Inside the Australian and New Zealand book industry

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Black Inc. and Hachette: how the removal of PIR will affect our business

The federal government’s recent announcement that it plans to remove parallel importation restrictions (PIRs) on books has been heavily criticised by the publishing industry. Books+Publishing asked two publishers, Black Inc. and Hachette Australia, to explain how the loss of PIRs will directly affect their business.

BlackIncSophyWilliamsSophy Williams, senior rights executive, Black Inc.:

The story goes that because 80-90% of our publishing program is Australian-originated, a smaller player like Black Inc. will be unaffected by the removal of PIR. Having listened closely to the recent arguments for and against, though, I am in favour of retaining the restrictions. I believe we will be negatively affected.

The first concern for us is how it might affect English-language licensing for our domestic list. At present, I search high and low for publishers in the UK and US to license our books and champion them overseas.

A concrete example is the sale of Alice Pung’s Laurinda to Knopf Children’s in the US, which will be re-titled as Lucy and Linh, re-jacketed and promoted to a whole new audience. This licensing is important for our authors and can give their book a greater life overseas than simple export can provide. It gives them an edition tailored to the local market and a publicity/marketing campaign.

The UK and US still protect their territories, so without PIR they could then export their editions back into Australia. But we can’t compete by offering ours in their territories. What happens with local authors and their royalties in this scenario?

If an overseas edition of one of our books floods the market, the royalty to author could be half or less of their home royalty. This is a contraction of income for them, and if booksellers import a significant quantity this is a reduction of margin for us. Not to mention, the consumer is potentially buying an edition which hasn’t been created for the Australian reader.

With PIR in place, overseas licensing can be considered a simple addition, without impact on the local market. The removal of the restrictions may have a large negative effect on author and publisher margins and the broader culture. I cannot see how this is anything but a retrograde move on the part of the government.

I also wonder about buying in titles from overseas when the restrictions are removed. Will we be able to make the same case to US agents and rights managers, as we do now, that they should recognise us as a separate territory and not bundle us in with UK and the rest of the Commonwealth? And instead of licensing, maybe they will simply export here themselves once we are part of the open market.

If there are competing editions in the Australian market, where we have licensed a title, won’t overseas publishers capitalise on our efforts in sales and marketing to support their own editions? Are we expected to make this investment in local editions of overseas works and watch as our returns diminish?

I wonder if we will become more selective in what we buy in. The buy-ins income supports investment in local authors, and with the reduction of buy-ins we may end up with a smaller domestic program. It seems a crying shame for a company which has existed with negligible government support and which has been growing year upon year since 2000.

HachetteJustinLouiseJustin Ractliffe and Louise Sherwin-Stark, joint managing directors, Hachette Australia:

Publishing is a highly innovative but also high-risk industry. Publishers invest significant sums in a large portfolio of authors and titles to enrich the reading culture of Australians and to create commercially successful hits. Those hits allow a publisher to maintain a diverse portfolio of authors and books, and fund further innovation.

As publishers, we buy the right to publish an author’s work in Australia and search out how best to bring Australian authors to the world. If the Australian rights to an author’s work no longer exist, what is it that we will actually be investing in?

If other English-language publishers are able to dump overstocked copies of works into our market, we will not be able to predict accurately how much we can viably invest in things that really matter to our authors and readers—quality editing and production, royalty advances, writers festivals, author tours and new and innovative ways of engaging with our customers.

Less investment in local marketing

Publishers will inevitably have less turnover and therefore less money to spend on promoting, marketing and publicising new titles, international and local alike. Why would a publisher spend time and revenue on promoting international titles imported into the market from our US competitors if they won’t see any return on that investment? For example, if our print runs for Stephen King are halved because of large retailers with the capability to access and distribute large volumes of books from the US, there will be little reason for us to spend at our current level on marketing and retailer co-operative marketing to alert King fans that there is a new book available. In addition, such uncertainty around our income for the top international books on our list will inevitably lead to less investment in marketing, retailer co-operative marketing and publicity for every book on our list, international and Australian alike.

Less investment in local authors

Removing parallel importation protections will, in particular, reduce our ability to invest in Australian writers, and will deprive Australian authors of the protections afforded to authors in other major markets in the world. Removing those protections will also deprive the Australian public of the chance to read their own stories written in their own voices by a diverse range of authors. In addition, it will be harder for Australian readers to discover new books and reading for entertainment, driving fewer readers to bookshops. This will inevitably mean that books and reading will lose out to other forms of entertainment, and the industry itself will shrink.

We have seen this in New Zealand and it’s unclear to us why the government wants to dismantle a simple system that has helped create a diverse, competitive, commercially viable, innovative and successful two billion dollar industry which is of immense cultural value to this country, that provides readers access to the broadest possible range of titles and which runs at virtually no cost to the taxpayer.

Current pricing is competitive

From what we’ve seen, there are no grounds for concluding that Australian publisher’s pricing policies are in any way anti-competitive. The diverse bookselling and publishing environment in the market and the rise of offshore online retailers have exerted a downward pressure on Australian book RRPs, particularly in the last five years. Recent BookScan analysis we have undertaken on our top 20 titles has found that 16 Hachette titles had Australian RRPs including GST lower than the AUD value of US RRPs excluding GST, with an additional two titles in line and only two titles cheaper in the US.

 

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