Discounts
on the Danube
Battle
Over Price Maintenance
Roils The European Book Trade
FROM PUBLISHING
TRENDS (SEPTEMBER 2000)
In case
there was any doubt about it, German culture minister
Michael Naumann will not go gently into his country’s
cultural good night. Portraying himself to the media
as a lonely lookout on the prow of the Titanic,
scanning for the iceberg that will plunge German literature
to the depths of commercialism, Naumann has in effect
declared war on the free market. And that means cut-price
bestsellers are still verboten in Germany, where publishers
have staunchly defended the century-old practice of
maintaining fixed retail prices for books. Their stance
was affirmed last month when the deeply discounted future
came knocking in the form of 14 European Commission
minions, who raided several German publishers — among
them Bertelsmann — seeking evidence that they
colluded to cut off distribution to savvy Austrian Internet
bookseller Libro, which on July 1 began selling
more than 100 German-language bestsellers into Germany
at a 20% discount.
July 1
was the fateful date that Germany and Austria agreed
to abandon their commitment to one another’s retail
book prices after bowing to EU competition commissioner
Mario Monti, who has crusaded against cross-border
price fixing on the grounds that it presents an illegal
restraint of trade. This skirmish on the Danube over
what is known as resale price maintenance has highlighted
the vulnerability of European book markets to vanishing
trade barriers. But the battle over fixed prices transcends
economics to pierce the very heart of what it means
to sustain a literary culture amid a one-world zeitgeist.
“For
smaller language zones like Germany, book price maintenance
is very necessary,” says Eugen Emmerling, a spokesman
for the Börsenverein, the German publishers and
booksellers alliance. “We must ensure a future for a
variety of independent bookshops and publishing houses.
In Germany we value freedom of speech.” Those are fighting
words in a country where more books are sold per capita
than in any nation save for Britain. Emmerling and others
argue that fixed prices ensure “literary productivity”
and “diversity,” because deep discounting by chains
and Internet booksellers threatens the existence of
small, literary booksellers and publishing houses. They
warn that the abolition of price-fixing would put two-thirds
of Germany’s 6,000 bookshops out of business. It would
also cut back on the 900,000 books in print in Germany,
where the new title output reached an all-time high
last year of 80,779. “We have more new titles in Germany
than in other countries,” explains Emmerling, “and we
think that the system of the fixed book price can help
retain this variety and stop conglomeration in the book
trade.”
Yet critics
note that the German book biz has been under siege from
imports for some time now. The Weekly Standard
examined a leading bestseller list and found that only
a quarter of the top hundred titles in Germany last
year were written by German-speaking writers. Within
the top ten, in fact, there was only one German speaker.
By contrast, more than 40 of the top hundred titles
were British or American works. In other bad news, the
German book market just turned in its second flat year
in a row, with sales up a slim 1.5% to $8.3 billion.
Given such numbers, it’s not hard to see why Germany’s
culturati are on the defensive.
“The whole
issue is loaded with emotions,” says agent Michael
Meller, who adds that matters aren’t helped any
by the fact that in Germany the publishers association
and the booksellers association are one and the same.
Clearly, Germany’s publishing establishment holds a
passionate faith in the Buchpreisbindung, which
has been in effect since the 1880s and exempts books,
magazines, newspapers, calendars, maps, and globes from
the free market. Thus Harry Potter fans had to shell
out DM44 (about $20.40) for Goblet of Fire on
Amazon.de, while UK readers had it for a breezy
$13.50. By comparison, US readers could find it on Amazon
for $15.57. Meller says that while price maintenance
protects the small booksellers in theory, in practice
those booksellers are being driven out of business by
chains such as Hugendubel, Phoenix, Douglas,
and Germany’s biggest bookseller by volume, Kaufhof.
Then there’s a joint venture between Hugendubel and
Weltbild called “Weltbild Plus,” a sort of book
club that specializes in “Modern Antiquariat” knock-offs
of successful titles. Meller also notes the irony that
the recent McKinsey report to the Holtzbrinck
Group expressly advised the publisher to stop cross-subsidizing
titles — that is, subsidizing slow-selling literary
titles with the proceeds from bestsellers — in order
to re-establish profitability.
The
‘Cultural Exception’
Of course,
Germany is not the only nation resisting a free market
for books. The French have fiercely guarded the “cultural
exception” that protects the nation’s culture from foreign
incursion. French book prices are strictly maintained
under the 1981 “Loi Lang,” named for former French culture
minister Jack Lang, which permits a maximum discount
of 5%. And last year, French culture minister Catherine
Trautmann even vowed that her government would pursue
a pan-European fixed-price regime when it assumes the
six-month term of EU presidency this year. As in Germany,
however, the state of literary affairs in France seems
somewhat compromised. The Académie Française
recently declared that a lack of interest in French
literary life “is on the verge of completely eliminating
knowledge and appreciation of literature.” And if they’re
worried now, just wait till Amazon debuts in
France this month.
As for
the rest of Europe, several other nations have moved
to block book discounts. Portugal passed a fixed-pricing
law a few years ago, and Greece implemented a price
regime last year. But most observers agree that the
long-term tide seems to be turning against trade barriers.
Finland and Sweden dumped fixed pricing in the 1970s,
while in 1996 Italy junked an agreement between some
publishers and booksellers not to supply books to retailers
that discounted deeply. And Spain recently authorized
the discounting of textbooks (they were considered too
expensive), while Denmark has severely cut back its
pricing scheme.
Meanwhile,
all eyes are trained on the UK as a free-market case
study. In 1995, British publishers abandoned their hundred-year-old
price-fixing scheme, known as the “net book agreement.”
But thus far, the predicted demise of small booksellers
has not come to pass. “We were anticipating a very detrimental
effect on the independents,” says Ian Taylor,
director of international and trade services for the
Publishers Association. “But it hasn’t been as
damaging as we expected.” Independents who decline to
discount titles such as Harry Potter are still “doing
very well,” and a growth of wholesalers in the UK has
had a cushioning effect, as discounts from publishers
are passed on to accounts. Indeed, only about 900 titles
were discounted out of the 150,000 published in Britain
last year, according to Frank Fishwick, economic
adviser to the Publishers Association, who adds that
book prices have risen much more than general inflation.
The country has also seen stronger sales of hardcovers,
as consumers seem prepared to buy a discounted hardcover
rather than wait for the paperback (which is the same
phenomenon that killed the mass market biz in the US).
Other evidence shows that the number of new titles has
been growing at about 5% per year. And how do publishers
feel about the end of price maintenance? “Most publishers
in this country don’t have an opinion,” Taylor says.
“They’ve simply moved on.”
Booksellers
apparently feel much the same. “It’s over, dead, and
buried as far as we’re concerned,” says Sydney Davies,
trade and industry manager for the Booksellers Association.
“The whole trade has changed since it was outlawed.
Booksellers now see their competition more from the
Internet and from American chain booksellers opening
in the UK.” He says the number of bookshops has decreased
only marginally since the end of price maintenance,
while chains have opened more branches and nontraditional
outlets are selling more books.
To some
observers of the European price wars, the rhetoric on
both sides of the issue has a familiar ring. “It’s an
argument that’s been present in the book trade for a
very long time,” says Laura Miller, an assistant
professor at the University of Western Ontario who studies
the book trade. “The idea is that books are not simply
another commodity.” Miller points out that in the US,
publishers formed the American Publishers Association
in 1900 (along with the ABA, which is of course
still with us) to battle price-cutting department stores.
Then in 1913, she says, Macy’s won a lawsuit
against publishers, and the APA was subsequently disbanded.
The booming postwar years made price maintenance irrelevant,
and the federal government put an end to such practices
in 1975. By that time, however, discounting was considered
a dandy way to sell books, and publishers couldn’t even
recall what the ruckus over price maintenance was all
about.
It’s still
unclear whether the Europeans will take a similar turn.
For the moment, German publishers have persuaded Libro
to stop discounts on German titles. That agreement,
however, was being reviewed by the EU for evidence of
collusion to restrict cross-border trade. Meanwhile,
trade warriors are keeping an eye on Belgian online
bookseller Proxis, which sells to the Netherlands,
France, and soon to Germany. As Meller sums up, “Now
it’s all up to the courts and will take another decade
to be resolved. In the meantime booksellers will disappear,
publishers will be rudderless, and the Internet is the
bogeyman!” Maybe bookselling in Europe isn’t so different
from America after all.
©2000
Publishing Trends
