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Beaujolais, Books and Barbecues

The Book Business in an Uncertain Economy
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Kim McArthur, president and publisher of McArthur & Company, and Derek Weiler, writer and editor of Quill & Quire, provide a fascinating insider look at Canadian publishing as we head into 2009 with a faltering economy and Book Expo Canada under the microscope. The interview was conducted via e-mail on December 15th and 16th, 2008.

DW:

I guess the thing on everyone's mind these days is the faltering economy and how that will affect the holiday selling season. How badly do you think the book business will be hit?

Some argue that in hard times, books are actually attractive purchases, since they still cost less than so many other items. Or is that just wishful thinking?

Also, Canadian publishers had a rough ride in the media (and in bookstores) last year because of the currency effect. With the dollar having dropped again, though, many new books actually represent a very good deal this fall. Do you think that will counteract the general financial unease at all? I suspect getting the word out is the tricky thing there: we're probably not going to see nearly as many "books are now priced for value" stories on the news as there were "books are a rip-off" stories last year.

So how about you, what kind of season are you anticipating? Are you doing anything differently this year in light of the economic situation?

KM:

Just finished our sales conference, complete with Beaujolais Redux/Happy to (Still) Be Here 10th anniversary party in our offices last Wednesday night.

The usual wonderful group that attends our annual Beaujolais fall launch (booksellers, media, agents and authors) came thundering over to celebrate the fact that we’re still here and to feast on lambsicles delivered fresh from Bistro 990. Interestingly, all the booksellers noted that festive parties are few and far between this season due to the economic crise. They were delighted that we had anything to celebrate at all (as are we!).

The economic situation is front of mind at the moment and was particularly noticeable with our visiting UK publishers last week. The demise of Woolworths has meant the closing of Entertainment UK (with the loss of 700 employees last Friday) and the ongoing shakiness of Bertrams. This has the British book trade in an uproar -- it could not come at a worse time than December, the busiest time of year for all of us. Since Entertainment UK was also the supplier for Tesco, that is a large chunk of the UK book trade not getting resupplied as Christmas looms ever closer.

Like Le Clézio in his Nobel speech, I am a huge proponent of the theory that books and the business of bookselling and publishing thrive during recessionary times. Books are fantastic entertainment value and always have been. Consumers may not have the money to buy new cars, but it is our firm hope and belief that they will always have ten or twenty dollars to invest in a book, which will provide them with hours of entertainment. (As Jack Rabinovitch always says at the Giller Prize gala, "For the price of dinner for two in Toronto, you can buy all five of the books on the Giller shortlist!")

Yes, as you note, Canadian publishers with books coming up from the US had a very rough ride last year due to the currency's suddenly going to par and above the US dollar. Now that the Canadian dollar is back to the exchange rate it was prior to last year’s bubble, publishers with US books are scrambling to re-price back up. But the mood is a far cry from the nasty and sometimes violent reaction to ‘sticker shock’ that booksellers and publishers encountered last year.

The Christmas buying frenzy has not yet hit in full force (it does get later and later every year), but booksellers at our party last week were saying that actually they were doing fine year on year, and in fact up a bit from last fall. They (and we) hope and expect a bump this week, this weekend and next Monday, Tuesday, Wednesday. The fact that so far we have had nothing like the blinding snowstorms we had last year has helped sales and foot traffic. What news from your end?

DW:

I was sorry to miss this year's Beaujolais party. It does seem like the party circuit has been a little light this fall, though that's completely understandable. And there were lots of events at the International Festival of Authors (IFOA) in October.

Regarding holiday retail sales, at Quill & Quire we've been hearing similar things from bookstores: that so far they're not having a bad fall at all. Part of that optimism, I'm sure, arises simply from the contrast to last year's consumer unrest over book prices. When your customers are screaming and pitching books at your staff, there's nowhere to go but up, I suppose.

On the other hand, it does also seem like the retail collapse that's hitting the States hasn't been felt to nearly the same degree here yet. Whenever I've been out in the stores in the past couple weeks, I've marveled at how busy they've been. And that goes for both Indigo and indie stores.

Maybe I'm pessimistic by nature, but I do wonder what will happen after the holiday mania passes and we get deeper into the spring season in a period of financial uncertainty, or worse. So far the Canadian industry's been hit lightly -- a couple layoffs here, a couple there -- but I suspect there's more to come in 2009. I know books are reasonably priced (although most other entertainment products are as well, from CDs to movies to DVDs), and for die-hard readers, they'll be the last things to cut from the monthly budget. But if there were plenty of die-hard readers out there, well, we'd all be making more money.

I want to follow up on pricing in a future e-mail, but, first, there's one piece of recent good new that I was happy Q&Q was able to report: that McArthur & Company is hanging on to the Hachette UK lines. For readers who don't know, the multinational publisher Hachette pulled its US lines from H.B. Fenn and Company, the Canadian agent and distributor, and decided to market and sell its own titles in Canada. But they opted to keep the UK lines with McArthur & Company, which had been distributing and selling them for years.

So: as the recession wears on and things get rocky for large US companies, do you think the Hachette US model will start to look like a tempting option for other firms? I assume the thought is to save on commission and distribution fees by shipping and selling themselves, directly from the US. In a case like that, what can a Canadian distributor or agent do to convince their clients of their value?

KM:

And we missed you too at the ‘Beaujolais in the Office’ party. However, many glasses were raised in the direction of the Quill & Quire and its small but mighty staff (rather akin to M&Co now that I think of it).

Hachette US is by no means the first to test this ‘warehouse and sell directly from the US; market in Canada’ option. Of course, we all know that Random House, McClelland & Stewart, Simon & Schuster and others warehouse and ship directly from the US (but still sell, design, edit and market here in Canada). However, Perseus has been working on this new ‘warehouse and sell direct from the US’ method for a couple of years now, sending their US chain reps up to call on Canadian chain accounts and getting Canadian PR agencies to do marketing and publicity only (no editorial) from Toronto. Interesting.

We’re just delighted that we will be selling the Hachette UK lines for at least another year, shipping out of the HarperCollins warehouse in Toronto, as we have done for the past ten years. Having Maeve Binchy at # 1 for six weeks during October and November (Heart and Soul is now at # 2), plus Ian Rankin’s Doors Open with a solid nine week run during September and October has not hurt the thinking that shipping UK books from the UK to the US and then to Canada, plus having US sales reps sell the UK lists, might not be the best option for Hachette UK going forward. Not much in the way of savings once you add in all the double freight and customs brokerage charges, and we do have years of experience selling these UK lists -- to the great advantage of the authors and publishers we represent.

Speaking of changes, Reed Exhibitions is bustling around meeting with various publishers this week to let us know what’s happening with BEC (Book Expo Canada) in June. At this point, it seems that BEC in June is off, and that plans are possibly afoot to have a Toronto consumer/trade show similar to the Salon du Livre in Montreal some time in the fall. Haven’t met or spoken with Reed yet on this round of visits, but I for one will really miss BEC in June.

In the fall there is a vast array of competition in Toronto (Word on the Street, IFOA, etc), and the independent bookstores from across the country haven’t a hope in hell of making it to Toronto at their busiest selling time of year. I realize that the ROI (return on investment) so much talked about by the multinationals is not great at BEC in June. Perhaps it’s because we have always had only four BEC booths, both when we were Little, Brown Canada and now as McArthur & Co, that I have always enjoyed BEC in June. To me it’s always been $25,000 well-spent dollars for our tiny booth, and we have always brought in all the visiting authors we can -- lots of great lineups for the people who will be hand selling our fall lists out of the stores. It’s great to see all the booksellers (Indigo and indies) from across the country, to meet with the media and plan the fall marketing and author tours and to introduce our leading authors (this year it was our Canadian and international mystery authors) to the booksellers and media at BEC. In past years we have had Ian Rankin, Joanna Trollope, Penny Vincenzi, Quintin Jardine, Ann Granger and many, many more to BEC to meet booksellers from across the country. What we’ll do this year remains to be seen, but I can appreciate that the publishers who take the larger (much larger) booths are feeling the pinch, especially in these economic times.

Have just had another horrifying party and BEC-related thought: what will become of our BEC BBQ??? (And thank you again for the great 10th anniversary cupcakes that you and Alison brought to that party this year!)

DW:

We haven't heard anything official from Reed regarding the June BookExpo, but I can't say I'm surprised at the prospect that they're folding it. The proposed revamp they unveiled a couple months ago didn't seem to come close to addressing most publishers' concerns.

I'll be sorry to see BookExpo as we know it go. True, it was an exhausting few days every June, and for publishers, at least, it was expensive. (Not so expensive for Q&Q, since our booth was always tiny, and the last couple years we didn't even have one.) But to me, an annual gathering seems like a pretty crucial sign of a healthy industry. I guess the typical model is that a trade show brings in money, which helps fund convention programming -- panels, seminars, roundtables, etc. -- and the all-important networking at receptions and get-togethers. But that model seemed to slowly break down over the past few years.

Part of it is the shift in the Canadian retailing landscape. When one vendor (Indigo) gains a disproportionate share of the market, people will naturally start to wonder about a trade show that, let's face it, is most efficient for a larger and more fragmented marketplace.

Some ask why publishers just didn't radically downsize their booths and cut costs without bailing on the show altogether -- which is basically what Reed proposed -- but I couldn't see that working, either. I have the sense that the booksellers who DO come definitely want to see the bells and whistles of author signings, cocktail parties, etc.

Even if the trade show does go for good, I do hope the industry comes up with some mechanism for a convention-type exchange of information and perspective. Whether via an expanded IV Club (which, for our readers, was a more industry-oriented meeting that took place at last year's IFOA) or some other model.

And hey, if there's a barbecue, I'll come, BookExpo or no BookExpo.

I'll be curious to see what they come up with in terms of a consumer show in September. They're supposed to be having a big group meeting in January with more details. My gut feeling is that it will have to be a free event, since I'm not sure Toronto can support another fall paying consumer authors' festival besides the IFOA. And even a free event would still have to compete with the Word on the Street, no? Still, if I'm skeptical of it all, I've been wrong many times before and I wouldn't mind being wrong again.

Getting back to the pricing issue, you mentioned earlier that publishers are scrambling to shift their prices up to reflect the change in the loonie's value. I've already been noticing this in stores, though it's worth pointing out that even after the shift, Canadian consumers still seem to be getting a bargain if you look at the exchange rate. Hopefully that will stimulate holiday spending, too.

But for no other reason than to play devil's advocate: Many cynical consumers assume that publishers are much quicker to RAISE their prices, when the exchange rate is disadvantageous to their bottom line, than they are to lower them when it's the other way around. Is there any truth to that, do you think?

KM:

It will be sad if BEC as we know it goes. What I don't think Reed expects (having offered us publishers the possibility of taking fewer and smaller booths that cost more money in June) is that if the June show gets cancelled many publishers and booksellers will throw in the towel altogether as regards an industry-wide trade show at any time during the year.

It's also been rumoured that Reed and some multinational publishers toured the Salon du Livre in Montreal three weeks ago with a view to holding something similar in Toronto in September/October/November. As mentioned in my last email, anything later than early September runs into Word on the Street, IFOA and the busy fall season.

The fact that the Salon du Livre is the only French language game in town (make that on the continent) every year does not seem to be coming into play in these BEC considerations. Having attended Word on the Street all these years (we gave up our booth after realizing that the consumers and their children thundering through are much more interested in free children's books and posters than anything else) and taken a good run at 'Booked' in league with BEC and the associations last year, I really wonder how many consumers will support yet another fall event. Also worth keeping in mind is that the Salon is purely a commercial show, wide open to the public from the opening bell. There are no trade-only educational seminars and panels, just plenty of books and author signings. Every publisher has a cash register in their booth, and I'm not sure how well this would play with our Toronto (or national) chain and indie booksellers. I attended the Salon last month, and it was enormously exciting to see such enthusiasm about books and authors. There were signings aplenty, as at BEC, but no freebies -- publishers made what money was to be made, and cash registers were busy at each booth.
However, even at the most successful booths such as Lemeac/Actes Sud, Boreal, Hachette and Benjamin News, I didn't get the impression that the money being pulled in during author signings was covering the cost of the booths. Back to the dreaded ROI (or lack thereof) I guess. It will be interesting to see how this all plays out.... Maybe the smaller Canadian publishers will run their own version of BEC in June.

Regarding pricing -- I know from discussing with my US-agency-carrying colleagues that we (publishers and retailers) are all responding to shifts in currency levels as quickly as we can. Given that frontlist books are printed months ahead of currency changes, it's a real tightwire. I won't even get into the horrors of trying to change prices on backlist, or what fun big backlist houses such as Penguin, Random House, Wiley and HarperCollins have been going through, but I'm sure readers can imagine the trauma of trying to guess how the dollar's shifts up and down are affecting pricing, stickering, etc. It ain't pretty!

I really wonder how the economic situation is going to affect all of us in 2009. Some of the magazines at last week's kneesup were aghast at how advertising revenues have 'fallen off a cliff' in the past two months. I think we'll all have to be as nimble and responsive as possible to keep our respective companies and the industry as a whole thriving and viable.

DW:

Yeah, it's been a struggle for the magazine business as well, even before the economic meltdown. Everyone agrees that the future is online, but no one's quite figured out the business model.

At Q&Q, we've been doing an online newsletter for more than eight years -- first as a PDF e-mailed to subscribers and then as an ever-growing website that has several new stories added per week. (This is all in addition to the regular print issue, although we did drop the print frequency from 12 issues per year down to 10 a couple years back.)

Our online news service runs on a separate subscription, which is a little counter to the trend of putting up everything for free and getting page views in an attempt to generate online advertising. But we are looking into ways to boost the ad revenue as well.

Digital delivery is a big issue for the book industry, too, with a similar challenge: shifting content to digital formats is an outlay of costs, time, etc., but with no clear business model on the other side, the return is uncertain, at least in the short term. (The costs are especially relevant for Canadian publishers that don't have the resources of multinationals behind them.) There are also fears of piracy -- what happened to the music business early in this decade is a cautionary tale for everyone, although the parallels to publishing aren't actually that strong.

In general, I'm a supporter of giving away SOME content for free online, which a few publishers have experimented with. If a consumer reads a short story by Pasha Malla and likes it, they're more likely to go out buy Malla's book -- after all, unlike reference information, fiction and narrative non-fiction is still going to go down easier in print format for most readers.

So I guess my last question for you is: how do you see the digital future shaking out? How much pressure do you feel as a publisher to get into that market? What are your options?

OK, that was a few questions.

KM:

Re: your questions about digitization: we still believe that the printed book is the most portable, easiest to manage and easiest to access format for our fiction and non-fiction.

Of course with all printing being done digitally now, books printed from film are in the ancient archives. Nowadays, when we need to reprint books such as The Power of One (now in its 16th reprint in Canada), we have to scan and digitize them first so that the printers can carry on printing. No choice about that really.

Because of our size (small), digitization is more a necessity than an investment to be mulled over. Bigger companies with enormous backlists such as HarperCollins, Penguin, Random House et al really have some tough decisions to make when it comes to digitizing all those backlist titles that are now in film form, or allowing them to go out of print.

Hachette UK is testing a few digital editions of their lead titles this season, for reading on Kindle and Sony readers -- we have the luxury of seeing how that works out before investing in it ourselves. For the moment, many editors in the UK and the US are downloading manuscripts to their e-readers rather than lugging them all over town, especially when reading submissions from agents and authors.

We watch with horror as many book sections in major newspapers in Canada (the Montreal Gazette, the Globe and Mail) are cancelled, cut down, folded into the main sections of the newspaper and migrate online. It seems to be the way of the world though -- two book review editors in London lost their jobs last week, and no newspaper has a standalone book section in the UK any more. The Q&Q online is terrific, and near-daily updates keep us all alert and abreast of the news. When it's publishing news-related, rather than an actual book, I do think online and digitization is the way to go. We don't have world enough or time to discuss the Google schoogle -- another time!

Have a brilliant holiday, and may your days be merry and bright throughout 2009.

DW:

Yes, shrinking books coverage is a depressing trend. It does indeed seem to be the way of the world, though, and the sad fact is that for most newspaper book sections, advertising support has been drying up for a long time.

One compensation is that there are a lot of talented and dedicated bloggers out there looking at individual books carefully and thoughtfully. Q&Q's own review editor, Steven W. Beattie, leaps to mind; he maintains an excellent personal literary blog at stevenwbeattie.com. But he's one of many.

The only problem is that the online lit community seems to be largely talking to itself. Publishers are getting intelligent consideration of their books -- which is all anyone can hope for -- but that coverage isn't really gaining the attention of anyone who doesn't already care deeply, the way it might if it was featured within a newspaper's pages.

Anyway, it's been a real pleasure virtually chatting with you. Thanks for everything, and have a great holiday yourself. I'll see you at some point early in 2009, I'm sure.

Kim McArthur

Kim McArthur is the President and Publisher of McArthur & Company, which was founded in Toronto in l998. McArthur & Company is a Canadian-owned and operated trade book publisher and exporter of quality Canadian and international fiction and non-fiction for adults and children. McArthur founded the company in May l998, when Time Warner closed Little, Brown Canada, a subsidiary which McArthur had started and run since l987.

In its first ten years of operation, McArthur & Company has had 65 bestsellers, including 25 #1 bestsellers, split between Canadian and international authors, and between fiction and non-fiction titles. M & Co’s authors have been shortlisted for 14 awards in Canada, including the Giller Prize, the Leacock Award, the W.O Mitchell Award, the Trillium, the City of Toronto Award, the National Business Book Award and the Charles E. Taylor Prize, and have won 7 of them. McArthur & Company is now one of the top three Canadian-owned publishers of Canadian fiction in Canada.

Derek Weiler

Derek Weiler has worked at Quill & Quire since 1999 – first as a staff writer, then review editor, news editor, and now editor. He has also worked as a book editor and has written for several other publications, including the Toronto Star, Saturday Night, Chatelaine and The Globe and Mail. A graduate of Centennial College’s Book and Magazine Publishing Program, he also has an MA in English Literature from the University of Waterloo.

The views expressed in the magazine are those held by the authors and do not necessarily reflect the views of Open Book: Toronto.
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