COLUMN

Closing the book on government

Ottawa should stay out of the bookpublishing industry and let international forces determine which firms survive

DIANE FRANCIS June 12 1989
COLUMN

Closing the book on government

Ottawa should stay out of the bookpublishing industry and let international forces determine which firms survive

DIANE FRANCIS June 12 1989

Closing the book on government

COLUMN

DIANE FRANCIS

Ronald Besse has carved out one of Canada’s biggest publishing empires from scratch in just 11 years. His conglomerate, called Canada Publishing Corp. of Toronto, owns Gage Publishing, Gordon V. Thompson Music Publishers and Macmillan of Canada, among others. His nearest rival in terms of sales, with about $40 million in annual revenues, is 70-per-centAmerican-owned McGraw-Hill Ryerson, which, ironically, Besse had run as president until 1977 when he left to do his first acquisition. Now, atop the biggest book business in the land, Besse says that Ottawa’s so-called protectionist “Baie Comeau” policy—named for the meeting place where Marcel Masse announced his new policy designed to restrict foreign ownership in the book industry—is misguided and has misfired. Said Besse: “To me, it’s government meddling in the private sector. It simply cannot work.”

Besse is right. The 1986 policy was a bone that the Mulroney government threw to a vocal minority within Canada’s literary set, which had spoken loud and long that free trade would result in the Americans overrunning our cultural industries. Although such concerns may have been appropriate two decades ago, they are not now. Similar outcries in the 1960s and 1970s resulted in heightened awareness by—and increased sales of Canadian books to—the book-buying public and such tax-supported institutions as Canadian libraries and schools. Now, the Canadian publishing industry is alive and well, and the foreign-owned portion is either sensitized to Canadian concerns or has sold out long ago.

But for mostly political reasons, the same old accusations were trotted out during the free trade debate. Uncharacteristically, the federal Tories, led by Communications Minister Marcel Masse, reacted with this ham-fisted and unnecessary “Baie Comeau” policy. Although Canadian governments are entitled to initiate policy, including unneeded policy, the real danger inherent in Baie Comeau is that it may

Ottawa should stay out of the bookpublishing industry and let international forces determine which firms survive

spark protectionism south of the border against Canadian media conglomerates, which have been buying up U.S. print, broadcast and publishing assets for decades. Thomson Newspapers, Maclean Hunter, Québécor, Rogers Cable and Hollinger are among those who own dozens of cable ventures, several hundred newspapers and thousands of periodicals in the United States.

Despite the obvious hypocrisy, the policy triggered the expropriation last month of two Canadian subsidiaries, GLC Publishers and Ginn & Co., from their parent, entertainment giant Gulf + Western Corp. The policy dictates that if ownership of any Canadian book publisher changes hands, control must be sold at “fair market value” to Canadians within two years. If a fair market price is not obtained, then Ottawa will buy it. That’s what happened. Gulf + Western was forced to sell the two companies, which had been acquired along with their U.S. parent companies during a Gulf takeover spree. Rumor has it that Ottawa paid $9 million for them.

Besse says that Ottawa paid twice the going rate and that he is annoyed because his government is using his tax dollars to compete against Canadian publishers like him. And he is right.

The fair-market-value formula is unrealistic, set at roughly 20 times the annual profits of the subsidiary, the usual price paid for publishing assets in the United States. However, in Canada, where the market potential is about onetenth the size, a multiple of 10 times profits is in order. Not only that, but the companies’ values are automatically less because they have been forcibly amputated from their parents, who supplied staff, capital and authors.

Such interventionism is unneeded as long as Canadians and large institutions, including the Canadian school system, continue to buy Canadian-made books. Even when there is foreign ownership, the lion’s share of the money stays here. For every $10 worth of book sales, the author makes $1, the store $4, the publisher’s printer and typesetter $2, the publisher’s editorial and promotional staff $2, and the publisher’s profit, if there is any, is $1. That means that the money accrues to Canadians no matter who owns what. The biggest beneficiaries are their Canadian sales and editorial staffs, their Canadian writers, their Canadian landlords, their Canadian printers and their other Canadian suppliers.

Critics counter that the real danger of foreign-owned publishers is that they do not hire local authors, nor do they manufacture here, but they distribute imported books. Besse says his biggest foreign rivals, including McGrawHill and Prentice Hall, derive about 60 per cent of their sales from Canadian-authored products. And the grant system to authors and publishers subsidizes those books, which may be important but are economically marginal to produce. (By comparison, U.S. writing subsidies come largely from nonprofit foundations set up by philanthropists or rich families to escape death duties, not from governments.)

While the importance of creating literature is often the focus, facts are the most important cultural underpinning in any country. The good news is that Canadians dominate their $85million textbook market with some 75to 80per-cent market share, estimates Besse. And a Baie Comeau policy is unnecessary to protect this in the future. A foreign onslaught is impossible because Canadian-elected school boards, teachers or provincial curriculum specialists dictate what books will be bought and what books will be approved for use. Besides that, the reality of the marketplace is that American texts for the elementary and high-school level are rarely in the running because they seldom deal with subjects of interest to Canadians.

Despite all that, publishing protectionism continues to hold currency politically and is undoubtedly due to a misconception that Canadian publishers are starving. That belief was underscored, over the years, as high-profile literary publishers, as well as several smaller ones, kept coming to the public trough for help. But Besse dismisses it and says that Canadian publishing is alive and well and making lots of money. “Harlequin is one of the largest publishing companies in the world and is Canadianowned,” he said. “What about Thomson or Anna Porter or General Publishing or me? We are for the most part very successful and do not need handouts.”