PUBLISHING

Red all over

Canada’s publishing industry is in trouble

VICTOR DWYER April 22 1991
PUBLISHING

Red all over

Canada’s publishing industry is in trouble

VICTOR DWYER April 22 1991

Red all over

Canada’s publishing industry is in trouble

PUBLISHING

As they gathered in Toronto early this month to discuss the state of their industry, the two dozen delegates of the Book and Periodical Council, representing various groups connected with the publishing industry, were visibly distressed. For several weeks, rumors had been circulating about serious financial troubles at Hurtig Publishers Ltd. in Edmonton. And two respected Toronto book publishers, Summerhill Press and Lester & Orpen Dennys, had recently shut down. But there had been even worse news just prior to the April 4 gathering. A newly released Canadian Book Publishers’ Council survey indicated that with the GST in place and Canada in a recession, book publishers’ sales in the first two months of 1991 had dropped 30 per cent from a year earlier. Another study, commissioned by the federal department of communications (DOC), showed that several of the country’s most established domestically owned publishing houses were facing “significant financial risks.” Said delegate Jacqueline Hushion, executive director of the Toronto-based Book Publishers’ Council: “I have never seen people so unnerved. Everyone just felt beat up.”

Since then, it has become clear that a number of large and medium-sized Canadian-owned book publishers are fighting for their lives. Some told Maclean ’s that they are releasing fewer titles to reduce costs: Toronto-based Key Porter Books Ltd. says that this year it is reducing its Canadian list by 30 per cent. As well, some companies have begun dramatically reducing author advances. And insiders warn that the worst may be yet to come. Jack Stoddart, chairman of Toronto-based Stoddart Publishing Co. Ltd., one of the country’s top three publishing houses (along with McClelland & Stewart Inc. and Canadian Publishing Corp., which are also both based in Toronto), said that if sales do not pick up this spring, “you’ll see

layoffs like you’ve never seen in this industry.” The DOC study, conducted by the Toronto accounting firm Price Waterhouse, explores the economic underpinnings for such measures. The company scrutinized financial statements for 1987 to 1990 of Stoddart, McClelland & Stewart and three other, unnamed English-language publishers—as well as those

of Lester & Orpen Dennys. All six companies had gross revenues in excess of $1 million each year, and were collectively responsible for 37 per cent of all Canadian-authored book sales in Canada. Among the study’s most troubling findings was the fact that several of the companies had slipped into “a heavy deficit position” by 1989.

Since then, such directly negative influences as devastating sales and diminished Canada Council funding have combined with the political uncertainties surrounding the national unity debate and free trade talks with the United States and Mexico to create a crisis atmosphere at the top echelons of Canadian publish-

ing. Acknowledged Anna Porter, publisher of Key Porter: “Things are looking very, very bad out there.”

Still, there may be relief from hard times ahead. Communications Minister Marcel Masse and his Ontario counterpart, Minister of Culture and Communications Rosario Marchese—whose province is home to almost all of the nation’s larger publishing houses—are reportedly working on rescue measures to be announced some time this spring. Analysts believe that Masse has gained a fair degree of support for his proposals from such high-level cabinet colleagues as Deputy Prime Minister Donald Mazankowski, Immigration Minister Barbara McDougall, External Affairs Minister Joe Clark and Minister for International Trade John Crosbie. It is not clear, however, whether Masse has succeeded in getting crucial backing from Finance Minister Michael Wilson.

According to one federal insider, who re-

quested anonymity, Masse hopes to have cabinet approval by mid-May for a series of proposals benefiting all cultural industries. He added that Masse is “especially anxious to address the dire straits” of Canadian-owned book publishers. Among the likely proposals: toughening restrictions on foreign investment to help bring more of the industry into Canadian hands; strengthening protection for publishers who buy the Canadian rights to foreign books; offering new tax incentives; and providing immediate funding to replace postal subsidies that the government began phasing out in 1990.

Those proposals would address some of the structural weaknesses that have plagued Cana-

dian book publishing for decades. Chief among them is the inundation of the market by cheaper products originating outside Canada—what Mel Hurtig, president of Hurtig Publishers, calls “the smothering domination of our book industry by foreign publishers.” U.S. and British publishers and distributors operate 42 Englishlanguage branch plants in Canada, which controlled 62 per cent of the $900-million domestic anglophone book market in 1989. Benefiting from economies of scale, those companies can sell books for less than Canadian publishers charge without seriously eroding their profits.

Meanwhile, the country’s 199 Canadian-controlled, English-language houses produced roughly three-quarters of the 3,743 Canadian-authored, English-language titles in 1988 (the last year for which statistics are available). But they have to fight vigorously to sell their more expensive products, especially in recessionary times.

DOC sources say that the minister plans to help Canadianize the industry by closing several technical loopholes in the so-called Baie Comeau policy that he introduced in 1985, during his first term as communications minister.

The policy requires foreign companies that acquire ownership of Canadian-based publishing houses to sell a 51-per-cent share to Canadians within two years. In meetings with Masse last summer, several publishers complained that the government has applied the policy unevenly while failing to censure several foreign investors who have found ways to gain effective—if not legal—control of publishing firms in Canada.

While advocating stronger restrictions

against foreign takeovers, the publishers urged the communications minister to support any new investment policy with financial and tax incentives to attract more Canadian business people into the industry—incentives that Masse is reportedly trying to convince the cabinet to establish. Said Avie Bennett, president of McClelland & Stewart: “If they did a few concrete things to make it financially worthwhile to be Canadian-owned, more peo-

ple might want to be Canadian-owned.” Canadian publishers also claim that the federal Copyright Act fails to protect publishers who buy exclusive, so-called agency rights to distribute specific foreign books in Canada. Some of those books are among the most lucrative for publishers, who say that their biggest titles include American self-help manuals and fiction by such fixtures on the best-

seller list as Danielle Steel and Robert Ludlum. Under current practice, booksellers and libraries can circumvent Canadian agents and save money by buying the same books from American wholesalers, who stock thousands of titles for distribution worldwide. Said Stoddart: “Agency books give you a bit of quick cash flow—and under Canadian law, someone is able to just steal that cash away.” With tighter controls, he added, Canadian publishers would have more money to publish Canadian titles—and be less dependent on government help. DOC insiders say that revising the Copyright Act is among proposals that Masse is presenting to the cabinet.

Publishers have also been lobbying Ottawa to speed up implementation of a $25-million fund for Canadian-controlled book publishers. The fund, which Masse announced in June, 1990, was designed to help book publishers survive the government’s phase-out of postal subsidies that had been in place since the late 1950s. Those subsidies were available for book shipments made by both Canadian and foreigno controlled companies. Ottaz wa is planning to begin dis~ tributing the relief fund in 1992, but publishers say they are confident that Masse recognizes their need for immediate capital and is trying to release money sooner.

They are less confident, however, that the government will address one of their biggest problems—the GST. How the industry will be affected by consumer aversion to the sevenper-cent tax—the first ever applied to books and periodicals in Canada—is not yet known. Although some perennial book buyers, including

libraries and school boards, receive government rebates for four-sevenths of the tax, most have set aside part of their book-buying budgets to cover the other three-sevenths. And several industry officials said that the federal rebates may end up in school boards’ general revenues, rather than being earmarked for books. Said Hushion: “My guess is that these funds have turned into windfalls for the coffers of those institutions.” At the retail level, meanwhile, no comprehensive figures are yet available on the GST’s effect on buyers, but several booksellers that Maclean’s contacted said that sales had dropped by up to 10 per cent from a year ago.

For his part, Roy MacSkimming, a policy consultant with the Association of Canadian Publishers, claimed that widespread unease over the upcoming free trade discussions among Canada, the United States and Mexico could jeopardize Ottawa’s support for Canadian culture. Although the Canada-U.S. Free Trade Agreement exempts book publishing and other cultural industries, U.S. Trade Representative Carla Hills has said that she wants to change that in the new round of negotiations. Said MacSkimming: “My fear is that this time, the United States will get a sympathetic hearing.” Political divisions within Canada may also pose new challenges to publishers. They express the concern that with Quebec demanding exclusive jurisdiction over its cultural sector, Ottawa may relinquish control over the area, and there will be no central authority left to protect their interests.

But there may be encouragement for the industry in one province: Ontario, where the seven-month-old NDP government will deliver its first budget in a few weeks. According to Marchese’s publishing adviser, Sherrill Cheda, the minister is working to persuade cabinet colleagues to approve a new agency, modelled on the Ontario Film Development Corp., that would finance the operations of Canadianowned book and periodical publishers in Ontario. That money would be in addition to about $2 million in annual loan guarantees and more than $2 million in grants that the province currently provides.

Canadian publishers say that unless governments come to the rescue with such programs, the country’s book culture could wither. Stoddart and others acknowledge that they are already concentrating on better-known authors at the expense of newcomers. And if things get worse, there may be fewer firms that specialize in the work of younger writers. Last month, Ottawa-based Oberon Press announced that it may have to close after three years of losses and a 30-per-cent cut, to $68,000, in its Canada Council funding for 1991. In its 24-year history, under the guidance of owner Michael Macklem, Oberon has produced more than 400 Canadian titles and launched such authors as David Adams Richards and W. P. Kinsella. Those accomplishments point vividly to the loss that Canada will experience if the publishing industry does not recover from its present depressed state.

VICTOR DWYER