Indigo Books & Music's decision to abruptly change its co-op terms has surprised and dismayed Canadian publishers. Indigo won't publicly disclose the details of agreements with vendors and wouldn't comment on the new co-op plan, but an e-mail from Bahram Olfati, v-p of adult trade, informed publishers of three major changes effective January 1, 2011: "1. Co-op will be charged for all titles sold chain wide based on POS reports, including online for all books shipped from our new DC. 2. The co-op fee is set at 4% of cost of goods sold of each book. 3. All titles with orders of more the 800 units for our LF [large format] stores will receive table placement."
One of the problems the publishers who agreed to speak to PW about the matter had with the new plan was that it means a loss of control for them. Previously, publishers had been able to determine which of their books would receive co-op placement, paying on a per title basis for a particular period of time. Indigo made offers to which publishers could accept or reject. Indigo will now take control of that decision, arguing that the new plan will be more interactive and effective for everyone because it will "enhance marketing efforts and promote sales based on individual store successes."
Olfati also said that Indigo "will continue to work closely with the publishers to make sure that all new authors and titles needing special attention/promotions receive front of store placement" and that "all titles of more than 800 units will receive table placement."
One publisher of a mid-size company, who asked to remain anonymous, said that the 4% figure wouldn't represent much change from the money the house is currently spending, but he was concerned that placement is only guaranteed for buys of 800 copies. "That would cut our number of placements in half," he said. "They said that that's just a guideline and there's going to be a number of placements that will take place even though the buy is below that number of copies, and that they'll be working with the sales reps on what those placements are." In spite of this assurance, it is an uncomfortable power imbalance for the publishers, who don't know where in the store the placement will be.
The publisher added that the mandatory way this system was introduced to publishers with no discussion also raises questions about the relationship between Indigo and publishers. "As one person in the industry put it, it's a tax," he said, adding that publishers have no choice but to pay it.
Marc Côté, publisher of Cormorant Books, said he was also surprised by the manner in which the change was introduced. "It's a done deal, either sell to us on these terms or don't [sell to us at all].... For the last few years, they've tended to be much more open to discussing things," he said. Côté was also worried about the added expense, particularly in cases when the publishers have already paid co-op fees for particular books this year. "Let's say we paid $1,200 to get 1,200 books on tables and we sold those books at $10 apiece, so really we sold them at $9 apiece... and now we're going to get hit with 4% as the book sells, if it sells next year.... We're paying again."
He added that the 4% alone for new books will still be onerous. It may also be detrimental for writers if that cut triggers a typical clause in contracts that determines whether they will receive a full royalty payment or only half.
Côté remained hopeful about having input into placement decisions and Indigo's understanding of small and independent publishers. "At least in our case, the [Indigo] buyers have been extremely careful about what they want to promote. They don't ignore us, they don't try to get us to buy in very often, and they are very careful about how they do it."