of the 30 year old Statutory Licenses that govern uses of content in educational institutions and governments and which cost these bodies close to $100 million a year in fees paid to copyright owners.

It's as if the ALRC has said 'Go back and start all over again! The system's not working. Come up with fair, clear, sensible proposals that consumers will respect, and that won't bog down education in silly bureaucratic tangles'.

Has it shown a bias towards content users like schools and universities, and tech giants like Google who want as much frictionless access to content as possible? Certainly. But this was predictable as owners in this country have had it too good for too long, and a good measure of re-balancing was overdue.

But the commission has obviously bent over backwards to be fair to owners as well. This is a pro-business document in a substantive way. It accords enormous respect to the need for any copyright regime to provide sufficient incentive and financial reward to owners and investors. In fact I found it increasingly frustrating the longer I read, in that it seemed to accord too much weight to what, for me, were silly opinions that should have been whacked out of the park. It was was bipartisan to a fault. 

Not once does it refer to the need to restore some measure of 'balance' between owners and users (apart from when quoting a submission). It never refers to the currently fashionable 'users rights' terminology. It never criticises court judgements that have been universally condemned, like the appalling Kookaburra/Men At Work case. It never even suggests that conservative, iffy judgements like Optus Now may well have been decided differently under a more progressive Fair Use regime. 

However this tendency to be even-handed and nice means it refuses to come down on one side or another even when it's called for to tease out the implications - many dire - of a Fair Use application. It lets far too much go to the keeper.

One critical example is its recommendation that 'education' be added to the list of 'illustrative purposes' for determining whether a particular use is fair. It studiously avoids mentioning whether this includes copying by teachers for students, such as multiple copying for classroom use, or downloading an article from a web site to a school server for classroom display. But this is the crux of the issue and something the school systems desperately want. Right now they have to pay big sums for it. In fact the schools claim that 65% of what Australian schools pay for under the statutory license is free in jurisdictions such as the US and Canada. 

It's as if the ALRC is a stealth bomber but not coming clean about it. 

There is some excellent stuff on 'non-consumptive (technical) use', 'third parties', 'text and data mining' and broadcasting, but this familiar refrain keeps being repeated over and over again:

       'The users say this. The owners say this.
        Fair Use will sort it out. 
        Some uses will be judged to be fair, others not. 
        It all depends'.

This to me is profoundly disappointing. For a body such as the ALRC, rich in legal knowledge and expertise, to constantly throw everything to future court judgements in this way sort of escapes responsibility for providing a measure of reassurance to users and owners alike. You are the one tossing the grenade so give us a feel for what you think will happen. Not a guarantee, just an educated guess. And we're not even asking for a preferred position or outcome. For lawyers that would be going just a tad too far!

This is copyright liberalisation the hard way, via litigation and the courts. Millions of dollars will likely be spent to get clarification. Two recent cases in the US and Canada to do with fair use in education have recently expanded what's deemed to be fair - one allowing US lecturers to add articles and chapters to e-reserves for access by students (remunerable in Australia), and the other allowing Canadian teachers to multiple copy for classroom use including constructing coursepacks (also remunerable in Australia) - so it is highly probable this sort of lawyer enriching trudge through the courts will be necessary in Australia. (As US copyright guru Larry Lessig quipped: 'Fair Use in America is the right to hire a lawyer'!)

Finally, on the issue of contracts and whether they should be allowed to override the fair use exceptions  in the Act. The ALRC effectively has it both ways. For some reasonably innocuous exceptions - no, they shouldn't be; but for the more contentious, more liberal ones like teacher copying - yes, they possibly should. 

So in the end it will all come down to this: the current Statutory Licenses will be replaced by voluntary licenses where universities and school systems will sign directly with publishers and broadcasters and other owners, or with collecting societies, and there will be enormous argy-bargy and vexation over what should be paid for and what shouldn't, and the amounts paid; and there will be some rather large test cases between uses and owners to sort out what precisely is fair and what isn't.

In my humble view, in order to avoid enriching any further the legal community, and to save decades of time, both parties should devise agreed protocols as to what should be remunerable and what should not, and the range of uses allowed and for what purposes. Such protocols would settle all sorts of things and allow business to proceed. Individual owners, competing in the marketplace, can come to their own agreements on prices and any further allowances, but they can't offer less than the minimums spelt out in the protocols. We're used to Awards and minimum wages and conditions in this country.

To get these sorts of industry protocols takes a good measure of generosity on all sides. Let's hope it's there.  

In conclusion, the ALRC is to be congratulated. After all, the grenade was long overdue.

An Exquisitely Dumb Move from Cengage

After Wiley lost its recent case in the US Supreme Court on the issue of 'first sale' and re-importation (I blogged about it below) it was always possible, however remotely, that a major US higher education publisher would panic and indulge in some sort of extraordinarily silly and defensive behaviour.

Cengage has done it. It has just announced a new 'global pricing' initiative:

Cengage announces global price structure for US-based higher ed print titles

Cengage Learning will adopt a new global pricing structure for US-originated higher education print titles in July, with around a third of the US-originated titles distributed by Cengage Australia to be affected.

Paul Petrulis, vice president of Higher Education and Gale for Cengage Learning Australia, told Books+Publishing that ‘with the new pricing structure, prices will increase for many of the titles, however, for a smaller cohort, prices will decrease’.

Petrulis said the new structure is a response to the recent Kirtsaeng v Wiley case in the US, in which the US Supreme Court ruled that the doctrine of first sale, which allows for ‘legally acquired copyrighted works to be resold by their owners’, applies to works made overseas. Petrulis said that the ruling widened the definition of the first sale doctine, ‘allowing re-importation of US products originally created in the US from lower priced markets’. 

The new prices will apply to US-originated higher education print titles published from 2012 onwards, and will come into effect on 31 July. Petrulis said that this means the majority of Cengage Australia’s products will not be affected, including: all digital products; all locally authored, adapted and produced titles; all custom print and digital products; all Gale reference digital products; all Nelson Secondary and Primary schools products; and all English Language Teaching and National Geographic products.

While Petrulis said that Cengage is the first US education publisher to respond to the Kirtsaeng v Wiley case in this way, he said it is ‘an industry-wide issue and it is highly likely other publishers are also looking to how they respond’.

‘Publishers of higher education texts from the US have often substantially lowered and varied pricing of their print texts for international markets within Asia, Europe and Australia,’ said Petrulis. ‘Over the years, publishers’ ability to do this has eroded as the distributors in lower-priced markets have sourced texts at a lower price and re-imported them back into the US at a much higher price, and made a handy profit. The books that are re-imported from lower priced markets compete with local US distributors and ultimately lessen the value of the publishers’ product.’

‘In addition, the development of large-scale online retail across the globe, combined with favourable shipping rates and delivery times, has accelerated this process,’ said Petrulis, who added that the Kirtsaeng v Wiley case ‘has effectively eliminated one of the last legal protections US publishers had to combat re-importation, often referred to as “leakage” or “arbitrage”’.

However, Petrulis said that there is an upside for the Australian market in introducing a global pricing structure, with Cengage Australia ‘actively pursuing ... greater emphasis and opportunities for more local authors to adapt and create content’. He said there will also be ‘advantages for local booksellers as this change creates a global price floor’, which will allow ‘local Australian booksellers with online facilities [to] effectively compete on price with international retailers such as Amazon or the Book Depository’. ‘Digital versions of US print products, which will be generally priced lower, are also likely to get an additional uptake as students take advantage of the digital format,’ said Petrulis.

(Courtesy http://www.booksellerandpublisher.com.au/DetailPage.aspx?type=item&id=27325)



The point about this is that it's not really a global pricing policy at all. It's a US first policy where the rest of the world is told to go suck.

Differentiated, territorial pricing around the globe is age old in book publishing, and makes all sorts of strategic and financial sense. This is particularly so in higher education. Less developed countries in Asia, the Middle East and Africa have for decades enjoyed lower prices on US-originated textbooks to reflect market conditions, namely the students' ability to pay. Publishers, universally, have produced lower cost paperback editions or priced their hardback US editions at far lower prices than those charged US students. (Australia and the UK have benefited from this policy over the years too, though with far less justification).

A decade or so ago, because the internet made international price comparisons easy, US students became increasingly aware of these price differentials and leakage back to the US began. Mr Kirtsaeng saw a commercial opportunity, prompting Wiley's litigation.

An important point here is that the Supreme Court's decision against Wiley was hardly surprising. Nothing really new happened. The understood status quo was confirmed. No 'expansion' of the first sale doctrine took place. The copies were 'lawfully made' in an overseas country, that is, they weren't pirate copies.

Cengage's panicky, over the top reaction is entirely unjustified. Asian and African markets will see huge price rises (at least double or triple), all done to protect the revenues and profits of the huge US market. Sales outside the US will collapse and piracy will get a huge boost. Cengage's name will be mud. They should also expect governmental pressure of some sort. In the end there's no way they can win. They would have been better advised to join with their industry colleagues and lobby Congress to toughen the law on re-importation.

If global pricing were to make any strategic sense at all it would be accompanied by significant price reductions in the US - in the order of 25 to 30%. But this is a far too bitter pill to swallow, so don't hold your breath.

No other major US higher ed company will follow this move. They are well on the way to the digital future where tailored, contractual pricing is the norm across the globe. 'Global pricing' of printed textbooks is the last gasp of the dying analogue age. And, ironically, perhaps the last gasp of a soon to be bankrupt Cengage.