Professional Documents
Culture Documents
Commonwealth of Australia 2011 This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without prior written permission from the Commonwealth. Requests and inquiries concerning reproduction and rights should be addressed to the Department of Innovation, Industry, Science and Research, GPO Box 9839, Canberra ACT 2601. ISBN 978-1-921916-21-2 DIISR 11/129
Editing by Wilton Hanford Hanover Design and artwork by GRi.D Printed by Elect Printing, Fyshwick Acknowledgments The Chair and members of the Book Industry Strategy Group would like to acknowledge the generosity of the following organisations in providing data for the research into the Australian book industry: Australian Publishers Association Copyright Agency Limited Nielsen BookScan
Printed on Pacesetter Satin, which has ISO 14001 (Environmental Management System in use), FSC (mixed sources product group from well-managed forests and other controlled sources. Also produced using elemental chlorine-free (ECF) pulps.
iii
Senator the Hon Kim Carr Minister for Innovation, Industry, Science and Research Parliament House Canberra ACT 2600
Dear Minister
On behalf of the members of the Book Industry Strategy Group, following the review requested by you in April 2010, I present the Groups report on the Australian book industry. In setting up this review, you asked that the Group assess the impacts of digitisation on the whole book supply chain. Since work began on the review, the speed of change has escalated and major impacts have already been felt within the Australian industry. The closure in Australia of 130 Borders and Angus & Robertson bookshops, although not solely resulting from digitisation, demonstrates the scale of change that is occurring. The findings and recommendations contained within the report reflect the need for government and industry to work together to achieve the reforms required for the Australian industry to compete effectively within the global market. The industry recognises the need to innovate and to invest in infrastructure to sustain a local industry which, in turn, supports the development of Australian content and creativity. In presenting this report to you, I would like to acknowledge the dedicated contribution made by a broad group of people. First, I thank the members of the Group, especially my Deputy Chair, Louise Adler, who made a major commitment of time and resources to produce this report. In addition, I recognise the contributions made by the hundreds of consumers and industry operators who participated in the Groups consultations. Officers from your Department were exemplary in their support, energy and expertise. The Book Industry Strategy Group records its appreciation to you, and them, for providing the resources to make its work possible. I am also grateful for the work of my technical adviser, Dr Dennis Perry. Yours sincerely
The Hon Dr Barry Jones AO Chair, Book Industry Strategy Group 30 September 2011
BISG members Ms Louise Adler, Deputy Chair Mr Philip Andersen Mr David Barnett Ms Lorraine Cassin Mr Graeme Connelly Mr Tom Crago Mr Alan Fahy Mr David Gaunt AM Mr Ross Gibb Mr Alexander Grant Mr Angelo Loukakis Mr Emmett Stinson Mr Chris Warren
iv
Contents
Letter of transmittal Terms of reference Executive summary List of recommendations Prologue: Cultural development and creativity in the digital revolution a personal perspective PART 1 UNDERSTANDING THE BOOK INDUSTRY 1 Introduction Note from the Chair The scope of this review Policy background 2 Economic contribution of the industry Sales income Exports Employment Investment and innovation Regional impact Economic contribution by subsector 3 Current operating environment Technological change Changing consumer preferences Emerging trends in digital readership Response by the Australian book industry A competitive environment Commercial uncertainties Copyright and piracy 4 Book industry SWOT analysis PART 2 TRANSFORMING THE INDUSTRY 5 Industry transformation strategy Competitive advantages Opportunities Actions Industry Outcomes The future 6 Recommendations Integrating the book supply chain Competing effectively in the global book market Improving supply chain efficiencies Rewarding and protecting creativity Supporting the business environment Supporting Australian culture APPENDIXES Appendix A The Book Industry Strategy Group Appendix B Addressing the Book Industry Strategy Group terms of reference Abbreviations and acronyms References iii vi 1 4 7 11 12 12 13 15 17 17 19 20 21 21 21 25 25 27 29 32 35 40 42 43 45 46 46 46 46 47 47 50 51 53 61 67 73 85 89 90 90 91 91 99 100
vi
Terms of reference
The Book Industry Strategy Groups terms of reference recognise that digital technologies are changing the way books, both printed and digital, are being produced and delivered, and the expectation that books delivered on digital platforms will command a growing share of the market. The terms of reference are: 1 What digital platforms for books are available in Australia, how they work, what features they offer, and how extensively they are used. How fast the market for digital delivery of books will grow in Australia and internationally, what factors might slow or hasten that growth and what is the relative position of printed books. The potential size and structure of the Australian digital and printed book markets, taking into account (a) demand from individuals, libraries, government agencies, and research, educational and cultural institutions; (b) the needs of the aged and people with disabilities; and (c) the needs of regional and remote communities. How the supply chain for trade, educational, scholarly, scientific and technical books has been, and will be, affected by digital technologies, taking into account the impact on authors, publishers, printers, wholesalers, retailers and consumers. 5 Options for encouraging efficiencies in the supply chain for printed books, integrating it with digital delivery of books on a global scale, and increasing the overall competitiveness of the Australian book industry. (a) How business models are likely to change in the digital environment; (b) how this is likely to affect business models for printed books; and (c) what can be done to facilitate these changes. Opportunities for the Australian book industry to participate more actively in the global marketplace for printed and digital books over the next decade, including by creating, adopting, and using new technologies. How existing Commonwealth programs and activities can be refocused to support the industrys adaptation to new technologies.
Executive summary
The traditional book supply chain in Australia authors, publishers, printers, booksellers is changing at an unparalleled pace. The emergence of digital technologies is affecting book production, publishing, distribution, marketing, communications, online retailing and consumption. In addition, digitisation and globalisation are eroding the protections formerly provided by Australias geographical barriers, forcing its book industry to compete in the global marketplace. In spite of these changes, the impacts of digitisation and globalisation are creating, and will continue to create, opportunities for the book industry. However, books are more than an industrial output, as conventionally defined. The book culture must be stimulated and transformed. Publishing must not be looked at only in terms of its economic value but also of its relationship to culture and education in general. The opportunities presented by the digital revolution should be welcomed and the publishing industry should be moving fast to adapt. Publishers, governments and institutions should be looking for imaginative links between themselves, including, for example, opportunities for Australian universities to combine to create a major academic publishing house for ebooks and print books. In order for the Australian book industry to continue to serve its critically important cultural and educational role, its economic viability must be assured. In the current environment, where protective barriers brought about by distance or other market protection mechanisms are being lowered, continued economic viability simply means achieving the most efficient and competitive connections between content creators and consumers, whether local or international. Over the past decades, and particularly since 2000, the Australian book industry has been very successful at making these connections and, as a result, has created value for the Australian economy. This value is represented through sales income, exports, and employment. While investment data are lacking, book printing, distribution, publishing and, more recently, booksellers are investing in new technology and adopting innovations to assist in adjusting to the new operating environment. Finally, book printers continue to make a significant contribution to supporting regional development in areas where their facilities are located. In 2010, the total value of books sold in Australia (in both print and electronic formats) is estimated at $2.3 billion. This is expected to grow to $2.8 billion by 2014, with an increasing contribution estimated at 24.3 per cent of that total comprising ebook sales. The factors that will influence this growth include the state of the Australian economy, consumer preferences, tablet and ereader penetration, the availability of ebooks and the potential substitution of print books by ebooks. In 2010, Australian book publishers exported an estimated $225 million in books. Of this, approximately two-thirds (or $144 million) were trade books, and the remaining third (or $80 million) was educational books. Total book exports accounted for 12.2 per cent of publisher revenue in 2010. Despite performing strongly during the early 2000s, the value of Australias book exports did not keep pace with the value of Australias total merchandise exports over that past decade. However, the value of book exports increased at a stronger rate than the value of exports for miscellaneous manufactured articles and food and live animals. The key markets for the export of Australian books, in order of size, were the United States, New Zealand, the United Kingdom and Canada. Approximately 25,000 people were directly employed in the book industry in 2010 through authoring, printing, publishing and retailing. However, there is also significant indirect employment in the book business. The employment contribution of the book industry is particularly significant in book printing. The industry has a regional impact in communities such as Maryborough in Victoria, where McPhersons is a major contributor to that regions employment. Innovation in the production, distribution and accessing of reading material is forcing more changes in the local industry. In recent years, the major book distributors have invested heavily in improving the efficiency of their distribution networks. Online book retailers have also emerged in the domestic market and are investing in digital and online sales facilities while others are initiating innovative, collaborative arrangements with other players to improve competitiveness. New online book sellers include Booktopia, TheNile ,QBD, Boomerang Books, Dymocks, Borders/Angus & Robertson (now owned by Pearson), Fishpond and Collins. Book printers have also increased their investment in new technologies to improve their capacity to respond quickly to market demands. These investments have been in digital and print-on-demand technologies. Local investment opportunities are also attracting overseas investors to the Australian book market. For example, on 16 June 2011, US-owned wholesaler Ingram announced the opening of its Lightning Source Australia printing operation in Victoria.
EXECUTIVE SUMMARY
The operating environment for the book industry is changing at a rapid rate. These changes are being driven by technology that is challenging the established notion of a book, which can no longer be defined only as a physical object with printed pages between two covers. This new notion of a book, combined with more reliable and safer ecommerce transactions, has facilitated major changes in how books are produced, distributed, sold and accessed. The technological changes have had two major effects on the book industry. First are the opportunities to change the supply chain and create new business models; the second is the globalisation of book markets. A third related impact is the weakening of territorial copyright regimes. These changes are now evident in the Australian book industry. In Australia, ebook sales made a slow start, largely due to the lack of acceptable reading devices. However, since October 2009, when Amazon released its Kindle eReader globally, a wide range of ereader options have flooded the Australian, and most other, markets, and ebook sales have increased correspondingly. Australian consumers now have access to a broad range of ereader devices. It is expected that the growth in ebook sales in Australia will accelerate now that a broader infrastructure has come into place to support consumer adoption of ebooks. The challenges confronting the book industry do not occur in a vacuum. They are part of a broader pattern of change within the media and creative industries. These changes do not undermine demand for creative content, but they are challenging the business models that have sustained profitable industries, such as newspapers or free-to-air television. The pressure on the broader industry both flows over to the book industry and acts as a feedback loop, intensifying the challenges the book industry faces. While technology is an enabling force, consumer preferences are driving the changes in book production, distribution and consumption. According to the Australian Consumer and Media Authority, four in five Australians have access to an internet connection at home and are increasingly embracing the digital economy. Between November 2010 and May 2011, 88 per cent of household internet users carried out one or more ecommerce activities and 69 per cent purchased at least one good or service. The authority found that age, gender, household income, level of education and employment influenced the level and way in which consumers engage in ecommerce. In general, consumers with higher levels of education, income and in some form of employment were more likely to engage in ecommerce. The survey conducted for the Book Industry Strategy Group by TNS Global confirmed a number of the authoritys findings. Australian men were more likely to purchase an ebook, and younger age groups (between 18 and 34 years) purchased as many ebooks as all other age groups combined.
While technology is an enabling force, consumer preferences are driving the changes in book production, distribution and consumption.
Individuals who made submissions to the Book Industry Strategy Group generally embraced digital technologies such as ebooks and purchasing books online. A majority of respondents in the category of individuals said they read ebooks, and a significant majority noted that their use of ebooks complemented their use of print books. Those who have embraced ereading technologies said that ebooks were convenient to access, easier to store and search, and were hugely beneficial for people in remote areas or with disabilities. A majority of respondents saw great benefits in ebooks, but consumers have expressed some frustration with the transition to digital books. Some of their key concerns include the myriad of ebook formats and device interoperability; high initial start-up costs to purchase ereading technologies; a lack of titles available for download in Australia; and the price of ebooks, particularly as they have no resale value and sharing is difficult. Consumer groups, including libraries and educational institutions, identified significant benefits from ebooks and digital technologies, while noting the drawbacks relating to access, affordability and copyright. The Australian market for ebooks is expected to grow, but this growth will depend on a number of factors, including the penetration of ereaders and the availability of ebooks. Drawing on the available evidence, the market research conducted for the Book Industry Strategy Group concluded that in the short to medium term, ebook sales are likely to expand the total market for books. However, the longer-term scenario for the impact on printed book is unclear. According to PwC (2011) the market forecasts for the international ebook market project that the worldwide ebook market [will] grow at a compound annual rate of 42 per cent from 2009 to 2012, increasing from approximately $4.6 billion in 2009 to $13.2 billion in 2012. The Australian book industry has been adjusting to these technological changes, and digital technology is employed to varying degrees along the supply chain. Australian authors make extensive use of digital technologies in their work. The publishing sector is also employing digital technologies, although the impact of digital platforms varies between publishing subsectors.
To remain competitive, Australian book printers have adopted a wide range of digital technologies. Digital printing allows books to be reprinted economically in small numbers; set-up costs are lower, and the cost per copy is more constant across the print run. However, in spite of these changes, the Australian book printing industry is also finding it difficult to compete on price with overseas printers, especially in China. As a result, over the past two decades revenue generated by the book printing industry has declined gradually, from $250 million in 2001 to $220 million in 2010, because of the increasing use of overseas printers by Australian publishers. Australian book retailers are experiencing the greatest impact of digitisation, ebooks and ecommerce. During the past decade, the bricks-and-mortar firms have been joined by a number of Australian online-only book retailers, some of which have enjoyed rapid growth. However, existing bricks-and-mortar bookshops have been slower to change and are experiencing greater competitive pressures from international, online retailers. The competitiveness of Australian booksellers is likely to be further challenged by the proposed purchase by Amazon of the Book Depository. These companies can sell books at a more competitive price in the Australian market than local booksellers. This is because they can buy books at a cheaper wholesale price; pay a low postage rate to Australia; and not required to impose the 10 per cent goods and services tax on books when the total value is under $1,000. The current exchange rate also favours overseas purchases. The exchange rate, in real terms, is at its highest level since the mid 1970s. Over the year to September 2011, the Australian dollar has appreciated by 15.4 per cent against the US dollar, by 8.3 per cent against the trade-weighted index of currencies, and by 5.2 per cent against the euro. The strong dollar is a challenge for all Australian trade-exposed industries. It has raised the price of the goods that Australian manufacturers sell in overseas markets and intensified competition from cheaper imported goods, including books. Australian book retailers are disadvantaged by a distribution system that is comparatively slow and inefficient. While book distributors have improved their distribution systems, booksellers continue to have difficulty accessing titles in a timely manner. As consumers now have the choice of accessing titles online, there is a substantial sales leakage overseas. In addition, Australian retailers do not yet have a comprehensive digital distribution system to help them to compete with their international rivals in the domestic or international markets.
The increasingly competitive environment is also clouded by some commercial uncertainties surrounding the sale, loan, and licensing of ebooks, particularly in relation to the holding of ebooks by libraries. These uncertainties, along with concerns about copyright and piracy (which is potentially much easier to commit in a digital environment), may erode the incomes of authors and publishers. The Book Industry Strategy Group has identified these as issues to be addressed by both industry and government in order to continue to provide incentives to Australian content creators. In spite of these challenges, the Australian book supply chain has significant strengths on which to build a competitive industry into the future. Among these are the creative capacities of Australias writers and illustrators, including a number of who are internationally acclaimed; a healthy and vibrant publishing industry; an efficient book printing sector with the capacity for quick turnaround times; a strong independent book retailing sector; proximity to the growing markets of India and China; an efficient royalty collection system; and the rollout of the National Broadband Network, which will provide the infrastructure necessary for an expansion of ecommerce. The Book Industry Strategy Group has set the following vision for the Australian book industry: To ensure that the Australian book industry is innovative, prosperous and sustainable for the long term, develops Australian creators and creative works and encourages investment in new technologies. The Book Industry Strategy Group believes that this vision can be achieved by a strategy to transform the book industry. This strategy would be implemented over the next three to five years, and would be embedded in a process of continual review and renewal. The transformation strategy requires the industry to recognise its competitive advantages and seize its opportunities for growth, innovation, investment and increased efficiency. Specific actions will be required to improve supply chain efficiency, encourage industry investment, develop industry skills, encourage creativity and develop new markets. To achieve the industry vision by 2020, the Book Industry Strategy Group has made a suite of recommendations aimed at integrating the book supply chain, enhancing competitiveness in the global book market, improving supply chain efficiencies, rewarding creativity, supporting the business environment and supporting Australian culture. These recommendations have been grouped into six themes that reflect the areas of core focus. A detailed discussion on the rationale supporting the BISG recommendations begins on page 50 of this report.
EXECUTIVE SUMMARY
List of recommendations
The Book Industry Strategy Group recommends:
INTEGRATING ThE BOOK SUPPLY ChAIN 1 That the Australian Government establish a Book
Industry Collaborative Council with membership from all parts of the book value chain, which is tasked with implementing the industry reform priorities identified by the Book Industry Strategy Group and other issues as they emerge.
COmPETING EffECTIvELY IN ThE GLOBAL BOOK mARKET 2 The Book Industry Strategy Group urges the
Government to recognise the competitive disadvantage being imposed on the Australian book industry as a result of GST inequity. In recognition of the broad range of considerations for government on this issue, the Book Industry Strategy Group offers three alternative recommendations: a That the Government take appropriate action to abolish the 10 per cent GST on books purchased in Australia, noting that in the United Kingdom and Ireland, and in most OECD member countries, books are either exempt from VAT or taxed at a reduced rate or b That the Government provide greater equity in competition for Australian retailers by applying the 10 per cent GST on books sold by overseas retailers to Australian consumers or c
FINAL REPORT TO GOVERNMENT
That the Government recognise the disadvantage placed upon Australian booksellers as a result of GST inequity when competing with international online retailers and support the Book Industry Strategy Groups suite of recommendations.
b marketing and distribution infrastructure $2 million over a two-year period c production infrastructure $2 million over a two-year period.
b the Australian Law Reform Commission consult directly with the book industry through its author and publishing associations.
10 That:
a Australian publishers work to clarify the business model for the use of ebooks in libraries
b following that, the Government establish a framework and guidelines for how ebooks may become a part of the ELR/PLR schemes.
b consider facilitating discussions between copyright owners and internet service providers over remuneration for copyrights accessed through the internet service providers.
b introduce a support package for displaced employees and regional communities impacted by labour reductions inherent in new digital production technologies and industry consolidation c where appropriate, adjust the eligibility criteria of relevant existing industry support programs to improve access for the book printing sector
d make the printing of a book in Australia a condition of receiving government assistance for developing and publishing a book e assist the industry to promote the environmental and employment advantages of buying a book printed in Australia provide financial support for printers encouraging technology reinvestment and facilitating business transformation in response to a digital future incorporating print on demand and short-run printing.
EXECUTIVE SUMMARY
b develop a reward/recognition system which promotes teaching excellence and authoring of quality educational materials and thereby creates greater balance with the research focus of the Excellence in Research for Australia (ERA) program.
b the development of attractive financial investment models with potential return to government and individual investors c funding of a multiyear marketing campaign for the promotion of Australian writers both nationally and internationally.
19 That:
a the Government legislate to make tax exempt all literary prizes, awards and grants that are funded and administered by government, whether local, state or Commonwealth
b the Government implement an income deposits tax measure, following the precedent of the rural (farm management) deposits scheme, to assist with management of fluctuations in artists/authors incomes over time.
Prologue: Cultural development and creativity in the digital revolution a personal perspective
The Hon Dr Barry Jones AO, Chair, Book Industry Strategy Group
It is essential to ensure that, in the name of the digital revolution, we dont discard the old regime. Irreplaceable aspects of traditional publishing should be identified and preserved. We read and write differently on screens: to read and write on them exclusively might have a profound effect. Language, for instance, would be bound to suffer as it already has with the rise of technocracy and managerialism. According to renowned Australian writer Don Watson, Books are objects of love, especially among children. What they draw from them, therefore, probably cannot be replaced by a digital device, which they may love as a piece of technology but not as a book, an object of enchantment or knowledge in itself. We research differently and find different information when we look in books. Looking up my old threevolume Websters for a word, I find things I do not find when I check a word on the digital Websters. Its the same when I browse shelves in the State Library. The human dimension of books the tactile thing is not unimportant, nor are the jewels of serendipity. We should be teaching a love of words and ideas from the very beginning that, and training teachers to do it, is the best guarantee of a healthy publishing industry and a more than useful contribution to a successful economy and a richer culture. Jason Epstein (2011), the veteran editor of the New York Review of Books, asserts: Far more than any other medium, books contain civilisation, the ongoing conversation between present and past. We live in a cultural, economic and political context where creativity seems to have fallen out of the lexicon and our approach to issues is increasingly managerial, instrumental and material and this situation is characteristic of most advanced economies. We look for instant communication, instant responses and instant gratification, in which Twitter speed is central.
PROLOGUE
American author, journalist, and biographer James Gleicks The Information: A History, a Theory, a Flood (2011) is sold in bookshops in Australia for A$65.00 in hardback and A$35.00 in paperback. Amazon offers the hardback for US$17.43 (plus postage) and it can be downloaded on Kindle for US$14.15. It is not a hard decision, at midnight, to decide which is the quickest and cheapest way to get the book. The Information is a valuable overview of the information revolution. Gleick refers to Claude Elwood Shannon (19162001), the American mathematician who pioneered information theory and promoted the term bit (from binary digit) for the basic unit of information. He calculated in 1949 that the US Library of Congress contained about 100 trillion bits of information. This equates to around 10 terabytes (TB) of disk storage, and could be regarded as the sum of acquired knowledge at the time. In 2011, disk drives of 3 TB are readily available, and in a few years a laptop computer could come with a 10 TB hard drive. Such is the growth of information that the Library of Congress now has a 250 TB digital archive that grows at 5 TB a month. Public tweets, the ephemeral output of the Twitter social media service, are among the material stored in the digital archive. As we seek to access such digital archives, it seems obvious that ereader devices such as Kindles, iPads or Android tablets will be necessary to store and display the material in a convenient way. How the new forms of display will work we do not know, but we know that this is happening and will continue to evolve. An encyclopaedia might be regarded as the perfect example of a non-fiction reference that would survive in print with regular updates of new material. However, Wikipedia has, in barely a decade, displaced Encyclopaedia Britannica, the Columbia Encyclopaedia and other paperbased reference works and, as Freeman Dyson (2011) observes, become the biggest storehouse of information on the planet and the noisiest battleground of conflicting opinions. Gleick sees the digital revolution as a symptom of omniscience (2011: 409). It is what the music critic Alex Ross calls the Infinite Playlist, in which all recorded knowledge can be accessed by the touch of a button, a mixed blessing that brings anxiety in place of fulfilment, an addictive cycle of craving and malaise. No longer has one experience begun than the thoughts of what else is out there intrudes. Gleick comments (2011: 409): The embarrassment of riches. Another reminder that information is not knowledge, and knowledge is not wisdom.
FINAL REPORT TO GOVERNMENT
In addition to their content, books have been important as possessions, physical objects, important mementos of childhood, gifts or for display, collectors items distinguished for beauty or rarity, and the treasures of great libraries. Publishing has provided career opportunities for designers, binders, illustrators, photographers and many other professionals. The new professional opportunities that will be created in electronic publishing are not yet clear, but there will be opportunities. Before the World Wide Web there were no web developers or web designers. The book industry exists in a cultural context, spanning the creators of books novels, poetry, biographies, travel guides, childrens books, books about cooking, gardening, art and sport through to consumers readers of all ages. Ebooks offer attractive supplements to the printed text. Wolf Hall by Hilary Mantel, a historical novel about Thomas Cromwell, provides in its electronic form an interview with the author by historian David Starkey, coloured maps and reproductions of portraits by Holbein. An ebook of Alices Adventures in Wonderland and Through the Looking Glass by Lewis Carroll adds animations of the original Tenniel illustrations. Both are offered at below the price of the printed book. Public libraries, physical depositories of books, journals, magazines and newspapers were essential elements in community education, especially self-education, for three centuries, places where readers were exposed to chance encounters with unfamiliar material and the assistance of helpful librarians. But the very concept of a public library is currently under threat and may appear to some readers as remote as the medieval monastery, especially when they can access the contents of the Library of Congress from their iPads. The Fisher Library of the University of Sydney plans to eliminate 500,000 books from its collection. The University of New South Wales Library is converting library space to lounges, which are more friendly to people using ereaders. It is difficult to imagine any government in 2011 committing large sums to the construction of new libraries. In publishing, many books are printed and promoted even where there is a low expectation of profit because publishers want to encourage younger writers and because a large success for a few titles the Harry Potter, Millennium and Twilight phenomena can enable publishers to survive even when many books with small print runs do not recover cost. Finding out about books and book content will change: theoretically access will be much wider, but without person-to-person contact in a library or bookshop. The future of literary journals such as the Australian Book Review (now available online) come under challenge, as will the book review pages in our major newspapers. Bookshops, word-of-mouth recommendations and access to libraries will remain significant for older readers, while electronic systems will dominate choices by younger readers. But it may be that social media services will become a new form of word-of-mouth recommendation.
The book industry exists in a cultural context, spanning the creators of books novels, poetry, biographies, travel guides, childrens books, books about cooking, gardening, art and sport through to consumers readers of all ages.
RESPONDING TO ThE DIGITAL REvOLUTION
Historically, Australia has generally been slow to adopt new technologies but, once adopted, the take-up rate is very rapid. Often, we have been rather passive in the development of new technology, preferring to adopt existing technology from overseas. Black-and-white television transmission became common in the United States and Great Britain after World War II but began in Australia as late as 1956. However, the take-up happened at an unprecedented pace. Colour television, relatively common in the United States and Great Britain in the mid 1960s, only began regular transmission in Australia in 1975; by 1978, 64 per cent of households in Sydney and Melbourne had colour sets. Although Australia built a large stored memory computer by 1949 and had some pioneering capacity in transistors, we failed to exploit either and were late to adopt mainframe computers or decades later personal and then portable computers. Japan had a mobile telephone network in 1979 but it was not adopted in Australia until 1987. There are now more mobile phones in Australia than inhabitants. In 2007, in Japan, 10 of the bestselling printed novels were based on cell phone novels, and 86 per cent of Japanese high school students read cell phone novels. Considering this pattern, it is reasonable to assume that even if the take-up of ebooks has been relatively modest until 2011, it may well be very rapid in the immediate future. There have been exceptionally rapid transitions in the retailing and production of videos and recorded music, from 78-rpm discs, to LPs to CDs to MP3s and now to online stores that allow the purchase of individual tracks, rather than the complete performance. Will the successor to the 2,500-year-old codex go the way of vinyl, the LP and photographic film? One aspect of the digital revolution is the speed with which change is possible. Email is a late 20th century development, but there are already attempts to reinvent email by asking the question: What would email look like if it had been invented in the 21st century? Email as we know it has been modified to allow the incorporation of multimedia (sound and pictures) and the notion of friends and conversations. The impact of globalisation and technology on the book industry, from authors through to readers, and the complete supply chain in between, remains highly speculative. However, there is merit in considering which likely changes in production can stimulate and increase opportunities for creativity rather than stunting them. A series of important technical changes will transform the book industry as electronic processing or creation becomes cheaper and more user friendly. Currently it costs around $1.50 per page to digitise a printed novel, but more for textbooks with illustrations. Similarly, electronic publishing services are being established to help produce ebooks more easily. Higher labour costs and relatively small production runs in Australia are serious, if not fatal, impediments to overseas competition, and are exacerbate by a strong Australian dollar. It is significant that people are rising to the challenges presented by the digital revolution and trying new ways of communicating and storytelling, in an age when many people think information should be free. This raises the question, What is a fair price?
10
Hunters are more likely to skim who take in material in diverse and discursive ways and are used to multitasking and moving rapidly between a variety of electronic forms, with limited time investment; their intake is wide but shallow and dependent on a diversity of external stimuli. They are less likely to be serious users of the traditional book. Of course, some readers will have characteristics from both categories. Older consumers are more likely to be farmers, younger ones hunters. The isolation required by serious reading is interrupted by constant distraction, as Knox observes, including email, digital news alerts, SMS, phone calls ... RSS feeds, tweets, blogs, social networking pokes. The American writer Nicolas Carr (2010) estimates that office workers check their emails 30 to 40 times per hour. Some writers have become, or need to become, marketers .... Most are worried by over-connectedness , Carr writes. But there are others, like journalist Nick Bilton (2010), who see this overstimulation as a way to increase motivation and stimulate imagination.
There is no reason to doubt that Australians will rise to the challenges that the digital revolution has presented to long-standing industries, built using the tools and economic models of an earlier age. There are plenty of failed experiments with the new ebook and ereader technologies. There are fiction books with embedded multimedia features that some readers may find are a distraction from immersing themselves in a story. However, the same multimedia approach could lead to better ways of teaching and learning. An animation of the circulatory system, or an engineering design, may be a better learning aid than pure text. If we are to peer into a dimly illuminated future, what can we see? When we look at computers, Moores law has relentlessly increased the computing capacity in ever smaller and cheaper chips. But we still have mainframe computers, minicomputers, personal computers, tablets and smartphones. They all co-exist in their own niches. So it may be with books. The taxonomy of books may become better defined, and in some areas, print books may thrive. Textbooks look like a good candidate for e-treatment, but surprising developments like rental markets for textbooks have all sprung up in a successful attempt to save students money. But we must encourage creativity or, as the dynamic English educator Sir Ken Robinson calls it, applied imagination. If something as new as email can be reimagined in the 21st century, it is not a big stretch to think that the book industry can be transformed by creative Australians. Where do we find these creative Australians? We grow our own, from native or imported stock, in schools and universities. The digital revolution should be welcomed, and the publishing industry should be moving fast to adapt to and embrace it. However, we should not be looking at publishing in isolation, but in its relationship to culture and education in general. Publishers, governments and institutions should be looking for imaginative links with each other. Australian universities could combine to create a major academic publishing house for ebooks and print books. Knowledge is an area of the economy that will still be crucial long after the mining boom is over. The Connected Continent, a report by Deloitte Access Economics commissioned by Google Australia, calculates that the value of the internet in Australia has already become as big as that of iron ore exports. Books are more than an industrial output, as conventionally defined. The book culture must be stimulated and transformed.
Part 1
UNDERSTANDING ThE BOOK INDUSTRY
12
1 Introduction
Note from the Chair
The Book Industry Strategy Group (BISG) was established by Senator the Hon Kim Carr, Minister for Innovation, Industry, Science and Research, in February 2010, partly as a response to the Australian Governments rejection of the Productivity Commissions commissioned research report Restrictions on the parallel importation of books (July 2009), set up under provisions of the Copyright Act 1968. Under the existing system, parallel importation restrictions (PIRs) provide for a 30/90-day rule, based on a use it or lose it principle. If a book is published overseas, local publishers have 30 days to produce a local edition; if no action is taken, the book may be parallel imported. Once a book has been published in Australia, the publisher is given up to 90 days to replenish stock, before parallel importation applies. The Productivity Commission expressed scepticism about the PIRs and recommended their abolition; a recommendation that was rejected by the Cabinet. Since 2009 challenges to the Australian book industry have intensified. It is a measure of how rapidly circumstances change that the commissions recommendations (and its press release) make no reference to the impact of globalisation or to unprecedented increases in the value of the Australian dollar. Such overseas factors influence the price of books and pose a threat to the viability of local publishing, which may lead to reduced opportunities for Australian writers. However, if we act strategically and pursue global markets, we can strengthen Australian writing. It is puzzling, given the date of publication, that the report made no reference in its recommendations to the rising significance of electronic books, available online at low cost, nor to the impact of the information revolution generally. In the past decade the writing, editing, publication, distribution, promotion and sale of books have been subject to unprecedented international pressure. Creators, producers and consumers are all affected by the twin challenges of globalisation and technology. Challenges include: > > > > > the rising Australian dollar the high price of imported books in shops compared to offshore online prices, which are GST-free small production runs evidence of overservicing and surplus capacity threats to local printers from low-cost, high-quality printing in China and other Asian nations Barry Jones Chair, Book Industry Strategy Group > > the growing take-up of electronic books (ebooks) available online at low cost increasing online purchase by readers of books through overseas suppliers such as Amazon and the Book Depository.
Tax and postage rates also affect the book industry. For example, GST of 10 per cent is imposed on books bought in Australia, while books from the United Kingdom are free of value-added tax (VAT) of 20 per cent at point of sale, and GST is not imposed on their arrival in Australia. This also applies to ebooks, which are free of GST if purchased from an overseas retailer. Variations in postage rates put the Australian book industry at a significant disadvantage compared to that of the United Kingdom. Although readers generally complain about the high cost of print books, Australians are among the highest per capita consumers of them in the English-speaking world. The Book Industry Strategy Groups aspirations are to support the development of Australian creativity and in doing so, improve the capacity of industry to connect content creators with consumers in the domestic and global markets. In pursuit of these goals, the Group seeks to persuade the Australian Government and industry to undertake appropriate action to strengthen the book sector. This report provides valuable information about the shape and reach of the industry and offers recommendations to government to ensure enhanced opportunities for the publishing industry, both in electronic and paper forms, and for booksellers and the printing industry. The recommendations aim to encourage reading as a central element in education, for pleasure, stimulation and self-discovery, and to provide greater opportunities and rewards for writers, designers, editors, publishers and for those involved in the process of production, distribution and sale. We want to see a stronger book culture both ebooks and print books in Australia and hope that this report will stimulate public interest and government support. We welcome this historic opportunity to report on an area that is vital to Australias cultural identity and our capacity for self-discovery. We see this as a time to respond to a technological revolution and a chance to stimulate our creativity and expand its global reach.
13
While the review recognises the fundamental importance of the consumer in addressing industry reform, consumer groups are not directly represented in the membership of the Book Industry Strategy Group. Consumer views, including those of individuals, associations, libraries and educators, were broadly canvassed through the BISG public submission process and stakeholder workshop series. The peak library associations were observers at BISG meetings and had the opportunity to influence the BISG deliberations.
Although readers generally complain about the high cost of print books, Australians are among the highest per capita consumers of them in the English-speaking world.
In determining a strategy for strengthening the Australian industry, the BISG formulated recommendations that recognise the importance of an efficient and integrated supply chain and promote collaboration between industry and government.
PRODUCTION
DISTRIBUTION
POINT Of SALE
Consumer
Printers
14
To shape the Book Industry Strategy Groups strategies and provide supporting evidence for its recommendations, the group commissioned a series of investigative activities to determine the current state of the industry and the needs of consumers. The outcomes of the research and consultation projects are summarised in the companion publication to this report, BISG research findings: Australian books in the digital era, available on the departments website.
Government agencies Relevant government agencies were briefed throughout the BISG process and representatives from these agencies attended the BISG workshops and meetings.
RESEARCh PROjECTS
A series of data-based research projects were conducted to provide the Book Industry Strategy Group with documented evidence on market performance, new technologies and other factors influencing the operating environment. Digital technologies in Australias book industry Ms Jenny Lee from the University of Melbourne was commissioned by the Book Industry Strategy Group to prepare a report on digital technologies in Australias book industry. The report examined technologies used in each part of the book supply chain and provides BISG members with an overview of how each segment of the industry may be affected by digital delivery of books. Market analysis research project The market analysis research project used factual data to examine the past and current performance of the Australian book industry, with specific focus on market size, competitiveness, business models and global opportunities. In addition to this analysis of secondary research, a survey of 1,000 participants was conducted to ascertain consumer preferences for printed and ebooks. The market analysis research report was compiled by Dr Cameron Crouch and Mr Jeremy Thorpe from PricewaterhouseCoopers. Review of Australian Government programs The audit of Australian Government programs provided BISG members with information to address BISG TOR 8 by reviewing how existing activities can be modified to support the industrys adaptation to digital technologies. The audit looked at programs that directly target the book industry as well as those that generally support Australian businesses.
CONSULTATION PROjECTS
High priority was given to broad consultation and ensuring that industry and consumers were given ample opportunity to contribute and participate in the BISG process. For a list of parties that participated in BISG consultation projects, see the companion publication. Industry roundtable meetings Through a program of industry roundtable meetings, the Book Industry Strategy Group sought the views of operators and associations from the key book industry sectors of authors and agents, publishers, printers and booksellers to ascertain the key concerns of each group. From these consultations, the BISG members from each relevant sector prepared an issues paper that was submitted to the full Strategy Group for further discussion. This process ensured that all BISG members had a sound understanding of the issues facing the related sectors. Public submissions The public submission process sought to garner the views of consumers and industry operators on the impacts of digital technology. The primary purpose of this activity was to gather information to inform TOR 3; however, respondents provided views on a far broader cross-section of issues. The process was open from 18 October 2010 to 31 January 2011, and 138 submissions were received.
FINAL REPORT TO GOVERNMENT
Stakeholder workshops The stakeholder workshops series focused on identifying strategic issues for determining a strong future for the Australian book industry. Over 200 industry practitioners participated in nine workshops that examined specific subsectoral issues, supply chain impediments and strategic considerations. Book Industry Strategy Group consultation process on recommendations Before formulating its recommendations, the BISG consulted with key industry representatives from each of the core book industry sectors: authors, publishers, printers and booksellers. In this final consultation phase, members sought to ensure that the final recommendations would be generally embraced by industry.
15
Policy background
GOvERNmENT SUPPORT fOR CREATIvITY
The Australian Government provides funding through a suite of programs to support the creativity of Australian authors and the publishers who take their works to market. According to the Cultural Ministers Councils Statistics Working Group, the Australian Government and state and territory governments contributed a total of $31.5 million towards literature and print media in 200607. The Australian Government Public Lending Right (PLR) scheme makes payments to eligible Australian book creators and publishers on the basis that income is lost as a result of the availability of their books for loan in public lending libraries. PLR payments totalling $8.324 million were made to 8,998 eligible creators and publishers in the 200910 financial year. The complementary Educational Lending Right (ELR) scheme makes payment to eligible Australian book creators and publishers whose books are held in educational lending libraries, including in schools, TAFE institutes and universities. In 200910, $10.81 million was approved under the ELR scheme to 10,876 eligible creators and publishers. The Literature Board of the Australia Council for the Arts aims to support the excellence, diversity, vitality, viability and distinctiveness of Australian literature by providing direct financial support to literary creators, and grants to organisations that offer infrastructure support to the literature sector and income-generating opportunities for writers. Professional development opportunities for individual writers, including Australian and overseas residencies, are also supported. In 200910, the board approved grants valued at $4.2 million. Publishing subsidies have been provided to Australianbased publishers through the Literature Board since 1995 to assist with the publication of literary works by Australian authors. The stated purpose of the publishing subsidies has altered slightly during this period from the original formulation, to assist the publication of books of literary merit by living Australian writers, which may not otherwise be published. The purpose is now to promote Australian creative writers and support the publication and appreciation of their work to a broader audience within Australia and overseas. Publication of 884 titles was supported between 1995 and 2005 by $2,716,699 in funding. Previously known as Books Alive, Get Reading! is an Australian Government initiative developed through the Australia Council for the Arts. The goal of Get Reading! is the promotion of books and reading to the general public, children and young people, including books by Australian writers. The program receives $1.6 million a year in funding from the Australian Government.
PART 1: 1 INTRODUCTION
16
The Prime Ministers Literary Awards are Australias richest literary prizes. The awards honour the contribution of Australian literature to the nations cultural and intellectual life and recognise the importance of literature to Australias national identity, community and economy. Awards are presented for excellence in fiction, non-fiction, young adult fiction and childrens fiction. Awards worth $100,000 are awarded in each category $80,000 for the winning title and $5,000 each for a maximum of four short-listed titles. All prizes are tax free.
The reproduction and first sale of books in Australia is governed by the Copyright Act, which aims to provide a balance of incentives between the creation and consumption of creative works, including books.
REGULATION
The reproduction and first sale of books in Australia is governed by the Copyright Act, which aims to provide a balance of incentives between the creation and consumption of creative works, including books. Included within the Act are the parallel importation restrictions (PIR), which establish the rules pertaining to the importation of books into Australia. The PIRs provide protection for holders (generally publishers and authors) of Australian rights to a title from competition by suppliers of foreign editions of that title. For the PIRs to apply, the Australian territorial rights holder must release the book in Australia within 30 days of its publication elsewhere in the world, and must ensure resupply within 90 days. Exceptions under the single-use provisions apply to consumers who can purchase books directly from overseas and booksellers who can purchase a single copy to fill a specific customer order. If a book is published in Australia within the 30-day limit, booksellers cannot import and sell stocks of that title from an overseas supplier. This enables rights holders to set a price, and thereby secure a certain level of royalties, in the Australian market with the certainty that they cannot be undercut by commercial quantities of imports of the same titles. In 2009 the PIRs were reviewed by the Productivity Commission to assess their effects on the community and to determine whether they should be retained, modified or repealed. The commission recommended the removal of the PIRs over an adjustment period of three years before the repeal would be effective; however, the government determined that changing the regulations governing book imports would not be likely to affect the availability of books in Australia, and rejected the commissions recommendation (Productivity Commission 2009).
17
$2,600 $2,400 $2,200 $2,000 $1,800 $1,600 $1,400 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
The factors that are likely to have underpinned growth in the Australian book market include: > favourable economic and demographic conditions Australias population increased, from 19.4 million in June 2001 to 22.3 million in June 2010 (an annual average increase of 1.6 per cent) (Australian Bureau of Statistics, 2011). Average weekly earnings also increased from $670 in 2001 to $978 in 2010 (an annual average increase of 4.3 per cent) (Australian Bureau of Statistics, 2011) investment in new retail outlets by Australian booksellers the release of several blockbuster series during the 2000s, including the Harry Potter (seven books, published from 1997 to 2007), Twilight (four books, published from 2005 to 2008), and Millennium series (three books, published from 2005 to 2007) continuing strong reading habits of Australians the Productivity Commission noted in 2009 that reading is a popular activity in Australia. ACNielsen found in 2001 that 78 per cent of the adult population read for pleasure every day or on most days of the week. A survey undertaken by Galaxy Research in 2008 similarly found that 85 per cent of Australians read for pleasure in their spare time once a week or more (PwC 2011: 10).
Sales income
In 2010, the total value of books sold in Australia (in both print and electronic formats) is estimated to have been $2.3 billion (PwC 2011: 9). This figure includes sales from bricks and mortar bookstores (chain, discount and independent), internet sales of books to Australian consumers (from both Australian-based and overseas-based online bookstores), sales to libraries and educational institutions, and an estimate of direct sales from publishers. Additionally, drawing on data from the Australian Publishers Association, rights income to Australian authors and publishers is in the order of $5 million to $10 million. Figure 2 charts the estimated total value of books sold in Australia over the past decade. As the chart highlights, book sales showed no growth at all in the two years following the introduction of the GST in 2000 and actually decreased by 0.6 per cent in 2002. From 2003 onwards, however, the value of book sales grew at a stronger rate, and in 2007 a 7.5 per cent increase in the value of book sales from the previous year was recorded. In all, the total value of book sales in nominal prices increased by an annual average of 4.1 per cent from 2001 to 2010. Adjusted for inflation, the annual average increase in the total value of book sales over the past decade was 1.6 per cent. > >
>
However, relative to other retail industries, the Australian book industry underperformed over the past decade. The total value of book sales from 2001 to 2010 grew less than other retail sectors in Australia (see Figure 3).
18
There are very distinct markets for trade versus educational books and the factors driving the growth of these markets differ considerably.
Figure 3: Index of total value of sales, selected retail sectors and the Australian book industry, 200110
180
Total value of sales (2001=100)
There are very distinct markets for trade versus educational books and the factors driving the growth of these markets differ considerably. In 2010, an estimated $1.5 billion worth of trade books were sold in Australia, accounting for 65 per cent of the total value of book sales recorded in that year. According to the PricewaterhouseCoopers analysis, the value of trade book sales grew by an annual average of 4.8 per cent from 2001 to 2010 (see Figure 4). Like the broader book market in Australia, trade book sales experienced stagnation during the early 2000s, before enjoying stronger growth from the mid to late 2000s. Figure 4: Value of trade book sales, nominal prices, 200110
70
Volume of sales (millions)
170 160 150 140 130 120 110 100 90 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
60 50 40 30 20 10 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
According to the Australian Bureau of Statistics (2011), for example, turnover in the retail sector as a whole grew by an annual average of 5.9 per cent from 2001 to 2010 (compared to the book industrys annual average growth of 3.9 per cent). On the other hand, the performance of the Australian book industry fared better compared to the performance of other creative industries in Australia and overseas book industries. Likewise, while the total value of book sales in Australia grew by an annual average of 5.2 per cent from 2005 to 2010, the annual average growth rates in other international markets for the same period were as follows: > > > > 0.6 per cent in the United States 0.3 per cent in the United Kingdom 2.4 per cent in Canada 0.6 per cent in New Zealand.
An estimated 66.3 million trade books were sold through Australian-based booksellers in 2010. As Figure 5 highlights, the volume of books sold through Australianbased booksellers increased by an annual average of 6.4 per cent from 2004 to 2010. Based on BookScan data provided by Nielsen, the average price paid for a book was $19.60 in 2004, $19.83 in 2007 and $18.98 in 2010.
19
In 2010, an estimated $820 million worth of educational books were sold in Australia, accounting for 35 per cent of the total value of book sales recorded in that year. According to PricewaterhouseCooperss analysis, the value of educational book sales in nominal prices grew by an annual average of 3.1 per cent from 2001 to 2010 (see Figure 6). Adjusted for inflation, however, the value of educational book sales over the past decade grew by an annual average of only 0.3 per cent. Figure 5: Volume of trade book sales, sold through Australian-based booksellers, 2004, 2007, 2010
70
Volume of sales (millions)
that average sales per student on commercial teaching and learning materials for each Australian primary and secondary student was $38.89 in 2000, $46.76 in 2006 and $43.85 in 2009. Taking inflation into account, the real value of sales of commercially published teaching and learning materials [decreased] by more than 15 per cent from 2000 to 2009 (Horsley 2010).
Exports
In 2010, Australian book publishers exported an estimated $225 million of books (Australian Bureau of Statistics, 2005; Australian Publishers Association, 200109). Of this, approximately two-thirds (or $144 million) was trade books, and the remaining third (or $80 million) was educational books. Total book exports accounted for 12.2 per cent of publisher revenue in 2010. Figure 7 outlines the value of book exports, by educational and trade publishers, from 2001 to 2010. It highlights the following:
>
The market for Australian book exports was relatively volatile during the early 2000s. It is unclear the extent to which this volatility represented an unstable market for Australian book exports or inconsistencies in reporting. The value of educational book exports declined over the past decade from approximately $122 million in 2001 to $80 million in 2010 (an annual average decrease of 4.6 per cent). The value of trade book exports increased over the past decade from approximately $40 million in 2001 to $144 million in 2010 (an annual average increase of 15.3 per cent). Overall, the value of book exports increased by an annual average of 3.6 per cent from 2001 to 2010. It is important to note, however, that the share of publisher revenue accounted for by book exports declined over the past decade from an average of 14 per cent over 200105 to an average of 12.7 per cent over 200610.
>
$800 $750 $700 $650 $600 $550 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
>
>
The educational market can be further subdivided into primary, secondary and tertiary texts; professional books, that is, books consumed by the scientific, technical, medical, legal and business professions, may also be included in this category. The value of primary, secondary and tertiary book sales grew from an estimated $450 million in 2001 to $620 million in 2010 an annual growth rate of 3.6 per cent. In contrast, the professional book market has been much weaker. Professional book sales grew from an estimated $170 million in 2001 to $190 million in 2010 an annual average growth rate of 1.6 per cent. The available evidence suggests that, while the value of educational book sales increased from 2001 to 2010, per student spending on educational books declined over the same period. Horsley (2010), for instance, estimates
Educational
20
180 160 140 120 100 80 60 40 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Some markets are more important depending on the type of book sold. New Zealand, for example, accounted for an estimated 68 per cent of Australias tertiary education book export sales in 2009. The Pacific islands (17 per cent) and Canada (7 per cent), meanwhile, accounted for a considerable proportion of Australias school book export sales. The United States, the United Kingdom and New Zealand accounted for just under 90 per cent of Australias trade book export sales in 2009.
Employment
The numbers of people employed in the book industry are based on the available data in each of the subgroups within the supply chain and represent, at best, an estimate of employment levels. The best estimate available for employment in the industry for 2010 is approximately 25,700, comprising: > > > > 10,000 employed in authoring and content creation 5,000 employed in publishing and distribution 2,000 employed in book printing 8,700 in retail.
Despite performing strongly during the early 2000s, the value of Australias book exports did not keep pace with the value of Australias total merchandise exports over the past decade (the latter increased by an annual average of 7.3 per cent). Figure 8 provides an index of the value of exports for select industry groups. The value of book exports, however, increased at a stronger rate than the value of exports for: > miscellaneous manufactured articles (for example, clothing, footwear and travel goods), which increased at an annual average rate of 0.7 per cent from 2001 to 2010 food and live animals, which decreased at an annual average rate of 0.6 per cent from 2001 to 2010.
>
The primary markets for Australian books are the United States, New Zealand and the United Kingdom, which in 2009 accounted for approximately 72 per cent of the value of Australian book exports (see Figure 9) a percentage that has remained more or less unchanged since 2001 (PwC 2011: p 54).
FINAL REPORT TO GOVERNMENT
While these numbers provide an overall picture of employment levels in the industry, there are a number of factors that affect the accuracy of these employment numbers. First, they do not include book employment levels in discount department stores, which currently sell 30 per cent of books. Second, they do not include any employment statistics for the nascent online book retailers in the Australian market, which include fastgrowing firms such as Booktopia, TheNile and Boomerang Books. Finally, these statistics will be affected by the recent closure of the Borders chain and the majority of Angus & Robertson stores, which resulted in the loss of over 2,000 jobs in book retailing.
21
as Random House, Hachette, Macmillan and HarperCollins, have also invested in upgrading their distribution systems, and most distributed between 10 and 20 million books annually.
Regional impact
While the total employment contribution of book printing is estimated at only 2,000 in total, some major book printers are located in regional areas where the loss of a facility will have significant economic and social impact. McPhersons Printing Group directly provides jobs for around 300 locals in Maryborough, which is more than 10 per cent of the towns employment. In addition to this, a significant amount of local indirect employment is supported by the Maryborough plant. In 2005, the facilities in Maryborough underwent a $20 million upgrade to broaden the range of products and services offered. Through investment in the region and employment, the printing facility continues to be an important contributor to the prosperity of Maryborough and its surrounding regions. Griffin Press is a major employer in the outer Northern suburbs of Adelaide and has also invested heavily in upgraded technology over recent years. Major publishing distribution centres are located in Moss Vale and the Central Coast of New South Wales and are a major provider of employment opportunities in those regions.
22
The development and income of authors and other content creators is also affected by the significant loss of employment and work opportunities in the broader media, particularly in print, such as newspapers and magazines. A 2010 report by the Media, Entertainment & Arts Alliance, Life in the clickstream, estimates that the number of people regularly and constantly employed in the mainstream media as journalists, writers, artists, photographers or other creative workers has fallen from about 9,000 in 2000 to about 7,000. About 5,000 of these work primarily in print, either as employees or regular freelance writers. Balancing this has been the emergence of some new opportunities in long form journalism through essays, non-fiction books and documentaries. Many if not most authors work either primarily or secondarily in newspapers and magazines and many emerging writers, particularly in the non-fiction book market, are coming out of journalism. According to the PricewaterhouseCoopers report (2011), authors are estimated to have earned approximately $140 million in 2010, of which $2 million was received through direct grants from the Literature Board and $8 million in direct payment to authors from the Copyright Agency Limited, $19 million were payments from Public Lending Rights (PLR) and Educational Lending Rights (ELR) programs, and $114 million was royalties and advances (see Figure 10). The major funding sources equalled approximately $102 million in 2001 and grew by an annual average of 3.5 per cent over 10 years. Figure 10: Author income, by major funding source, 2010
6% 1% 11% Publisher/author royalties PLR/ELR payments Direct CAL distributions Literature Board grants
$130 $120 $110 $100 $90 $80 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Literary agents represent authors in their dealings with publishers, mainly in the publication of trade and consumer books. The Australian Literary Agents Association has 18 member agencies, and at last count some six other agents were not association members.
PUBLIShERS
According to analysis based on Thorpe-Bowkers Australian Books in Print database, there were approximately 4,000 book publishers in Australia during 2008. The market has a relatively long tail of small publishers. > > > Over 70 per cent of these publishers only published one ISBN-tagged publication in 2008. 295 (or 8 per cent) published more than five titles in 2008. 23 (or 1 per cent) published more than 100 titles in 2008 (Lee et al. 2009).
82%
While the total amount of funding to authors has grown (see Figure 11), the average income earned by authors has declined, over the past decade. Mean creative income earned by writers in 2001 was $23,200, but this had fallen to $11,100 in 200708, a drop of 52 per cent. Equivalent median figures for the same periods were $5,400 and $3,600, respectively.
Revenue (millions)
Education
Source: Cover to cover, Figure 14, p. 24.
Trade
While the total employment contribution of book printing is estimated at only 2,000 in total, some major book printers are located in regional areas where the loss of a facility will have significant economic and social impact.
Revenue (millions)
The Australian book publishing industry employs approximately 5,000 people. New South Wales and Victoria had by far the largest concentrations of book industry employees, accounting for 78.9 per cent of the total between them in 2006. The Australian Bureau of Statistics last survey of the book publishing industry in 200304 found that these two states accounted for 92.8 per cent of industry income (Productivity Commission 2009). In 2010, book publishers in Australia generated an estimated $1.8 billion in revenue. Of this figure, trade book publishers earned 68 per cent (or $1.3 billion), while educational book publishers generated the remaining 32 per cent (or $580 million). Total publisher revenue grew at an annual average rate of 4.3 per cent over the decade 2001 to 2010. Over the same period, trade publisher revenue grew by an annual average of 5.6 per cent, while education publisher revenue, in contrast, increased by an annual average of only 1.9 per cent. Figure 12 shows the income for both trade and educational publishers of the decade. These trends are generally in line with the rates of increase in the value of sales recorded by trade books (4.8 per cent) and educational books (2.6 per cent).
Figure 13: Trade publisher revenue, by Australian and imported/agency books, 200110
$700 $600 $500 $400 $300 $200 $100 $0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Imported agency
Source: Cover to cover, Figure 16, p. 25.
Australian
Trade publisher revenue generated by Australian books grew by an annual average of 8.7 per cent from 2001 to 2010, compared to trade publisher revenue generated by imported and agency books, which grew by an annual average of 3.0 per cent. Educational publisher revenue generated by Australian books grew by an annual average of 2.3 per cent from 2001 to 2010, compared to educational publisher revenue generated by imported and agency books, which decreased by an annual average of 1.1 per cent.
24
PRINTERS
The book printing industry in Australia includes three larger specialised book printing companies: McPhersons Printing Group (Maryborough Victoria), Griffin Press (Adelaide) and Ligare (Sydney), which account for more than 40 per cent of revenue earned. McPhersons and Griffin print the majority of locally sourced mono books for the larger read for pleasure publishers, generally under contract. The remainder of the book printing industry comprises several smaller, mid-size specialist printers, for example, BPA Print Group, Hyde Park Press, a small number of large printers who print books as a small percentage of their total business (for example, Blue Star, Geon) and a very large number of smaller printers who also print books of relatively small print volumes. The majority of nontime sensitive printing is in Asia, particularly high-value colour books and educational texts. Books, for purposes of this report, are defined in a production sense and include anything that is bound in a book form, excluding brochures, flyers, magazines and so on. The definition of books would include bound directories, industrial catalogues, manuals, guides and journals. The concentration of ownership has been associated with increased capital intensity, partly to counter strong competition from offshore printers in low-wage countries. Book printers account for only a fraction of Australian printing employment and their numbers are not tabulated separately in the census. PricewaterhouseCoopers estimated that 2,000 people are currently employed in book printing. The revenue generated by the book printing industry in nominal prices is estimated to have declined from $250 million in 2001 to $220 million in 2010 an annual average decrease of 1.4 per cent. Adjusted for inflation, the drop in book printing revenue over the past decade was even greater an annual average decrease of 4.1 per cent. The drop in revenue reflects the shift of book printing jobs from Australian to overseas printers.
FINAL REPORT TO GOVERNMENT
Australians are changing the way they are using communication services four in five Australians have access to an internet connection at home and are increasingly embracing the digital economy.
The available evidence suggests that the number of bookstores has grown over the past decade, but declined in recent years. In 2011, the Australian Booksellers Association (through Thorpe-Bowker) calculated the number of booksellers as 1920, in the following categories: Chain/franchise Trade/general Education Academic Religious Library supply Second-hand/antiquarian 110 1,210 90 90 205 15 200
In its most recent survey, the ABS calculated that employment in the businesses designated as bookshops amounted to 8,717 people, including 697 working proprietors. More than two-thirds of employees were female, and just under half were employed casually. These numbers will have changed after the closure of Borders and some of the Angus & Robertson stores in 2011.
RETAILERS
The Australian bricks-and-mortar book retail sector has three main arms: chains such as Dymocks and the franchise-based Collins; discount department stores that offer books among a wider range of consumer goods (including Target, Big W and Kmart); and independent retailers. The most recent ABS survey of book retailers in 200304 found that there were 1,572 businesses selling books in Australia, including 561 bookshops. In total, they sold almost 80 million new books at a value of $1.4 billion. Bookshops accounted for 78 per cent of total sales, department stores for 14 per cent, and newsagents and miscellaneous retailers made up the remainder. The survey did not include direct online or mail order sales to consumers.
25
SCENARIO 2 fLUID/LOCAL
SCENARIO 3 fLUID/GLOBAL
TRULY GLOBAL
PART 1: 3 CURRENT OPERATING ENVIRONMENT
SCENARIO 1 fIxED/LOCAL
SCENARIO 4 fIxED/GLOBAL
FIXED FORMAT
Source: Neville Freeman Agency 2011.
26
Digital platforms are used to offer books in printed and electronic forms, or a combination of both. Applications include print-on-demand, pay-per-view (single chapter purchases), audiobooks, ebooks and enhanced ebooks, which are linked to video, sound and interactive elements. In Australia, ebook sales made a slow start, largely due to the lack of acceptable reading devices. However, since October 2009, when Amazon released its Kindle ereader globally, a wide range of ereader options have flooded the Australian, and most other, markets, with a corresponding increase in ebook sales (see Figure 15). Figure 15: Value of ebook sales, by book type, 200510
$40 $35
Value of sales (millions)
>
smartphones. According to Telstra (2010), 36 per cent of the Australian mobile population own a smartphone and ownership is expected to grow to more than half the Australian mobile population within 12 months. notebooks and computers. Notwithstanding their relatively low prominence in discussions about ebooks, computers remain one of the most popular means of reading ebooks. A survey commissioned by the Book Industry Study Group (2010) in the United States found that, in 2010, 37 per cent of readers were reading ebooks using computers compared to 32 per cent for the Kindle and 3 per cent for the iPad.
>
$30 $25 $20 $15 $10 $5 $0 2005 2006 2007 Trade 2008 2009 2010
Digital books have recently gained acceptance in the US market after an extended period in which they were largely limited to niche and specialist fields. This change has not arisen simply from the adoption of new ebook technologies; in fact, most of the technologies deployed have been in existence for at least a decade. What has changed is that a broader infrastructure has come into place to support consumer adoption of ebooks, specifically: > > > > > availability of fast broadband and mobile telecommunications near-universal adoption of internet-based payment systems development of a service infrastructure to convert, manage and distribute books in digital form formation of a large web-based library of digital texts diversification of large firms from several different sectors into the manufacture, sale and promotion of ebooks and ebook readers release of a range of well-publicised ereading devices offering individual consumers wireless access to these texts.
Educational
Such devices include ereaders, tablets, smartphones, and notebooks and computers more broadly: > ereaders. Australian consumers now have access to a broad range of ereader devices. There is already evidence of downward pressure on ereader prices: In 2011, Amazon is selling the WiFi-only version of its Kindle in Australia for $139. This downward trend is likely to be compounded by the emergence of device suppliers in the Asian region, where the proprietary US brands are manufactured. tablets such as Apples iPad and Samsungs Galaxy Tab. These are increasingly popular in Australia and can easily be used for ebook reading. PricewaterhouseCoopers estimates that 740,000 tablets were sold in Australia between the iPads release and the end of March 2011.
>
>
The result is that US ebook sales have experienced rapid growth, though from a very low base. Ebook sales recorded by the Association of American Publishers rose 176.6 per cent in 2009, to give a compound growth rate of 71 per cent since 2002. The Economist has estimated that US sales of about 110 million units in 2008 grew to almost 340 million in 2009.
27
INDIvIDUALS
Australians are changing the way they are using communication services and how they value particular services. According to the Australian Consumer and Media Authority, four in five Australians have access to an internet connection at home and are increasingly embracing the digital economy. Eighty-eight per cent of household internet users engaged in one or more ecommerce activities and 69 per cent purchased at least one good or service in the last six months. While email is the most widespread use of a home internet connection across all age groups (94 per cent of those who have an internet connection), social networking is equally popular for the youngest age group (91 per cent of those aged 18 to 24 years) and is more likely than email to be the main form of communication for this age group. The use of social networking declines with age, to a low of 15 per cent of internet users aged 65 years and over (ACMA 2011).The authority found that age, gender, household income, level of education and employment influenced the level and way in which consumers engage in ecommerce. In general, consumers with higher levels of education, income and in some form of employment were more likely to participate. The incidence of ecommerce activity is shown to decrease with age, while the types of goods or services purchased online differ across age groups. Respondents aged 25 to 34 years had the highest incidence of purchasing online: 82 per cent had purchased a good or service online. This figure decreases in a linear fashion to 38 per cent for people aged 65 years and above.
Change in the global book business is occurring at an unparalleled pace, and the Australian industry must evolve to adapt to this fundamentally transformed market.
The typical ebook consumer differs somewhat from the typical print book buyer. A 2010 survey by the US Book Industry Study Group found that 51 per cent of ebook consumers were men, while women are the largest buyers of print books. Ebook consumers are also more affluent than print book buyers. The Australian survey conducted by TNS Global confirmed that Australian men were more likely to purchase an ebook (Figure 16) and revealed that younger consumers those aged between 18 and 34 years purchased as many ebooks as all other age groups combined. Figure 16: Ebook demographics, by gender
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Purchased eBook in 2010 Women
Source: Cover to cover, Figure 26, p. 32.
Proportion of respondents
28
47% 26% 19% 18% 15% 11% 9% 8% 7% 10% 20% 30% 40% 50%
Individuals who made submissions to the Book Industry Strategy Group generally embraced digital technologies such as ebooks and purchasing books online. A majority of respondents in the category of individuals said they read ebooks, and a significant majority noted that their use of ebooks complements their use of print books. Those who have embraced ereading technologies said that ebooks were convenient to access, easier to store and search, and were hugely beneficial for people in remote areas or with disabilities. This was supported by the consumer survey (see Figure 17). Vision Australia, which represents close to 300,000 Australians, emphasised that digital books offer opportunities to reduce the barriers that people with a vision impairment face in attempting to read the books of their choice, through synthetic speech, braille, and screenmagnification software. Retirees, represented by the Association of Independent Retirees, overwhelmingly prefer to purchase, borrow and lend the printed book. It is generally believed that only those retirees who live in remote locations, do not have physical access to a library, are no longer able to drive, have a disability or are confined to a residence are likely to demand ebooks. However, this view is less likely to apply to younger retirees, such as the baby boom generation. A majority of respondents saw great benefits in ebooks, but consumers have expressed some frustration with the transition to digital books. Key concerns include: > > > > the myriad of ebook formats and the issue of device interoperability high initial start-up costs to purchase ereading technologies a lack of titles available for download in Australia the price of ebooks, particularly as they have no resale value and sharing is difficult.
LIBRARIES
Through the BISG public submission process, libraries reflected a willingness to adopt ebooks and associated technologies, with digitisation of content an integral part of contemporary Australian libraries. The National Library of Australia has been building and delivering a digital collection for well over a decade. The State Library of Western Australia has a policy that digital resources will be collected in preference to print within budget constraints and current standards. The University of Tasmania Library remarked that electronic journals and databases now account for a major part of its acquisitions budget. The benefits of digital delivery specific to libraries included that collections are more accessible, that ereading technologies encourage people to read, and that the digital world offers solutions for disabled and vision-impaired readers. Practical benefits include the fact that library staff spend less time shelving, checking books in and out and collecting fines. While the benefits of ebooks and the digitisation of content are broadly recognised, there are three primary concerns: equality of access, copyright and affordability for institutions and individuals. Access Libraries seek to ensure equitable access to information for users in all geographic locations. The development of a reliable broadband infrastructure to facilitate equality in the provision of online services to regional and remote communities is seen as a priority.
29
Affordability Educational libraries at both the school and tertiary level have raised concerns about the additional cost of technology to support digital books. Educational institutions face a choice between the cost of ereaders plus ongoing licence fees to access individual ebooks, or the purchase of a printed book that is not subject to ongoing subscription costs. Copyright Copyright and licensing is an important issue for libraries because they need to continuously balance the rights of copyright owners with the rights of the public to gain access to information. In the case of digital media, the owner of the resource is not the purchaser, but the publisher, who permits use of the resource through a subscription. This model relies on continued yearly licences and downloads to specific machines, which limits the transfer of the resource and adds additional costs for further downloads. Digital rights management is challenging the traditional library model in terms of how their clients are able to obtain, store, retrieve and use information. The inability for libraries to loan ebooks efficiently is an issue that may offset the benefits of digital delivery.
only a print version; and 24 per cent would purchase both ebook and print versions. The key reasons given for the preference for ebooks over print books were portability, ease of storage, speed and convenience in downloading and price. These findings reflect similar results from consumer surveys in the United States, where affordability, ease of downloading, readability, instant access and portability were the key factors influencing the decision to purchase an ebook. Around 30 per cent of respondents to the survey who purchased an ebook in 2010 said that they would likely buy more in 2011. Furthermore, consumers who were familiar with or interested in both print and ebooks expressed a slight preference for purchasing an ebook version of a newly released book rather than a print version. Table 1 summarises consumer intentions regarding print and ebooks in 2010 and 2011. Findings from the public submissions show that all groups believe that the use of ebooks is likely to grow. Table 1: Expected growth in print and ebook sales, 201011 Print books Proportion of population who purchased in 2010 Proportion of population who are likely to purchase in 2011 Number of units per person purchased in 2010 Number of units per person expected to be purchased in 2011 Growth in volume and sales from 2010 to 2011
Source: Cover to cover, Table 2, p. 39.
ebooks
EDUCATORS
Like libraries, educational institutions have already started to invest heavily in technologies that create a transition from print to digital materials and that in turn will significantly affect the Australian publishing industry. Submissions to the Book Industry Strategy Group stated that technological advances, such as the development of ebooks, have fundamentally changed the learning environment for both teachers and students, bringing benefits such as greater student access to educational materials, more certainty of availability, and improved speed of delivery particularly for students in regional and remote Australia and people with disabilities. The key concerns for educators mirror those of libraries. In addition, educators have concerns about the impact of globalisation on curricula and on the practice of copyright.
Notwithstanding the increase in demand for ebooks, demand for print books is predicted to remain stable over the short term. Print books are seen to have some significant advantages over ebooks relating to ownership and the ability to share. Additionally, the emotional attachment to the print book was strongly expressed in the public submissions and validated by a group of the population in the TNS survey. Some of the comments from the public submissions include there is nothing like the touch, the smell and feel of a book or a printed book is a wonderfully sensual and enchanting experience. Some readers believe that, for these reasons, the printed book will continue to exist in some form.
30
This evidence suggests that the availability of supply may act as a constraint on the expansion of the ebook market in Australia over the short to medium term.
AvAILABILITY Of EBOOKS
The availability of ebooks is a critical issue in determining the future size of the ebook market in Australia (Lee 2010). A sufficient range of titles is required to ensure that supply is matched with demand. Globally, there is a wealth of ebooks available to readers. The United States Kindle store, for example, has more than 800,000 titles, while there are an additional 1.8 million free ebooks in the public domain that can be downloaded from Amazon (PwC 2011: p 42). Barnes & Noble, meanwhile, contends that it is the worlds largest ebook store with more than 2 million ebook titles. The available evidence (primarily of a qualitative nature) suggests, however, that there are constraints on the availability of ebooks in Australia. For example: > While Australians can access Apples iBookstore using their iPads, users have reported concerns about the availability of titles, specifically titles beyond those already available in the public domain. A 2010 analysis of the ebook market in Australia highlights the difficulty faced by independent booksellers in accessing ebooks and selling these to consumers. Numerous submissions made to the Book Industry Strategy Group highlight problems in the supply of ebooks in Australia, particularly in relation to Australian-authored work.
Drawing on these survey results and others, it is suggested that the choice may not be about either ebooks or print books, but a marketplace where content in multiple formats actually increases book purchasing across the board. Industry experts in Europe (surveyed by PricewaterhouseCoopers) have a more nuanced perspective. They all agree that ebooks and printed books will co-exist. However, they also believe that in certain cases, printed editions will be replaced by digital editions. This is probable particularly in the case of special interest and travel books and in areas in which only sections of books are read (PwC 2011: 44). Drawing on the evidence outlined above, in the short to medium term, ebook sales are likely to expand the total market for books. However, in the longer term the impact on printed books is unclear.
>
>
31
>
Figure 19: Projections of ebook share of Australian book market, by scenario, 201014
Share of total value of book sales
30% 25% 20% 15% 10% 5% 0% 2010 2011 Scenario 1 2012 Scenario 2 2013 2014 Scenario 3
PricewaterhouseCooperss Global entertainment and media outlook 20102014 projects that the value of global ebook sales will increase from $4.7 billion in 2010 to $10.7 billion in 2014 an annual average increase of 22.5 per cent. The projected rate of global growth in ebook sales is illustrated in Figure 20. According to the survey, the ebook market in the following key international territories will grow strongly in the short to medium term: > In the United States, the value of ebook sales is projected to increase from an estimated $2.6 billion in 2010 to $4.8 billion in 2014 annual average growth of 16.4 per cent. In the United Kingdom, the value of ebook sales is projected to increase from an estimated $82 million in 2010 to $500 million in 2014 an annual average growth of 57 per cent.
PART 1: 3 CURRENT OPERATING ENVIRONMENT
>
The future of the print book market is unclear over the medium to long term. Recent data released by the American Association of Publishers suggest that the cannibalisation effect may be occurring more rapidly than previously expected. Members of the association recorded that their ebook sales grew by 164.4 per cent from 2009 (from US$167 million to $441 million), while their print book sales decreased by 5.1 per cent (from $5.1 billion to $4.9 billion). In May 2011, Amazon announced that it is now selling more ebooks than paperback and hardcover print books combined.
>
In Canada, the value of ebook sales is projected to increase from an estimated $77 million in 2010 to $154 million in 2014 an annual average growth of 19 per cent. In New Zealand, the value of ebook sales is projected to increase from an estimated $11 million in 2010 to $35 million in 2014 an annual average growth of 36 per cent.
>
While the rate of growth in ebook sales is projected to be the greatest in the United Kingdom over the next three to five years, ebook penetration in the United Kingdom is still expected to lag behind that of the United States, Canada and New Zealand.
32
for small presses, Twitter and facebook are overwhelmingly the social media of choice and are almost unanimously seen as promotional tools.
PUBLIShERS
The impact of digital platforms varies according to the specific publishing subsector. Reference book publishing The extensive use of digital platforms for the delivery of reference book material, whether it takes the form of web-based content, online subscriptions or standalone ebooks, has required reference and professional publishers to integrate their processes for print and digital production. Higher education publishing This highly competitive field has several significant areas of concern for the long-run future of higher education publishing. These include: > the changing role of textbooks, which are becoming less central to higher education as courses of study diversify and enrolments in traditional disciplines such as physics and mathematics fall away in favour of professional courses the cost of developing supplementary digital materials for supply in conjunction with textbooks the universities increasing emphasis on offering education through online platforms.
> >
Higher education publishers have used digital technologies to adapt their offerings to these new patterns. Some make digital materials available through the universities password-protected learning management systems.
33
For subjects with large enrolments, publishers offer customised textbooks made up of extracts from books on their lists as alternatives to the ubiquitous photocopied course packs. These customised readers are printed digitally for the main print run, with top-up copies produced by print-on-demand, which offers higher reproduction quality than photocopies. Some publishers offer academics the option of editing, rewriting and supplementing textbooks using publishers software to fit specific courses. Scholarly publishing To varying degrees, Australias few remaining mainstream university presses offer digital editions. Most of the journals published in Australia are only available digitally and are produced by commercial publishers at commercial prices. This has placed academic libraries under budgetary pressure, which has reduced the libraries ability to purchase scholarly monographs. This has had serious implications for university presses and their capacity to publish. Titles released by the traditional university presses are generally released through ebook and print-ondemand formats. Several universities have established e-presses (all originally associated with university libraries), which provide free electronic copies of titles by academics at the institution and digital copies of theses, but charge for print-on-demand books. Educational publishing For well over a decade, publishers of primary and (especially) secondary textbooks have supplemented their print materials with electronic content, such as password-protected websites, classroom exercises and downloadable PowerPoint presentations. The sector is highly competitive and, as in the case of higher education, much of this material has been made available at no cost, provided teachers adopt the relevant textbooks. Many educational publishers are hoping that a shift to digital books will enable them to repurpose and charge for more of the content they produce. In terms of their forward lists (as opposed to titles already in print), educational publishers are increasingly integrating the preparation of print titles with the production of ebooks. There has been much more widespread use of XML tagging to facilitate the indexing and repurposing of content, and some educational publishers are now having works proofread on screen. The options for incorporating visual material have also been broadened by the availability of digital image libraries, which are open to making agreements with publishers for access to their contents
Trade publishing The release of the Kindle (2009) and Apple iPad (2010) triggered a shift in the approach to digital publishing among trade publishers. While ebooks have been offered by some publishers in PDF form for a number of years, the shift to more versatile formats makes the product viable commercially. Disparities between formats and inconsistencies in metadata standards impose considerable costs and inefficiencies on publishers. The emergence of digital publishing has ramifications for the workflow of print books. In the past, many publishers released their titles in digital form after they were completed as printed products; however, many are now moving to integrate the two processes so that books are optimised for release in either medium. With few exceptions, such as Lonely Planet, this is a recent development for most publishing firms. Digitisation has introduced a number of changes to publishing processes: > > > streamlining of print production an increase in global publishing output a shift from physical production to ancillary services, such as marketing, metadata, content management and distribution.
Book marketing has universally been digitised. In educational, professional and technical publishing, client databases are compiled into email lists for targeted promotion; in trade and consumer publishing, the promotion of titles and author events has largely shifted to the web and to mobile phones. Digital technologies have also made it possible for publishers and booksellers to receive more timely information about book sales and trends. One example is the advent in 2000 of Nielsen BookScan, a service that collects point-of-sale information directly and generates weekly sales reports. More generally, publishers have had to pay closer attention to the management of both print and online content, the tracking of publishing workflows, budgeting, royalties and the management of client lists. In the early stages of digital publication management, individual publishing houses tended to devise their own software for these purposes, but especially among the larger publishing houses this has now given way to the use of specialist publishing software. Developing and acquiring specialist software, managing large client bases and compiling and updating data are all activities that require a substantial investment of capital and labour. Rising capital requirements have contributed to the consolidation of ownership in the global publishing sector.
34
SmALL PRESSES
Publishers in the small press sector, in Australia as elsewhere, have become increasingly active in the past decade or so as what you see is what you get desktop publishing and internet-based communication have reduced the capital costs of preparing books for publication. For small presses, Twitter and Facebook are overwhelmingly the social media of choice and are almost unanimously seen as promotional tools. Australian small publishers use of electronic publishing is mixed; just under 30 per cent publish ebooks, and 37 per cent use print-on-demand. Through the BISG workshop series and a 2011 survey compiled by the Copyright Agency Limited, publishers (across all categories) identified their key concerns about the digital environment: > lack of technical expertise and a need for re-skilling (noted as being the greatest impediment to developing digital product) piracy and lack of protection for digital works lack of digital marketing skills the low price of ebooks affecting profitability for publishers market domination of large multinational distributors such Apple, Amazon and Google emergence of multiple interactive platforms that drive changes in consumer choice impact of technology on the future of reading effect of globalisation on the capacity of Australian publishers and authors to be noticed in global markets.
Although many authors operate as small economic units and producers, their place within the broader economy is blurred by the nature of their practice and the often poor fit between effort and return.
continued to rise, from about 500 copies in 2008, to 2,000 to 3,000 copies in 2011 (depending on the number of pages). From the printers perspective, digital equipment is a major investment. A fast digital web press that includes integrated finishing and binding equipment costs between four and seven million dollars. Digital printing is especially useful for backlist titles because the numbers sold are generally too small to warrant using offset. General demand for digital printing is growing rapidly; however, much of this is not book printing but the production of training materials, catalogues and similar items. Further down the quantity scale is print-on-demand, which can be used to print books as single copies. The main reservation many publishers have about print-on-demand is the quality of the resulting books, which are often visibly inferior to web offset or longer-run digital printing. Globally, digital printing of all kinds is increasing its market share as publishers seek to tailor print runs more closely to demand, avoiding the cost of trade returns and losses from sales of remainders. It is also benefiting from growth in small-press publishing. Book printers also provide archiving services. Older titles that were printed from film need to undergo conversion before they can be brought back into print. In some cases this involves scanning printed copies of older works to convert them into current file formats. It is difficult, however, for Australian printers to compete with the lowcost options offered by firms in India. Digital technologies are widely used to speed up ordering systems. This is primarily done through online archiving services that allow publishers to order books by ISBN. Once a book is available in PDF format, it can also be converted into an ebook.
PRINTERS
FINAL REPORT TO GOVERNMENT
To remain competitive, Australian book printers have adopted a wide range of digital technologies. Publications arrive at the printers as print-ready PDFs prepared using Adobe InDesign, which has become an industry standard. This produces interoperable files that can be printed in a number of ways. Australian book printers have been moving into the digital arena for several years, partly in response to a joint industry study funded under the Australian Governments Enhanced Printing Industry Competitiveness Scheme, which identified the need for printers to adapt as book publishing moved towards mass customisation rather than mass production. Digital printing allows books to be reprinted economically in small numbers; setup costs are lower, and the cost per copy is more constant across the print run. The quantity at which digital printing is more economical than offset has
1 Interviewed by Jenny Lee, 11 June 2010.
35
The impact of digitisation on the print industry is significant. While new opportunities exist through digital printing and print-on-demand, the market transition from paper to screen book formats is fundamentally changing the face of the book printing industry. It is generally anticipated that the printed book will continue to have a place in the market, but the ability of Australian printing firms to remain competitive against low-cost Asian rivals in a shrinking market is an immediate and significant challenge.
A competitive environment
AUThORS AND OThER CONTENT CREATORS
Exploring the competitiveness of Australian content creators presents challenges. Though commonly used to ascertain relative cost, competitiveness is a concept of limited efficacy when applied to authorship. An individual authors inputs and productivity may of necessity vary widely from one project to another, making measures of output other than the delivery of an acceptable manuscript to a publisher to a deadline hard to establish. Within a given book genre, one author may be deemed to produce more efficiently in cost or output terms than another, perhaps on the basis that one writes more books more quickly than the other. However, depending on the genre and a host of other factors, a slow writer may not be an efficient practitioner, but may still be an effective creator who enjoys a greater commercial success than a fast writer. Although many authors operate as small economic units and producers, their place within the broader economy is blurred by the nature of their practice and the often poor fit between effort and return. Authors output retains a twin character being commerce and art/craft so that their economic contribution must be weighed alongside the delivery of cultural and other benefits. In the context of the book industrys overall costs, authors influence general industry competitiveness in only limited ways. While authors direct cost to publishers takes the form of advance and royalty payments, roughly ten per cent of the total publishing pie, there is no evidence that author-driven excessive or publisher misjudged advances and royalty payments are cumulatively sufficient to have influenced retail prices and made local products less competitive than imports. Taking the total Australian book market over time as being open and fluid, the creation of a greater volume of quality, local authorgenerated intellectual property is an economic input with at least the potential to enhance revenues through increased book sales. On this measure, an indication of the competitiveness of Australian authors lies in the number of local titles produced and published annually.
Computerised stock control Barcoding and scanning Receiving online orders Researching availability/ cost of services online Researching bibliographic information online Businesses having a web presence
68.2
16.6
56.7
19.3
Unfortunately, no subsequent ABS surveys have specifically looked at book retailing; the 2009 report Arts and culture in Australia: A statistical overview reiterates the 200304 figures, and the industrial classifications used in the census combine book retailers with newsagencies and do not distinguish the book-retailing activities of supermarkets and department stores. During the past decade, the bricks-and-mortar firms have been joined by a number of Australian online-only book retailers, some of which have enjoyed rapid growth. Booktopia, for example, was among the 100 fastestgrowing Australian companies in 2009, and CEO Tony Nash is confident it will retain its position in 2010.1 Other onlineonly retailers include TheNile and Boomerang Books, which has a particular (but not exclusive) emphasis on Australian titles. While all these firms operate online, their main focus is on the sale of print books.
36
PUBLIShERS
The conversion of content into books in Australia is primarily the responsibility of the countrys publishers. However, the competitiveness of Australian publishing industry is difficult to assess because of the protection afforded it under the Copyright Act and also because many publishing houses are subsidiaries of larger international publishers. Notwithstanding these issues, the Australian publishing industry is competitive relative to international competitors. The following observations help to support this conclusion: > The export market for Australian books has grown over the past decade (an annual average increase of 3.6 per cent), while the export markets in the United Kingdom and United States have stagnated. The value of Australias book exports grew from $162 million in 2001 to $225 million in 2010 an annual average increase of 3.6 per cent. The share of Australian publishing revenue accounted for by Australian books has grown over the past decade from 44 per cent in 2001 to 48 per cent in 2010 (see Figure 21). This suggests that Australian publishers have become more effective in linking Australian content creators with the Australian market. Australian book publishers have improved the management of inventory over the past decade as inventory levels as a proportion of sales have been trending downwards for both trade book publishers and educational book publishers. Australian book publishers have embraced the digitisation of production.
Labour productivity is an issue as this has stagnated over the past decade. This has increased by an annual average of 0.6 per cent for trade publishers and declined by an annual average of 2.5 per cent for educational publishers. However, this trend may reflect the overall slowdown in productivity growth throughout the economy.
PRINTERS
The Australian book printing industry has been involved in the production of books since the early 19th century. The past two decades, however, have witnessed a gradual decline in the revenue generated by the book printing industry, from $250 million in 2001, to $220 million in 2010. The decline in book printing revenue may be attributed to the increasing use of overseas printers by Australian-based publishers, driven by cost differential between Australia and Asia. Asian-based printers have a price advantage of between 12 and 27 per cent; the biggest differential is for four-colour casebound books. The cost differentials result from higher labour costs in Australia; higher paper costs; the small market; under-utilisation; economies of scale; higher regulatory standards; and the high Australia dollar, which provides a price advantage for overseas-based printers. Other factors include: > The average print run for a book in Australia (excluding trade paperbacks) is between 7,000 and 10,000, in contrast to 1.2 million in China. Compounding the print run problem is the significant underutilisation of capacity. At the extreme, 2011 International Labour Organization data show that manufacturing labour costs are 1,900 per cent higher in Australia than those in China and 600 per cent higher than those in Malaysia. Australia imports coated and uncoated paper at a higher price than printers in the United Kingdom. PricewaterhouseCoopers believes this is because Australia buys lower volumes of paper.
>
>
>
>
>
50% 48% 46% 44% 42% 40% 38% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Imported/agency
The industry has sought to adjust to these changes through investment in new technology. The industry has embraced digital file plate technology, and wages in the broader printing industry fell as a percentage of revenue between 2005 and 2010 due to efficiency and productivity gains. As a result of these adjustments, the average price of trade paperback fell by 9 per cent at Griffin Press and McPhersons Printing Group over the past decade.
Lastly, Australian publishers have made some progress in addressing the problem of returns. Confidential data provided by the Australian Publishers Association show a 5 per cent decline in trade returns as a proportion of sales over the past decade.
37
Australian booksellers have been pitted directly against their overseas competitors in the ebook and online sales of print book market.
DISTRIBUTORS
Distribution is widely seen as a factor impeding the competitiveness of the Australian book industry. Inefficiencies in the distribution system in Australia could account for 6 to 16 per cent of the price differential of the average total price charged by Australian and overseas online booksellers. Factors that affect distribution are the geographically large and dispersed market, a fragmented distribution system, lack of agreed standards underpinning book distribution and lack of access to the distribution system for smaller publishers. As a result of these difficulties: > The fragmentation limits the ability of publishers to achieve economies of scale in distribution, which drives up the cost of each unit distributed. The lack of agreed standards results in the multiple handling of books, thus increasing costs. The use of radio frequency identification could help to track the seamless movement of books across the supply chain and reduce costs. Up to 40 per cent of publishers, mostly small, feel that they are locked out of the national distribution system.
RETAILERS
With fast internet connection speeds and reliable online payment systems, consumers are increasingly willing to purchase print books through online platforms. PayPal Australia estimated that Australian online retail sales would reach $33.8 billion in 2012, a 40 per cent increase over 2009 levels. Local online retailers are struggling to establish a presence in the market, and overseas firms account for about 40 per cent of total Australian online retail sales. Australian booksellers have been pitted directly against their overseas competitors in the ebook and online sales of print book market. The use of specialist wholesalers in the United Kingdom and the United States helps to improve efficiency, because such wholesalers are able to offer more consolidated ordering services to booksellers. Speed of access and the range of available titles are major issues for booksellers competitiveness. Books that are out of stock locally can take between three and 12 weeks to be supplied, while major US book distributor Ingram can supply any Australian bookshop in four to five business days. However, books that are in stock can usually be supplied in Sydney or Melbourne within three to five days. Lengthy delivery times can encourage inefficient ordering behaviour, such as ordering on the basis of predicted future demand. As a result, booksellers may be less likely to have the titles to meet consumer needs. An inefficient distribution system is blamed for slow delivery times. Another key issue for competitiveness of Australian retailers is price. Overseas online booksellers such as Amazon are able to sell print books published overseas to Australian consumers at a price (including delivery) that is more competitive than the price charged by Australian online booksellers for the same book. The available evidence suggests that Australian online booksellers are able to sell print books published in Australia more competitively (see Table 3).
>
>
Distribution in Australia is also affected by the absence of an Australian digital asset distributor, which acts as an intermediary between publisher and bookseller. These specialist companies play an important role in the ebook supply chain in the United States and the United Kingdom through providing publishers with technical capacity in managing their ebook portfolios. This includes managing metadata and digital rights for the publisher and providing ebook formats that match the ecommerce systems of booksellers.
38
Table 3: Summary of comparison of total prices charged by Australian-based and overseas-based online booksellers (as at 27 March 2011) Average total price Sales rank 18 21 24 13 7 22 14 3 8 6 11 12 15 10 16 20 19 1 23 17
FINAL REPORT TO GOVERNMENT
Differential
Title Letters and Numbers * The Plantation * Ben Cousins: My Life Story * Last Sacrifice: Vampire Academy * Losing the Last Five Kilos * MasterChef Australia (Volume 2) * Dog Days: Diary of a Wimpy Kid * Ugly Truth: Diary of a Wimpy Kid * Diary of a Wimpy Kid * Lake of Dreams Before I Fall Rodrick Rules: Diary of a Wimpy Kid* Last Straw: Diary of a Wimpy Kid * Fast Fresh Simple * Clean & Lean Flat Tummy Fast! You Belong to Me The Kings Speech Tick, Tock Jamies 30-minute Meals Secrets to the Grave Awakened: House of Night The Girl Who Kicked the Hornets Nest Eat, Pray, Love The Girl with the Dragon Tattoo The Girl Who Played with Fire
Australia
Overseas
(%)
$20.14 $35.39 $39.97 $23.39 $32.11 $40.43 $19.30 $19.48 $19.46 $33.18 $15.80 $19.71 $20.05 $43.68 $31.32 $29.11 $32.80 $33.88 $52.38 $36.02 $33.08 $27.43 $27.07 $26.95 $26.01
n/a n/a n/a $30.14 $38.33 $46.54 $21.89 $21.89 $21.56 $36.48 $17.31 $21.56 $21.89 $42.34 $29.39 $25.88 $27.49 $26.57 $39.40 $26.27 $24.12 $18.20 $17.67 $16.65 $15.94
n/a n/a n/a 22.4% 16.2% 13.1% 11.8% 11.0% 9.7% 9.0% 8.7% 8.6% 8.4% -3.2% -6.6% -12.5% -19.3% -27.5% -33.0% -37.1% -37.1% -50.7% -53.2% -61.8% -63.2% 10.7% -26.0% -9.4%
$20.41 $36.31 $39.34 $23.45 $33.61 $42.15 $20.26 $20.41 $20.11 $33.61 $15.95 $20.34 $20.41 $44.47 $32.14 $29.44 $33.91 $35.97 $51.91 $36.64 $33.79 $29.16 $29.29 $29.06 $26.46
n/a n/a n/a $30.14 $38.33 $46.54 $21.89 $21.89 $21.56 $36.48 $15.99 $21.56 $21.89 $43.47 $27.89 $25.88 $22.37 $19.48 $35.96 $26.27 $17.57 $20.55 $16.25 $13.12 $14.85
n/a n/a n/a 22.2% 12.3% 9.4% 7.4% 6.8% 6.7% 7.9% 0.2% 5.7% 6.8% -2.3% -15.2% -13.8% -51.6% -84.6% -44.4% -39.5% -92.3% -41.9% -80.3% -121.5% -78.2% 8.3% -42.6% -18.3%
2 4 25 5 9
Average for books published in Australia Average for books published overseas Average for all books
* Titles published in Australia. Note: Prices include sales price and postage. Source: Cover to cover, Table 7, p. 69.
39
Table 4: Comparison of unit postal costs, Australia Post and Royal Mail 250g500g satchel or other item Australia Post Regular parcel, within Australia (standard) Regular parcel, within Australia (estimated contract discount) Air mail, to the United Kingdom Unsorted, worldwide, economy, 100 items Royal Mail Unsorted, worldwide, economy, 150 items Unsorted high volume, Australia, economy, 100 items Unsorted high volume, Australia, economy, 1,000 items Unsorted high volume, Australia, economy, 2,000 items
* Reflects exchange rate as of 15 April 2011: 1 GBP = 1.5513 AUD. Source: Cover to cover, Table 11, p. 81.
$6.05 $5.75 $20.30 $5.42 $5.36 $3.04 $2.93 $2.92 3.49 3.46 1.96 1.89 1.88
Factors affecting the price competitiveness of Australian booksellers include: > The wholesale price of books. The prices paid for wholesale books published overseas by Australian booksellers are, on average, greater than those paid by booksellers overseas. GST on books sold in Australia PricewaterhouseCoopers found that if the GST on books sold in Australia were removed, the price advantage enjoyed by overseas online booksellers would be reduced for all books by approximately 87 per cent and would increase the price advantage for Australian booksellers for books published in Australia by approximately 60 per cent. The differential cost of postage between Australia and other destinations. Australian businesses suffer a significant disadvantage in postal rates to the United Kingdom compared to postal rates from the United Kingdom. Rates from Australia can be up to 89 per cent higher for posting parcels of similar volume and weight (see Table 4). The appreciation of the Australian dollar against the US dollar and the British pound has made purchasing books in those markets much more attractive to Australian book buyers. The exchange rate, in real terms, is at its highest level since the mid 1970s. Driving the appreciation in the Australian dollar has been our high terms of trade, relatively strong economy and the expansionary monetary policy settings of major world economies including the United States and the United Kingdom. Over the year to September 2011, the Australian dollar has appreciated by 15.4 per cent against the US dollar; by 8.3 per cent against the
>
trade-weighted index of currencies; and by 5.2 per cent against the euro. The strong dollar is a challenge for Australian manufacturing industries, particularly those that are trade exposed. It has raised the price of the goods that Australian manufacturers sell in overseas markets and intensified competition from cheaper imported goods; thus putting pressure on income, sales levels, margins and ultimately profits. This is the current scenario for the book retailing segment of the book industry Australian consumers are able to buy books more cheaply offshore due in part to the stronger Australian currency. The restrictions on the parallel importation of books reduce competitiveness for Australian booksellers. As the Productivity Commission (2009) noted, Australian consumers can now effectively import books themselves as soon as they are released anywhere in the world, and can take advantage of different prices and format choices, as well as the GST-free status of books purchased online from abroad. However, booksellers are still constrained by these regulations. The availability of ebooks is a critical issue, particularly in a country such as Australia, which has not been strongly represented in the existing global stores. To shore up their share of the local market, the major Australian book chains have built up their range of digital titles and diversified into selling ereaders capable of reading ebooks in various formats. Local online retailers are particularly concerned to boost their holdings of Australian titles to gain a point of difference from the omnipresent online global retailers. The range of Australian ebooks available has gradually widened as more locally published books are converted to electronic form.
>
>
40
Commercial uncertainties
Digital publishing, and ebooks in particular, have created significant uncertainties and concerns in commercial transactions. The commercial reality of the printed book market is simple: the book may be purchased from any source and ownership then rests with the purchaser. The owner of the printed book can then choose to lend that book to any number of persons, give away, resell or destroy the book. The emergence of ebooks has raised concerns for authors and publishers, who fear the loss of income and threats to revenue streams. Both want to ensure that lowerpriced digital versions of print books do not undermine or erode sales and royalties. The report Ebooks and public lending right in Canada (Whitney 2011) noted that authors report greater difficulties in negotiating royalty rates on ebooks than on print equivalents. Coupled with the fear of an overall decline in unit sales, a significant concern of authors is that in some instances royalties from ebook sales are lower than for print sales. The potential ubiquity and permanence of ebook availability lies at the centre of may publishers concerns. This concern is firmly rooted in the knowledge that, because a perfect copy of the ebook can be made anywhere, the incentive to buy more than one copy disappears. The result of these concerns in a nascent ebook market is that authors are seeking different approaches when negotiating digital rights contracts, and publishers and distributors have developed a mindboggling array of measures and controls to ensure that ebook transactions and use do not undermine their income.
Agreement on the terms and conditions of sale, loans and use of ebooks will not be resolved until a business model that serves the needs of all has evolved.
Many consumers are unsure of their rights when they purchase an ebook. This is because many of the rights associated with the printed book, such as resale or lending, are unavailable. For this and other reasons, consumers expect to pay a lower price if they cannot recover any of the investment made in an ebook through resale, as they would in the sale of a printed book. The commercial transactions are significantly more complex, unclear and even uncertain when the purchaser or licensee is a library. Many publishers have yet to develop a satisfactory business model for their dealings with libraries. Recently, HarperCollins in the United States announced a model that would see their ebooks made available to libraries for 26 loans only. Their concern was that selling ebooks to libraries in perpetuity would undermine the emerging ebook ecosystem, hurt the growing ebook channel, place additional pressure on bricks-and-mortar bookstores and lead to a decrease in book sales and royalties paid to authors.
41
The Australian library system is experiencing the complexities of the decisions relating to the sale and use of ebooks, especially for trade books. Ebooks can be acquired and licensed in a variety of ways. However, The US-based company OverDrive, the premier global supplier of ebooks, supplies Australian public libraries. According to the OverDrive model: > The library must be a current subscriber to OverDrive. This requires paying OverDrive a once-off setup fee and an annual hosting fee. The library then purchases individual titles for its collection. The librarys subscription allows it to lend the ebook to one customer at a time, for a fixed period of seven, 14 or 21 days. Items cannot be returned prior to their due date and cannot be loaned to the next customer until that period has lapsed. At present, there is no limit on the total number of times that an ebook can be loaned; however, this may change as publishers begin to stipulate terms to distributors. To maintain access to ebook files, the library service must maintain its subscription contract with OverDrive.
>
The PLR scheme was developed on a print-book model that is not immediately transferable to an ebook. Ebooks and public lending right in Canada suggests that, where annual payments are made to subscribe to ebooks, the rationale for compensating authors for lost royalties due to the ongoing presence of their books in libraries is no longer valid. However, many agreements are in place between libraries and distributors, publishers and distributors, and publishers and authors, all of which are based on different business models and do not easily replicate the model that was developed for print books. The Canadian review notes that changes in how content is created by authors, published and distributed by publishers and acquired and maintained by libraries may make the present approach untenable. However, a new business model for library ebooks, which addresses the legitimate concerns of all parties, has not yet emerged. The issue is also a cause for concern in Europe. In the United Kingdom the debate centres on how the library user accesses the downloadable content: from within the library or remotely from the librarys website. The Publishers Association in the United Kingdom is concerned about the geographical reach of library membership, because the web technically allows anyone, anywhere in the world to be a member of a given library, who could therefore download material. Agreement on the terms and conditions of sale, loans and use of ebooks will not be resolved until a business model that serves the needs of all has evolved.
>
>
The Australian-based company Bolinda is an alternative supplier of e-audio books to Australian public libraries and includes many Australian titles. The US-based company 3M is attempting to break into the library ebook supply market; however, the monopoly held by OverDrive is presenting challenges for competing firms. The agreement or agreements between the library and the distributor have flow-on effects on arrangements such as the Public Lending Rights (PLR) and Educational Lending Rights (ELR) schemes. The PLR and ELR schemes were intended to compensate authors and publishers for the potential loss of sales from their works being made available in public and educational libraries. A working scheme is in place in 29 countries, including Australia.
42
The industry broadly accepts that digital delivery presents problems for capturing copyright royalties. However, there is much debate about the most effective way to manage piracy of digital works. Some believe that regulation should be tightened to enable prosecution of those that illegally copy digital works; others feel that piracy and viral marketing are an opportunity for attaining profile and should be exploited. Still others believe that a systemsbased approach to monitoring use and capturing royalty payments should be employed. Within the educational sector, all agree that licensing arrangements must be revised to capture the use of digital objects. However, how the use of this material should be remunerated is the subject of considerable debate between government policy makers and the book publishing industry. Systems for managing territoriality are also central to the digital delivery debate. The global nature of the internet means that it is difficult to regulate online sales of ebooks. The relevance of regulatory frameworks, such as parallel importation restrictions (PIR), which currently do not cover digital works, is also being scrutinised by industry operators. Many consumers believe that digital information should be provided free of charge particularly when accessed from the internet. This attitude appears to be particularly prevalent among younger consumers and presents a significant threat for the future viability of the book industry. Educating consumers on the illegitimacy of this approach before it becomes further entrenched as an expectation is an important component of creating a sustainable balance between the needs of creators and users.
These rights make copying and selling of copyright material without the permission of the author or publisher an infringement under the Act except in some limited circumstances. The right to control who may use their work gives authors and publishers the ability to trade their intellectual property. In the case of books, publishers seek permission to use an authors creative work in exchange for payment. Authors may also allow their work to be published or reproduced in other forms, including ebooks. The electronic environment has created many problems relating to the access and use of copyright material and is considered a major threat to the incomes of authors and publishers. Participants in the workshops conducted by the Book Industry Strategy Group, as well as contributors to the public submissions, raise a number of concerns. These concerns reflected both sides of the copyright and access debate: on the one hand some felt that copyright was restricting access to use of material, while others felt that a tightening of the copyright rules was appropriate.
43
Table 5 presents a SWOT analysis of the book industry in Australia. This analysis has informed the transformation strategy outlined in section 5.
44
STRENGTHS
AUTHORS
> Creativity > Current copyright legislation > Number of well-known Australian authors domestically > Growing international recognition of the quality of Australian educational and general authors > Agent success in promoting Australian authors both domestically and internationally > Support from Australian-based publishers > Distribution inefficiencies > Absence of digital distribution infrastructure > No metadata standardisation > Lack of digital skills and strategy > Lack of international sales and marketing expertise > Lack of price responsiveness > Export opportunities > Infiltration of emerging international markets, particularly for educational materials > Diversification of delivery formats > Global supply barriers removed for digital formats > Development of a digital delivery system and its accompanying set of standards > Innovations in customisation of products, e.g. educational, interactivity > Rationalisation and improvement in distribution of print books > Print on demand > Environmentally sustainable product > Investment in ink-jet technologies, e.g., enables smaller print runs > Consolidation of printing firms to gain efficiencies > Growing uptake of digital devices with corresponding growth in sales of digital material > Consumer purchasing power > Opportunity to value-add and build/ increase customer loyalty > Investment/innovation to build online presence > Print on demand > National Broadband Network; ease and speed of transactions > Development of niche products
PUBLISHERS
> PIR conditions, which protect investment in Australian publishing > Vibrant independent publishing sector > Multinational parent company support for larger Australian entities > Strong skills in the craft of publishing > Trend in increased efficiency and profitability > Good publisher-specific data collected by the Australian Publishers Association
PRINTERS > > > > Geographic spread and small market size High capital costs High input costs, e.g. labour, paper Fluctuations in demand resulting underutilisation > Absence of book printing data > Lack of digital infrastructure > PIR conditions, which inhibit competitiveness of Australian booksellers > High overheads for bricks-and-mortar bookshops > Speed and availability to market > Poor industry-specific data > Lack of online book sales data for print and ebooks
Proximity to domestic market Speed of turnaround of material Flexibility in providing products Investment and innovation in new technologies
> Ebooks > Cheaper overseas printing > Multinational firms entering the Australian market > Generational change resulting in increased use of digital products > Lack of skills in digital technologies > Competitive advantage of overseas based online retailers, re access, price, taxation, availability, postage, exchange rate > Large multinational retailers > Discount department stores cannibalisation via ability to purchase at large discount then sell cheaper than bookshops
BOOKSELLERS
> Personalised customer base > Stronger presence of independent bookshops than other countries > Excellent data on sales of print books collected at point of sale > Capacity to create and maintain community connection
45
Part 2
TRANSfORmING ThE INDUSTRY
46
Opportunities
The changes taking place in global book markets bring both challenges and opportunities for the Australian book industry. The opportunities that require commitment from the industry as a whole are the ones likely to provide the greatest benefit for Australian books and the Australian economy. While digitisation presents options for Australian operators to work directly with overseas firms, the strengthening of our domestic supply chain provides the foundation for export expansion into established and emerging overseas markets. However, the capacity of the industry to take advantage of opportunities is largely dependent on the underpinning hard and soft infrastructure that supports new initiatives. Key examples include the urgent need for digital warehousing for online ordering and supply of ebooks and systems to facilitate consistency of metadata standards. Booksellers cannot optimise opportunities to promote and sell Australian works if the systems to connect them with publishers and consumers do not exist. Achieving outcomes that will strengthen the global position of Australian books requires innovation, investment and collaboration across the sector.
Competitive advantages
In assessing the Australian industrys competitive advantages, it is important to look across the supply chain and to recognise that what gives one sector an advantage may be seen as an impediment by another. The diverse nature of the supply chain makes it challenging to find the right balance between competing priorities. A good example of this is investment protection through parallel importation restrictions (PIRs). For many booksellers, the PIRs present a barrier to competitive commerce because they cannot source cheaper books from overseas suppliers. However, authors, publishers and printers view the PIRs as a safeguard for encouraging investment. When we examine the net benefit to the whole supply chain, we must consider both positions and find suitable compromises to enable the industry as a whole to flourish. Achieving effective collaboration across all sectors of the industry is paramount to the success of the Australian industry. While the digital environment provides an opportunity to reshape the traditional supply chain, all sectors will benefit from a combined approach to evolving the business environment to strengthen the appeal of Australian books to domestic and international consumers. By maximising advantages such as Australias relatively low publishing costs, good author reputation and strong independent book sector, the industry can establish a place in the global market. This list is by no means conclusive, and individual operators will identify innovative ways to triumph over competitors. The key is to ensure a focus on our strengths when assessing the viability of opportunities.
Actions
The BISG recommendations identify a suite of actions that will strengthen the Australian industrys position and its capacity to compete globally. Priority areas include improving efficiency of the supply chain, investing in industry infrastructure and skills development particularly in relation to the digital environment recognising and rewarding content creators and increasing the export market for Australian books. These actions, however, are not an end in themselves, but represent the beginning of a process that will see the traditional supply chain evolve into a more adaptable and resilient structure. A key challenge for the book industry is to implement strategies that improve efficiency and facilitate collaboration across the supply chain, without hindering the capacity of individual sectors to take advantage of opportunities presented by the digital environment. The BISG report looked specifically at how industry and government can work together to address the emerging digital environment for books. However, beyond the BISG recommendations for government, the industry can do much to innovate and improve its competitiveness and global profile. The pace of change is accelerating, and if the Australian industry is to thrive in a global market, this must be an ongoing process.
47
Achieving effective collaboration across all sectors of the industry is paramount to the success of the Australian industry.
Industry outcomes
Over the past four decades, Australia has established a thriving and independent book industry. However, as new technologies change the operating environment for book production and sales, the ability of Australian companies to remain competitive is increasingly under challenge. Industry and government must commit to the development and implementation of a strategic approach to industry development to achieve reforms. Realising the full potential of the industry will require commitment to change. Among other adjustments, this will mean the development and adoption of new business models that complement, rather than resist, new modes of supply and production, including those that engage with consumers and recognise their ability to influence supply. To be globally competitive, the commercial environment must empower Australian firms to meet the increasing demands from consumers related to efficiency, availability, quality and price. However, to be sustainable, consumer needs must be balanced by industry profitability and incentives for content creators. The outcomes being sought through the BISG process are about creating a balanced environment that encourages creativity, attracts investment, and improves business conditions for all parts of the book supply chain.
The future
Like many creative industries, the book industry has long relied on the commitment of its participants, despite the low remuneration and return on investment that have traditionally been part of the sectors operations. The new global environment created through online commerce is irrevocably altering what it means to be viable in this industry. Those who thrive in this new world will do so through improved efficiency and innovation. This environment will favour big corporations that can achieve economies of scale. But it is also an environment that will provide opportunity for the development of niche markets and personalised customer service and product. What this will mean for Australian books is yet to be fully determined, but the BISG process has provided an opportunity for the industry to influence its own outcomes and to create a future that is both prosperous and sustainable in the long term.
48
The Australian Bureau of Statistics annual collection of data, implemented in 2012, will reveal that Australian authors in 2020 earned an annual income double that of the previously reported figure of $15,000 a year. The copyright regulatory framework will recognise and value originality and reward creativity. The Australian ethos of a fair go will extend to the knowledge economy, and the public will recognise that the creators and distributors of content are entitled to a reasonable financial reward for their endeavours. The intellectual property of Australian authors will be recognised through an equitable royalty system that captures and values both print and ebook sales. Australian authors will be promoted nationally and internationally with support from the Australian Government. The international promotion of Australian writers will have proven to be a cost-effective form of soft diplomacy, enhancing Australias image abroad and promoting Australias talents. Australian authors and books will have a particular resonance with Australian readers. Meeting readers cultural appetite will be a priority for the local book industry. The promotion of Australian writing to Australian consumers will deliver income to Australian writers and employment to Australian printers, publishers and retailers. The book industry-wide campaign for consumers to buy Australian books, funded under the rebranded Books Alive program, now known as Get Reading!, will have been successful. The consumers commitment to the Australian book will have been matched by excellent service from publishers and retailers who have recognised their mutual interdependence. The need for the whole industry to be profitable will have ensured that each sector is firmly focused on speed of delivery, understanding the market, and competitive pricing.
49
INDUSTRY OUTCOmES
vISION
English-language product
+
INVESTMENT Renewal of capital assets to maximise capacity
Develop industry skills > Accreditation systems > Tailored training packages
Skilled workforce
To ensure that the Australian book industry is innovative, prosperous and sustainable for the long term, develops Australian creators and creative works and encourages investment in new technologies.
Strong independent book sector EFFICIENCY Efficient royalty collection system Streamlining production processes to increase productivity Develop new markets International promotion of Australian works
Industry adaptability
50
6 Recommendations
The BISG recommendations respond to the terms of reference set by the Minister and seek to provide reforms that strengthen the Australian book industry in a global digital marketplace. The recommendations are divided into six broad themes: > > > > > > integrating the book supply chain competing effectively in the global book market improving supply chain efficiencies rewarding and protecting creativity supporting the business environment supporting Australian culture.
51
This report provides the context for understanding the issues facing an industry in transition. It proposes a suite of recommendations, some of which address the needs of individual subsectors and others which target wholeof-industry reforms. The industry needs a collaborative forum which is empowered to communicate directly with government and mandated to implement industry wide reforms. It is essential that this body becomes a permanent forum with the longevity and authority to act on behalf of the entire book industry, while recognising and supporting the role of specific sector organisations such the Australian Society of Authors, the Australian Literary Agents Association, the Australian Publishers Association, the Small Press Underground Network, the Australian Booksellers Association and the Printing Industries Association of Australia. The establishment of a body with representation from all sectors within the Australian book value chain the Book Industry Collaborative Council will provide such a forum. While not limited to implementation of reforms identified in the BISG recommendations, the council must be guided by a clear priority agenda that links to the recommendations in this report.
PART 2: 6 RECOMMENDATIONS
52
This agenda should include: 1 efficiency reforms for the book distribution network within Australia, including industry standards (as a matter of immediate urgency) maximising export opportunities for Australian book producers coordination of industry skills development strategies and implementation development of funding models which support Australian literature facilitation of research initiatives a body for centralising book industry consultation with government and other bodies.
RECOmmENDATION 1
2 3 4 5 6
That the Australian Government establish a Book Industry Collaborative Council with membership from all parts of the book value chain, which is tasked with implementing the industry reform priorities identified by the Book Industry Strategy Group and other issues as they emerge.
53
Table 6: GST and VAT on books in the OECD (selected countries) Country Australia Austria Belgium Canadaa Denmark France Germany Greece Ireland Italy Japan Netherlands New Zealand United Kingdom Rule Normal rate Reduced rate Reduced rate Normal rate Normal rate Reduced rate Reduced rate Reduced rate Zero rate Reduced rate Normal rate Reduced rate Normal rate Zero rate Rate on books (%) 10 10 6 5 (plus PST) 25 5.5 or 19.6b 7 6.5 0 4 or 20d 5 6 15 0 Standard rate (%) 10 20 21 5 (plus PST) 25 19.6 19 23 21 20 5 19 15c 20
PART 2: 6 RECOMMENDATIONS
a In Canada the total harmonised sales tax (HST) is the sum of the national GST of 5 per cent (normal rate) plus provincial sales tax (PST which varies between 0 and 10 per cent). There is a point of sales rebate for books of the PST portion in Ontario, British Columbia, Nova Scotia, New Brunswick, and Newfoundland and Labrador. b The higher rate is for books that have a pornographic character or which may incite violence. c Source: New Zealand Inland Revenue Department website. d The data provided two rates for books. The circumstance in which each rate applies is not made clear in the data. Sources: OECD 2010 and European Commission 2011.
54
subsidised postage) or downloaded as an ebook. More sensitive bookbuyers gain information directly from the web without hurting the feelings of booksellers. Technologically advanced customers, whether sensitive or not, may use freely available software such as RedLaser and Booko to scan the ISBN of the book into their iPhone or Android and check price and availability from online suppliers (domestic or international) and often find suppliers with a more competitive price than the stockholding store offering a range of titles. Some commodities shoes, designer clothes, jewellery are being bought online, but they attract VAT or its equivalent in Europe at point of sale. In no product area is the gap so wide 30 per cent (20 + 10) as in the case of books imported from the United Kingdom. Implausible as it sounds, ordering an Australian book from the United Kingdom, online, can be cheaper than buying it from a local bookshop. A striking example is The Cooks Companion (Viking/Penguin) by Stephanie Alexander: the hardcover edition sells in Australian bookshops for $130.00. The Book Depository in the United Kingdom offers it, airmail postage included, for $92.83. If Australia imposed 10 per cent GST on books ordered online from overseas,
then the price to an Australian purchaser would be about $101.25 still a substantial margin against the local bookseller. The issue of whether books should be exempt from GST was hotly debated in Australia at the time of the announcement of the tax reform package in August 1998. The government of the day resisted claims for the exemption of books from GST but, in return, developed a compensation package in the form of a book industry assistance plan to help the industry adjust to the new tax environment. The plan primarily focused on compensation for the increase in the cost of books used specifically for educational purposes, but also provided some direct support to the book industry. It committed $240 million over four years, beginning in in 200001 ($60 million per annum), and included: > > an educational textbook subsidy totalling $117 million to be paid to retail sellers $48 million to enhance the Printing Industry Competitiveness Scheme
Table 7: Thresholds in other countries Country Switzerland Canada United Kingdom Chile Netherlands
FINAL REPORT TO GOVERNMENT
Threshold (A$) 0 19 28 (VAT) 208 (duty) 28.04 30 (VAT) 201 (duty) 47 115 130
Threshold All postal items from foreign countries to Switzerland are generally subject to duty and VAT. Importer does not have to pay duties and taxes if a parcel is worth Can$20 (A$19) or less except for alcohol, tobacco, and, in some circumstances, books, or magazines. Consignments valued at 18 (A$28) or less are free from import VAT (but not excise duty). Duty is payable if the value of the goods is over 135 (A$208), although the duty is waived if the amount of duty is less than 9 (A$14). US$30. No duty or turnover tax on shipments valued at up to 22 (A$30). No duty on shipments valued at up to 150 (A$201). US$50. 10,000. Exempt if the total value of the goods including purchase price plus freight and insurance is less that W150,000 and Customs recognises that the goods are for personal use. US$150. US$200. S$400 based on the value of the goods. GST and duties not collected if the taxes would be less than NZ$60 (A$44) approximately NZ$400 in terms of the value of the goods. A$1,000. No entry threshold limit at all imports of any value come in duty and tax free.
Indonesia Japan Republic of Korea Malaysia United States Singapore New Zealand Australia Hong Kong
a Exchange rates as at 31 May 2011. The thresholds quoted often exclude goods such as tobacco and alcohol. Source: Productivity Commission 2011: 160.
55
>
$38 million for a scheme to provide further support to Australian authors the Educational Lending Rights scheme $1.2 million to enable the Australian Bureau of Statistics to collect data annually on book publishing and retail sales $8 million for a marketing campaign to promote books, reading and literacy $28 million in grants to all primary schools to upgrade their holdings of Australian books.
RECOmmENDATION 2
>
> >
However, it is important to note that since the original compensation package was introduced in 2000, the global marketplace has dramatically changed and is continuing to affect the local book industry. The un-competitiveness of the current book retailing environment has a serious impact on price. The high price of books in Australia is an elephant in the room, compounded by the VAT/GST factor, subsidised postage on books from overseas, small production runs and the high Australian dollar. The Book Industry Strategy Group is also aware that the Productivity Commission is currently undertaking a review of the economic structure and performance of the Australian retail industry with specific focus on the sustainability and appropriateness of the current indirect tax arrangements. As shown in Table 7, the importation threshold varies between countries. While the book industry would prefer that books were GST or VAT free as they are in many OECD countries, the Book Industry Strategy Group notes that the GST is off the agenda for the upcoming tax forum. The book industry therefore urges the Government to move quickly to implement the draft recommendation from the Productivity Commissions inquiry into the economic structure and performance of the Australian retail industry that there are strong in-principle grounds for the low value threshold (LVT) exemption for GST and duty on imported goods to be lowered significantly, to promote tax neutrality with domestic sales (Productivity Commission 2011). Noting the Productivity Commissions caveat that the Government should not proceed to lower the LVT until it is cost-effective to do so that is, at a minimum, the tax revenue should exceed the full costs of collecting it, until such time as that occurs, the Book Industry Strategy Group believes that the book industry should be compensated for this obvious inequity in tax treatment, which is having such an adverse impact on local book retailers.
The Book Industry Strategy Group urges the Government to recognise the competitive disadvantage being imposed on the Australian book industry as a result of GST inequity. In recognition of the broad range of considerations for government on this issue, the Book Industry Strategy Group offers three alternative recommendations: a That the Government take appropriate action to abolish the 10 per cent GST on books purchased in Australia, noting that in the United Kingdom and Ireland, and in most OECD member countries, books are either exempt from vAT or taxed at a reduced rate or b That the Government provide greater equity in competition for Australian retailers by applying the 10 per cent GST on books sold by overseas retailers to Australian consumers or c That the Government recognise the disadvantage placed upon Australian booksellers as a result of GST inequity when competing with international online retailers and support the Book Industry Strategy Groups suite of recommendations.
PART 2: 6 RECOMMENDATIONS
56
RECOmmENDATION 3
That the Government initiate negotiations with the Universal Postal Union to secure amendment of the appropriate postal treaties to provide more equitable and competitive pricing for print post delivery, where Australia is currently severely disadvantaged.
57
PART 2: 6 RECOMMENDATIONS
58
efficiency across the book supply chain and contribute to a sustainable Australian industry in the long term. In facilitating an industry agreement, such as a voluntary code of practice, outside of the legislative protection of the Copyright Act, it is vital that endorsement from the relevant industry associations is secured and that the conditions of agreement are clearly stipulated in all documentation. Gaining whole-of-industry agreement on the PIR conditions represents a significant milestone in creating an environment that will enable individual sectors to thrive and, as a result, strengthen the viability of the Australian book supply chain.
RECOmmENDATION 4
That the Australian book industry (authors, printers, publishers and booksellers) formalise an agreed, industry-wide code of practice that will reduce the timeframe for retention of territorial copyright from 30/90 days to 14/14 days without the need to amend existing legislation. To support this, TitlePage will provide information to booksellers on the PIR status of individual titles. The code will be reviewed at the end of 12 months and subsequently at determined intervals to assess its effectiveness.
59
No. of grants 26
25 $1,076,798
16 10
$966,055 $317,870
15 15
21 $1,035,476 13 $636,952
22 12
$944,966 $448,784
28 12
$683,802 $343,889
$454,088
$160,978
$257,051
$322,738
$312,841
60
The Book Industry Strategy Group is aware that the Australian Government, through Austrade, supports Australian exporters, individuals, companies or groups to develop export markets by providing financial assistance through the Export Market Development Grant (EMDG) scheme. The book industry has received support over the last few years (see Table 8). The EMDG scheme only provides support for promotional activities and, in many instances, the threshold for support is beyond the capacity of smaller players in the market. Austrade acknowledges that restrictions on eligibility (that is, only the principal owner, not an agent, is eligible) prevents literary agents from applying for support on behalf of their clients. To counter difficulties posed by size, one suggested pathway is to undertake an industry-wide promotional campaign through the auspices of an approved body (for example, an industry association). This approach has worked well for a number of other industries. In addition to the EMDG scheme, there are other programs within Austrade that may be accessed to provide export support to the Australian book industry. These include: > Getting into Export program: This is designed to help small and medium enterprises that are new to exporting or have limited experience in exporting. Exporting online: This program provides online information and collaboration tools dedicated to help Australian exporters better understand and utilise the internet to support and develop their export endeavours. Exporting for the Future: This provides teaching and learning resources for those who wish to enter export markets. Brand Australia: This is a four-year program to sell Australia to the world by broadening perceptions of Australia in the international marketplace. Creative Australia: Literature is one of the creative industries targeted under this 2009 initiative to promote the diversity of Australias industries.
The Book Industry Strategy Group believes that, in order to increase the participation of the book industry in the EMDG scheme and other export support programs, there is a need to improve the book industrys knowledge and understanding of all aspects of these programs, including the EMDG scheme. This will require the book industry to work closely with Austrade. Austrade assumed responsibility for international marketing and promotion of Australian education and training on 1 July 2010. A framework for international marketing and promotion of Australian education and training has been developed by Austrade. The framework identifies three strategic objectives and five key priorities that guide Austrades work in international marketing and promotion of Australian education and training. (A copy of the framework is available on the Austrade website.) While this framework focuses primarily on promoting educational institutions, there is merit in the book industry working with Austrade to expand this strategy to include the promotion of educational materials. Most Australian businesses that are exporting or investing internationally know that it takes more than a competitive product or service and a keen buyer to succeed overseas. Turning business prospects into sales or investments often depends on securing finance. The Export Finance and Insurance Corporation (EFIC) can assist exporters in overcoming the financial barriers associated with exporting. EFICs finance solutions for individual export transactions and broader export activities can help to free up a companys working capital and to finance production. As such, any export marketing strategy also needs to ensure the book industry is aware of EFICs range of products.
>
>
>
RECOmmENDATION 5
>
FINAL REPORT TO GOVERNMENT
That the proposed Book Industry Collaborative Council work with Austrade to improve the support provided to the book industry to enter export markets. This may include working with Austrade to develop a long-term book industry export strategy to promote Australian books, including educational material, to the world, especially the AsiaPacific region.
61
2 STOCK hOLDINGS
The Australian book industry, particularly publishing, incurs considerable costs because of an inefficient distribution system. These costs not only affect the bottom line but also the price that consumers must pay for books. The range of costs includes: > managing distribution centres is a substantial supply chain cost and adds to the un-competitiveness of Australian retailers holding inventory processing returns pulping stock.
1 SPEED TO mARKET
In order to be competitive, the Australian book industry must be able to deliver to consumers the title they want in a timely manner international competitors are not only able to provide a greater range of titles, they are also able to deliver them to Australian customers much quicker and often at a cheaper price than Australian suppliers can. A list of issues concerning speed to market follows: > Titles need to be available. Less than 90 per cent of books ordered by booksellers orders are available to be delivered to store. Retailers need to be able to order titles efficiently. The upgrade of TitlePage, which enables online ordering of a range of formats and sources, needs to progress urgently. Warehouse dispatch needs to be faster. It is suggested that the book industry needs to set a target of 48 hours turnaround from order to shop. > > >
PART 2: 6 RECOMMENDATIONS
>
>
62
The Book Industry Strategy Group notes that the industry will, under the auspices of the proposed Book Industry Collaborative Council, undertake as a matter of priority the process of rationalising and improving current distribution systems, setting new targets in agreement with booksellers and seeking to create an environment that will sustain a competitive industry in to the future.
RECOMMENDATION 6
>
That the book industry establish a goal of 48 hours turnaround for fulfilling Australian reseller orders. In seeking to achieve this, the Government should support the proposed Book Industry Collaborative Council in its task of improving the efficiency of the book distribution network through rationalisation, standardisation and consolidation, as its key priority over its first three years.
63
>
64
>
integration with print on demand services to facilitate supply to booksellers and their customers of singlebook delivery for low-demand books, backlisted books not currently in stock, and fulfilment of small-volume orders from booksellers of books temporarily not in stock in warehouses pending print runs integration of the distribution warehouses for orders placed into the system integration of ebook warehousing, order processing and supply to consumers via booksellers through counter sales and their online stores.
purchases. Such development is a national imperative to secure a strategic industry. Stage two of the TitlePage enhancement will enable the Australian book industry to build the right infrastructure to meet its future needs. Establishing this infrastructure as a collaborative project will benefit all parts of the industry, from Australian authors, publishers and printers to booksellers and librarians. As a result, the Australian book industry will be better placed to be globally and domestically competitive and provide Australian consumers and institutions with faster access to the widest possible range of books in print or digital form. Development of TitlePage stage two will be overseen by a steering committee in which the proposed Book Industry Collaborative Council will have an active role to ensure that the interests of all book industry sectors are appropriately considered and incorporated. It is important to note that Titlepage will be non-exclusive, with its aim being to provide access to the market to a wide variety of suppliers of books, including ebooks, resellers and service providers.
> >
RECOmmENDATION 7
That the Government provide funding of $5 million for the development of the stage two TitlePage enhancement to develop the digital infrastructure required for an efficient, costcompetitive and secure online service to consumers that is comparable in promotion, range and functionality to that of the main offshore retailers.
These facilities will empower Australian independent booksellers to compete effectively and maintain a crucial link to consumers wishing to access Australian books. However, the stage two initiative provides benefits to the whole industry that are not able to be captured by a private sector investor and therefore require government support. By providing this support, the Government would ensure that the Australian industry can compete with the well-resourced and -funded international competitors that are rapidly capturing Australian consumer book
65
PART 2: 6 RECOMMENDATIONS
66
In its first two years the network will consist of a $12 million publication subsidies scheme and a $4 million infrastructure development program. The subsidies will seed a born-digital content bank of more than 450 scholarly monographs, which will grow by more than 200 new titles every year thereafter. This represents a necessary and robust increase in the volume of scholarly monographs being published. The infrastructure will reduce the cost per publisher for producing, marketing and distributing book content in print and electronic formats, and will form a comprehensive suite of tools for any publisher producing scholarly and specialised content targeted at small but global audiences. Simulating many aspects of journal content aggregation and distribution models, the proposed will serve as a portal where scholars can publish, promote and buy monographs. Once established, this infrastructure will be self sustaining and managed as a not-for-profit enterprise. It will specifically enable scholarly and specialist publishers to compete online with the stronger international players in the international library market, rather than in the general trade market, which other BISG proposals are addressing. Collaboration with complementary initiatives, where viable, will be a key principle of development. For example, the new networks titles will be listed on TitlePage to ensure that booksellers have accurate information and immediate access.
RECOmmENDATION 8
That the Government provide financial support to establish a National University Press Network of $10 million over a two-year period, matched by $6 million from the university sector, for three related projects: a a publication subsidies scheme $6 million over a two-year period; 97 per cent of these funds will be used to subsidise scholarly publications in the humanities and social sciences b marketing and distribution infrastructure $2 million over a two-year period c production infrastructure $2 million over a two-year period.
67
Adjusting for inflation, between 199596 and 200607 Australias copyright sector grew at an average of 4.7 per cent a year, with core copyright industries (those that exist only because of copyright) growing at 5.1 per cent a year compared to an annual rate of 3.6 per cent for the economy overall. Spurred by digitisation, copyright industry employees have significantly increased their productivity and earnings. Between 199596 and 200607, the value generated in Australias copyright industries increased in real terms from $85,512 to $116,742 per employee. Over the same period, real average wages in these industries increased from $51,572 to $61,355.
PART 2: 6 RECOMMENDATIONS
68
The Australian Copyright Council notes that, just as digital technology has provided increased opportunities to access copyright works, it has also generated the expectation that if a work can be made available, then it should be made available. In turn, this expectation has placed pressure on governments to expand the provisions of copyright law that grant special concessions, or exceptions, for certain users of copyright materials to accommodate the new possibilities offered by digitisation. There is broad acceptance in the industry that digital delivery presents problems for capturing copyright royalties. However, there is much debate about the most effective way to manage piracy of digital works. Some believe that regulation should be tightened to enable prosecution of those that illegally copy digital works; others feel that piracy and viral marketing are an opportunity for attaining profile that should be exploited. Still others believe that a systems-based approach to monitoring use and capturing royalty payments should be employed. Within the educational sector, all agree that licensing arrangements must be revised to capture the use of digital objects. However, how use of this material should be paid for is the subject of considerable debate among government policy makers and within the book publishing industry. The Australian Content Industries Group has expressed concerns about the impact of online copyright theft and notes that governments in a number of countries, such as Chile, Finland, France, the Republic of Korea, Malaysia, New Zealand, Taiwan, and the United Kingdom, have adopted or are in the process of implementing a range of graduated response measures to encourage consumers to access legitimate content and to grow the digital economy. The Book Industry Strategy Group is aware that Australian governments have made an effort to ensure that copyright law keeps up with technological change. For example, the Copyright Amendment (Digital Agenda) Act 2000 implemented major reforms to the Act in order to update Australias copyright regime to take into account the rapid development of new technologies. The amendments were to ensure that copyright law continues to promote creative endeavour while at the same time allowing reasonable access to copyright material through new communications technologies.
Further amendments, such as the Copyright Amendment Act 2006, introduced reforms to strengthen owners rights and provide more certainty for users in the digital environment. On 1 January 2007, a range of copyright enforcement measures commenced as a result of this Act, including the creation of a tiered system of criminal copyright offences incorporating indictable, summary and strict liability offences. More recently, on 25 February 2011, the Attorney-General for Australia, the Hon Robert McClelland MP, restated the Governments support for copyright and its role in providing an economic incentive for the creation of new works. He noted that governments around the world are facing challenges in adapting copyright systems to the realities of the digital economy and further, that governments are being asked to find national solutions to a global problem. The Book Industry Strategy Group supports the Ministers view that it is time to revisit the digital agenda amendments to the Copyright Act in order to assess if the policy settings remain right. The announcement of the Ministers intention to provide a reference to the Australian Law Reform Commission on copyright is welcomed by the book industry.
RECOmmENDATION 9
That, as copyright is fundamental to the viability of the book industry: a issues relating to digital books form part of the Australian Law Reform Commissions upcoming review of digital copyright b the Australian Law Reform Commission consult directly with the book industry through its author and publishing associations.
69
The PLR and ELR schemes are intended to compensate authors and publishers for the potential loss of sales from their works being available in public libraries. In their report to the Book Industry Strategy Group, PricewaterhouseCoopers estimates that lending rights comprise about 11 per cent of the total income received by authors which amounted to $19 million in 2010 paid directly to authors. The lending rights schemes are highly valued by authors. However, while the application of PLR and ELR to print books is well understood, there is a considerable degree of uncertainty surrounding the application of ELR and PLR to digital works. Authors and publishers are concerned about the potential provided by ebooks for the exploitation of works without an appropriate level of compensation for authors and publishers. While there are 29 countries that currently have a working lending rights scheme in place, they have all been cautious about extending the scheme to ebooks. The United Kingdom is the only country that indicated its intention to include ebooks in its scheme but subsequently decided against doing so. PLR has not been extended to ebooks in Europe for a variety of reasons and a recent review undertaken for the Canadian PLR scheme to access the viability of the inclusion of ebooks found that it would not be feasible to extend the program at the present time. The Canadians have decided to continue to monitor the situation, as the current publishing and library environments are in flux (if not upheaval) and this is likely to continue to be the case for an extended period.
RECOmmENDATION 10
That: a Australian publishers work to clarify the business model for the use of ebooks in libraries
PART 2: 6 RECOMMENDATIONS
b following that, the Government establish a framework and guidelines for how ebooks may become a part of the ELR/PLR schemes.
70
RECOmmENDATION 11
That the Government actively monitor the implementation of the statutory licence for education to ensure that it meets its dual objectives of enabling instant use of material for educational purposes while ensuring the ongoing development of materials used in education.
71
The Book Industry Strategy Group supports the development of the proposed industry code of practice as one approach to addressing the issue. However, the Book Industry Strategy Group also notes that the development of the proposed industry code of practice to ensure that reasonable steps are taken to prevent infringement of copyright is at a difficult stage of negotiations. The Commonwealth Attorney-Generals Department has been working, over a period of years, with the relevant parties to develop the code of practice; negotiations are currently in abeyance following the instigation of legal proceedings by the Australian film industry. The responsibility of internet service providers to monitor use and abuse of copyright is currently before the High Court and has been a matter of ongoing discussion both in Australia and overseas. While the decision will resolve the application of the law to the facts in the case, it is widely acknowledged that it will not resolve all issues in this area. Internet service providers should provide an opportunity for copyright owners to be identified and appropriately remunerated for any use of their copyright.
whether the service provider took any reasonable steps to prevent the infringement this may include compliance with an industry code of practice.
72
The Book Industry Strategy Group understands that there have been recent discussions between representatives of content owners, including publishers and authors, and internet service providers, with a view to adoption of an agreed industry code. The Book Industry Strategy Group supports the development of the industry code of practice and is keen to see progress in this area as one step towards addressing the issue of piracy.
RECOMMENDATION 12
That the Government: a work, through the Attorney-Generals Department, with the content and internet industries to ensure adoption of a binding industry code on copyright infringement by internet service providers and their customers in accordance with the legislative framework in order to combat and defeat piracy b consider facilitating discussions between copyright owners and internet service providers over remuneration for copyrights accessed through the internet service providers.
73
RECOmmENDATION 13
That the proposed Book Industry Collaborative Council develop a comprehensive skills strategy, which addresses training needs for all parts of the book supply chain as a matter of priority and that it then works with peak industry associations, employers and unions to progress implementation and ensure alignment with relevant industry training packages.
PART 2: 6 RECOMMENDATIONS
74
RECOmmENDATION 14
That the Government and the book industry share the cost of reinstating collection of book industry statistics by the Australian Bureau of Statistics and that survey collection commence in the 201213 financial year.
75
SmALL PUBLIShERS
Most innovation in book publishing begins with the small enterprise, usually one or two or three individuals with a passion for a niche. This is a historical pattern in print book publishing, as seen in the initiation and development of individual imprints. As imprints grow, they become of interest to larger publishing organisations who often buy and then take them into their own, better capitalised environment and thus allow them access to larger markets. There is every reason to see the pattern repeated in electronic publishing. In the digital environment, many small publishing outfits and individuals lack the capacity to undertake capital investment in infrastructure that wont yield immediate results. They need access to funds to advance their operations in a new area where traditional business funding is unknown or uncertain. Meanwhile, bodies awarding grants for cultural reasons are typically insensitive to initiatives that are commercially innovative. This means that there is no pool of funds available for development in these areas. Small presses, including those wishing to serve niche markets, are thus under particular pressure. Small business grants provided by government would help to finance innovative projects of long-term benefit and would enable such entities to take advantage of digital delivery methods. Grants of up to $15,000 that help to finance innovative projects of long-term benefit (such as website and ecommerce development, for example) could be offered to enable such entities to begin delivering products and services. An appropriate industry association, such as the Small Press Underground Network Community, could administer the grants. Such an organisation could be responsible for processing both applications and acquittals of grants.
PART 2: 6 RECOMMENDATIONS
AUThORS
As there is no regular or regulated income of the kind associated with more formal employment, authors are and remain, in essence, piece workers. They are most commonly paid for the specific bit or book they produce by publishers for books, by media companies for casual or freelance journalism, and so on. To the traditional vagaries are now added uncertainties generated by seismic shifts in publishing and bookselling. The trend towards more and more, cheaper-than-print, ebooks immediately reduces earning potential for authors. Current business models have long performed well in satisfying authors publishing and bookselling needs. Constrained forward income from print books in a burgeoning digital environment, and in some cases unsatisfactory remuneration for ebooks published by print publishers, however, will have the potential to compromise authors productivity and financial health. Authors who otherwise have a history of productive writing will, in the circumstances, be less inclined to make the investment in time and personal resources needed to create work. Authors are beginning to adapt to these changes, and a distinct new, digital-oriented business model has begun to emerge: the author as self-publisher. Authors need to be encouraged to take advantage of new and evolving digital technologies to create potentially valuable self-publishing activity, including the possibility of upscaling to as small business entities where feasible. New author self-publishing enterprises could be productively supported through: a a specialist business advisory service or services dedicated to digital book self-publishing. This could be funded and managed through the Australian Society of Authors through its professional digital development program
76
The benefits for government are multiple: > > > These grants would fill a direct need that is not currently subject to other forms of grant money. These grants would be awarded purely on criteria related to innovation and commercial development. Each pool of funds could produce up to 70 separate business initiatives, meaning that there would be a large amount of material delivered for a relatively low government spend.
BOOKSELLERS
Equally, many small and independent booksellers continue to struggle with developing an effective use of ecommerce. Successful independent, small- to mediumsized bookshops generally have loyal customer bases, built up through hand-selling and the specialist knowledge and service offered to customers. However, small- to medium-sized bookshops do not have the financial or technical ability to develop their own ecommerce facilities and therefore, in the digital environment, lack the ability to provide ebooks to customers. There are a number of solutions that would provide booksellers with ecommerce capacity, with cost estimates being between $9,000 and $12,000 per business.
One of the key concerns is that many of these businesses lack the technical expertise to maintain ecommerce websites once they are established. Training in ecommerce and emarketing is essential to ensuring that the highquality customised service traditionally provided by the independent bookselling sector is extended into the digital realm. Most independent booksellers are small businesses, often operating with minimal staff and limited opportunity to invest in training. While it is vital that skills development in ecommerce be a key component of the whole-of-industry skills strategy proposed within these BISG recommendations, support in the form of training grants is needed to enable small independent bookselling businesses to take advantage of skills development opportunities.
RECOmmENDATION 15
That the Government, through new or existing grants programs, support the introduction of (a) business development programs for new and proposed digital enterprises, including for authors, publishers and booksellers, and (b) training grants to enable small business to invest in digital skills upgrading for staff.
77
78
COmmITmENT BY INDUSTRY
1 The industry supports consolidation of major book printing participants and will not oppose such activity leading to the survival of at least one large-scale trade book printing operation in Australia. The Australian publishing sector will continue to support a price-competitive local print industry as their major source of mono read for pleasure books. The industry will actively promote the environmental advantages of the print book and the employment and service advantages of printing a book in Australia. Major Australian book printers will commit to the large capital investments in new technology (including inkjet-based production) required to service the quick turnaround, short-run production service now required by the market while retaining the conventional capacity to print longer-run titles. Book printers will retrain and upskill their workforces to ensure best use is made of new technology investments and minimise job losses wherever possible.
RECOmmENDATION 16
That the Government recognise the significant structural shift occurring within the Australian book printing sector and provide a structural adjustment program to facilitate the transition of the sector into the future. As part of the structural adjustment process the Government should: a allow necessary industry consolidation for large-scale book printers b introduce a support package for displaced employees and regional communities impacted by labour reductions inherent in new digital production technologies and industry consolidation c where appropriate, adjust the eligibility criteria of relevant existing industry support programs to improve access for the book printing sector d make the printing of a book in Australia a condition of receiving government assistance for developing and publishing a book e assist the industry to promote the environmental and employment advantages of buying a book printed in Australia f provide financial support for printers encouraging technology reinvestment and facilitating business transformation in response to a digital future incorporating print on demand and short-run printing.
79
PART 2: 6 RECOMMENDATIONS
80
Funding within each school has been directed away from teaching and learning classroom resources and used to fund a rise in photocopying, the purchase of interactive whiteboards, ICT infrastructure, furniture and fittings for new classrooms built under the federal School Buildings initiative, and rising broadband costs. Without an injection of specifically targeted funds from the Australian Government, schools and parents are unlikely to commit already scarce resources to purchasing digital material to meet the program requirements set by the new national curriculum. By reallocating a portion of current funding from computer infrastructure to educational content creation, the Government can ensure that its investment is achieving the goals of the new national curriculum. The introduction of a market mechanism, such as the Electronic Learning Credits voucher system used in the United Kingdom, will enable individual schools to test and buy digital educational content that best suits their specific needs. Such a system is able to effectively target government spending directly to the purchase of educational materials, as it is not transferable to other school purchasing needs. The Australian educational publishing industry has developed, and continues to add to, a vast bank of both digital and print teaching and learning materials. Under a voucher system, educational publishers will compete in an open market and all suppliers will need to demonstrate the value of their digital and print content offerings. A voucher system approach is an efficient, measurable and controllable platform for ensuring educational value, support and learning outcomes for students.
Funding of $30 million over three years has been reallocated from the existing Digital Education Revolution program to enable schools to purchase quality digital teaching and learning resources that correlate exactly to the ICT requirements of the national curriculum as it is rolled out. This represents around $2,000 per primary and $5,000 per secondary school, which can enable purchasing of relevant digital content that can then be leveraged for use by students for a number of years.
RECOmmENDATION 17
That the Government reallocate $30 million over three years from the existing Digital Education Revolution funding for the purchase of digital teaching and learning resources administered through a market-based mechanism that directs government spending to the purchase of digital learning materials.
81
82
If there are no incentives for academics to author or contribute to teaching resources, over time there will be fewer and fewer products available for academics to base their teaching programs on. Students will lose the continuity of the Australian context in areas where this is vitally important for regulatory, legislative or policy content. Students who are enrolled in disciplines such as law, accounting and politics will suffer, and academics will be forced to waste time (which they could be productively spending on research) scrambling notes together from a wide variety of sources to give students access to the right materials to pass their courses. There are both teaching quality and research productivity issues. The Australian Government has clearly recognised the importance of improving and promoting quality teaching standards and learning outcomes in higher education. As part of the Bradley Reviews recommendations on wider student participation, engagement and completion, the Government has committed $50 million over the next four years to the Promotion of Excellence in Learning and Teaching in Higher Education program. ERA plays a vital role in driving the research quality agenda, which is in turn a key factor that underpins quality in teaching and learning. However, some concerns have been expressed that ERA may act as a disincentive for the creation of high-quality teaching and learning materials. To ensure greater balance with the research quality assessment processes of ERA, it is proposed that a framework be established within the remit of the Promotion of Excellence in Learning and Teaching in Higher Education program that is not limited to recognising excellence in individual teaching awards, but encompasses a broader pedagogic contribution to teaching practices and methods, and to learning outcomes in a discipline area. The introduction of a grants system that is devoted to improving learning outcomes will stimulate competition between institutions, raise the profile and incentives for the development of quality teaching and learning materials and provide sustainable outcomes for the production of educational content for the higher education sector. The criteria for grants should include print publications and textbooks, digital applications and innovative learning solutions.
Many of the most successful Australian textbook authors are already the recipients of excellence in teaching awards (it is often their exceptional teaching skills, which they are able to translate beyond the face-to-face experience through print or another format, that makes them great educational authors). Getting an award provides some prestige for the individual educator and their institution, but doesnt translate into additional funding for the institution or promotional opportunities for the individual. As the Promotion of Excellence in Learning and Teaching in Higher Education program is currently in the midst of a consultation process, this is the right time and vehicle to introduce a new grant or award stream that advances and supports the promotion of excellence in authoring learning and teaching content for higher education.
RECOmmENDATION 18
That the Government, in order to stimulate the development of quality higher education teaching and learning materials: a allocate 10 per cent of the $50 million funding from the Promotion of Excellence in Learning and Teaching in higher Education program to a grants program that supports the development of quality, innovative teaching and learning resources for the higher education sector b develop a reward/recognition system which promotes teaching excellence and authoring of quality educational materials and thereby creates greater balance with the research focus of the Excellence in Research for Australia (ERA) program.
83
Authors income is not and never has been a matter of certainty. Among the factors influencing variation in income is the market worth of a given authors work some authors are more skilful and popular than others. Complicating matters still further, Australian authors income is today more fragmented and uncertain than it has been for some time. Our authors are labouring in an increasingly complex and challenging digital environment, which will see: > > > > > traditional royalty schemes changing and possibly declining as a source and means of distributing income a likely increase in the sale of international rather than local content a decline in direct funding and support from cultural agencies fewer remunerative opportunities as publishers reduce their publishing programs as authors endeavour to respond to the above, financial risks in attempting unskilled self-publishing in print and in electronic formats.
In this context, the nations system of literary awards, prizes and grants even if these are limited in number and value and none is worth more than $80,000 is a vital component of the reward structure for Australian authors. But while quality authors look to augment their income through winning the occasional such prize, they then find they lose a considerable part of the potential income it represents to tax. For the many dozens of authors around the country who win the various literary prizes, awards and grants funded by local, state and Commonwealth bodies, it would be enormously beneficial to have the tax impost on these lifted. There is already a precedent for taking such a step, in that the Prime Ministers Literary Awards have been granted tax-exempt status. It is important to appreciate that awards and grants encourage literary endeavour that is particularly Australian. They therefore constitute a reward for an important cultural contribution. The issue of low levels of remuneration could be addressed through government legislation to grant tax-exempt status to all government-funded and administered literary prizes, awards and grants, whether local, state or federal.
PART 2: 6 RECOMMENDATIONS
84
FLUCTUATIONS IN REMUNERATION
The second issue of ongoing concern for authors is the periodic, annual and longer-term fluctuations in income that they experience. The impact on personal tax of variations in income may currently be managed by authors to a degree through the current average taxable professional income provisions of the Income Tax Assessment Act 1997 for special professionals. This scheme is based on calculations over four years of past income.2 For many authors, the reductions that may be achieved through such a scheme are of value for tax payable purposes. But that is a post facto benefit such a scheme does not assist in dealing with managing income as it arrives. In order to better understand the financial situation of Australian authors, whether professional or semiprofessional, it may be useful to compare them to rural producers. Like many who work the land, authors experience fat years as well as lean. There are years of unexpected earnings and years that provide very little or no income at all. Although they may spend much time producing a given work, authors nevertheless have little certainty as to whether that work will find favour and be taken up by a publisher or other institution. When this occurs, an unexpectedly large tranche of income may arrive, either in the form of a sizeable publishers advance for a book yet to earn royalties or a flat fee. If their personal circumstances are conducive, it may be in the authors interest not to take the money as income that year, but to bank it to draw on in the future. This problem could be resolved with the development of an income equalisation scheme for authors similar to the one that exists for primary producers. The current farm management deposits scheme allows participants to claim a deduction for farm management deposits made in the year they deposit. If a participant withdraws a farm management deposit, the amount of the deduction previously allowed is included in their assessable income in the year of repayment. Farm management deposits are a mechanism for primary producers to hold over income from years of good cash flow (deferring the payment of tax on these amounts) and draw down on it in years when additional cash flow is required. Broadly, this is achieved by allowing the primary producer a deduction for the amount of a farm management deposit in the year in which it is made provided the farm management deposit does not exceed their net primary production income for that year (and including the amount in their assessable income in the income year in which it is repaid).
To be eligible for a farm management deposit deduction, a taxpayer must (among other things) be an individual who carries on a business of primary production in Australia when the farm management deposit is made. In the case of authors receiving unexpected income or an above-average tranche in one year, it would be of significant assistance if they were able to deposit part or all of these funds in a participating institution (a bank, credit union or the like), and also claim a deduction on these funds in that same year. A scheme such as this would provide authors with an important risk management tool. It would greatly assist in dealing with the impact of uneven income that flows from the nature of their activity and that of the book industry itself. There is no structural or philosophical impediment to the introduction of such a scheme. It would be complementary to the special professionals income averaging provisions in the Income Tax Assessment Act. Its establishment would require the nomination of appropriate participating financial institutions and the development of associated tax act relief provisions, following the precedent and methodology of the farm management deposits scheme. An authors scheme could, in broad outline, be based on the current farm deposits scheme (which began in January 1999), which replaced an earlier income equalisation deposits scheme. (The current legislative provisions are as per Division 393 of the Act.)
RECOmmENDATION 19
That: a the Government legislate to make tax exempt all literary prizes, awards and grants that are funded and administered by government, whether local, state or Commonwealth b the Government implement an income deposits tax measure, following the precedent of the rural (farm management) deposits scheme, to assist with management of fluctuations in artists/authors incomes over time.
Generally, average taxable professional income (ATPI) in an income year is one-quarter of the sum of TPI for each of the preceding four years (Income averaging for special professionals 2009, Australian Taxation Office fact sheet NAT 247506.2009).
85
(Australia Council, literature sector plan 201112) The Australia Council has failed to identify the potential benefits of a substantial funding boost to literature, or to commit to a program to realise that benefit. Such support, on past evidence, is almost certain to nurture an array of new authors capable of producing long-form narratives in the traditional genres history, biography, the novel and other forms for which there remain substantial markets. Where the Commonwealth takes a hands-off approach to how the Australia Council makes its internal allocations, significant issues arise for literary authors. Internal Australia Council processes mean that authors must compete with more high-profile and better-funded sectors for funds. The main focus of the Literature Board is described as excellence in the creation of literary work. But the pursuit of excellence is a given for literary authors, while the mere valuing of excellence of itself provides no formal mechanism for supporting time-critical authorship. The fundamental investment authors make lies in the time they are able to set aside for the work involved: good books take time to write authors need time to write them. Throsby and Zednik (2010) note that writers reported financial assistance as providing them the highest stimulus quotient of all. More than finding ways to provide authors with time out, we need to find ways of affording them time in. Funding that is long term and that is conceived as an investment rather than gift, whatever it does materially for the individual author, will ultimately be of the greatest benefit to readers, our education system and Australian culture overall.
PART 2: 6 RECOMMENDATIONS
86
The development of a more confident and productive Australian literary scene (and local film and television output) received a dramatic boost through the early 1970s via an expanded and expansive grants and fellowship program delivered through the Literature Board of the Australia Council. In its first year of operations, 197374, the Literature Board of the Australia Council was aware of the value of declaring initiative and foresight, as well as establishing a climate of expectation and confidence (Shapcott 1988: 3031). Following its first call for applications, the Board received 1,147 applications and provided 230 grants. Importantly, there was an emphasis on longer-term funding in the form of a Guaranteed Income scheme and Three-Year Fellowships. By contrast, the reduced number of and dollar value of grants provided through the Literature Board in more recent years has also constrained output of higher-end literary and creative work. Many of the most important contemporary names in Australian culture and literature were assisted to find their footing at that time, including such luminaries as David Malouf, Helen Garner, Peter Carey and Roger McDonald. There are strong arguments for an overall re-resourcing of the Literature Board of the Australia Council. A doubling of its budget to approximately $9 million, would allow it to more effectively deliver on its currently stated obligations. This boost should also include a rise in direct grants to authors, from the current $1.7 million to approximately $33.5 million. A reinvigorated overall Literature Board program, judiciously promoted and managed across both traditional book formats and new digital formats, would ensure an increase in the number of applications and a significant boost to local, quality literature.
Allowing that around half the overall Literature Board budget is currently, and should continue to be, spent on marketing and the support of key organisations and other priority measures as outlined above, the increase in funding sought here should be allocated directly to the support of artists careers a stated goal of the Australia Council overall by making available a greater number of time-buying author grants and fellowships. An overall funds boost could then be articulated across an additional number of author funding categories to allow for: a more new work
b an increased number of single and multiyear fellowships c additional opportunities to encourage production of original content for digital platform delivery.
(Regarding (c), the Australia Councils Story of the Future project (200609) represented both a precedent and platform for this, but the opportunities to support young artists capable of presenting challenging, new-form narratives online have not yet been fully explored or satisfied.) In the context of Australias trillion-dollar economy, the funds required for new exercises of this kind are extremely modest.
RECOmmENDATION 20
That the Government encourage a review of the Australia Councils Literature Board grants allocation processes and criteria, aiming to provide substantial additional funding directly to authors to a minimum $3.5 million per annum thus ensuring the ongoing support of creative authorship in a period of declining remuneration.
87
PART 2: 6 RECOMMENDATIONS
88
The proposed councils approach will lie in encouraging, securing and facilitating significant private sector investment in the output of Australian authors and in building markets for their works. Operations of the National Book Council will be based on three inter-related funds: a Manuscript Fund, a Production Fund, and a Marketing Fund. The Manuscript Fund would provide for a variety of interesting and useful small- as well as large-scale commercial and investment arrangements. The Production Fund would encourage an individual benefactor or investor to partner separately perhaps on a tax concession basis with publishers for a proportion of production costs on certain authors and titles, as supported through the Manuscript Fund, in anticipation of a successful commercial outcome and a share of final profit. To build receptivity and maximise exposure to works created through the programs of the National Book Council, we also propose a Marketing Fund that can be used for a range of book- and industry-supportive promotional activities. The book industry sees the establishment of a National Book Council as additional to, not as a replacement for, the work of the Literature Board of the Australia Council. It is intended to support books across the broadest range of subject categories including, but not limited to, the formal literary book genres within the purview of the Literature Board.
RECOmmENDATION 21
That the Government work with key industry sectors and associations to create a National Book Council as a new, specific partnership. The National Book Councils roles would include: a provision of additional funds to writers for the creation of new Australian works b the development of attractive financial investment models with potential return to government and individual investors c funding of a multiyear marketing campaign for the promotion of Australian writers both nationally and internationally.
89
APPENDIxES
90
Appendix A
The Book Industry Strategy Group
Chaired by the Hon Dr Barry Jones AO, the Book Industry Strategy Group comprises representatives from across the book supply chain. Publishers Ms Louise Adler: Deputy Chair; Melbourne University Publishing Mr David Barnett: Australia/New Zealand, Pearson Education Australia Mr Ross Gibb: Macmillan Publishers Australia Mr Emmett Stinson: Small Press Underground Network Community Booksellers Mr David Gaunt AM: Gleebooks Mr Graeme Connelly: Melbourne University Bookshop; Australian Campus Booksellers Association Printers Mr Alan Fahy: McPhersons Printing Group Mr Philip Andersen: Printing Industries Association of Australia Ms Lorraine Cassin: Australian Manufacturing Workers Union Authors Mr Angelo Loukakis: Australian Society of Authors Mr Chris Warren: Media, Entertainment and Arts Alliance Copyright Mr Alexander Grant: Copyright Agency Limited Information Communication Technology Mr Tom Crago: Tantalus Media
Libraries, represented by the Australian Library and Information Association and/or the Council of Australian University Libraries, attended the Groups meetings as observers and were invited to contribute to its deliberations. Secretariat support was provided by the Department of Innovation, Industry, Science and Research.
91
Appendix B
Addressing the Book Industry Strategy Group terms of reference
This section details how the Book Industry Strategy Group responded to its terms of reference, and: > > responds to questions raised about the status of the Australian book industry recommends how to strengthen the Australian book industry in the global digital marketplace. > Publishers in most sectors make extensive use of digital technologies to streamline print production. The publishing process is based on a single set of digital files, which is transformed into a print-ready book by editing, proofreading, indexing, illustration and book design, using word-processing software in the first instance and desktop publishing software in the latter stages. Publishers can also integrate these processes with the production of electronic resources, including ebooks. This integration has proceeded furthest among higher education and professional and reference publishers, which together accounted for 11.4 per cent of industry income at the last ABS industry survey in 200304. The use of digital processes to integrate print and electronic production remains a work in progress in the two largest sectors of the industry, school textbook publishing (23.2 per cent of industry income in 200304) and trade and consumer publishing (65.4 per cent). While no quantitative information is available about the extent to which publishers are integrating print and electronic production, qualitative information from interviews suggests that most major firms are actively reviewing their processes. This may be at odds with the result of a recently conducted survey by Copyright Agency Limited, which indicated that only 15.3 per cent of publishers have a digital strategy. The largest global publishers are also employing sophisticated publishing software to manage and monitor operations such as budgeting, scheduling and royalty payments. These technologies are mostly beyond the means of small and independent publishers.
1. What digital platforms for books are available in Australia, how they work, what features they offer, and how extensively they are used. The conventional printed book is now part of a continuum that includes: > > > > digital files printed in small or even single numbers pay-per-view files where a single item may be purchased audiobooks enhanced ebooks in which text is linked to video, sound and interactive elements.
Books in all these forms, including print, are increasingly available through digital platforms. Retailers and libraries are the primary agents in this process, though publishers and other parties in the supply chain also play a role. Digital technologies are almost universally employed at all stages of the Australian book supply chain. To date their primary use has been in streamlining print production, but the same technologies are being adapted to supply electronic resources. Digital technologies are used at each stage in the book supply chain: > Authors: Qualitative research indicates that authors generally prepare their books as digital files, and most perform research online as well as using print. Some also make use of technologies such as digital photography, scanning and voice recognition. It is difficult to quantify the extent of authors digital technology use, however, because the category author is itself elastic. Agents universally use digital technologies in communications with authors and publishers, and often secure authors digital files against illicit copying before submitting them to publishers for consideration.
>
>
Book printers use computer-to-plate technology to produce print books, and have invested extensively in digital printing technologies that allow books to be economically printed in small numbers. Printers also supply a range of other digital services, including file storage and archiving.
APPENDIX B
92
>
Book distributors have used digital technologies to streamline the supply of both print and electronic materials, especially through the use of online searching and ordering. In trade publishing, the major global publishing firms have invested heavily in computerised distribution facilities for print books and have made these facilities available to selected independent publishers. Book retailers employ computerised stock management and database searching throughout their operations. The most recent ABS survey of book retailers in 200304 found that 75 per cent of specialist bookshops had computerised stock control, almost 90 per cent were recording transactions by barcode, and just under half had online ordering services. Libraries have invested heavily in digital technologies at every level, including providing computer and internet facilities to people without private access. Electronic resources are a large and growing component of expenditure in university libraries, where they accounted for 62 per cent of expenditure in 2008. The public libraries acquisition of electronic resources is less even; the proportion of library budgets spent on electronic resources ranges from 20 per cent in the Australian Capital Territory to 3 per cent in South Australia and New South Wales.
>
PricewaterhouseCoopers projects that global ebook sales will increase from $4.7 billion in 2010 to $10.7 billion in 2014 an annual average increase of 22.5 per cent. This will represent 6 per cent of the total value of all book sales in 2014. In the United States, the value of ebook sales is projected to increase from an estimated $2.6 billion in 2010 to $4.8 billion in 2014 an annual average growth of 16.4 per cent. In the United Kingdom, the value of ebook sales is projected to increase from an estimated $82 million in 2010 to $500 million in 2014 an annual average growth of 57 per cent. In Canada, the value of ebook sales is projected to increase from an estimated $77 million in 2010 to $154 million in 2014 an annual average growth of 19 per cent. In New Zealand, the value of ebook sales is projected to increase from an estimated $11 million in 2010 to $35 million in 2014 an annual average growth of 33.6 per cent. The factors that are likely to slow or hasten the growth of the ebook market in Australia include: the state of the Australian economy consumer preferences ereader penetration availability of ebooks potential substitution of print books for ebooks.
>
>
>
>
>
>
>
The supply chain information infrastructure has greatly benefited from the introduction of digital technologies and internet-based communication, with the provision of online bibliographical information through ThorpeBowkers Books in Print, price and availability information through the Australian Publishers Associations TitlePage, and sales data collected by Nielsen BookScan. 2. How fast the market for digital delivery of books will grow in Australia and internationally, what factors might slow or hasten that growth and what is the relative position of printed books.
FINAL REPORT TO GOVERNMENT
>
Studies in Germany, Greece and Turkey have shown that the ebook market has not cannibalised the print book market but that in some instances, the growth of ebooks has driven the growth of print books. Surveys in the United States show that only 13 per cent of ebook readers were not planning to buy a printed book over the next 12 months. A significant but unrepresentative sample of Australian readers who responded to the call for public submissions to the Book Industry Strategy Group stated their desire to continue to see and use the printed form of the book. Industry experts believe that both printed and ebooks will coexist and only in certain cases, such as special interest or travel books, will the printed editions be replaced by the digital editions. In May 2011, Amazon reported that less than four years after introducing Kindle books, amazon.com customers are now purchasing more Kindle books than all print books hardcover and paper combined. PricewaterhouseCoopers concludes that, in the short to medium term, ebook sales are likely to expand the total market for books and only slightly cannibalise print book sales; however, the long-term future for print books remain uncertain.
>
>
Based on assumptions about the Australian economy, consumer demand for books and the expected growth in ebook readers, the total market for books in Australia is expected to be approximately $2.8 billion in 2014. Australians purchased approximately $35 million worth of ebooks in 2010, which was 1.5 per cent of the total value of book sales for that year. The ebook market is projected to reach between $150 million and $700 million in 2014, representing between 5.5 per cent and 24.3 per cent of total estimated book sales. Of the projected value of ebook sales in 2014, $500 million will be trade ebooks representing 25.7 per cent of the trade ebook markets, and $200 million will be educational ebook sales representing 21.4 per cent of the educational book market.
>
>
>
>
>
>
>
93
3. The potential size and structure of the Australian digital and printed book markets, taking into account (a) demand from individuals, libraries, government agencies, and research, educational and cultural institutions; (b) the needs of the aged and people with disabilities; and (c) the needs of regional and remote communities. > The total book market in Australia is expected to grow to approximately $2.8 billion in 2014, 24.6 per cent (or $700 million) of which will comprise ebook sales. Of this $700 million, $500 million will be trade ebook sales (representing 25.7 per cent of the total trade book market). $200 million will be educational ebook sales (representing 21.4 per cent of the total educational book market).
Government agencies and research institutions already have a high uptake of digital material and this is likely to continue. Libraries see benefits of ebooks in greater accessibility and better solutions for disabled and visually impaired readers. Educators see benefits in greater access for students in regional and remote locations and benefits for distance education. Vision Australia, which represents approximately 300,000 Australians, sees considerable benefits in ebooks for the visually impaired. The Association of Independent Retirees notes that retirees overwhelmingly prefer print books but remarked that retirees who live in remote locations, who do not have physical access to a library, or those who are no longer able to drive, may prefer an ebook.
>
The market for print and ebooks is likely to increase in the short to medium term, although the ebook market is likely to grow at a much faster rate than the market for print books. Australians have shown a willingness to adopt digital book technology, and there is a sizeable demand for ebook readers in the short to medium term. The TNS Global Survey revealed that for those who had previously purchased an ebook, 40 per cent would prefer to purchase another ebook version, 31 per cent would prefer a printed version, and 24 per cent would purchase both. The market for digital books is likely to increase with generational change. The TNS Global Survey showed that of all the respondents who purchased an ebook in 2010, 51 per cent were aged between 18 and 34 years old. The availability of ebooks in Australia may slightly constrain the market for print books in the short to medium term. Demand for ebooks will likely expand the total volume of books purchased in Australia, but also lead to a slight reduction in the value of print book sales. The market for digital books is projected to grow to approximately a 25 per cent share of the Australian book market by 2014. Based on the findings from the public submissions as well as the research reports, much of this growth will occur in educational institutions and libraries. However, trends showing the increased uptake of ereaders, greater access to the internet, and greater use of ecommerce by individuals also point to growth in ebook purchases. The results of the public submissions have revealed considerable benefits to a range of consumers (individuals and organisations) of ebooks over the printed book.
>
>
While the book market is expected to show overall growth, it is likely that there will be changes in the structure of the book industry arising from digitisation of content delivery. These include the following: The number of authors could increase if the selfpublishing business model is widely adopted. However, unless the overall incentives to create increase, the impact of self-publishing is likely to be small, therefore resulting in very little growth in author numbers. If the current regulatory environment remains, publisher numbers are unlikely to be negatively affected by ebooks. This, however, depends on the rate of adjustments made by Australian publishers to the new digital environment. In the Copyright Agency Limited survey of May 2011, only 15.3 per cent of publishers had a clearly defined digital strategy. There is likely to be further consolidation in the number of print book distributors and an increase in digital distributors. Technology firms that are involved in digital conversions and support for publishing are likely to become more integral to the supply chain. Significant stress will continue to be placed on book printers. However, there is likely to be a significant increase in print-on-demand facilities, such as US firm Ingrams Lightning Source . An expanded ebook market is likely to place great stress on bricks-and-mortar booksellers and further reduce the number of physical bookstores in Australia. This trend has commenced, with the closure of a number of Borders and Angus & Robertson outlets.
>
>
>
>
>
>
>
APPENDIX B
94
4. How the supply chain for trade, educational, scholarly, scientific and technical books has been and will be affected by digital technologies, taking into account the impact on authors, publishers, printers, wholesalers, retailers and consumers. > Digital technologies have changed every sector of the book supply chain and facilitated a shift in the balance between supply and demand. Consumers are now empowered to influence the format, price, choice and availability of book titles through use of online retailers. While globalisation and digitisation benefit consumers, they bring significant challenges for industry. These include competitive pricing, protection of intellectual property rights, piracy, territoriality, lack of industry skills, changing business models, market domination by international operators and format interoperability. Ebook sales are likely to expand the total market for books in Australia and may slightly reduce print book sales in the short term. The long-term impact of ebooks is yet to be determined. Digital technologies enable access to backlist titles through print-on-demand production, thereby providing new opportunities across the supply chain. Younger consumers are more likely to embrace digital technologies, and influences such as social media, instant demand, media consumption patterns and changing reading patterns are likely to increase in significance over time. Digital technologies reduce barriers for people with disabilities and those living in regional and remote areas in accessing book titles. However, transition to digital books brings obstacles for consumers, such as the myriad of ebook formats, device interoperability, high start-up costs, lack of available titles in Australia and ebook pricing models. The digital learning environment provides greater access, more certainty of availability and faster delivery for teachers and students. Issues emerging for the acquisition of digital material in libraries and educational institutions include equality of access, affordability, copyright and digital rights management. Digital delivery enables authors to self-publish and market themselves online, bypassing the traditional book supply chain. However, author set-up costs have increased, and the expectation of electronically submitted works and visibility in the crowded online environment present many challenges for Australian authors and publishers. Digitisation and globalisation bring concerns for authors and publishers around protection of intellectual property rights, relevance of territoriality, digital rights management, piracy and remuneration.
>
Trade publishers are increasingly moving to integrate digital and print book workflows to include metadata, content management, digital distribution and marketing. Educational publishers have been producing digital content to supplement and integrate with print materials for over a decade, using XML tagging for indexing and repurposing content. High costs are borne by higher education publishers in developing digital material to supplement textbooks, staff training and labour, digital conversion and ecommerce technology. However, as universities increasingly offer online education, customised textbooks are being digitally printed, with print on demand for top-ups. Commercialisation has eroded the publication of scholarly monographs. Most Australian journals are produced and sold commercially and are only available digitally. Higher acquisition costs have reduced the capacity of libraries to purchase scholarly monographs, to the detriment of university presses. Digital technologies have reduced the capital costs for small presses and enabled increased productivity for this sector. Publishers and retailers are facing increased pressure to supply books in multiple formats and the integration of digital with print production is costly. Book marketing has universally been digitised across the educational, scientific and technical publishing sectors. Book printers are diversifying and providing digital archiving services and ordering systems. Larger printing firms offer both offset and digital printing options. While ebook production excludes printers, opportunities exist for digital and economical shorterrun printing. The digital publishing supply chain bypasses traditional distributors and printers but engages digital converters and new distribution models. Digital inventory systems can provide processing and warehousing efficiencies for distributors and booksellers. However, for these to be effective, metadata and coding must be standardised across the industry. Local retailers have to compete fiercely in the global market. Despite several Australian onlineonly booksellers enjoying rapid growth, 53 per cent ($150 million) of Australian 2010 online book purchases were from overseas booksellers. Operating costs are lower for online booksellers, which enables lower prices, convenience and comprehensive listings.
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
>
95
>
Parallel importation restrictions benefit Australian authors, publishers and printers but constrain timely access to titles for booksellers. However, online sales enable consumers to bypass both the restrictions and Australian booksellers.
That the Government take appropriate action to abolish the 10 per cent GST on books purchased in Australia, noting that in the United Kingdom and Ireland, and in most OECD member countries, books are either exempt from VAT or taxed at a reduced rate or
5. Options for encouraging efficiencies in the supply chain for printed books, integrating it with digital delivery of books on a global scale, and increasing the overall competitiveness of the Australian book industry. Research undertaken by the Book Industry Strategy Group has found that the competitiveness of the Australian book industry is negatively affected by the following: > > > > lack of cohesion and collaboration along the supply chain a relatively inefficient print book distribution system lack of a comprehensive digital distribution system that provides reasonable access for small booksellers uncompetitive postal rates within Australia and between Australia and external sources and destinations the differential tax treatment of books sold by Australian booksellers and those by online overseas retailers who do not pay the GST the comparatively high cost of printing books in Australia compared to Asian countries such as China the lack of digital skills along the supply chain the parallel importation restrictions, which curtail the choices open to booksellers and put them at a competitive disadvantage with overseas online retailers.
b That the Government provide greater equity in competition for Australian retailers by applying the 10 per cent GST on books sold by overseas retailers to Australian consumers or c That the Government recognise the disadvantage placed upon Australian booksellers as a result of GST inequity when competing with international online retailers and support the Book Industry Strategy Groups suite of recommendations.
>
Recommendation 3: That the Government initiate negotiations with the Universal Postal Union to secure amendment of the appropriate postal treaties to provide more equitable and competitive pricing for print post delivery, where Australia is currently severely disadvantaged. Recommendation 4: That the Australian book industry (authors, printers, publishers and booksellers) formalise an agreed, industry-wide code of practice that will reduce the timeframe for retention of territorial copyright from 30/90 days to 14/14 days without the need to amend existing legislation. To support this, TitlePage will provide information to booksellers on the PIR status of individual titles. The code will be reviewed at the end of 12 months and subsequently at determined intervals to assess its effectiveness. Recommendation 6: That the book industry establish a goal of 48 hours turnaround for fulfilling Australian reseller orders. In seeking to achieve this, the Government should support the proposed Book Industry Collaborative Council in its task of improving the efficiency of the book distribution network through rationalisation, standardisation and consolidation, as its key priority over its first three years. Recommendation 7: That the Government provide funding of $5 million for the development of the stage two TitlePage enhancement to develop the digital infrastructure required for an efficient, cost-competitive and secure online service to consumers that is comparable in promotion, range and functionality to that of the main offshore retailers. Recommendation 13: That the proposed Book Industry Collaborative Council develop a comprehensive skills strategy, which addresses training needs for all parts of the book supply chain as a matter of priority and that it then works with peak industry associations, employers and unions to progress implementation and ensure alignment with relevant industry training packages.
The Book Industry Strategy Group has proposed a number of recommendations, which, if adopted in a strategy for the book industry, will help to integrate the print and digital book supply chain and improve the overall competitiveness of Australian books. These recommendations include: Recommendation 1: That the Australian Government establish a Book Industry Collaborative Council with membership from all parts of the book value chain, which is tasked with implementing the industry reform priorities identified by the Book Industry Strategy Group and other issues as they emerge. Recommendation 2: The Book Industry Strategy Group urges the Government to recognise the competitive disadvantage being imposed on the Australian book industry as a result of GST inequity. In recognition of the broad range of considerations for government on this issue, the Book Industry Strategy Group offers three alternative recommendations:
APPENDIX B
96
6. (a) How business models are likely to change in the digital environment; (b) how this is likely to affect business models for printed books; and (c) what can be done to facilitate these changes. The increasingly global nature of the book market and the impacts of digitisation are forcing all parts of the book supply chain to examine how it conducts its business. Changing business models are being driven by the wider options available to consumers and by new technologies. Examples of this are print on demand, which allows printers to play a stronger role in the distribution of books; and authors delivering content directly to consumers through self-publishing (especially ebased publishing). As the industry changes, pressure will increase on booksellers (unless they have the capacity to sell online); printers (who do not have a role in ebooks); and print book distributors (as volumes of print books decrease). Industry-wide changes are required to support authors, booksellers, printers, publishers and agents and so forth in addressing the opportunities and challenges posed by digitisation. Improvements should include: consolidating print book distribution to facilitate a speedier and more reliable distribution system; establishing an industry body charged with improving the supply chain efficiency; and establishing an industry-owned ebook wholesaler.
PUBLIShERS:
> With respect to the printed format of the book, many of the parties involved in the Australian book supply chain publishers, distributors and retailers in particular have built their business model around a mix of local production and importation in a small, dispersed market remote from its major suppliers. Many of the largest Australian publishing companies are offices of global conglomerates providing some that support of a business model where publishing locally originated books alongside Australian editions of international titles while also directly importing books published elsewhere can add overall value to the business. The basic business model employed by publishers is to take the risk on an authors work and to bring it to market. In addition, publishers seek to create further value by licensing the rights of authors works to other parties and purchasing the rights of international authors and publishers and then publishing those works exclusively in the Australian market. A number of large Australian publishing houses also engage in importing, exporting and distributing for third parties. This basic model is unlikely to change in the digital environment as some local publishers are using the infrastructure already established by their international parent companies to manage the digital supply chain. Journalist Eloise Keating (2011) reports that Hachette Australia has chosen to manage its ebook business through the infrastructure of its international counterpart because of the large-scale investment associated with the production of ebooks. Other major publishers such as Pan Macmillan are also reported to be working with a conversion house to produce its ebooks and have been investing in new staff to work on the digital side of the business. Technology firms are increasingly becoming a part of the supply chain for digital books. For example, the software company SAP offers publishers a range of software products to manage the demands of digital publishing, including digital asset management, media sales management, subscription management, and tools to analyse how customers are using their content. These technology providers are also helping publishers to manage their online presence in an industry where social media tools are becoming increasingly important marketing tools. Keating also reports that small publishers are seeking to manage the sales and distribution of digital content in-house. For example, Text Publishing recently created a position of digital manager to take advantage of the emerging market. While a third party may be used for digital conversions that are released simultaneously with printed versions, the publisher manages the sales and distribution directly with retailers.
>
>
>
AUThORS:
> Authors are generators of content and intellectual property for books of all types. For income, authors rely on publisher-paid royalties and advances against royalties, as augmented by government schemes such as Public and Educational Lending Rights schemes and through statutory copying licences administered by the Copyright Agency Limited. Authors have experienced a tightening of access to large and medium print publishers in recent years. For cost-saving and other reasons, such publishers have come to rely less on unsolicited manuscripts and open door editorial policies in favour of working through literary agents, or designing and commissioning their own titles. With the arrival of digital self-publishing options, many authors are turning to their own resources to secure publication and remuneration, and so become a distinct business model of their own. >
>
> >
FINAL REPORT TO GOVERNMENT
>
>
>
97
PRINTERS:
> Australian printers adopt either of two business models. Larger printers offer publishers a comprehensive suite of services based on offset and digital printing. These printers need to be responsive and have the ability to establish effective working relationships with publishers. The second business model is targeted at smaller book publishers and self-publishers. The suite of services tends to be more limited or specialised based on either offset or digital printing. Business models in printing need to change to create greater efficiencies. This may involve consolidation across the industry. Printers should also consider embracing print-ondemand as a business strategy as this will improve the responsiveness of book printers to consumer needs. Other advantages include the ability to print short runs, including back-list titles at a reasonable cost.
>
A number of booksellers are now seeking to sell ebooks and to sell print books online, but ebook sellers are hamstrung by a lack of the appropriate digital infrastructure to store and distribute digital books. Recent shifts in retail strategy are resulting in Australian online merchants moving to shipping systems where stock is warehoused offshore and shipped on demand, rather than utilising more expensive domestic channels, such as Australia Post. This trend is being driven by an increase in offshore retailers attracting Australian consumer dollars by reducing or eliminating shipping costs, thereby stifling competition in the local retail sector. A few retailers may also consider print-on-demand as is being offered by Campus Booksellers.
>
>
>
>
>
7. Opportunities for the Australian book industry to participate more actively in the global marketplace for printed and digital books over the next decade, including by creating, adopting, and using new technologies. > The value of Australias book exports increased in nominal terms by an annual average of 3.6 per cent over the decade 200110 and there are opportunities for the Australian book industry to continue to increase the value of exports. Australias English-language heritage gives it an important advantage in global markets, as books can easily be consumed by readers in the United States, the United Kingdom and Canada, as well as the vast number of readers in other countries who read in English. In addition, Australian book producers have access to two of the fastest growing global markets India and China with GDP that is projected to grow by an annual average of between 8 and 10 per cent over the next five years. Both countries also have large numbers of English speakers, many of whom received their education in Australian institutions. Educational publishers have been successful in forging exports to AsiaPacific countries and the United States. There are opportunities to continue to grow these markets and forge new ones in Africa and Asia. Ebooks and online retailing give Australian book producers access to a global market while negating the traditional costs associated with Australias location in relation to major global markets. Ebooks open an opportunity for Australian authors to sell their rights globally as it becomes more difficult to track and manage territorial restrictions. Australian publishers may seek to enter into agreements with international publishers to share global rights.
APPENDIX B
DISTRIBUTORS:
> Some book distributors (who are also publishers) seek to increase the volume of books distributed to add value. They increase volume by distributing the books of their parent company and for third-party publishers. New business models for book distribution in Australia may include: the continued rationalisation of existing distribution systems the better use of digital technology to improve the tracking of printed and digital books the development of capacity in Australia for the distribution of digital books. >
>
>
RETAILERS:
> > The business model adopted by booksellers directly reflects the type of channel that is used to retail books. Chain booksellers generate profit through economies of scale and through franchises. They attract customers by offering the promise of a range of titles. Independent bookstores seek to create value by offering a specialised range of titles, diversifying into associated goods, and engaging directly with the local community. Discount department stores focus on a limited range of mass-market books that they buy in significant volume and at considerable discount, while online booksellers generally enjoy lower operating costs than bricks-andmortar bookstores and lower prices, convenience and a comprehensive listing. >
>
>
>
>
>
>
Australian book producers must improve their competiveness and efficiency, particularly in the speed and cost of delivery, to take advantage of
98
global export opportunities for the online sale of print books. This may involve negotiating postal deals with Australia Post. > To participate effectively in the digital online market, Australia must develop the appropriate infrastructure to deliver digital books with correspondingly aggressive marketing of Australian-produced material. Opportunities to market Australian-produced material must be pursued through social networking sites along with other traditional marketing media.
>
8. How existing Commonwealth programs and activities can be refocused to support the industrys adaptation to new technologies. The Book Industry Strategy Group has identified legislation and a number of Australian Government agencies, programs and activities that may assist the industry in adapting to new technologies. These have been reflected in the recommendations and include: > the Copyright Act 1968, the Copyright Digital Amendment Act 2000, and the Copyright Amendment Act 2006 the Income Tax Assessment Act 1997 Austrades suite of export support programs Public Lending Rights and Educational Lending Rights schemes the Digital Education Revolution statistical collection by the Australian Bureau of Statistics Australia Post the Literature Board of the Australia Council for the Arts small business development programs Skills Australia and the National Workforce Development Fund.
99
100
References
Reports commissioned by the Book Industry Strategy Group provided the main source of data for this final report. Extracts from these sources have not been individually referenced in the body of the report. The reports listed below are available on the website of the Department of Innovation, Industry, Science and Research. Department of Innovation, Industry, Science and Research 2011a, BISG research findings: Australian books in the digital era. 2011b, Review of public submissions. Eichhorn, Peter 2011, Book distribution research project. Lee, Jenny 2010, Digital technologies in Australias book industry. Neville Freeman Agency 2011, Final analysis report, stakeholder workshops. PwC (PricewaterhouseCoopers) 2011, Cover to cover: A market analysis of the Australian book industry, prepared for the Department of Innovation, Industry, Science and Research, May. Doidge, Norman 2010, The brain that changes itself: Stories of personal triumph from the frontiers of brain science, Scribe. Dyson, Freeman 2011, How we know, New York Review of Books, www.nybooks.com/articles, March. Epstein, Jason 2011, Books: Onward to the digital revolution, New York Review of Books, www.nybooks. com/articles, February. Ernst, O., & van der Velde, W. 2009, The future of eBooks? Will print disappear? An end-user perspective, Library Hi Tech, 27 (4). Este, Jonathan, Warren, Christopher & Murphy, Flynn 2010, Life in the clickstream: The future of journalism, Media & Entertainment Alliance, December. European Commission 2011, VAT rates applied in the member states of the European Union, Brussels, 1 July. Franki Committee (Copyright Law Committee on Reprographic Reproduction) 1976, Report, Australian Government Publishing Service, Canberra, October. Gleick, James 2004, Isaac Newton, Vintage Books, New York. Other sources Accenture 2001, Ad rem The Australian book industry: Challenges and opportunities, Australian Publishers Association and Printing Industries Association of Australia. ACMA (Australian Communications and Media Authority) 2011, Implications of research into consumer issues, consultation paper 4. Australian Bureau of Statistics 2009, Arts and culture in Australia: A statistical overview, cat. no. 4172.0. Bilton, Nicholas 2010, I live in the future & heres how it works, Crown Business, New York. Carr, Nicholas 2010, The shallows: What the internet is doing to our brains, W.W. Norton & Co., Inc., New York. Clayton, Janet & Travers, Mary 2009, Arts plus: New models new money, Centre for Social Impact/Arts Queensland. Cultural Ministers Council 2008, Building a creative innovation economy: Opportunities for the Australian and New Zealand creative sectors in the digital environment, report from the Cultural Ministers Council Creative Economy Roundtable, February. Deloitte Access Economics 2011, The connected continent: How the internet is transforming the Australian economy, Google Australia Pty Ltd, August. 2011, The information: A history, a theory, a flood, Pantheon Books, New York. Godin, Seth 2011, Technology, the brain and going camping with neuroscientists, Future Tense, www.abc.net. au, 16 June. Horsley, M. 2010, Investment in teaching and learning materials: Equity and access in providing teaching and learning materials in Australian schools, Australian Publishers Association, Sydney. Keating, Eloise 2011, Chain reaction, Bookseller + Publisher, June. Knox, Malcolm 2011, Driven by distraction, Sydney Morning Herald, 2 April. Lawrence, A. & Ziguras, C. 2002, The business of exporting books, in B. Cope & C. Ziguras (eds), The international publishing services market, Common Ground, Altona, pp. 926. Lee, Jenny, Davis, Mark & Thompson, Leslyn 2009, University of Melbourne book industry study, ThorpeBowker, Melbourne. May, Ned, Fooladi, Pooneh & Worlock, Kate 2010, Worldwide e-books market size & forecast report, 20092012, Outsell, Inc., Cambridge, MA. OECD (Organisation for Economic Co-operation and Development) 2010, Consumption tax trends 2010, OECD Publishing.
101
Productivity Commission 2009, Restrictions on the parallel importation of books, Research report, Canberra. 2011, Economic structure and performance of the Australian retail industry, draft report, July. Shapcott, Thomas 1988, The Literature Board: A brief history, UQP. Telstra 2010, Fact sheet: Telstra Smartphone Index Highlights, retrieved 25 March 2011, from www. telstra.com.au/abouttelstra/download/document/ telstrasmartphone-fact-sheet.pdf. Throsby, David & Hollister, Virginia 2003, Dont give up your day job: An economic study of professional artists in Australia, Surry Hills, NSW. Throsby, David & Zednik, Anita 2010, Do you really expect to get paid? An economic study of professional artists in Australia, Surry Hills, NSW. Trippe, Bill, Guenette, David & Golden, Karen 2010, A blueprint for book publishing transformation: Seven essential processes to re-invent publishing, Outsell, Inc., Cambridge MA. Whitney, Paul 2011, Ebooks and public lending right in Canada, Canada Council for the Arts. Wolfram, Stephen 2002, A new kind of science, Wolfram Media, Inc., Canada.
REFERENCES