PIRs. My thoughts and response to Allan Fels

Thanks for the additional links to recent articles from The Age, Reneespeak. I'm glad you listed Allan Fels' Reading through the Lines, I’ve got a general response to his article…

The PC does not say that repealing PIRs will lead to cheaper books – I don't know how Fels can assert that it does when this is not in their report. He’s made his own theoretical leap (and even if there are savings to booksellers ensuing from an open market there’s no assurance that these will be passed on to the consumer). Perhaps the fact that this is inconclusive is one of the reasons why the federal government has asked for a working group to be formed to respond to the PC report prior to any decisions about PIRs being made. (This is not the sole reason: scrapping PIRs will have large and negative consequences for employment in the industry – 10% shrinkage the PC says; the suggestion from the PC of subsidies instead of PIR protection needs to be developed and explored in greater detail if it is to have any credence; and if PIRs are removed, how to curb the extent of the negative effect on cultural externalities – as the PC terms it – needs to addressed.)

Fels also asserts that the PC report finds books more expensive in Australia than in comparable foreign markets and that this is due to Australian PIRs. Again, another leap, the PC does not state this. Instead, the report consistently mentions that it doesn’t have accurate, current and relevant data to make price comparisons and that comparisons are largely dependent on (amongst other factors) the strength of the Aussie dollar (which in most of 2008-9 made Aussie books on average comparably cheaper). Even the price comparisons that the report does use do not overwhelmingly show that books in Australia are more expensive than the same editions in overseas markets. Many publishers also provided the PC with their own analyses which points to the same result. But perhaps this is off track. After all, when did anyone say that Aussie books were always cheaper (Fel’s second sentence)? Leaving this aside, what the PC report did conclude was that PIRs exert an ‘upward pressure’ on book pricing (NOTE: the PC reached this conclusion through economic theory rather than actual evidence). But this conclusion is different to Fels’ assertion that Australian books are more expensive than in comparable foreign markets and that this is all because of Australian PIRs.

So what’s the problem? If Aussie books can compete in pricing with their foreign counterparts why can’t PIRs be removed? Well, I have a limited understanding of this whole issue (and am readily confused) but I think the crux is this: if PIRs are removed Australia could be inundated with a flood of remaindered stock from foreign markets – stock that foreign markets can’t sell which will be picked up cheaply by book wholesalers and retail chains, and dumped in Australian stores. This remaindered stock, injected into the Aussie market, will mean that there are ‘cheap books’. These dumped books could then potentially compete with Australian products. There is a distinction between these types of books and the price-compared books mentioned earlier – these books will be unsellable product from other markets, their value in their own domestic markets has crashed, so they can now compete with Aussie books at an unbeatable level. Cheaper, yes, but…

From what I can see, most of the content of this cheap supply of books will be crud and there will be no Australian equivalent (same book, different version) so really there is no problem (apart from this crud being read by Aussies potentially at the opportunity cost of other, better Aussie books). But perhaps as Bernard Keane (Crikey) points out we should have faith in the Aussie consumer and in what they will and will not purchase/read. There will be a problem if the dumped books compete with Australian (unremaindered) versions of the dumped books – if there is the same book available from a foreign publisher and it is a lot cheaper, the consumer may not necessarily know what they are missing out on – price will be the only hook.

A primary export designer I work with is often asked to change content of our primary educational textbooks to meet the needs of overseas markets. Over the last two years, these are some of the content modifications she's made:

1) for a book on where milk comes from: remove the udders on a cow as it was too sexually explicit
2) for a book about Ancient Egypt: add tops to the men so nipples and chest are not seen (the men now have toga tops which is historically inaccurate)
3) for a book on building dams: remove the word ‘dam’ from title and in-text citations, ‘dam’ is too close to ‘damn’.

These examples are humorous but sobering. Can you imagine this content reentering our shores and being purchased instead of the original Australian version? This goes beyond ‘mom’, ‘color’, ‘gridiron’ and ‘faucet’…

So, back to Fels. The PC report did not say that removing PIRs will make books in Australia cheaper nor did it say that our price comparisons with like books in foreign markets show that Aussie books are more expensive because of PIRs. Yes, there is the potential that removing PIRs will enable cheap books to be available to Australians but most of these will be the castoff crud not wanted by other territories (why should we?) or, much more dangerously, they will compete in price but not quality of their Australian equivalents. I doubt this dumping will make Australian books cheaper on the whole.

Again, I don’t know extensive amounts about this issue and I do get befuddled so correct me if I’m missing something or oversimplifying. Also, apologies for length – I wasn't going to blog about this issue further as it isn't strictly class content... but I got swept along when writing about it.