Publishing, Copyright and Canada. Is it really the end of days?

Reading publisher and author submissions to the Productivity Commission's inquiry into our intellectual property laws is a dismal way to spend a few days let me tell you.

The two issues of concern to the industry are the parallel importation provisions (predictably) and the possible introduction of US-style 'fair use' exceptions into the copyright act to replace our current and more limited 'fair dealing' provisions.

I want to address the fair use arguments the industry is making because they are quite simply dreadful if not downright dishonest.

Here's what Pearson says:

We would be very concerned to hear about any changes to Australia's fair use or fair dealing provisions, particularly in light of changes made to Canada's copyright laws with respect to fair dealing, which have had catastrophic effects on the publishing industry.

Here's what Oxford says:

Canada’s new ‘fair dealing’ guidelines, which were adopted in 2012, and which redefined what can be copied without compensation to creators and publishers, has had significant negative impacts on educational publishing in Canada. 

Here's what McGraw-Hill says:

Taking the Canadian experience from 2012, revisions to ‘fair dealing’ directly contributed to an unprecedented decline in Access Copyright revenue for McGraw-Hill Education in Canada, with the Schools division heavily impacted. There has been a subsequent loss of jobs and a shift to a US structure, damaging not only the local industry but by extension the publications of Canadian-specific cultural and curricula content. 

Here's what Macmillan says:

We support the view of the Oxford University Press Australia and NZ Submission that highlights the severe impact seen on businesses in Canada due to the change to a ‘fair use’ approach to copyright. 

A number of other submissions refer to the hugely 'negative' and 'destructive' impact the Canadian change has brought about.

Then, over the weekend, this interview with lawyer Roy Kaufman from the Copyright Clearance Centre in the US appeared in an international book trade newsletter Publishing Perspectives which forecasts armageddon for the Australian industry if proposals similar to Canada's were to be adopted here.

This interview is well worth reading. It is an exquisite example of massively over-hyped, absurdly overly dramatic, apocalyptic nonsense. Even the statistics it quotes are cherry-picked and flat out wrong, all out of context and marshalled to support propositions that have no basis in fact. If an Economics 101 student served this sort of stuff up they'd be quite deservedly kicked back into primary school to study arithmetic.

In any case Canada seems to be the thing. But any calm analysis of the facts about the Canadian educational publishing industry's fortunes over the last few years shows quite a different picture. I've spent quite a bit of time recently trying to unravel what's happened there and this is what I've found:

- Canada's fair dealing provisions were indeed loosened in 2012 after Supreme Court decisions allowing a liberal interpretation of 'educational use' in classroom settings. Educational authorities subsequently issued guidelines allowing teachers to copy up to 10% of a work, or one chapter, without seeking permission or making any payments.

- Previously such copying had to be licensed by Access Copyright, Canada's equivalent to Australia's Copyright Agency/Viscopy. The payments to Canada's publishers and authors over the last eight years (since 2008) have been far less than Copyright Agency pays in Australia (roughly $A100m per year):

                      2008: $28m
                      2009: $24m
                      2010: $16m
                      2011: $17m
                      2012: $18m
                      2013: $13m
                      2014: $10m
                      2015: $8m
(Source: PwC 2015b, Economic Impacts of the Canadian Educational Sector's Fair Dealing Guidelines, p43)

- So, since 2012, the year the new guidelines came into effect and the year all provincial governments stopped paying licensing fees to Access Copyright, the industry suffered a loss in revenue of $10 million. Not $100 million, but just $10 million. Total industry revenues in 2013, as quoted in the PwC report for both School and Higher Education, were $540 million. So the percentage drop due to the fair dealing liberalisation was, at most, 2%.

- In contrast, the absolute collapse of revenues due to market forces as a whole started in 2006 when sales peaked. For the school segment alone, sales declined from close to $205m in 2006 to approximately $100m in 2015. That's a 50% decline (about 10-15% per year). It clearly dwarfs the licensing losses from Access Copyright.

- That's what Armageddon really looks like. What was at play here? Here are some quotes from Canadian insiders that I approached (and who wish to remain anonymous). All have been in the publishing game for many years:

'The short answer to your question is that the decline of educational publishing in Canada, especially at K-12, is a sad and sordid tale of a long and steady decline - think of the the frog in the pot - which began well before changes to copyright. I believe responsibility for this can be laid right at the feet of greedy owners who wanted all the cash but none of the risk, and paralytic general managers stricken by a mind-numbing lack of imagination, courage and foresight. I would say that new legislation, which undoubtedly weakened the raison d’etre of Access Copyright and future licensing revenue, was just one more small nail in the coffin'.

'The real business of publishing, as you know, is making outstanding educational products and services that further educational outcomes. In this regard Canadian educational publishers have really fallen short. They have held a death grip on traditional product profiles and business models. “From my cold dead hands” they protested - which, it turns out, has become a self fulfilling prophecy. Ultimately their sense of entitlement and self importance led them to the position that the problem was the customer, not their products and services. A fatal conclusion. In my view, buying “educational content” was seen by senior educators and administrators as a low return investment. They want to change instructional practice and have spent huge monies on professional development and system change. There is still a ton of money in the system, but only for things that map onto priority initiatives. Content acquisition isn’t one of them. Today, Canadian publishers have put up the white flag and just given up making any new indigenous educational product. Its very very sad'.

'In the digital age content is ubiquitous. Industries of all kinds are being disrupted, disintermediated and decimated by new digital solutions. Educational publishers are amongst the many victims of this global phenomenon. So yes it is Armageddon!!! Abso-fucking-lutely!!! But fixating on protecting intellectual property rights is like howling at the moon - its not going lead to innovation or better products and services. The problems are just so much bigger than that. One might argue that it only protects vested interests and excuses them from innovation and reinvention. Like taxi cab companies complaining about Uber - ultimately futile. Stop complaining and reinvent yourself!!!!'

'In my opinion the most significant difference between the current health and prosperity of K-12 markets in Canada and Australia is that in Australia parents pay for resources and in Canada governments do. In Canada, if it had been up to classroom teachers, textbook sales would have declined much less. But because spending in Canada is controlled by politicians and bureaucrats, spending priorities have really shifted based on efficacy and investments that make a measurable difference. In Australia, buying educational resources has a much lesser impact on government policy and budgets. I think that structural reality is the one to really protect'.

'I'’ll say one other thing that you may want to pass on. Words of warning. For years, company presidents here have excused poor performance because of market conditions. Ministries of Education are all screwed up, spending is down, priorities have shifted, customers are stealing from us, blah, blah, blah, blah, blah. And for a while it worked. But I am convinced that these continuously negative market evaluations poisoned their back yard. Higher ups in NY and London etc. finally said well if this is such a crumby market why are we in it? This is what they did at Oxford. Management was so endlessly pessimistic they finally said well this is crazy and got out. The truth was there are plenty of opportunities. So by focussing on unwinable battles and inevitable losses, like copyright, you just make things look bad. Forget about it and move on and sing a song of happy opportunity otherwise they are gonna get it in the neck. Of course, eventually you have to deliver results on your happy tune which may be difficult if you have no courage or imagination. But that’s another story.'