This year Canadian publishers face a triple challenge—tough economic conditions, the first big surge of e-book sales, and a dramatic shift in strategy at Indigo Books & Music, Canada’s largest book retailer. But, as is often said, no one goes into publishing unless he or she is an optimist, so PW is devoting these pages to looking at these challenges for publishers north of the border, and the innovations and strategies they are employing to turn that optimism into results.
So far in 2011, the sales numbers tracked by BookNet Canada have been pretty bleak. In the first quarter of 2011, the number of print books sold in Canada dropped by 10.9%, and by 10.8% in the dollar value of the sales. BookNet CEO Noah Genner attributes the drop to a combination of factors, including the jump in the sale of digital books, difficult economic conditions, and the lack of blockbuster hits that have buoyed sales in recent years. Sales picked up a bit over the summer, with George R.R. Martin’s fantasy series and Kathryn Stockett’s The Help both doing very well and boosting sales figures somewhat. But Genner says, “We’re still seeing the year trending down a little bit over the year before. And 2010 was down from 2009.” As for e-book sales offsetting the decline in print, Genner says he cannot say for sure what the proportions are, as BookNet is still developing a panel to measure digital sales, and he doesn’t expect that to be in place for a year or so.
Still, the big fall season is just beginning, and Canada has a few things going for it. Amid the global economic turbulence, the Canadian economy, relatively speaking, has been an island of stability. In an August article, the Economist concluded that most of the strengths that helped Canada through the recession that hit the U.S. and Europe hard in 2008—tightly regulated banks, a stable housing market, sound public finances, and a strong Asian demand for Canadian commodity exports—would help it through a double-dip recession that some analysts fear is looming. However, there is a downside to that success: the Canadian dollar has soared, to as high as $1.06 U.S. this summer, its highest level since 2007. Although it has come down since, close to par, those heights put pressure on publishers who received a lot of bad press in 2007 when the media and even the federal finance minister used books printed with both U.S. and Canadian prices as an easy target for stories about prices not keeping up with the dollar’s climbing value.
“Pricing is a big issue for us,” says Alison Morgan, managing director of Tundra Books. Because of economies of scale in the much larger U.S. market, prices there are expected to be lower, but since 2007, publishers have been trying to keep Canadian prices close to the U.S. price. “So where we used to have an $8 spread, we’re now trying to do it with one or two dollars and even that meets with some resistance,” says Morgan. “We’re losing margin on both sides of the border.”
Jack David, copublisher of ECW Press, says, “It’s a killer. I wake up in the middle of the night [after dreaming that] the dollar is at 72 cents again.” But he says ECW has found ways to soften the blow, making the new exchange reality work by printing more in the U.S. And because ECW’s books are shipped out of Chicago, the company pays its distributor IPG in American dollars. “So, between printing and sales and distribution, we’re spending a lot of money in U.S. dollars with our Canadian dollars.”
The Economist article also warned that one weakness in the Canadian economy is “its intrinsic vulnerability to the outside world, in particular its American neighbor and biggest trading partner,” and trouble for the U.S. is trouble in Canada.
Some Canadian publishers, such as Firefly Books, sell more books in the U.S. than they do in Canada, and thus feel the impact of events in the U.S. most directly. “There are loads of challenges for us because we have to replace our sales that we used to make to Borders,” says Firefly publisher and owner Lionel Koffler. “And we have both adult illustrated books and children’s titles that sell to school and high school libraries that are missing a lot of their historic funding in the U.S. and Canada. So we have to be very clever and diligent to make more sales out of fewer customers or fewer dollars around.”
Several publishers observed that the market is tougher in Canada than abroad. Rick Wilks, director of Annick Press, says it is “daunting.” The U.S. market is “really tough and getting tougher,” but he says sales in the U.S. “make all the difference” for Annick, along with important international sales, rights, and film sales.
The view from HarperCollins Canada is different. President and CEO David Kent says that the Canadian publishing program remains the most profitable part of HarperCollins Canada’s business. The company just closed a fiscal year with a happy ending that included such highlights as Emma Donoghue’s Room selling more than 100,000 copies and Sara Gruen’s Water for Elephants selling more than 405,000 copies. Perhaps inspired by a series of good years, Kent takes a philosophical approach to the challenges of publishing. He says years ago he told people in the finance department, “ ‘You want predictable. Don’t be in books…. Be in aspirin, be in Band-Aids. You want to be consistent, open funeral homes. Don’t go into books.’ ”
The E-book Has Arrived
For a few years, publishers in Canada have been busily digitizing their lists and backlists preparing for the digital revolution to cross the border. There was a time lag, partially because many of the e-reading devices like the Kindle launched first in the U.S. while Canadian consumers waited impatiently. But now, all the e-readers are here. Many Canadians got them for Christmas and they have been enthusiastically buying and reading on them since. E-book sales in Canada still have a way to go to catch up with sales levels in the U.S., but publishers are watching the e-book portion of their sales rise. “As we pass into 2012, we anticipate more e-book devices being sold,” says Kevin Hanson, president of Simon & Schuster Canada. “We think 2012 will be the year that e-books really have a full impact on the business broadly speaking.”
BookNet Canada is in the process of assembling a panel to track digital sales, so hard statistics are not available yet, but anecdotally publishers surveyed generally believe that e-book sales are about 5%–7% of sales, with higher figures of 10%–12% on some titles. A few houses, such as House of Anansi Press and ECW, report e-book sales are already between 10% and12%. “On certain bestsellers [e-book sales] can be anywhere,” says Leo MacDonald, v-p of sales and marketing at HarperCollins Canada. “It depends on who takes it. If Costco doesn’t take it, it can be a higher percentage. If Costco takes it, it drops. I’ve seen some books up to 50%.” He notes, however, that e-books have a very short shelf-life. “We find that e-books sell like crazy when they are on [an e-retailer’s] home page; once they are off the home page they drop dramatically.”
“E-books are mass market books,” says Kent. “If you look at the categories that do well in e-books they are the categories that do well in mass market—romance, mystery, thrillers. Mass market existed because it was inexpensive and disposable.”
Other publishers make similar observations. Kevin Hanson notes that e-book purchasing is especially high for commercial authors. ”I think in that context we’re actually finding new readers in e-book formats,” he says, noting that the cheaper price encourages people to sample work from authors they haven’t read.components/article_pagination.html not found (No such file or directory)