With Grant Thornton, the financial company managing the affairs of Canada's bankrupt distributor H.B. Fenn, saying more details about the alternatives it is exploring on the Fenn bankruptcy are still a week or so away, some industry members are questioning whether distribution is still a viable business in Canada. The bankruptcy, others noted, makes the current review of the government about its role in supporting publishing all the more important.
Vancouver's Raincoast Books, which ended its publishing program in recent years to focus on distribution, is the last independent company of size left standing. But Jamie Broadhurst, Raincoast's v-p, marketing, said Raincoast is "very bullish about the future of selling books in Canada" because Canadian reading rates are high, its retailers are nimble, and sales have started to bounce back from the recession. In 2010, Raincoast moved to a new warehouse that has 40% more capacity, and Broadhurst said the company shipped 4% more units this January than in the same month in 2010. Raincoast may pick up some of Fenn's clients, but Broadhurst said it's focused on helping its customers through the current turbulence; it has more than 200 titles from Macmillan, a former Fenn client, in stock.
Although many of the multinational publishers in Canada now ship their books directly from U.S. facilities, HarperCollins Canada and Penguin Canada maintain large distribution businesses. David Kent, HarperCollins Canada president and CEO, said he could not comment on the specifics of H.B. Fenn's situation, but he did outline the pressures a distributor in Canada faces. Digital books have created "an intense pressure on physical book distribution for faster order fulfillment and shipment turnaround," he said. That pressure is one reason why HarperCollins maintains its Canadian distribution facility. "As long as we have copyright protection for our own titles, and importation protection for our own market, in the same way that the U.S. and U.K. can protect their domestic markets for foreign importation, the value of local distribution and the publishing it supports will be maintained," Kent said, but he warned that "if Canadian companies are not given the same protection as our neighbors to the south, then all Canadian book distribution will come from the U.S."
McArthur & Company president and publisher Kim McArthur noted that the Canadian government is no longer enforcing the protection for cultural industries in the ways it used to and that what happened to Fenn may serve as an example of the consequences. Two years ago, Fenn had a severe loss when Hachette Book Group moved its sales and distribution for big national accounts to the U.S. In the late 1980s and '90s, McArthur ran Little, Brown Canada. "I had to warehouse in Canada. I had to be Canadian, which I am. I had to have Canadian staff," she said. "I had to publish Canadian authors from coast to coast, and I had to report to the government every year proving net benefit [to Canada] and I was a multinational. I wasn't getting any funding." So, McArthur said, she was startled to see that Hachette could move so much of its operations to the U.S. with no repercussions from the Canadian government.
As part of its review of its publishing investment policy, the Canadian government held round-table discussions in Vancouver, Toronto, and Montreal in December. An announcement is expected later this year. Carolyn Wood, executive director of the Association of Canadian Publishers, which represents independent Canadian publishers, doesn't make a direct connection between Hachette's move to the U.S. and Fenn's collapse, noting there is nothing in Canadian policy that says that a publisher has to stick with a particular distributor. She pointed out if Hachette had moved to another Canadian distributor, the effect on Fenn would have been the same. But the fact that Hachette was able to establish itself in Canada without a Canadian partner does have a relationship to Canadian policy, she said.
"Net benefit is somewhat in the eye of the beholder," Wood said. There are lots of examples of decisions she would argue were not of benefit to Canada. "We do not believe allowing the retail arm of Hachette, which is HDS, into Canadian airports was of net benefit to Canada. There's lots of these. We're not persuaded that letting Amazon.ca have a physical presence in Canada will be of net benefit to Canada."
Jacqueline Hushion, executive director of external relations for the Canadian Publishers' Council, agreed that Canadian cultural industries need protection. The CPC's members include subsidiaries of multinational publishers, but Hushion argued that even such large houses, which import international books and invest the revenue in publishing Canadian books, are "just at much at risk from a marketplace and from rules that are unclear as a Canadian-owned publisher. It's a different kind of risk, but everybody is at risk."
Publishers in Canada are frustrated that booksellers sometimes break the rules that say they must buy their books from Canadian distributors or wholesalers to get them cheaper from a U.S. source. The Fenn fallout hit a nerve here as well. Hushion said she was upset that Macmillan had recommended that Canadian booksellers temporarily source books from Ingram. "Once you get in that habit, I'm sorry, it's a habit that's hard to break… I was very distressed that Macmillan didn't say… ‘you should buy from your Canadian wholesalers.' There are plenty of them."
Striking the right balance between being "open for business" and protecting cultural industries will be a challenge for the Canadian government. "There's a lot at stake on that and we are anxiously awaiting the outcome of that policy review," Wood said.