Amazon and the GST

I've said it plenty of times before, and I'll say it again: calls by Australian publishers and booksellers for the government to force Amazon to charge GST to Australian customers are profoundly misplaced. As a government policy it would be just plain bad.

Here are the reasons:

1. It would dampen the pressure on publishers to keep their markups on imported titles reasonable and competitive. (And the government have relied on this pressure as a justification for not tampering with the parallel importation restrictions).

2. Booksellers should welcome this pressure, not lobby to weaken it. The most effective way for booksellers to compete with Amazon is through ramping up the pressure on publishers to be more competitive on pricing, delivery and trading terms, and certainly not by (once again!) supporting publishers in their efforts to be protected from it.

3. I'm not an accountant or tax expert, but I'm sure it's relevant that the GST is a value-added tax, not a consumption tax or sales tax. So businesses have to be in the Australian value chain to be able to deal with it administratively and financially. Businesses that charge the tax receive input tax credits for the GST charged all the way through their supply chain. Overseas businesses supplying direct to consumers are, by definition, not in the supply loop. Nor are they subject to Australian law. This is why calls to 'slap a GST on Amazon like US states that impose their sales taxes', are naive. It's apples and oranges. If ever Amazon sets up a distribution centre in Australia, that's when they'll be forced to charge GST.

4. The Rudd government has just decided that Amazon is the savior - a friend of booksellers, printers, authors, readers, because of the pressure it puts on publishers to ratchet up their performance. So does the industry really think the government will now agree to protect publishers from that competitive rod up their arse?

5. Booksellers have one huge advantage in competing against Amazon - they don't have to charge freight. If that sizable impost doesn't currently deter Australians from purchasing from Amazon, then an additional 10% GST won't make one skerrick of difference, and is frequently washed away by currently fluctuations anyway. Why do booksellers keep banging on about this? Go to the publishers instead and bang on about the need for better, more responsive terms. That would be entirely productive.

6. It's simply not a good look for the trade to be arguing that book buyers should be lumped with another tax. And it's not a good look to keep arguing in Canberra for additional protection. Talk of 'levelling the playing field' is a dead give-away. It's how rent-seekers frame it.

It really is time the book trade grew up, and began to focus on the real issues facing it. There is so much that could be done if all parties stopped being distracted and absorbed by ephemera.

The Big Lie...again!

I referred in my last post to the Big Lie perpetrated by publishers and authors in the parallel importation debate. Here is a succinct expression of it. It was published in Crikey yesterday:



'Patrick Gallagher, Chairman, Allen and Unwin, writes:



A combination of naiveté and muddled thinking from Crikey in the Great Book Debate. Blind Freddie can surely see the motivation behind the Murdoch Press's rabid publisher bashing, which is simply a case of a handy stick to take to Rudd. Which in fact makes the Government's decision to retain Territorial Copyright the brave one; it would have been far easier to take the populist line, tear down the walls and proclaim cheap books for all.


Put those pesky intellectuals back in their place and give the people lots of cheap rubbish from overseas.


Don't fall for the economists' and free marketeers' attempts to paint this as a failed opportunity to create a nirvana for the reading public. The small but noisy minority led by Dymocks and Bob Carr had one thing and one thing only in mind - better margins for their business.


The government deserves credit for appreciating this, and for understanding the wholesale damage that change to copyright would do to the book industry, to authors and ultimately consumers'.



The Government's decision 'to retain territorial copyright'? That wasn't the government's decision at all! The government decided to retain the importation restrictions. THESE HAVE NOTHING WHATSOEVER TO DO WITH TERRITORIAL COPYRIGHT! (See my speech to the Copyright Society on October 17 on this blog for a explication of this issue).


It really pains me to see seasoned industry players not even at first base in their understanding of these issues after almost 20 years.

Why the Booksellers Comprehensively Lost.

When the history of the parallel importation debate is written, as I'm certain it one day will be, what with so many publishing courses and academics sprouting like mushrooms across the country in recent years, there will be a judgement made on precisely why the nation's booksellers, big and small, chain and independent, got this debate so profoundly wrong, ill-judged the political zeitgeist, and so comprehensively lost on every conceivable front.


Even given that the Rudd government gave up and played dead on the issue, which is not stopping the APA from insufferably championing its campaign winning brilliance, the booksellers, both the ABA and Dymocks, misjudged their fundamental strategy and therefore tactics so badly that the sorry saga needs to be recorded by an expert commentator such as myself before the caravan moves relentlessly on and we all get back to business.


1. The campaign run by the authors and publishers was based on a Big Lie (not an intentional one, so it would be more accurately labelled a 'big untruth', but that phrase has no poetry or power so let's stick with lie). The central thesis was that it was all about maintaining territorial copyright in Australia, because without it this great and successful industry would collapse.


2. The ABA and particularly its independent bookseller members swallowed this lie hook, line and sinker. I remember the sheer terror I felt when the booksellers, at various meetings around the country last year when the issue first arose, decided to support this publisher thesis and ditch their previously long-held position in support of a deregulated, open market. There was also a misguided belief that any gains from abolition of the restrictions would go mostly to the hated chains who could flex their purchasing muscle to gain more competitive advantage over the little guys.

3. This blog is littered with references to this 'sublime delusion', much to the chagrin of many of my bookseller friends. But the fact is the ABA's adoption of this posture hamstrung them from day one and neutered them in the unfolding political campaign.

4. The one sad fact of this campaign was that the lie was never nailed. Never ever nailed, except by me, a lone, irrelevant and pretty irritating voice. But imagine what could have been, if the ABA, united with Dymocks, had focused their energies in the media, in Canberra and elsewhere on nailing the lie, the absurdity and illogicality of the publishers' line.

5. Every crazy utterance could have been pounced on, and there were literally hundreds of them through the course of the debate. The madness of the printers, for example. Of all the nonsensical propositions put forward the printers' fantasies were some of the most exquisite. But the ABA never had the enemy in its sights. It never even knew who the enemy was.

6. As for Dymocks, what a mess. Their campaign was built around the premise of 'cheaper books' for western suburbs' punters. But they never nailed the lie, didn't even see it. Thus their campaign had no power or momentum. You can't position yourself as an enemy of culture and win any debate in Canberra. You just can't. Because you make it way too hard for the politicians. If you're demanding they nix a thriving and vital cultural industry you've lost them totally. Dymocks had to nail the lie, but they didn't.

7. The APA ran a superb campaign - focused, passionate, constantly on message, and very simple: preserve what we have or see a vital cultural industry die: It's all about preserving territorial copyright. There's the lie right there. And where are the voices saying it isn't so? Even the Productivity Commission was sucked in. It refused to engage and argue this point. In my memorable phrase it endlessly quoted submissions articulating the lie, but left them on the page 'like stinking turds'. It made itself utterly vulnerable.

8. In the final stages of the campaign the ABA and Dymocks, scenting defeat, came up with a compromise plan which was full of holes and could not possibly get up, as I explained in recent blog posts. You just can't propose something that breaches international treaties on one hand, and is utterly impractical in the real world on the other. This was a real low point.

9. Now the booksellers are lamenting the lost opportunity. They should be celebrating what they campaigned for - continuing protection; the continuance of 'territorial copyright' - but they must know they got it wrong right from the start. They are also promising to continue the fight. Oh please! IT'S OVER!

'Governing This Country is All Too Hard': Rudd

What a miserable waste of everyone's time!

The Rudd government has decided not to reform Australia's book importation regime - at all. Not even the teeniest bit of modernisation. Not even reducing the 90 days on the backlist to 30 days that every party in the industry expected and would have welcomed.

It's almost as if they've discovered Amazon in the last twelve months and concluded 'well, that's let us off the hook! We don't have to think, we don't have to debate, we don't have to upset anyone, we'll just sit back now and luxuriate in the accolades of the nation's authors. Productivity and economics can go to buggery. Basically, governing this country is all too hard'.

I'm flabbergasted! But at least I take comfort from the fact that I did predict it, fifteen months ago when this debate started:

'All of this [the author and publisher claims] is nonsense of course, but it is highly effective politically. No arid report or recommendation from an economic body like the Productivity Commission is going to be able to dislodge these noble sentiments from any politician's breast. So my strong sense is that the reform initiative will falter and the 30/90 day provisions remain'. (LOGOS 19/3, 2008)

Another Look at the ABA's Pricing Proposition

Malcolm Neil, ABA CEO, has kindly clarified for me how he envisages the Canadian price control mechanism working in the Australian context.

In summary, if a bookseller calculates, on any given day, that the RRP set by the publisher is more than 10% above the price of the overseas edition (excluding GST), then the bookseller can freely import.

In other words, publishers would have parallel importation protection under the law, but that protection would be subject to a continuing test, based solely on price.

As much as I admire Malcolm, one of the trade's gentlemen and a good friend, I feel obliged to say that this is, frankly, unworkable, and will end up being counter-productive to bookseller interests.

Let's tease out the practicalities:

- Publishers set their prices months in advance of publication, for obvious marketing reasons, and they cannot keep changing them based on daily exchange rate fluctuations. Very few systems can handle that, particularly retailer systems. In fact retailers get quite annoyed at frequent price changes, particularly price decreases. It plays havoc with good inwards receipting, account reconciliations, returns processing, etc.

- Yet the ABA is asking for the right to test the legitimacy of those prices on a daily basis.

- Because of the impossible challenge set publishers in such an environment, recommended retail prices will soon be abandoned and net pricing become standard industry practice. Thus the law will be rendered obsolete very quickly.

- Publishers would accept the 10% markup challenge, but they would tighten their trading terms with booksellers as a result. Thus the booksellers will lose out as they have nowhere else to go. This whole debate is not just about lowering prices to consumers - although that's the ultimate point. It's also about lowering wholesale prices to booksellers by allowing them to source offshore to their competitive advantage. Booksellers would be denied this critical benefit of real reform.

- Quite likely, faced with a margin squeeze, booksellers will mark prices up, beyond RRPs, just as Red Group Retail are doing now. So where will that leave the spirit of the legislation?

The ABA is trying to engineer an open market by the back door, and it won't work. Pricing controls, whether direct or indirect, simply don't work. What works is competition.

Had the ABA opted to honor their history and support the open market from day one, as they should have, then they would not find themselves in this awful half-way house quandary. An open market would oblige publishers to earn bookseller loyalty in the usual old-fashioned way, by excellence in all facets of their business including pricing, servicing, and responsive trading terms.

The ABA's price control system will simply antagonise publishers, even those who genuinely want to play the game fairly and responsibly. And it will work against booksellers' real interests.

Where's the sense in that?

A Presentation on Digital Futures - My Speech to the AGM of the Australian Campus Booksellers Association

Five years ago I made a rather rash forecast in front of about 100 campus booksellers that, because of the rapid advance of digital technology, 50% of them wouldn't be around in five years time.

They've never let me forget it. Each and every one of them are still in business, seemingly stronger than ever.

This is the speech I delivered this week at their 2009 AGM.

First, some snippets to whet your appetite:

'Amazon is the gorilla and it’s setting price expectations, and this will be critically important as this new market unfolds. But, to be frank, reading an ebook is such a pared down, low rent, decontextualised experience, that it’s hardly worth 40% of the hard back price on any measure'.

'Authors are clamouring for a higher royalty rate, and so they should. If publishers’ net profit on the title is higher as a percentage – which it is – then the author’s share should match it. These two elements, net profit and royalty, should always be in balance'.

'Letting the consumer decide would be the best strategy, and this will also be the best way to combat piracy. Don’t alienate your customers. They’ll take revenge. In the global online world, people don’t mind paying, but they do resent waiting. Imagine if newspaper publishers temporarily withheld important content from their websites to force readers to buy the printed paper! Digital editions run in parallel – they’re not part of some outdated analogue sequence'.

A Presentation on Digital Futures – Publishing
(ACBA AGM, Brisbane, November 2009)

Some of you may remember - well...probably all of you remember - that five years ago I stood up at this gathering and pronounced that, because of the rapid advance of digital learning technology in our educational institutions, half of you traditional booksellers wouldn’t be here in five years time. The printed textbook would be well and truly on its last legs.

Looking around this morning I see that all of you are still here! Far from being almost dead, the textbook is thriving. In the year ending August 2008, according to publishing industry statistics compiled by the APA, tertiary sales grew 10.2%. In the year ending August this year growth was just as robust, at 7.8%.

A number of things can be concluded from this. Firstly, and most obviously, I didn’t know what I was talking about, and secondly, some profound transformations we all anticipated simply weren’t happening to the extent we thought they were.

In my defence let me say that I wasn’t alone. In 2001 the huge, global business consultancy company Accenture forecast that there’d be 28 million dedicated ebook readers in use in the US alone by 2005, and ebook sales would be $2.3 billion. Forrester predicted a more modest $251 million in sales of ebook devices in 2005, but – and this is astonishing - $3.23 billion in digital textbook sales. RCA, who made ebook devices at the time, dismissed Forrester’s forecasts as ‘ridiculously low’!

Even Microsoft, when it launched its famed Microsoft Reader software back in early 2000, got it laughably wrong. It predicted that, by 2005 ebook sales would be almost $1 billion, and ebook stands would be everywhere, in bookstores, newsagencies and airports.

Of course, by 2005, nothing remotely like that happened. The Rocket eBook, the SoftBook, the Franklin eBookman were all dead and gone.

Notice, however, that all these forecasts are in 5 year time frames. There’s something about that 5 year horizon that is immensely and emotionally appealing to digital enthusiasts. I guess it conveys the sense that a revolution is just around the corner, and there’s an urgency about it that can’t be ignored. But importantly, it’s a timeframe where, in a rapidly changing landscape, the forecaster can be reasonably assured that he or she is across most of the elements in play.

In preparing this presentation today I read a number of books and articles published over the last two years, notably Print is Dead by Jeff Gomez, formerly Digital Director at Penguin USA, and The Book Is Dead by Sherman Young from Macquarie University. Both these books are excellent and I wholeheartedly recommend them. They were first published two years ago.

But here’s my point: neither book mentions the huge game-changer, Amazon’s Kindle, which was first released in late 2007 (while the books were being printed, ironically) and which, almost singlehandedly, has radically changed the landscape because of its wireless technology, but most importantly, because of its US$9.99 ebook pricing. Suddenly ebooks are off and running. The revolution has well and truly started.

The early forecasters simply got the timing wrong. Had they have opted for a 10-15 year period they would have been substantially correct.

And so perhaps would have I! We should be in no doubt: we’re in the midst of a tectonic shift, and the only question is the pace of it.

In September this year, the Frankfurt Book Fair in co-operation with Publishers Weekly and the German trade magazine Buchreport conducted a survey of international publishing industry experts which showed that most participants believed that 2018 would be the year that digital sales would overtake sales of physical books. Only 22% believed digital would never overtake print. The great majority actually embraced the ‘radical change’ digitisation would bring about.

How quaint now does Pulitzer prize-winning author E. Annie Proulx sound, a decade after she stated in the New York Times that ‘nobody is going to sit down and read a novel on a twitchy little screen. Ever’.

In order to get a handle on what’s happening now, and how things might well develop over the next five to ten years, I’ll first say something about the consumer, then the technology, and finally the economics of it all.

The Consumer

As Campus booksellers your future, more than any other sector of the book trade, lies in the habits and preferences of the under thirties. Believe me, that should be a real worry. While I think I can uncontroversially say that the future of our industry doesn’t lie with the blue rinse book lovers who currently sustain most of our downtown bookstores, and certainly populate our writers festivals, I do predict with a certain trepidation that the declining book reading habits of Gen Y’ers certainly don’t presage a healthy book retailing sector into the longer term future.

In a marvellous book released last year called The Dumbest Generation, Professor of English at Emory University in the US Mark Bauerlein argues very convincingly that our young students today are so absorbed, virtually 24/7, in their digital world, that they are becoming increasingly ignorant of everything culturally, socially and scientifically important. ‘Instead of opening adolescents and young adults to worldly realities, acquainting them with the global village, inducting them into the course of civilisation, or at least the Knowledge Economy, digital communications have opened them to one another – which is to say, have enclosed them in a parochial cosmos of youth matters and concerns.’

Buying music, buying newspapers, watching free-to-air TV at scheduled times, buying books – these are all activities that 20 somethings don’t really do anymore. It’s not how they socially connect and integrate with society. I have three kids in their 20’s and I’m continually amazed by their habits and how they keep up with what’s going on. It’s all through their laptops. They take them to bed. So much for the claimed portability of the book. To them I’m a relic. I actually buy media, entertainment and information on a regular basis. I wouldn’t know how to pirate something even if I wanted to. To them the appurtenances of my information world are analogue legacies with fading relevance. Books are, at the most, beautiful objects, great for gift-giving. I get a cook book for Xmas and I’m expected to cook for them when they deign to visit.

Just as they’ve taken to the iPod and iPhone, so they’ll take to ebooks, on whatever device makes sense and that they can afford. The real issue is, not whether printed books will survive, but whether long-form reading will survive, that absorption that is the book reading experience. There are plenty of voices that are saying that the very nature of reading will change. US guru Bob Stein, for instance, who runs the Institute for the Future of the Book in the US, claims that the 600 page novel, such as Hilary Mantel’s Wolf Hall, this year’s Booker winner, will not be the gold standard for much longer. Mobile technology will re-structure books into ‘shorter bits and bursts’, to be read ‘in the interstices of life’, like standing in queues, etc.

But we don’t have to subscribe to these more far-reaching and radical scenarios to know that there is something profound happening now, around which we need to develop our business strategies immediately. The digital future is really the digital present.

The Technology

Ebook readers like the Kindle, the Sony and Barnes and Noble’s nook are only one manifestation of the new, digital paradigm. There’s a new reader being released virtually every day. An interesting debate is being carried on as to whether the market will go to single purpose devices like these, or multi-purpose devices like the iPhone and other internet-connected tools. Some commentators are predicting the Kindle will quickly be consigned to the rubbish bin of history. In an excellent article in this month’s Monthly magazine author John Birmingham says: ‘Amazon’s electronic reader, the Kindle, which excited primal fears and thrills in equal measure among publishers, may well be dead technology within six months. If Apple releases its long-awaited tablet PC, then Amazon’s closed and clunky ebook system (and its ham-fisted attempt to establish the company as a monopoly provider) will end in abject failure. The modest ebook functions of the iPhone already far exceed those of the Kindle. A larger, more luxurious and powerful device like a tablet PC may provide mainstream publishers with the platform they need to convince paying customers that reading an onscreen copy of Esquire, or The Age, or The History of the Decline and Fall of the Roman Empire is just as pleasing and incalculably more convenient than lugging round an analogue copy.’

As far as young people are concerned, especially students, there can be little doubt that web-enabled devices will dominate, and I agree with Birmingham, the Apple tablet will likely be the category killer. The one thing that an educational setting requires, and that printed books and non-webconnected ebook devices can’t offer, is interactivity. Laptops offer that, so will tablets, but the tablets will offer students much more, including their music and phone. It’s a very appealing package.

Tertiary publishers, as you know, have been marketing digital, online learning packages for a few years now. Wiley’s WileyPlus, Pearson’s MyLab, etc. Their experience has been interesting, for what they’ve found is the old-fashioned textbook has been virtually impossible to dislodge. Even with heavily discounted prices – up to 50% - for the online versions, the books can’t easily be blasted out of their entrenched positions. It seems the established business models are proving to have considerable traction.

Personally I think this is a temporary stay of execution. The book business is strong at the moment because enrolment growth is strong; secondly, what we’ve seen is the first generation of online resources. The integration with university-administered Learning Management Systems such as Blackboard and Moodle, has not always been adequately or seamlessly done, if seriously attempted at all; thirdly, hosting in the US has meant latency problems in Australia due to inadequate broadband speeds. It’s frequently been a frustrating experience for adopters.

New generation packages are now being released which will address these things as well as offer far more functionality, including higher levels of customisation, greater flexibility for lecturers, far more content linkages, better collaborative tools for class interaction; more assessment, communication and administration features and so on.

Publishers are building lots of internal production efficiencies through the integration of workflows and systems. There’s a lot happening that customers aren’t noticing. And there is a great deal of investment going on. Content Management Systems are being built that ensure all of a publisher’s content is tagged according to highly sophisticated taxonomies which allow well-designed and searchable output, including visual and tabular, onto all sorts of screens. Publishers are absolutely convinced that the near future is digital so that’s where the money’s going.

And the important thing is this: no publisher can continue to invest equally in both sides of the business. We won’t see a big, toe-crushing, 1000 page, full colour textbook alongside a rich-functionality online package in seven to ten years time (notice I didn’t say ‘five’!). You might see a black and white, short companion, but that’s all. And the question for the bookseller is: will you sell it, or will the publisher give it away for free?

Look at what’s happening in our schools now, particularly Secondary schools. The Federal government is spending upwards of $2 billion dollars rolling out its Digital Revolution, including providing laptops and netbooks to every student. The fibre infrastructure pipes are being laid. It’s really all happening and teachers are responding. Publishers are also responding. In a few years’ time the industry could well be getting 15% of its total school revenues from digital-only products. Certainly that’s the ambition of the major players.

And when these kids go to university, do you think they’ll revert to buying expensive analogue textbooks, even second hand?

Higher Education textbooks, after all, are a pretty recent phenomenon. They have never been god-given entities of enduring educational value. They are a product of a particular sociological time – the post-war period of mass education and rapid economic growth. Their commodified, mass market, lock step pedagogical formula is well and truly dated. Coursepacks can be seen as an early expression of customisation and individualisation. Digital interactivity enables that exquisitely.

The technology is facilitating all this and the students of today are ready for it. The ducks are all being lined up in a row.

The Economics

But it’s not just the felicitous coincidence of devices and ready-made consumers that is propelling the transition. For publishers the economics of it all are extremely attractive, and some would say life-saving. They are an offer too good to refuse.

Ebooks and online resources provide publishers with enormous cost savings and high margins. No inventory baggage including printing, warehousing, shipping, returns; no tied-up capital, write-downs or write-offs; no foreign exchange exposure; no custom clearance charges; no expensive air-freighting; no damages in transit; no insurance; no fire or flood risk; no errors that can’t be immediately corrected; no out-of-stocks costing sales; no second hands – I could go on!

There are of course new sorts of costs – technical staff and systems, platform development and hosting; 24/7 support. But these are fairly minor in comparison.

There are plenty of discussions and debates going on about pricing, royalties, DRM, release dates, territoriality, etc, and also the proper place, if any, for booksellers. Let me briefly address these in turn.

Everybody agrees ebook prices should be lower than the printed hardback. Most publishers are saying around 20-30% cheaper. This is an interesting debate because Amazon is charging $10 - 12 for most titles, and this amounts to roughly 60% less than the standard US hardback price. It’s parked around the middle of the US trade paperback at $14.95 and the mass market paperback at $7.95. Amazon is the gorilla and it’s setting price expectations, and this will be critically important as this new market unfolds. But, to be frank, reading an ebook is such a pared down, low rent, decontextualised experience, that it’s hardly worth 40% of the hard back price on any measure. When Random House Australia priced the new Dan Brown ebook, only available off its own website, at the same price-gouging list price as the hardback - $49.95 – did they honestly expect to be taken seriously?

Of course no-one’s in clear water here. Publishers will still continue to have analogue overheads for many years, if not decades, to come, and these have to be covered. That’s traditionally called, in the words of management guru, Rosabeth Moss Canter, ’persevering in the middle’, and it’s not unique to publishers. But one thing you cannot do is make a victim of your customer. If ebook prices have to come down because their own cost structures demand it, then they have to come down. And, in any case, excessive margins will always be competed away.

Authors are clamouring for a higher royalty rate, and so they should. If publishers’ net profit on the title is higher as a percentage – which it is – then the author’s share should match it. These two elements, net profit and royalty, should always be in balance.

I would dearly like to see simultaneous ebook and print book release dates, as I firmly believe this is the only way to maximise total revenue, but most publishers are resisting this as they fear cannibalisation. Letting the consumer decide would be the best strategy, and this will also be the best way to combat piracy. Don’t alienate your customers. They’ll take revenge. In the global online world, people don’t mind paying, but they do resent waiting. Imagine if newspaper publishers temporarily withheld important content from their websites to force readers to buy the printed paper! Digital editions run in parallel – they’re not part of some outdated analogue sequence.

Digital consumers also resent mindless, producer-centric authority: proprietary formats and restrictive DRM controls are not the way to go.

And now we get to the tough one – territoriality. I can think of nothing more absurd than there being a number of ebook editions on the market to accommodate territorial copyright restrictions. For instance Amazon won’t sell an Australian customer a Kindle edition of any original US title where Commonwealth rights have been sold to a British publisher. The Australian customer has to wait for the British or Australian publisher to amble up and publish their own version of the ebook. To add insult to injury, if the Australian customer travels to the US with her trusty Kindle, she can’t purchase any US edition there either, like she can the printed version.

I believe this is unsustainable. The better solution would be to have all publishing parties around the globe share revenues on the one ebook edition. It really shouldn’t be hard to administer this. Thus the ebook would be available from day one to all customers globally, just as the print book is now, and the original ebook publisher simply keeps track of customer locations and rights sales and disburses revenues accordingly. It is quite wrong, in my view, to harness retailers into supporting territorial rights deals between publishers, which is what publishers supplying ebooks to Amazon and others have done. Apart from alcohol and drugs, retailers should be able to sell whatever to whomever. To me that’s a fundamental commercial principle in a free society.

Finally, do booksellers have a place in this new landscape?

In a word, no. I’m sorry. Do newsagents share in the revenues from fairfax.com.au, or news.com.au? That’s how it will be for ebooks. I can’t see how local booksellers can insert themselves productively into the supply chain in these transactions. Amazon and Apple will continue to sell to their customers directly, and so will Google once they set up their ebook business, as they’re certainly doing. There may be minor opportunities, particularly for Australian titles, but frankly, it will never be the main game. I notice the APA has announced a partnership arrangement is being explored with booksellers here in Australia, but I wouldn’t put too much store in this. It would only make sense where the ebook is an adjunct to a print book purchase, but not in a digital-only environment. And the digital-only environment will be the main game, perhaps sooner rather than later.

As far as Higher Education goes, there’ll be even less opportunity. The simple fact of life is that there is no love lost between American textbook publishers and their campus booksellers. This poor relationship goes back to the dark ages, when campus booksellers got heavily into used books, and started to prioritise them. It’s been a very tense relationship ever since, so publishers are chomping at the bit to get even. US publishers actually marvel at the excellent relationship their Australian colleagues have with their campus stores. They envy it. But if you try and persuade them to change their attitudes in their own territory, their hackles rise. It’s too visceral. Emotionally they can’t go there.

Unfortunately, our more collaborative tradition in Australia won’t save any of you sitting here today. I don’t bring good news. There are simply too many benefits in dealing direct with students, and too many costs that have to be eliminated in order to get prices down. The 33.3% discount to booksellers is far too easy a target.

So, in conclusion, let me wish you well. You have ten years at the most. And please don’t invite me back in ten years’ time. If I’m still alive and mentally functioning, I could well be too embarrassed!

Thank you.

Peter Donoughue
November 6, 2009

The ABA/Dymocks flawed compromise on parallel importation

The ABA and Dymocks have seemingly come together around a compromise proposal to the government on reform of our parallel importation provisions.

They want both the 30 day and 90 time frames reduced to seven days.

And they want a price cap policy to be introduced, as exists in Canada (which regulates a maximum 'exchange plus 10%' mark-up).

No matter how many times I've pointed out to both parties, in writing and in person, that both propositions are legally and economically non-starters for Australia, it seems they persist. Some dogs simply can't be put down.

Firstly, the seven days notion: Let me put this as clearly as I can - IT.CONTRAVENES.THE.BERNE.CONVENTION! (See my post of Sept 30 for the exact wording and rationale of Berne's 30 days definition of simultaneous publication).

It's no surprise to me that the ABA has fallen into this trap of seeing the 30 days time frame as some sort of old fashioned relic of analogue shipping times. Well, persuade all the Berne signatories and get it changed there (good luck!), but don't continue to bang on about something that has absolutely no chance of getting up in Australian law. For the same reason that the idea of protecting only 'Australian editions', favored by David Gaunt and Mark Rubbo over the years, has consistently failed the Berne test, so this seven days proposal is a dead cat swinging in the breeze.

As for the Canadian price cap idea: on importation issues Canada is a vastly different place than Australia for one simple reason: it borders the United States. That vast economy is geographically adjacent. This means that the default position of Canadian booksellers is to import direct from the huge publishing and wholesaler warehouses in New Jersey, and get supplies shipped in virtually overnight, at US prices with no markups, and with freight costs similar to Sydney to Melbourne rates. Why the hell wouldn't booksellers do that?

Therefore the Canadians, to enforce local sourcing, had no option but to regulate pricing and availability, and guarantee booksellers and consumers comparable service standards.

Could you think of a situation less like that prevailing in Australia? The default position of Australian booksellers is exactly the opposite: to source locally. The importation route is far more costly. Trucks don't traverse the Pacific overnight. Air freighting is necessary, prohibitively expensive, and shipments are always weeks away.

What really annoys me about the booksellers' position however is this: they abandoned their consistent position over the last 20 years of supporting complete abolition of the PIRs, which would have absolutely given them what they still profess to want, and instead have opted for a nonsensical set of propositions which have ZERO chance of getting up. So they are likely to be stuck with no improvement at all.

It's been a disastrous performance and a hopelessly wrong-headed campaign. By choosing to support the publishers on the basic notion of protection, they've had nowhere to go but to invent a 'have your cake and eat it' mess, which is akin to straddling a barbed wire fence for reasons of comfort!

As for Dymocks' notion of forcing publishers to cough up 1% of their revenues to establish a fund to support the publishing of 'culturally worthy' books, the less said about this the better. It is simply one of the most absurd propositions I've ever heard advanced in all my years in the trade. Dymocks cannot claim on the one hand that publishers are massively overreacting to the prospect of an open market, and that indigenous publishing won't collapse, and then pose a 'solution' to that very prospect!

The ABA/Dymocks 'compromise' position will get no traction in Canberra whatsoever. There is only one compromise position that ticks all the necessary legal, economic and political boxes, and that's the one I myself, with great respect, have proposed (elsewhere on this blog).

My god, give me a drink..