Publishers and consumers in Canada who had become accustomed to a Canadian dollar at par with the American dollar are adjusting to what appears to be the new reality: a Canadian dollar hovering around the 90¢ mark. In January, the loonie, as it is nicknamed (for the bird on the C$1 coin), hit its lowest level since 2007. While the lower Canadian dollar has some benefits for publishers exporting to the U.S., it makes imports very costly and is creating pressure that will likely result in higher prices for some books.
Though Simon & Schuster Canada launched a new domestic publishing program in 2013, its business is primarily imports. President and publisher Kevin Hanson noted that the Canadian market has some unique challenges as a heavy importer of books from both the U.S. and the U.K. “We have to be very nimble in figuring out what the right price is,” he said. “In the U.S., the market is dominated by domestically published books, and there are pricing effects through inflation but not through currency [fluctuations].” U.K. publishers typically acquire rights and publish books themselves, but the Canadian market is too small to publish most foreign books domestically, he said. “With imported books it makes it a little bit complicated when you have highly volatile exchange rates.”
Hanson also noted that Canadian government policy allows publishers importing books to add 10% on top of the exchange rate and U.S. price. If their prices go beyond that ceiling, Canadian retailers can choose to buy the book directly from an American supplier.
HarperCollins Canada president and CEO David Kent keeps close track of the exchange rate, and the Canadian dollar’s recent fall is hurting his company. “Our business is great. What kills us is that every time we lose a [basis] point, we lose hundreds of thousands of dollars,” he explained. A strong HC domestic publishing program helps to offset the decline in the Canadian dollar, but it’s not enough to compensate for the increased costs, Kent said. “The fall list is great, but what I’m concerned about is that there are no economies of scale here, and so much depends on the books that we import from the U.S. If those are going to be 10%–15% more expensive, and we have to try to sell them for the same price, how do you make that up?”
Kent said he doesn’t think publishers have much choice except to raise book prices. HC has the advantage of owning its own distribution arm, which can adjust to currency fluctuations quickly by stickering new prices at its warehouse. But the prices may not go up enough to cover the increased costs, Kent said.
Canadian publishers are very conscious of the fact that Canadian consumers—who have become accustomed to prices that are close to, and in some cases the same as, U.S. prices—will notice the differential on books that are printed with both U.S. and Canadian prices. Publishers and booksellers still have bad memories of Canadian Finance Minister Jim Flaherty holding up a copy of a Harry Potter title as an example of book prices that were out of synch with exchange rates, as the Canadian dollar reached parity with the U.S. dollar in 2007.
Another challenge, Hanson said, is that “we don’t know whether the dollar is going to fall further or whether it is going to solidify. The challenge is fortune-telling what the dollar is going to be.” Some of Canada’s major banks have predicted that the loonie will fall to 85¢ or even lower this year.
Hanson said he expects that prices will rise modestly, but noted that pricing “is on a book-by-book basis…. We watch the trend and see which ranges the book price can operate in, and you start pricing at the range that you think it is going to fall into.”
The picture is much brighter for publishers that export books. David Caron, copublisher of Toronto’s ECW Press, said that the decline in the Canadian dollar means an increase in revenue for the company. “We’re in a place where 60%–70% of [our revenue] comes in through U.S. dollars, so when the U.S. dollar is higher than the Canadian, then our revenue is that much higher.” But a lower Canadian dollar can also increase some of ECW’s expenses, such as distribution fees that are in U.S. dollars.
Caron said ECW frequently prints a single U.S./Canada price on books, but still uses dual pricing as well, taking into account what price it thinks a particular book will sell for in each country. “For instance, even if a book could be priced C$19.95 in Canada and $14.95 in the States, we wouldn’t price it that way,” he explained. “We might go a buck or two [higher] in Canada than in the U.S., so C$16.95/$14.95, because that’s just over 10%, and that’s a reasonable spread depending on where the dollar is.”
Firefly Books president Lionel Koffler said the effects of the change in the exchange rate are just starting to be felt at his company, which also exports a large portion of its books. “We’re just getting paid now for sales we made in September, October, and November, so until now there’s been no money to convert,” he said. Koffler added that the lower Canadian dollar isn’t a “total windfall” for Firefly, because the company has plenty of expenses that are paid in American dollars, such as commissions for sales reps in the U.S. and shipping costs. Koffler has no plans, however, to change Firefly’s longstanding practice of par pricing. “It’s confusing, we think, to the customer [to have two prices] on the book, and it’s just simpler for everybody,” Koffler said.
The new exchange rate may also benefit Canadian printers. Koffler noted that the falling Canadian dollar “does make it better for us to print in Canada and to do more activities [here]. If we had a choice between an American or a Chinese supplier, or a Canadian one, now it’s a bit better for us to choose a Canadian one, if other things are equal.”
