(This article was originally written in 2002)
Lately the media have portrayed Canadian book publishers as coddled corporate welfare recipients who are protected from foreign competition. Calls for letting the market sort things out---even if this means that dozens of publishers go under---miss the point that this sector, here and abroad, has always lived in an environment shaped, and sometimes distorted, by government intervention.
Over the past seven years, Canadian book publishers have been subjected to a trial by fire. Facing an acute short-term crisis, as well as longer-term challenges, the industry now is in an alarmingly weakened condition.
The acute crisis has its origins in the transformation of the book-selling sector with the creation of the Chapters superstore chain. In 1995, Chapters started building large-format bookstores in every corner of the land, driving out long established, locally owned booksellers. The company established Pegasus, its own book wholesaling operation. Without a green light from Ottawa’s Competition Tribunal, the rise of the monopolist bookseller would not have been possible. With Ottawa’s blessing, the ecology of book marketing in Canada was completely altered.
Initially appearing to be an unbeatable company, Chapters turned out to have feet of clay. The company overbuilt in relation to the size of the market. It ended up as a failed real estate venture, imperiling Canadian publishers as its problems deepened.
Thrashing about for survival, Chapters’ management seized on a strategy of cutting back its purchases of new books, returning vast quantities of books and making tardy payments to publishers. The consequence was a cash flow problem for many Canadian publishers. In February 2001, Heather Reisman, owner of the rival and smaller Indigo chain, acquired Chapters’ 77 superstores and 204 mall stores for $121 million. The Chapters’ bloodbath was stanched, but many publishers were left in a state of anemia.
Last month five companies in the General Publishing group run by Jack Stoddart received bankruptcy protection for debts that totaled almost $46 million. Among other business problems was the collapse of his distribution business---General Distribution Services. GDS has been the vital link between Chapters/Indigo and 60 small to medium sized Canadian publishers. Seventy-five per cent of books that were distributed by GDS went to Chapters/Indigo.
The crunch has come for many publishers because Stoddart’s company has not been able to pay them for their sales. Today, individual companies are owed anywhere from a few thousand dollars to over a million dollars. In all, the Canadian owned publishers are owed over $5 million and General is estimated to have at least $15 million of their inventory in its possession. The publishers, as unsecured creditors, are last in line to get money from General. Many publishers are owed more than 25 per cent of their annual sales. Under the circumstances, some publishers could go under while others could end up limping along with reduced staffs and curtailed publishing plans.
Last fall, fearing that General Publishing was a domino that could take others down with it, the federal government stepped in with an emergency $4.5 million loan guarantee. As it turns out, the guarantee came too late. Maybe it went to the wrong place. In any case, the bankruptcy of General Publishing has left many domestically owned publishers facing varying degrees of disaster through absolutely no fault of their own.
Domestically owned publishers have made a huge contribution to Canada over the past four decades. McClelland and Stewart, Douglas and McIntyre, Key Porter, Raincoast, Coach House, Macfarlane Walter and Ross, and Goose Lane to name a few, have played an indispensable role in nurturing and launching the careers of Canadian authors writing about Canadian subjects for readers in this country and around the world. Margaret Atwood was first published by Anansi and McClelland and Stewart, Michael Ondaatje, by Coach House and Anansi, Robertson Davies by Clarke Irwin and Macmillan, David Adams Richards, by Oberon, and Nino Ricci by Cormorant.
Ottawa needs to step in to see the industry through the immediate crisis. This time it should direct the assistance where it will actually do some good.
Beyond the crisis, there is the challenge of sustaining the industry for the long-term. Canadian publishers have built their industry, and with it the viability of Canadian authors, next door to the largest publishing industry in the world.
It should not be imagined that U.S. publishing emerged from the purity of the free market. For more than a century after the birth of the Republic, when the United States was a huge net importer of cultural works from Britain, under-capitalized American publishers were shielded by a protectionist U.S. copyright law that allowed them to publish British writers without paying royalties for their work. The consequence was that U.S. publishers survived by turning out cheap, unauthorized editions of British novelists, much to the fury of Charles Dickens and others. For American writers, the results of this policy were mixed---there were publishers in a position to market their work, but they were forced to compete on unequal terms with the best-known British writers. The Americans only learned the virtues of international copyright when they had plenty to sell themselves.
No one suggests that Canada head down this piratical road. However, it is a fact that Canadian authors are forced to compete for access to their own domestic market with cheap editions of the work of the best known U.S. authors. That’s why governments have had to play a role in sustaining the Canadian publishing industry. Without the federal government to make a difference---to the tune of about $20 million a year---there would be no domestic industry publishing the works of Canadian authors on Canadian subjects.
On the mundane level that government investment has paid off handsomely in jobs and GST payments to the tune of more than $100 million a year. On a more important level, the benefits have been incalculable. Like it or not, Ottawa is complicit in the travails of Canadian publishers. The Liberal government cannot now bury its head in the sand.
Lately the media have portrayed Canadian book publishers as coddled corporate welfare recipients who are protected from foreign competition. Calls for letting the market sort things out---even if this means that dozens of publishers go under---miss the point that this sector, here and abroad, has always lived in an environment shaped, and sometimes distorted, by government intervention.
Over the past seven years, Canadian book publishers have been subjected to a trial by fire. Facing an acute short-term crisis, as well as longer-term challenges, the industry now is in an alarmingly weakened condition.
The acute crisis has its origins in the transformation of the book-selling sector with the creation of the Chapters superstore chain. In 1995, Chapters started building large-format bookstores in every corner of the land, driving out long established, locally owned booksellers. The company established Pegasus, its own book wholesaling operation. Without a green light from Ottawa’s Competition Tribunal, the rise of the monopolist bookseller would not have been possible. With Ottawa’s blessing, the ecology of book marketing in Canada was completely altered.
Initially appearing to be an unbeatable company, Chapters turned out to have feet of clay. The company overbuilt in relation to the size of the market. It ended up as a failed real estate venture, imperiling Canadian publishers as its problems deepened.
Thrashing about for survival, Chapters’ management seized on a strategy of cutting back its purchases of new books, returning vast quantities of books and making tardy payments to publishers. The consequence was a cash flow problem for many Canadian publishers. In February 2001, Heather Reisman, owner of the rival and smaller Indigo chain, acquired Chapters’ 77 superstores and 204 mall stores for $121 million. The Chapters’ bloodbath was stanched, but many publishers were left in a state of anemia.
Last month five companies in the General Publishing group run by Jack Stoddart received bankruptcy protection for debts that totaled almost $46 million. Among other business problems was the collapse of his distribution business---General Distribution Services. GDS has been the vital link between Chapters/Indigo and 60 small to medium sized Canadian publishers. Seventy-five per cent of books that were distributed by GDS went to Chapters/Indigo.
The crunch has come for many publishers because Stoddart’s company has not been able to pay them for their sales. Today, individual companies are owed anywhere from a few thousand dollars to over a million dollars. In all, the Canadian owned publishers are owed over $5 million and General is estimated to have at least $15 million of their inventory in its possession. The publishers, as unsecured creditors, are last in line to get money from General. Many publishers are owed more than 25 per cent of their annual sales. Under the circumstances, some publishers could go under while others could end up limping along with reduced staffs and curtailed publishing plans.
Last fall, fearing that General Publishing was a domino that could take others down with it, the federal government stepped in with an emergency $4.5 million loan guarantee. As it turns out, the guarantee came too late. Maybe it went to the wrong place. In any case, the bankruptcy of General Publishing has left many domestically owned publishers facing varying degrees of disaster through absolutely no fault of their own.
Domestically owned publishers have made a huge contribution to Canada over the past four decades. McClelland and Stewart, Douglas and McIntyre, Key Porter, Raincoast, Coach House, Macfarlane Walter and Ross, and Goose Lane to name a few, have played an indispensable role in nurturing and launching the careers of Canadian authors writing about Canadian subjects for readers in this country and around the world. Margaret Atwood was first published by Anansi and McClelland and Stewart, Michael Ondaatje, by Coach House and Anansi, Robertson Davies by Clarke Irwin and Macmillan, David Adams Richards, by Oberon, and Nino Ricci by Cormorant.
Ottawa needs to step in to see the industry through the immediate crisis. This time it should direct the assistance where it will actually do some good.
Beyond the crisis, there is the challenge of sustaining the industry for the long-term. Canadian publishers have built their industry, and with it the viability of Canadian authors, next door to the largest publishing industry in the world.
It should not be imagined that U.S. publishing emerged from the purity of the free market. For more than a century after the birth of the Republic, when the United States was a huge net importer of cultural works from Britain, under-capitalized American publishers were shielded by a protectionist U.S. copyright law that allowed them to publish British writers without paying royalties for their work. The consequence was that U.S. publishers survived by turning out cheap, unauthorized editions of British novelists, much to the fury of Charles Dickens and others. For American writers, the results of this policy were mixed---there were publishers in a position to market their work, but they were forced to compete on unequal terms with the best-known British writers. The Americans only learned the virtues of international copyright when they had plenty to sell themselves.
No one suggests that Canada head down this piratical road. However, it is a fact that Canadian authors are forced to compete for access to their own domestic market with cheap editions of the work of the best known U.S. authors. That’s why governments have had to play a role in sustaining the Canadian publishing industry. Without the federal government to make a difference---to the tune of about $20 million a year---there would be no domestic industry publishing the works of Canadian authors on Canadian subjects.
On the mundane level that government investment has paid off handsomely in jobs and GST payments to the tune of more than $100 million a year. On a more important level, the benefits have been incalculable. Like it or not, Ottawa is complicit in the travails of Canadian publishers. The Liberal government cannot now bury its head in the sand.
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