Books without borders: the electoral threat to Australian publishing

One of the debates taking place on the fringe of the current Australian federal election campaign centres around our local book publishing industry and the Turnbull government's intention to remove the so-called 'parallel import' rules.

Unless you are associated with or particularly interested in book publishing there is a good chance this issue has passed you by. However, if you are a book reader who believes in the importance of an Australian writing culture, now is the time to take notice. Your vote in the July 2 federal election could influence the future of the Australian writing industry.

Let me explain as best I can. Unfortunately this is a complex issue that really requires more than a blog post to fully describe so I'm going to have to summarise. However many others have also written on the issue (here, here and here are just three examples) so a bit of googling will get you a long way.

A little industry background

The global publishing industry operates on the basis of 'territorial rights'. What this means is that the author of a book – who by definition owns the copyright to their work – can grant to a publisher the right to publish and distribute their work either globally or only within certain countries ('territories'). For instance, as authors of Scattered Pearls, Sohila Zanjani and I have granted publishing rights to Simon & Schuster Australia within Australia and New Zealand. We retain the potential to negotiate the licensing of our rights in other territories.

Territorial rights, particularly for books and authors that are in demand, have value. Australian authors (for instance), along with their agents and publishers, can earn some income from selling those rights into other markets such as the UK and US.

Since 1991, one of the ways in which territorial rights have been enforced in Australia (as in the UK, the USA and elsewhere) is via parallel importation restrictions. These rules forbid the importation of books 'around' local publishers. So, using Scattered Pearls as an example again, Australian stock of this book cannot be exported to the UK – for the book to be available for sale in the UK, a UK publisher would need to buy the rights (from us, the authors) to publish it.

Conversely, the territorial regulations require that Australian booksellers buy bulk stock through Australian-based publishers (including the Australian outposts of international publishing houses). Booksellers cannot import multiple copies of a book directly from overseas suppliers unless Australian publishers choose not to produce a local edition✝✝.

If you're thinking that this sounds anachronistic in a global economy and the age of the ebook, you are probably right, to a point. Really this system is fundamentally no different to the way in which national borders are used to govern and protect trade in any other product. An open and free single global market sounds great in principle, but in practice we are a long way from it.

The Productivity Commission

The Productivity Commission recently recommended (as they have more than once in the past) that the federal government repeal the parallel importation restrictions on books.

The Productivity Commission's recommendation is based on a research report it released in 2009. Put simply, its argument is that parallel importation restrictions skew the market and result in Australians paying higher prices for books than they need to. They argue that removing these restrictions and allowing unrestricted import of books from overseas markets will see prices drop. They argue that lower priced books will not affect what authors can earn because cheaper books will mean that more books are bought. At the same time they argue that any 'cultural externality' – a euphemism for the potential impact on local authors – could be ameliorated via some form of subsidisation.

The Liberal/National Coalition government has committed to accepting this recommendation in its next term, if it is re-elected at the coming election. Labor, the Greens and Nick Xenophon have all stated that they have no intention of removing parallel importation restrictions. The Coalition make no mention of any plan to reduce the impact of those 'cultural externalities'.

The implications

It should go without saying that the idea of opening our borders to the unrestricted import of overseas-produced books – without, it has to be said, any reciprocal arrangement with any other country except New Zealand – is likely to have a detrimental effect on the local publishing industry.

These effects will be numerous – too numerous to list here. However, let me touch on a handful.

  • When the next Harry Potter-like success is published in the UK, its publisher will ship copies directly to Australian stores, bypassing any local publisher. (In practice a local office may play the role of marketer, but that's pretty much all they will do.) No local publisher will earn any meaningful revenue from the sales of those books. Multiply this effect over a number of popular books and, very quickly, local publisher earnings will drop substantially. In today's conditions, these earnings would be have been used in large part to fund the publication of both new and established Australian authors. Every new book is like a new business: it requires upfront funding to get established. Less funds means less books. Less books means publishers will need to take less risks if they want to remain profitable; they will do this by publishing established authors ahead of new and unknown authors.
  • Australian territorial rights will be worthless. With the borders removed, there will no longer be an effective Australian publishing territory. (It is ironic that a government that is so loud about 'border protection' is happy to remove our borders entirely in this instance.) Those rights may maintain some value for books published only within Australia, but if, say, Sohila and I sold the rights for Scattered Pearls to an American publisher, that publisher would be free to export copies of the book back into Australia, undercutting the local publisher. This will further reduce author earnings because those exported books would earn us less than one-third of the royalty we earn on locally produced copies✝✝✝.
  • Where a book is produced and published in Australia, that book will go into stores in competition with high numbers of cheap imported books. Obviously, in order to compete, local 'recommended prices' will need to fall. This is exactly what the Productivity Commission intends. However it ignores the fact that this will further diminish the earnings of local publishers, distributors, authors and their agents.

I could go on, but this post is already getting way too long. Needless to say it is difficult to see any upside for local writers and publishers. The only potential upside is that book prices may drop across the board. A good thing for readers, but at what price?

Ideology over evidence

The Productivity Commission's findings are essentially based on circumstantial evidence. There is only one country – New Zealand – that has taken the action they propose, and they do not draw on that example in their report. If they had, they may have noticed that book prices did not drop to any meaningful extent in New Zealand, but that open borders have had a severe impact on New Zealand publishing.

The Commission, and the government, are also ignoring the fact that since the Commission's 2009 research, book prices have dropped in Australia in any case. There are less dedicated book retailers competing with 'big box' stores like Big W and Kmart that regularly discount the titles they sell. (Scattered Pearls is regularly available in these stores for $19.) And, of course, there is ample online competition.

As well, the Productivity Commission and the government are placing no value on the economic benefits that come from an industry that supports 20,000 jobs and contributes $2.2 billion to the GDP.

It is difficult to conclude that the Productivity Commission, and the Turnbull government, are seeing this as anything more than a battle of neo-liberal ideology against the 'soft touch' of an industry whose inherent value lies 'hidden' in its cultural contribution. They see what they regard as excessively high book prices through a lens of protectionism. The government, in the meantime, is more than happy to offer protection to the mining industry, in the form of the diesel fuel rebates, or to the shipbuilding industry in the form of incredibly expensive submarine contracts, or to numerous other industries where they perceive more obvious economic benefits.

Perhaps parallel importation restrictions are a form of protection, but if so, surely that is a reasonable price to pay to maintain a thriving local publishing industry that supports Australian voices? After all, it is a form of protection that does not cost the taxpayer a single cent. A form of protection that is entirely market driven and which book buyers can readily and legally work around if they choose to do so.

Making a point at the ballot box

In any case, regardless of their underlying motivation, the fact is that the Turnbull–Joyce Liberal–National Coalition, if re-elected, will dissolve the national borders of Australia's publishing industry. Every other book publishing nation, in the meantime (with, as mentioned, the exception of New Zealand) maintain their own borders. The end result of this will be a vastly depleted local publishing industry and significantly reduced opportunities for new Australian authors. If this matters to you, you can make your views heard at the ballot box this weekend.

The point of using my own book as an example here is not to cry poor – we are very grateful to have been published at all – but to hopefully make the explanation a little clearer. My understanding is that our publishing contract in relation to Scattered Pearls is fairly standard.
✝✝ There are a number of rules and regulations around this that I can't do justice to here. For instance, there is no restriction on individual Australians importing books for their own purposes, which is why Australians can readily buy books from or (which, as an aside, is an Amazon subsidiary). Book stores can also import individual copies of a book for one of their customers.
✝✝✝ Authors generally earn a royalty of 10 per cent of the recommended retail price for books sold in territories for which they have sold the rights to their work. That applies regardless of the price the book is actually sold for. For exported books, on the other hand, royalties are based on the publisher's actual earnings, equating to around one-third of the 'domestic' royalty.

As usual, if you have any questions or comments, please add a comment below or contact me.

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