Wednesday, November 26, 2008

To intervene or not to intervene

A new report, commissioned by the UK Booksellers Association, which compares the UK bookselling industry with five other markets: Ireland, the US, the Netherlands, Sweden and Finland, has reignited the whole debate about the Net Book Agreement (NBA) and discounting. The Benchmarking Study concludes that British bookshops are making less money, seeing less market growth, and giving away more in discounts than the five other countries surveyed. UK bookshops are also making fewer profits per book.

There has been some growth in the UK market though, with volume sales up 19% (4% excluding Harry Potter) in 2007 over 2006, according to Book Marketing Limited. However, the 2008 figure – and more particularly perhaps, as we enter recession, the 2009 figure – may make salutary reading.

The Comments section on the Bookseller’s website has been heavy with responses Should there be some sort of compromise NBA, which limits the discount on new titles, or perhaps does not allow discounts for the first two months of a book’s release? Julian Rivers, who for years was Terry Maher’s right hand man at Dillons when Maher led his campaign against Retail Price Maintenance (RPM), believes “one should not substitute legislation for commercial common sense”. He believes publishers have abandoned a consideration for the whole market and have concentrated too much on pleasing the supermarkets. The result, of course, is that ‘proper’ bookshops suffer.

Yet Hachette UK is making a stand here, and independents have recognised it and applauded it. Hachette UK CEO Tim Hely Hutchinson has said many times that UK publishers have already given away too much in discounts and that enough is enough. Trouble is, of course, publishers brought this situation upon themselves by abandoning the NBA and therefore letting the supermarkets become major players: publishers want supermarkets because that’s how they can achieve the volume sales and get their books into the charts. And so it goes on.

So much of life comes down to free market versus intervention arguments. Why have speed limits? Sod it – how dare anyone tell me how fast I can drive? But of course, the reason we have intervention here is that it is better for everyone. The interventionists are having a good time at the moment, thanks to the global financial crisis.

Europe, in its widest definition, is roughly split over intervention on pricing. RPM, either as law or a trade agreement, exists in Austria, Denmark, France, Germany, Greece, Hungary, Italy, Netherlands, Norway, Portugal and Spain. There is no RPM in Belgium, Estonia, Finland, Ireland, Latvia, Luxembourg, Poland, Russia, Sweden and the UK.

The US, of course – the traditional home of the free market – may not have RPM, but it does have the Robinson-Patman Act. It has alway struck me as ironic that the UK is now arguably more free market than the US. Doesn't the US also have some sort of cap on the earnings of sports stars too? There are some who believe the UK needs something similar - certainly in the book trade, perhaps even when it comes to footballers.

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