Op-ed published exclusively on the Montreal Economic Institute's website.
The big news, as far as Canadian culture goes, is that Ottawa’s heritage ministry will allow the US retailer Target to sell Canadian books in its chain of recently acquired Zellers stores. This is news because Target is an American company. In Canada books are not like shoes or televisions. A foreign company wishing to sell books at a certain volume needs government approval. If Ottawa’s decision to let Target sell books is a sign of things to come, then we can expect a large and refreshing draught of competition in the Canadian book industry.
Competition is needed because our book industry ranks among the many industries protected from competition that Jack Mintz, one of Canada’s leading economists, decries because they fatten corporation profits at the expense of higher prices and fewer meaningful choices for consumers.
Recent technological advances in how to publish and distribute books cast doubt on the traditional argument that the "Canadian book" is a delicate creature that cannot survive outside a preserve managed by publishing and retailing wardens toting anti-competitive regulations and subsidies.
First, some facts about Canadian book publishing and distribution. Ottawa gives subsidies to established publishers that may have up to twenty million dollars in annual net sales, and only if they have been in business for at least three years. Small newcomers are not welcome. The direct dollar subsidies are fairly modest: the Canada Book Fund has been providing them with around $40 million a year for the past decade.
Canadian bookstores cannot import books from the US without buying them through Canadian-based publishers acting as distributors. The regulations allow for a ten percent markup over the US price, which is a constant source of annoyance to Canadian readers and of hardship to students paying this markup on already expensive textbooks.
The hidden subsidy that is difficult to evaluate lies in the Investment Canada Act, which requires foreign investments in book retail over five million dollars to pass a government administered "net benefit test." According to Ottawa's own Competition Policy Review Panel, "The guidelines for the process tend to discourage foreign investments. In book publishing, investments other than joint ventures with Canadian-controlled businesses are unlikely to receive approval."
This Act is what allowed Ottawa to discourage US retailer Borders from starting up in Canada in 1996. With American players out of the picture, Indigo was able to mount a hostile takeover of Chapters in 2001 to gain the major share of English book retail. That year, the Chrétien government helped shield Indigo from further competitive pressures by discouraging Amazon from opening warehouses here.
The justification for government meddling is that there is a distinct and recognizable form of writing that can be called Canadian. Only large publishers, retailers, and sympathetic government bureaucrats can nurture Canadian literature and bring by small steps a reluctant populace to an appreciation of its merits. In this spirit Ottawa's Department of Canadian Heritage tells us that it supports "the ongoing production and promotion of Canadian-authored books through financial assistance to Canadian-owned and controlled publishers."
But is such assistance needed? In the last ten years a technology called publishing on demand has arisen that allows anyone to publish a professionally printed book at no cost and make this book available in North America and Europe. It’s so easy that thirteen-year-old kids are publishing novels and making money.
You upload your manuscript to, say, the Amazon or Lulu website where you can design a handsome cover in a few minutes using their easy systems. They can provide you at no cost with an ISBN number and take care of details that go into a book, such as generating and affixing a barcode. The moment someone buys the book one copy is printed, packed, and mailed, at no direct cost to you and generally at no charge to the buyer. Converting your book for electronic distribution is also a snap. The author is now free from the need to pass through a bricks-and-mortar publisher and retailer and receives a bigger royalty.
The free availability of publishing on demand and electronic books calls into question the need for a complicated and costly system of regulations and subsidies. The Department of Canadian Heritage seems ignorant of this new reality. It informs us that "An acute challenge for the Canadian book industry has been connecting Canadian books with readers. Factors such as our small and dispersed population and the logistical difficulties of distribution across large distances make reaching audiences an expensive and complex task."
Perhaps the Department should talk to that thirteen year-old who self-published her book with the new technology at zero cost in defiance of the "logistical difficulties."
If there is a challenge that remains, it is how an author is to market his or her work. As struggling authors will tell you, marketing is one of the lowest priorities a publishing house has for someone who is unknown. Publishing houses market winners, and there is no subsidy needed for that.
Canadians didn’t get the chance to peruse books at Borders, but they now live in a world where borders and distances have become largely irrelevant, at least when it comes to selling or buying books. Any rationale that might have once existed for protecting and subsidizing the publishing industry has now disappeared. It is too much to expect Ottawa to catch up with the times and get rid of such anachronistic policies?
Filip Palda is senior fellow at the Montreal Economic Institute and professor at École nationale d’administration publique. He has self-published his latest book, Pareto's Republic, and certifies it "subsidy free." The views reflected in this op-ed are his own.