What Next for the Australian Publishing Industry?
By Tim Coronel
Tim Coronel, former publisher of Bookseller and Publisher magazine, looks at the dramatic changes in ways of doing business over the past five years in the Australian book trade – and predicts what the future might hold, both positive and negative. This an edited version of a Lunchbox/Soapbox address delivered at the Wheeler Centre last week.
When I first worked behind the counter of a chain bookshop in a suburban Canberra shopping mall in 1990 (yes, I am that old), there were two cash registers, one telephone, a microfiche reader for Books in Print and, in the back room, the latest tech: a fax machine. We memorised the stock on hand, and would do stock-checks and write up reorders by hand on carbon pads, faxing them to publishers and distributors where a small army of ‘customer service’ employees would be keying the orders into green-screen computers. While there was a head office and some central buys of major titles, the store manager (the lovely Meredith Wright who is still selling books in Canberra) spent much of her week seeing publishers' sales reps and she had autonomy on ordering most of the stock for the shop.
In the ensuing 20-ish years, many things have changed drastically, but, other than a few hiccups such as the introduction of the GST in 2000 and the collapse of Collins Booksellers in 2005 (quickly reborn phoenix-like as a successful franchise network), the Australian book industry developed, matured and grew steadily in the 1990s and 2000s. (Not that selling books has ever been that profitable – publishing is gambling writ large, and the returns are modest: single-figure net profits and market growth are thought of as ‘good’, but if they are viewed as compounding over 20 years, then the trade certainly has grown)
Salad days: when and why business was good
One of the main catalysts for the development of the Australian book industry were the 1991 changes to the Copyright Act which enshrined the parallel import restrictions that have been in contention so often since. By creating a solid, protected market for local editions of overseas-originated books, a ‘portfolio’ model for publishing companies became the norm. Both locally owned indpendent publishers such as Allen & Unwin, Text, Scribe, Black Inc., Hardie Grant and many others, and the local branches of the big international publishers – Penguin, Random House, HarperCollins, PanMacmillan, Hachette and Simon & Schuster – developed businesses that combined ‘buy-ins’ of overseas-originated titles alongside their publication of local books.
And as these companies grew, they were better equipped to participate in international rights markets at events such as the Frankfurt, London and Bologna Book Fairs and to sell rights to Australian books to many other territories and languages. (There is a downside to this model, however. It is estimated that for many of the larger companies, they are reliant on sales of overseas-derived titles for up to 55% of their revenue. If, as we get to shortly, a growing proportion of Australian readers are buying these books online and offshore, a crucial part of Australian publishers' business model is being eroded.)
Bookselling was pretty healthy as well through the nineties and 2000s. Independent bookshops maintained a substantial market share; chain stores served the mass-market well; and the massive discounting wars that distorted the UK and US book trades and moved much of bookselling there into supermarkets and discount mass retailers were largely averted.
The downturn: ebooks, the Australian dollar and REDgroup
But then, a few years ago, something happened. Or rather, a few ‘somethings’ coincided. It wasn’t sudden, and to be honest we’d all known it was coming but still weren’t prepared for its impact.
Amazon started selling books online in 1995, and others, local and global, followed. The momentum took a while to build among the general public, but before long it was easy to look up any book online and do price comparisons. It was no longer an automatic choice to buy books at your local bricks-and-mortar bookshop. But, much of the time, even if an individual title seemed much cheaper overseas, exchange rates and shipping costs meant that it wasn’t all that much cheaper by the time it got to your door.
But once the Australian dollar got to parity with the US, and then some, and stayed there (and got to 60p against the UK pound), the massive scale and loss-leading discounting of Amazon and the Book Depository meant that the sort of book that was $30 in your local bookshop (and which really needs to be $30 to cover costs – but that’s a detailed argument for another time) could be had, at your door in a matter of days, for half that.
Ebooks also were a slow-burner, and have been talked about since the 1990s. But until the rise of the Kindle and similar inexpensive, always-online hand-held devices, there wasn’t much of a commercial argument for them. But again, the speed of take-up of ebooks since 2007 has been phenomenal. Amazon jumped in and dominated the ebook market and the ereader device market with Kindle and drove the perception that ebooks should cost $9.99 or even less. (And remember, while Dymocks tried to start selling ebooks in 2007, Australians only got access to the Kindle store in late 2009, to Kobo in May 2010, Apple iBooks and Google Ebooks both in Nov 2010, and local start-up Booki.sh in January 2011. This is all very recent.) In Australia, ebooks are currently about 10% of publishers' revenue, but in the US ebooks now make up a quarter of mainstream publishers' revenues and there are many titles, especially in genre and popular fiction, that are ebook-dominant or ebook-only. The proportion of books sold as ebooks will continue to grow. Will it plateau? We don’t know.
The 2011 collapse of REDgroup, the private-equity funded owner of Borders and Angus & Robertson, wasn’t directly due to online competition or ebooks. The business model and culture of REDgroup was really at fault. But the aftermath has been very instructive. REDgroup’s market share – at least a high-teens proportion of mainstream Australian book sales – just hasn’t been replaced. That proportion of the retail market was already gone – gone online and offshore. Local publishers are suffering, of course, and many have reported that their sales are 20% or more down.
The future: ‘Established ways of doing business … have changed forever’
I’m going to move away now from the historical explication and get dot-pointy with some assertions and predictions about where things are headed. It’s important to note that all the following assertions are ‘and’ statements, not ‘or’. There will be print books and ebooks. There will be large publishers and small ones. There will be bookshops on our streets and there will be online sellers delivering to our doors or to our devices. There will be authors who do exceedingly well by self-publishing and handling their own affairs, and there will be authors who will benefit from having a traditional publisher back them. But what is clear is that the established ways of doing business in bookworld have changed forever.
‘Book culture’ in Australia is currently very healthy: there are writers festivals all over the country that draw crowds into the tens of thousands; most nights you will find a book launch or author event being held at a local bookshop; children’s authors are out and about in schools and libraries; literary magazines are going gangbusters; and genres such as romance and sci-fi/fantasy, with their passionate fans, are holding more and more and bigger and bigger events.
Australians currently read as much as ever, but their buying patterns have changed dramatically already and will continue to change.
Nielsen BookScan’s pie that shows 1/3 market share for each independent bookshops, chain stores and Discount Department Stores such as Target and Big W doesn’t include local online sellers, let alone overseas ones, and doesn’t measure ebook sales. The pie is more likely split five ways, Amazon and Book Depository combined (now under common ownership, remember) have almost as much market share as any local sector – worth hundreds of millions of dollars. This is where the ‘missing 20%’ has gone from the local market. Their share will continue to grow, and we won’t get it back. More and more of the bestselling titles will be bought online as ebooks or in print, and many consumers' default online choices are offshore. We are now dealing not just with Amazon but with Apple and Google: the global book industry is utterly tiny in comparison to these behemoths.
While ‘book culture’ in Australia is very healthy (and diverse, not just literary), there are no real signs that the pool of readers is increasing, and it may well shrink as babyboomers die off and the next generation’s reading/consumption habits change. While there is a lot of book buzz, is it all preaching to the converted?
The 1991 parallel import legislation is dead next change of government, but might not even be necessary by then. Readers are doing their own importing, and publishers have been forced to move closer to simulataneous release for many titles (although is 14 days any better than 30 in a ‘want it now’ online world?)
Global English-language rights will become more and more prevalent, as will simultaneous world-wide publishing. Where this leaves author tours, writers festivals and associated marketing, which until now has been staggered with territory-by-territory release dates, is a key problem.
(Near-)parity pricing will be essential, even if it seems commercially suicidal, and will need to move quickly with currency fluctuations.
The local offices of global publishers have already contraced and will continue to have to ‘rationalise’ and restructure as the market shifts. One or more may leave this market altogether, or may even cease to exist globally The ‘Random Penguins’ will likely be the first of a number of mergers: will it be Harper & Schuster next?. Almost all the biggest trade companies are part of diversified international cross-media businesses: how much longer will these companies – News Corp, Viacom, Lagardere, et al – want to own a book publishing arm?
It’s possible that one or more of the well-known Australian independent publishers won’t be able to weather the changes and will have to close or merge
More bookshops will close, I suspect in suburban high-streets and regional towns next, both indies and franchise-owned chain stores. However, existing inner-city stores, mainly indies, will prosper if they continue to be smart and proactive with their connections to reader communities.
Among the online-only retailers, will there be more diversity, or will Amazon eventually steamroller everyone? (and/or also diversity as niche, online genre specialists and ‘social reading’ sites hook into communities – but utilise affiliate revenue rather than being ‘retailers’ per se).
‘Showrooming’ may well be legitimised, with publishers paying for (even more) display space in prominent stores, yet content to see customers buying online.
Book distribution will need to shrink, physically, yet improve service levels and tech smarts dramatically. In Aust, we can’t maintain all these ‘sheds’ owned by individual publishers (however, indie publishers are reliant on this third-party distribution …).
A consolidated distributor (maybe B&T, maybe Ingram) will emerge (athough it might be offshore: NZ or S-E Asia).
Prizes as publishing (aka the Vogel model) will become even more common; advances (and even royalty income) will be much less of a sure thing for authors. Getting a second and subsequent book published will be harder and harder, the semi-career of being a mid-list author is in severe danger.
‘Worthy’ publishing will be even more subsidy-reliant, but as reaction to the recent BISG report has shown, the book trade will have a hard time convincing government to give more funding. Mooted OzCo changes may well enshrine a number of subsidised publishers as ‘the keepers of OzLit’.
In many cases, Australian publishers will have to accept more of an ‘incubator’ role for local authors and be prepared to lose authors to big international players.
Australian publishers will increasingly need to base their lists on titles for local consumption and learn to live without many sales of O/S-originated books.
Accentuating the positives
The local industry will be more ‘Australian’, with less of its energies focussed on promoting the O/S-originated titles that have been their bread and butter.
Authors/books with obvious global potential will get there, and probably quicker.
Lit mags and small publishers are flourishing and will become even more important, as incubators and as the home for adventurous publishing (they also have less of a financial imperative … passion over profit).
There will be more use of agile technology: ebooks, apps, PoD; books will be made successful by appealing directly to communities of readers, online, and less so by mainstream media.
But … where’s the money?
Where’s the money? What size of local industry will be financially viable? I suspect it will be considerably smaller than what we have now. What will happen to skills? Will authors, and freelance/part-time bookmakers, be able to afford to continue? If we lose even moderate economies of scale, will local books be even more expensive to produce and even less likely to return a profit?
Whatever the shape of the Australian book industry in the future, it will be small and independent local publishers keeping the flame burning.