HERI Committee Meeting
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STANDING COMMITTEE ON CANADIAN HERITAGE
COMITÉ PERMANENT DU PATRIMOINE CANADIEN
EVIDENCE
[Recorded by Electronic Apparatus]
Thursday, April 13, 2000
The Chair (Mr. Clifford Lincoln (Lac-Saint-Louis, Lib.)): In the interest of time, I'll declare open the meeting of the Standing Committee on Canadian Heritage.
[Translation]
The Standing Committee on Canadian Heritage is meeting today in order to continue its study of the Canadian book industry.
[English]
Today we are receiving four witnesses, three of whom have appeared before us, but because their hearing was cut short by voting bells, they requested to appear again. So we are pleased to welcome Mr. Larry Stevenson, president and CEO of Chapters Inc.; Mr. Denis Zook of Pegasus Wholesale; Mr. Howard Aster, a publisher from Mosaic Press;
[Translation]
as well as Ms. Carole Morency, Director of Communications, Groupe Renaud-Bray.
[English]
We have a little bit of a logistics problem in that Mr. Stevenson and Mr. Aster have to take an early plane.
[Translation]
I understand that Ms. Morency and Mr. Zook are able to stay until the end of the meeting.
[English]
So we've agreed that Mr. Stevenson will make a short statement first, we'll open the meeting to questions to Mr. Stevenson for about 20 minutes, then Mr. Aster will make a short statement, and we'll let him be questioned until about 12:45 so that he can take off and catch his plane. I believe the two of them are taking the same plane anyway. After that Mr. Zook and Mrs. Morency will be available to us, and they have more time.
So Mr. Stevenson, please carry on.
Mr. Larry Stevenson (President and Chief Executive Officer, Chapters Inc.): Thank you, Mr. Chairman.
First of all, thank you for allowing us to reappear. Given how short the last meeting was, we do appreciate the committee doing this.
Rather than repeating the arguments—and I know we made a submission last time—I thought I'd keep it mercifully short and just address some of the key issues that have been raised since we last appeared before the committee. There are three or four I specifically want to address, and then I'm sure there will be follow-up questions to them.
The first one is probably the most troubling to me, and I just want to clear the air. I don't know whether it was in front of the committee or publicly, but there have been a lot of arguments about whether or not there is freedom of speech. I just want to make very clear that I wrote a letter to the publishers' association saying I thought they should appear and give the facts, because quite frankly I think a lot of what has happened here is death by innuendo, which is not particularly helpful.
In fact, contrary to some of the statements that publishers are not willing to come forward to say negative things about Chapters, which is what I've heard from some members of this committee, to a large extent it is actually the opposite of that. A number of the publishers have called me and have actually said they're not very comfortable coming out and saying anything positive, because quite frankly, whichever way they go on this, they're going to be damned. If they say something negative about Chapters, clearly Chapters is a large customer of theirs and they worry. But if they something positive, then all the rest of the industry, which they also try to sell books to, will have an issue.
So I would encourage—and I don't know enough about the rules of procedure—that there be cross-examination and that people sit in the same room and have the facts. I have to tell you I think the facts will speak loudly and clearly as to what we have and haven't done. It's very hard for us to react to some of these accusations that publisher A said X, since we don't know who publisher A is and we don't know what X is.
• 1110
One of the examples that came up—and it's been repeated in the press
a number of times—is a company called Firefly, which is one of our
suppliers. The allegation was that somehow we at Chapters had, by
using returns, tried to punish Firefly. If there are other examples
in the questions, I'd be more than happy to answer any one, but let me
talk about Firefly, because that's one that has been in the media.
I just want to be really clear: we have not returned books as a way of telling anybody to do anything. We do return books as a matter of course, all the time. In fact if you look at our returns this year, they are smack in the middle of where they've been in the last five years. They have ranged anywhere from 28% to 32%, and this year they're at 30%. So returns have not been abnormally high this year in an effort to actually tell anybody to do anything.
In the specific case of Firefly, the accusation made in the press by one of the independent bookstores was that we had returned a whole whack of goods because they had not chosen to go through Pegasus. Our returns to Firefly in this fiscal year that just ended two weeks ago were $1.07 million. Our returns to that same publisher a year ago, which was pre-Pegasus, were $1.08 million. So let's just have the facts, as opposed to people saying some things they obviously don't have the facts on when they're talking in front of some of the press.
There's one other thing I'd like to talk about. I know the Competition Bureau did appear before, and I read their remarks. What is clear is we disagree on the definition of the market. That's fair; reasonable people can disagree. We have, from the day of the merger back in 1994 when we started the process, believed that anybody who sells a book to our consumer—same book, same consumer—is a competitor of ours. They obviously then, and still do now, as I read their transcript, defined the market more narrowly as, if you're a bookstore and sell anything other than books, then you are not defined as being in the market. I find that an odd definition of the market.
I asked our store staff to take pictures—and I'll circulate them as you're asking questions—of a grocery store called Save-On-Foods, out in Vancouver. This grocery store, which according to the Competition Bureau would not be in the market, i.e., doesn't compete with us, is actually a larger store than our SmithBooks store in Vancouver, which, by the way, is obviously in the market. It is a 2,600-square-foot bookstore that happens to be in the middle of a food store, and it discounts the books more than we discount the books. We had our folks count, and the store has 9,773 titles, compared to our SmithBooks, which has 7,338 titles. So under any definition of the market, in my view, they are a competitor of ours. For people who have not been in these kinds of stores, I would just say anybody who is selling books as we sell books is obviously a retail competitor.
Having said that, reasonable people can disagree. If one accepts the narrow definition of the market, clearly our market share would be higher, I think the Competition Bureau said in the neighbourhood of 35%, as opposed to the 20% to 23% that we define on the broader definition.
I also wanted to share—and I have shared this individually with some members—a little bit of the history of Pegasus. Even though it became public last year, this is something we at Chapters have been working on for three years. The reason we've been working on it for three years is we believed fundamentally it would help the retail business, but also that it was impossible for us to be on-line without actually having a national wholesaler.
As I said the last time we appeared, it's impossible to have an on-line offering that competes with people offering the same books, by and large, from south of the border and who make those books available in 24, 48, or 72 hours, when we would have to have a site that said, “Welcome to our site. We're Canadian, so support us, but it will take 6 to 8 weeks to get you the book.”
Those are the primary ones that have come up, at least that I saw, in reading the transcript of other members who have appeared before the committee. There is a need, and there is tremendous fear of the changes that are happening in the book industry. I would encourage us—and I include us in that definition—to try to find common ground. A lot of things could be done.
I would recommend, for example, a better understanding of why there are so many returns in the industry and what one can do with the chain of books from the time it leaves the printer all the way through to the consumer and back. That would be a smart thing—a smart thing for us as a government, a smart thing for us as a retailer, and a smart thing for consumers. So I'd encourage that. We would be more than willing to be participants in that.
Also, one of the things that pretty dramatically hurt the book industry at the beginning of the 1990s was the imposition of GST on books. I am on record, having appeared before this committee, saying I thought it was a good idea to take GST off books. That would help not specifically independent bookstores, Chapters, or publishers, but everybody in that chain, because it would help us sell more books.
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One concern I've heard is this whole issue of vertical integration
and what would happen if Pegasus were to go and get exclusive rights.
So I also think it is worth looking at making some form of amendment
to Bill C-32 in the distribution rights so that wasn't possible. We
are on record saying we do not have exclusive rights over in Pegasus
and we don't want them. So if there were some legislative change to
that, we'd welcome that as well.
Mr. Chairman, that's all I have in terms of prepared remarks.
The Chair: Thank you.
In the interest of time, could we agree, so that all members have a chance to question Mr. Stevenson, as I'm sure you want to do, to have one question each? Is that fair enough? He's going to leave anyway, so we might as well take advantage of it.
Mr. Mark.
Mr. Inky Mark (Dauphin—Swan River, Canadian Alliance): Thank you, Mr. Chairman, and I thank our witnesses for appearing before us today.
I have two short questions. First, through this whole process, one of the criticisms of Chapters has been tardiness in paying your bills. Could you elaborate on that? And the other one is, how many publishers actually don't have anything to do with Chapters today, compared to, say, a year ago? You lost a lot of publishers through this process.
Mr. Larry Stevenson: On payments, you're absolutely right. The two biggest issues when I appeared before the publishers back in 1994 and again in 1995, at the time of the merger, were that we were returning too many books and we weren't paying fast enough. Those have been perennial complaints, and they are related to how often we do or don't turn our inventory. When we turn our inventory 1.8 times, our view is we pay as fast as we possibly can, which is actually according to history. We're not paying slower or faster than we ever have. But you're right; that is not specific to Pegasus and it's not specific to the year 2000 or 1999. They felt the exact same way in 1994 and 1995. Unfortunately those are our terms of trade with them. It is not a result of the merger. We are paying exactly on the same terms as we used to pay them before.
On the second one, I'm not aware of any publisher we are not doing business with that we were doing business with a year ago. Some of them are going through Pegasus and some of them are coming directly to the stores. In fact we've had a pretty massive increase over a three-year period in the number of publishers dealing with Chapters, a lot of that having to do with stores and, in the last 12 months, with the explosion of the Internet. We are now selling over the Internet the books of a lot of more obscure publishers we may not have dealt with before.
Mr. Inky Mark: Going back to my first question, what would you consider a reasonable timeframe for paying your bills?
Mr. Larry Stevenson: It would be according to the accepted standards of how we've dealt with those publishers for 20 years. There is nothing different today from what was done 15 years ago. Every supplier would love us to pay them faster. We'd love to pay them faster. We'd love to turn the inventory faster and not have an eight-week supply so that we could pay them faster.
Part of the solution to that, by the way, is Pegasus, because we can pay faster if we are actually able to turn the inventory a hell of a lot more by not having it all out in stock at 320 stores.
The Chair: So what is it, 60 days, 90 days?
Mr. Larry Stevenson: Really it depends on the publisher. Some publishers require immediate payment. Some publishers won't sell to us unless we actually pay them beforehand. With other publishers it's 30 days or 60 days; with some it's as many as 120 days. So it really differs by publisher.
The Chair: Mr. Mark, we'll get back to you.
Mr. Inky Mark: On the same question, though, how do you respond to the criticism that you're taking a year to two years to pay your bills?
Mr. Larry Stevenson: Well, that's categorically untrue, and I'd be more than happy for anybody in government to come and check our books. The Competition Bureau, by the way, for the first three years after the merger, did exactly that. They checked our payables on a quarterly basis, and they absolutely were convinced that we were paying exactly the same way we were before. And we're still doing that today. So I'd be more than comfortable for anybody to come and check those numbers.
[Translation]
The Chair: Mr. de Savoye.
Mr. Pierre de Savoye (Portneuf, BQ): Mr. Stevenson, our committee is not here to judge, to find fault or to incriminate. We are here to examine the possibility of passing new laws, new regulations and new policies. You know that your arrival on the market has disrupted old habits. The whole market is disrupted by the level of business activity you maintain with publishers, by the time you take to pay your accounts and by your returns which can be massive.
Do you have any suggestions when the time comes for us to make recommendations that would allow us to avoid disruptions caused by your presence?
Mr. Larry Stevenson: That is a very good question. I will answer in English, if you don't mind.
[English]
First of all, I don't know because I don't know enough about the legislation and what is therefore possible for this committee.
Let me tell you that I do agree that there are big concerns with the changes happening in the industry, which, by the way, I think will get only worse over the next couple of years with things like print-on-demand, like digital download of books. Therefore, some of the boundary issues that today perhaps protect some of the Canadian publishers and distributors will be really under pressure.
My perspective would be that what this committee could do is perhaps recommend that there be some funds put at the disposal of the industry so that a whole group of the industry—publishers, distributors, wholesalers, retailers—could work through what is the best way.
For example, should we move to non-returnable? I have been on record from the first day I was in the book industry as being in favour of non-returnable. The publishing industry for 50 years has not been returnable, so they say that I am a naive outsider who doesn't understand the book industry. But you can't tell me to not do non-returnable and then complain about returns. I mean, those are not my terms of trade. That is not a Chapters thing. We didn't invent returnability. That was done by the book industry, and, by and large, the people who are very keen on it are the very same publishers.
Our returns are better this year than they were two years ago. We returned 32% of our books two years ago. We returned 30% this year. Returns cost us money every bit as much as they cost publishers, because we have to pay the labour to take the books back off the shelf and we have to pay all the financing costs. By definition, we had a book that we had financed, that we had gone to the bank to borrow money for to have on the shelf, and that we didn't sell. We'd prefer not to do that.
From our perspective, I think a large part of trying to become more efficient is through setting up a national wholesaler so that we can actually reduce the returns and increase how fast we do pay. From our perspective, I think this is one of the important things we need to do.
But I do think that this committee is probably in a better position of determining what other things, from a legislative perspective, could be done. I don't know, unfortunately.
The Chair: Mr. Shepherd.
Mr. Alex Shepherd (Durham, Lib.): I heard your comment about putting more money at the behest of the industry. We are already giving money to the book publishers. In my mind, we're indirectly subsidizing your business, because you've in fact rolled back those discounts from the publishers that we've essentially given them. We're already subsidizing Chapters, one way or another, and you're asking for another subsidy.
Then you actually went on to say that you wanted relief from the GST. It amazes me when businesses come here and say they need special tax policies and so forth and then turn around and have their hands out. What's worse is that I've also looked at your financial statements, and I see that Chapters, quite frankly, isn't profitable.
But there's a question I want to ask. In an earlier dissertation, you said something to the effect that it was with regret that you had to restructure this industry and create a wholesaler in Canada. I see that you've sold off a portion of Pegasus. Would you be prepared to do a complete divestiture in regard to Chapters and Pegasus?
Mr. Larry Stevenson: For the right amount of money, absolutely, but we've invested $54 million in this business. I would have been prepared to be a minority investor if someone else would have put in the money. So if what you're saying is that the government would like to buy a big chunk, I'd willingly sell to this government a piece of Pegasus.
Mr. Alex Shepherd: No, no—
Mr. Larry Stevenson: I'd love for you to be on this seat explaining why you're running Pegasus.
Mr. Alex Shepherd: We would like you to go to the market and do an underwriting of Pegasus—
Mr. Larry Stevenson: Absolutely. On the right terms I would do that, but you can't possibly say, well, now, give it away, which is what the publishers had wanted us to do when we wanted to set up in the first place. They wanted us to put in the money, but they didn't want us to have the ownership. That's not feasible. You can't possibly ask shareholders to put in $54 million and then say, “But actually, we don't want you to have any kind of equity return.”
I'm willing. Any consideration where.... But you tell me who is going to give us the money, and if you'd like to facilitate that transaction, we will—
Mr. Alex Shepherd: Well, have you researched with your underwriters the possibility of doing a share offering like that?
Mr. Larry Stevenson: We have not. No.
Mr. Alex Shepherd: So how would you know what the price would be? You haven't—
Mr. Larry Stevenson: Because I've sold a piece of the company for $7.5 million, so I know exactly what that transaction value was. There was an arm's-length transaction with a venture capital firm, so I know what the equity value of that is. They came in before it had any publishers, before it was up and open for business, so that if they get a return on their money and we get a return on our money, absolutely.
Now, in terms of the question about Chapters not being profitable, I must admit, sir, that I'm not real sure about where you're getting your numbers. There are two separate companies. There is Chapters retail, which has been profitable in every single year since we went public, and Chapters Online, which is not profitable, not unlike every other e-tailer in the world.
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The question is, does Canada want to have an e-tailer? I believe they
should. But you can't possibly have a business that has built the
kind of infrastructure it has—so that it can provide an on-line
alternative—making money today. We're not dissimilar from anybody
else there, but there are two separate parts of Chapters.
Mr. Alex Shepherd: Well, this is Chapters Inc., and the way we get bottom lines is net gain on the sales of Chapters Online and the sales of Pegasus. These are book transactions. But if I take those things out of there and actually look at the on-line operations, it doesn't seem to me that it's a profitable business.
Mr. Larry Stevenson: Sorry, but I couldn't hear you. You don't think our retail makes money...?
Mr. Alex Shepherd: That's what your statements show.
Mr. Larry Stevenson: No. Then you're not looking at the full year's statements. In three of four quarters, nobody in the book retail business makes money; they make their money in the Christmas quarter. You have to use the full year. I don't know what numbers you're looking at, sir, but that is categorically untrue. Chapters retail, every year, has made money.
Now I don't know if you want to have it both ways. If you're subsidizing us and we're making money, I don't know whether you'd be more perturbed than if you were subsidizing us and we were losing money. It's your call.
The Chair: Anybody else on the Liberal side...?
Monsieur Bélanger.
Mr. Mauril Bélanger (Ottawa—Vanier, Lib.): Would you describe, if you don't mind, the relationship of Chapters or Pegasus or Pegasus-Chapters with the Manda Group, is it?
Mr. Denis Zook (President and CEO, Pegasus Wholesale): Yes, I can. It's actually a Pegasus relationship. Pegasus has a marketing and sales staff of its own, which we have just put together since the launching of the company, but it's not a large enough one to actually cover the entire country quickly, to try to get the business off the ground and meet with potential customers.
So what we have done is contract two independent sales rep forces. One is Manda and one is Jacqueline Gross and Associates. Both of those companies make their money by representing many different publishers and some other distributors as independent sales reps. They go out and call on potential retail customers, book stores, and sell the books, and we pay a commission if they sell something that we fulfil. We don't pay them unless they get a sale for us.
Mr. Mauril Bélanger: Do they also get exclusive distributorship rights?
Mr. Denis Zook: No.
Mr. Mauril Bélanger: You said they go after publishers.
Mr. Denis Zook: Yes, they represent some publishers.
Mr. Mauril Bélanger: In representing those publishers, they don't have exclusivity...?
Mr. Denis Zook: No. For instance, I believe they represent Sterling. They could sell you a book by Sterling. It would be up to you who you actually get that book from. You've made the choice that you want to carry that book and then it's up to you whether you're buying it from Sterling, from Book Express, if they have it, from North 49, or from Pegasus. You still have the complete choice of who you're buying it from. They're just representing the publisher because the publisher doesn't have their own sales force in Canada.
Mr. Mauril Bélanger: What I'm trying to understand is this: do they become exclusive agents for Pegasus if Pegasus has exclusive distributorships?
Mr. Denis Zook: First of all, we don't have exclusive distributorships. We've said repeatedly that we have no intention of having them.
But no, they're not exclusive to us, nor does anybody have to buy the product from us if they sell it. There's no exclusivity on either side of that.
Mr. Mauril Bélanger: So it's strictly a sales force for you?
Mr. Denis Zook: It's strictly a sales force and it's a way, without having to hire 20 new employees all at one time, to have someone out there calling our customers and offering us as a choice, although we do have our own sales staff as well.
The Chair: Mrs. Lill.
Ms. Wendy Lill (Dartmouth, NDP): I'd like you to answer a question or a statement that has been raised with me several times, that is, that Chapters doesn't really know how to sell books and, very specifically, doesn't know how to sell Canadian books. We are the heritage committee and that's what we're here about: we care about Canadian books and their continual creation.
So the problem exists that once upon a time there were many independent stores that would have titles, have little book promotions, and have book signings. There was a culture around a new Canadian title, whether it was a book of poetry or a play or whatever. It's the culture that seems to have allowed more Canadian creators to exist. There's a real fear that this is not happening anymore, that in fact bookstores such as Chapters do not really know how to sell Canadian books. They know how to sell the big splashy books. If there are certain publishers that will put a lot of money into presentations, they can sell, and the ones at the front of the store that are highly discounted, those sell. But for Canadian children's books, Canadian poetry books, Canadian creators don't sell.
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I want to know what you have to say about that, because that seems to
be the nut of what we care about here. I'd like to know how many
Canadian books and how many Canadian titles you sell, and in your
estimation, how you're doing actually promoting Canadian culture and
not simply just some titles.
Mr. Larry Stevenson: Thank you very much for that question.
First of all, I support it wholeheartedly, and I categorically believe we have been fantastic for Canadian authors. I know our competitors say we cannot sell books, but they can't have it both ways. Either we're selling too many books and that's their problem and that's why they're here, or we actually cannot sell books.
The reality is, according to Heritage—these are not my numbers—Canadian books, Canadian-authored titles, went from being 30% of the books sold in this country to 46% today. We have been part of helping that happen. Trying to break out who was responsible for that 16-point gain is fruitless, but I don't know that we've ever had a better time in terms of the exposure Canadian authors have had.
What are the things we do to help that? We have all kinds of programs, and I listed them in my last submission, pages of things, from the First Novel Award to the Robertson Davies award, to what we do for the Giller nominees, to what we do for the Governor General's Awards—and people from the Canada Council are here. There is not a Canadian author we would not like to help.
We have a small-press feature, a made-in-Canada feature, a Write From Canada feature. We do everything we possibly can to help Canadian authors. We had 18,000 events in our stores; 90% of those who were in those events were Canadians.
Could we do more? We could always do more. I'd love to do some more. But I think the proof is in the pudding, which is, are we selling more Canadian books? The answer is, absolutely, positively, yes.
So that's all I can be judged on, how well we have been selling those books.
Ms. Wendy Lill: On the issue of the number of titles, can you get us those statistics?
Mr. Larry Stevenson: It's a great question. I cannot get you an answer, and I'll tell you why I cannot. It is because a Canadian-authored title is not broken out that way in anybody's database, including ours. You can have a Canadian author that's published by a non-Canadian publisher. You can have a foreign author that is published by a Canadian publisher. I can tell you what our sales to Canadian publishers are, but that doesn't capture it, because a lot of the very good Canadian authors are now either with Random House or somebody else.
I think it's a good question to ask of the publishers—you have a small publisher here—but I think we do an amazing amount to help small Canadian presses. I think that's very important to us, because for us to have been successful.... Five years from now I'd want to be back in front of this committee with people saying, gee, aren't we selling more Canadian books in this country. But isn't it fair to say, aren't we selling more books today than we were five years ago? The answer is absolutely, yes, more Canadian books. So this heritage committee, as opposed to having this hearing, should be saying, what have we done right in the last five years that we ought to continue for the next five years so that this 46% becomes 60%?
The Chair: I'm going to have a problem here. In fairness to Mr. Muise, I'm sure he would like to question you, but at the same time, I'm thinking of Mr. Aster who has to catch a plane. This is not the doing of the committee; we sit between 11 a.m. and 1 p.m., and these two people have to go.
Mr. Muise, could you quickly question Mr. Stevenson, if you want, and then we'll move on to Mr. Aster?
We're not leaving you very much time, Mr. Aster. I feel really badly there. You'll have to blame Mr. Stevenson for talking too much.
Mr. Mark Muise (West Nova, PC): Thank you, Mr. Chairman. As you know, my questions are always short and to the point, so I hope you'll remember that in the future.
Thank you to our guests as well today.
Mr. Stevenson, we've heard at the committee that other jurisdictions have basically one single retail price for books. I'd like to know what your reaction would be if that policy were adopted in Canada.
Mr. Larry Stevenson: I think that's an impossible policy to police in the age of the Internet. France has a great policy on that too. I don't know how you stop a digital download of a book even though you have the retail price. I think it will become tougher and tougher to have any kind of jurisdiction like that for reasons of price protection. At the end of the day, who pays for that is obviously the consumer.
• 1135
One of the competitive weapons, whether it be selection or service,
is also price. I think one of the things that has led to an explosion
of book sales, frankly, is not only what Chapters has done but that
there have never been more outlets that sell books.
One of the reasons I believe Save-On-Foods & Drugs is a competitor of ours is that they sell a lot of books, because people are in there twice a week buying their food and they actually buy books while they're there. And they are pretty deep discounters of those books. So if you said to Save-On-Foods they could only sell at full retail, they might be less interested in being in books, which means the publishers would sell less and the authors would sell less. I would have thought the book industry would be hurt by taking away one of those pieces of flexibility.
But even if you wanted to, I really don't know how you're going to force Amazon.com to sell the books at the price at which you would like them sold. The Germans are having a little bit of a tough time telling which books they can and can't sell, so to tell them what price they can and can't sell at I think would be very hard to enforce.
Mr. Mark Muise: One of the things Mr. de Savoye says is the way I come at things. We're not here to judge but to understand and to gather some facts.
One of the things we're hearing is that some of the independent bookstores are being squeezed out. What I'd like to know is, do you have a long-term commitment to keeping a wide selection of books in your stores? Maybe you could answer that question by telling us what selection you had when you first opened your store here in Ottawa and what your selection is now.
Mr. Larry Stevenson: That's a great question.
First of all, the large stores can't survive on the big-name books; 5% of the sales of the large stores are best-sellers that are discounted. Therefore, by definition, 95% are all the other titles. It's the exact opposite.
In a small store, we are limited. When I was in front of the bureau at the time of the merger, people said, well, you carry only 8,000 titles in your Coles and SmithBooks bookstores. That's a fair comment. The walls kind of constrain you as to how many titles you can carry, which therefore means, with 40,000 new English books coming out each year, you tend to carry not only the new releases but the fastest moving of the new releases. You cannot really give a lot of space to relatively obscure poetry.
When you go into a store that's 42,000 square feet, let me tell you, we have some sections of that store that turn less than once a year, which means we have a tremendous selection because that is what people want in those categories. It's easy for me to look at you and say our commitment is to improve the selection, because that is our competitive advantage. The number one reason people go to a Chapters store is because they believe we have a better selection than the alternatives. It would be suicidal for me not to do that. No matter what this committee wanted me to do or not do, I would like to increase the selection continuously.
As a store matures, it gets better and better, because it starts understanding its market. So it then understands, if science fiction is going to do particularly well in this store, they ought to expand the science fiction selection.
What you tend to find is when we first open a store, it might have something like, on average, 90,000 titles. It grows to about 105,000 titles in the first two and a half years, and that's really the store just getting smarter about what kinds of titles it should carry.
So let me assure you, we will increase the selection. Let me assure you, by the way, that the Internet will increase selection whether we want it to or not. With 450,000 books available from Pegasus and virtually any book that is available now being available on the web, there is no such thing as a book being unavailable to anybody in any part of Canada.
The Chair: I have an apology to make to the members.
I thought I had learned to read the clock, but I was off by one hour. So I would suggest, Mr. Stevenson, if you want to stay with us, I'm sure the members will direct more questions at you as time goes on, but maybe we could now change over to Mr. Aster.
Maybe you can make a short statement and we'll have questions, and then we'll proceed on to Madame Morency and Mr. Zook.
Mr. Howard Aster (Publisher, Mosaic Press): Thank you, Mr. Chairman, and thanks for asking me to appear before this committee.
I should say, really, that I read about the proceedings of this committee with great interest over the past little while, and my perspective on the issues of this committee is perhaps somewhat different from what many other people think.
The issues, as I understand them, are from the perspective of a small Canadian publisher, which is the company I run, called Mosaic Press. But I also think the perspective I bring to the issues before the committee really relate to the evolution both of Canadian literature, which I've been involved in for the past 25 years, and our perspective on the way in which the marketplace has changed over the past 10 to 15 years, specifically in the United States, and the changes that are taking place in Canada and that I think are sweeping through the U.K. as well.
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My background is partly academic. I want to address one quick
comment to the research staff here. There are lots of very
interesting cultural statistics that float around this country, and I
think they're very good. I think the cultural statistics branch of
Statistics Canada does a great job.
I want to identify two interesting things, one that I read this morning and one that I read last night. The comment I want to bring immediately to the table is from the April 27 issue of the New York Review of Books. It appeared in an article by Jason Epstein, a very interesting man. The article is entitled The Rattle of Pebbles, and the statement is:
-
Today the book business stands at the edge of a vast transformation,
one that promises much opportunity for innovation: much trial, much
error, and much improvement. Long before another half-century passes,
the industry as I have known it for the past fifty years will have
been altered almost beyond recognition.
I don't think one has to look at 50 years. I think one can look at the past five years and anticipate another incredible transformation in the next five years that will deeply affect what I do as a publisher and also what all of us actually do in the way of being readers.
The second thing I want to add is a sad note. In today's Globe and Mail there's an article about the passing of one of the great publishers of the English language, a man by the name of André Deutsch. It says:
-
André Deutsch, who has died at age 82, belonged to a breed of
publishers that existed, and occasionally flourished, before
accountants and computers took over—in an age when publishers were
entrepreneurs of the imagination, seeking quality, proud of the
influence and longevity of their discoveries, exultant if lucky enough
to be associated with a genius.
-
He frequently came up with surprises during crises.
It's an interesting kind of bookending of the way in which, it seems to me, Canadian literature evolves.
I have a few quick comments about Mosaic Press, and then let me try to address some of the big issues.
We publish about 20 Canadian titles each year, and they're all Canadian authored. We do not publish non-Canadian authors. Very rarely will we actually be tempted to do so. Miracle of miracles, we've been around for 25 years. We have close to 500 books in print, which is an astonishing number. We've published 11 Governor General's award winners, one Nobel Prize winner—non-Canadian but translated by a Canadian, I can say proudly—numerous Crime Writers Association Award winners, Aurora winners, Stephen Leacock award winners, and so on. We've done our share, I think, in terms of the evolution and strength of Canadian literature.
We're different from most other small Canadian publishing houses for a number of reasons. One is that we do our own distribution. We tried giving over our distribution to someone else. That was a disaster, so we do our own distribution. That puts us in a very direct relationship with all the book sellers and retailers in Canada, and it puts us in a very direct relationship with Chapters, which I want to talk about for a few moments.
Miracle of miracles, we're actually debt free. We don't make a lot of money and we don't lose a lot of money, but we really are debt free. We run our own warehouse. We have significant distribution in the United States and now in the United Kingdom. In fact, this year our export sales will probably be a little over 50% of our total sales. In the next fiscal year, which began on April 1, we should be about a $400,000-a-year company.
The last general comment is that we are not members of any association, other than the Ontario publishers association. We are not members of the Association of Canadian Publishers. We are not members of the Literary Press Group. We have had experience with both major associations, and we've chosen not to be involved with them. If you want to know why, I'd be happy to tell you why.
A voice: Why?
Mr. Howard Aster: Do I answer right now, or do we—
The Chair: Leave it for now. Just carry on.
Mr. Howard Aster: Okay.
I have a few general comments about the transformation of retailing and what it means to a small Canadian publisher such as ourselves. The passing away of the small independent retailer is something I regret, but it has been good for our business. The coming into being of e-commerce is even better for the business aspect of what we do, which is publish Canadian authors. We watched that transformation in the United States starting in about 1985. We were almost Hegelian in the sense that we said it was inevitable that it would proceed in the United States and it was inevitable that it would happen in Canada.
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Then the question was, what do we as a small Canadian publisher do in
order to survive in this transformation? What we did was something
very simple. In the United States we found a distributor that doesn't
sell to every single retailer. Our distributor in the United States
sells to 25 major accounts, which reaches 80% of the trade. Our
strategy in Canada is exactly the same. Three years ago we sat down
and said, it's absolutely inefficient and not very cost effective to
try to sell our books to every single independent bookseller. The
reason for that is because everything becomes very difficult, such as
shipping, sales staff, collections, etc. We decided we would focus on
Chapters. We do a booming business with Chapters, and now with Indigo
as well. If another big superstore were to come into this
country—and hopefully it would be Canadian—we would do exactly the
same thing.
The transformation in retailing, in my estimation, is nothing but good news for small, innovative Canadian publishers such as ourselves. Why? It means fewer accounts to deal with. We don't have to rely on sales reps because we sell directly to head office. It's a more efficient and more effective way of doing sales, marketing, and distribution. The management of distribution is much more effective in that sense. We do exactly the same thing in the United States with our distributor, Midpoint Trade Books. Now the revolution in retailing is taking place in the U.K, and we're going to do exactly the same thing there. We found a company that will focus on the big retailers.
The perennial issues are discounts, returns, and so-called monopolies. We run our own warehouse. We set the price of our books. We're happy to give retailers an extra two points in the discount schedule, if they want, if they'll do more volume with us. We can do that. We do that in the United States. We're happy to do it in Canada.
Our returns with Chapters run about 11%, which is very good. Our returns in the United States run higher. We try to ensure that with sufficient support of our authors and events and the promotion of our books, our returns will remain around that level, which is very acceptable.
With regard to monopolies, quite simply I would say that I'd much rather sell books to a large Canadian retailer such as Chapters than to sell to Ingram or Baker & Taylor. My view on this is that as long as we can keep the big American companies out of Canada, Canadian authors are safe. If, God forbid, Ingram or Borders came into Canada, our authors would have a very difficult time.
I'd like to make a few quick comments about the Chapters phenomenon and our perspective. We've never sold more books by Canadian authors than we have in the past year, and that's simply due to Chapters. We get more shelf space, more exposure, and more efficient sales and marketing, and we have absolutely no complaints about payment. We get two cheques a month. We pay our bills on time. Without Chapters we could not do that.
Niche bookstores will survive, it seems to me. Small independent booksellers will be around, like any form of small independent retailer, as long as they're good and they're niche. The survival strategy for Mosaic, it seems to me, is as we did three years ago, which is focus on the big ones and to try to develop a relationship with Chapters, which we have done.
Thank you.
The Chair: Thank you very much, Mr. Aster.
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We'll start with questions for Mr. Aster. If there's some
correlation with the others here, you may do that also.
We'll start with Mr. Mark.
Mr. Inky Mark: Thank you, Mr. Chairman.
I have one question, one I've asked at other meetings as well. As an independent publisher—well, non-associated with other organizations—do you think this is a debate about changing business practice technology in the book industry or is this a debate about Chapters trying to take over the industry?
Mr. Howard Aster: I don't think Chapters is taking over publishing. We sell them stuff. They sell our books. They sell books published by Canadian authors.
I think this so-called debate is about fear. It's fear because there's an incredible transformation taking place. It's not just the transformation of retailing; it's the transformation of readership, writing, right down the line.
Stephen King just published a book that was sold on-line in one day. This is a real issue. It's a real debate. It's the point I brought to the table right now, that there is a remarkable transformation taking place.
Having said all of that, readership, I think, in this country is very Canadian-oriented. There's never been a better time for Canadian publishers, in my opinion, than now.
The Chair: Monsieur de Savoye.
[Translation]
Mr. Pierre de Savoye: Mr. Aster, it is true that the industry is being transformed. Those transformations are not to be feared, but understood. Nonetheless, what you say worries me for several reasons. First, you seem to be putting all your eggs in the same basket. When I was in business, I always worried about having only one customer, because the day he would quit on me would be the day when I myself would have to quit.
I also worry that, as soon as you concentrate on supplying one big customer, you will neglect your small customers. You will no doubt understand that we are particularly concerned with ensuring book distribution not only to big distributors but also to smaller distributors scattered all over the country. If everyone does as you do—according to you, this is the right approach if you want to be profitable—, well, you will probably be profitable as long as the one who is distributing your books remains profitable. At the same time, however, books will no longer be accessible in the smaller or more distant areas. I would like to hear your comments on this issue.
Mr. Howard Aster: Thank you. Am I allowed to answer you in English? It would be easier for me.
Mr. Pierre de Savoye: Do as you please.
[English]
Mr. Howard Aster: Let me try to be very concrete and give examples of the Canadian-authored books we publish. Let me give examples of the most unmarketable of Canadian books—namely, poetry. Let me go even further and give some examples of the worst of the worst—namely, first-time Canadian poets. We publish them, but let me be very concrete about the stories and about how we get books through retailers to readers.
We published a young Canadian poet who happens to live in Oakville. It's his first book. He is a very interesting, very good poet who will go on to do very well, I think. But how do you sell him?
We live in Oakville, so we went to Bookers Bookstore, a small independent bookshop with 4,000 titles. We begged them—begged them—to take in five copies. They took in one. I said we'd do a promotion with them; we'd deliver the body, in the window, anything. No—one copy.
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I phoned the manager of the Chapters at the Oakville shopping centre
and said I would deliver the poet and set up an event. We did it; 30
books sold—Chapters.
We did a first-time book of poetry by a very interesting young man by the name of John Wing Jr., who actually makes his living as a comedian in Hollywood. I'm trying to repatriate him to Canada. He's a brilliant, brilliant poet.
He comes from Sarnia, so I approached The Book Keeper in Sarnia. She went out and organized a high school reunion of the year in which John Wing graduated from Sarnia high school. She did a lunch and she did a book signing—100 copies sold.
So those were two different extremes—Chapters and a very good, innovative independent bookseller in Sarnia.
What's the moral of the story? The moral of the story is that both the independents and the big ones are willing to work with publishers such as ourselves. I have no fear of either, absolutely no fear, provided you work directly with the retailer and provided the publisher finds the place where promotion activity and innovation is possible.
I can't predict the future of The Book Keeper in Sarnia. I don't know what's going to happen to them. I can't tell you whether they'll survive or not. But I can tell you that our experience has been wonderful with both the large and the small.
I have one further comment on something that disturbs me immensely. I use public libraries. Wherever I am, I go into public libraries. I travel a lot. I find it astonishing that the holdings of Canadian public libraries stopped in 1996-97. They are no longer buying every Canadian book. It used to be that we had standing orders. It's no longer the case.
Now, I would love to see a system where we dump the money into the public libraries and tell them to buy five copies of every Canadian book published. There aren't that many. Fewer than 1,000 Canadian books are published every year. A readership out there is now being deprived of Canadian material because the public libraries claim they don't have resources to buy Canadian books.
I go into the surrogate libraries these days, which is Chapters. My daughter is 17 years old. She and her friends hang out at the surrogate libraries, Chapters or Indigo. They go in and they sit, because the contemporary library is there. They don't buy, but they watch and read.
I think that gap is terrible. Public libraries should be supported so that they can buy Canadian books.
The Chair: Mr. Bonwick.
Mr. Paul Bonwick (Simcoe—Grey, Lib.): Thank you, Mr. Chair.
I first of all want to provide my perspective on two issues that have already been raised, based, I guess, on my working career before coming here. The first one is market share.
In the town I come from, Collingwood, part of my portfolio as a municipal councillor was business development. We had a small independent book retailer on the main street in Collingwood. They were in operation for about three years, and positioned, I think, very well in the area considering the traffic that comes through into our region.
The Loblaws store did an expansion of about 11,000 square feet, and they incorporated as part of that expansion—and I'm going to take a guess, because I walk by it—about 1,000 to 1,200 square feet for a book retailing operation. Within one year the independent bookseller closed his doors. He directly attributed that to the fact that he could not physically compete with Loblaws.
If you brought him here and asked him whether he considers Loblaws part of the competition within Canada for bookselling, he would say yes. That's just a scenario from my own riding.
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The other issue I want to address before I go into my questions is
one of payments and terms—criticism about negotiating payment terms.
I would just suggest, again based on my background in business, that
unless there are significant discounts for early repayment, there is
very likely no successful retailer or business in Canada that doesn't
extend payment terms to the longest that is acceptable to the person
or the company supplying. That's just a standard business practice.
When Larry made a comment about the Government of Canada possibly buying part of Pegasus, I think he would be more concerned about the length of our repayment than some of his customers might be, insofar as how the Government of Canada processes its invoices from time to time.
I envision us dealing with two issues.
Miss Lill has touched on one, and that's the protection of Canadian culture—the authors and the ability of authors to get their products to market or into Canadian hands. She's done a very good job at focusing on that. I just want to go on the record that you have to continue to investigate all possible avenues to get more exposure for Canadian authors. Whether it be book readings, signings, or launchings within your store, or directives to your managers, I think it's absolutely critical that you do that—in fact, incorporate it perhaps into your mission statement.
The second issue is market dominance. I'm wondering if you could provide a comparison—I don't work in the industry, so I'm trying to understand—of our domestic industry versus perhaps that of the U.S. or countries in Europe, both from Chapters and from Pegasus, because there have been some comparisons drawn between us and the U.S.—what the U.S. government has done versus what we appear to have done or not have done.
The Chair: Mr. Stevenson, Mr. Zook.
Mr. Larry Stevenson: Let me talk about the retail side. We have tended to look more at comparisons laterally, with other retail industries in Canada. That's the one we've tended to watch more. You'll find in almost every sector of retail...I was the chairman of the Retail Council last year, and we just watched.... The market leader in each segment in Canada tends to have higher market share percentages than is true in the U.S. The U.S. tends to be a regional market. If you looked at food retail, you'd say that's a very, very fragmented business if you looked at the U.S. market as a whole. But actually, if you looked at California, you'd end up saying no, actually, California, which is larger than all of Canada, is a very concentrated market. So the U.S. statistics are tough, I think, to look at.
When we look at Canada, it depends on how you define the market. That's where I think it's tricky. If you define it narrowly as just bookstores, clearly I think the Competition Bureau would say that under that narrow definition, we're somewhere around a 35% share, maybe as high as 40%, depending on who you listen to.
We think if you include the Loblaws, the Save-On-Foods, and the rest of those folks we think we compete with, it's 20% to 23%.
For comparison, from some of the numbers I'm aware of from the retail shopping statistics that have come out, Loblaws would have 31% market share in food retail in Canada. Home Depot would have a similar kind of market share; it could be about 26% or 27%. Wal-Mart, in department stores, would be similar. So generally, you're seeing the same thing.
One of my arguments whenever I'm asked about business definition is that if you narrowly defined the business, Toys-R-Us would have a monopoly in toys. If you were to say, if you don't carry more than x number of toys, you're not a toy store, then actually Wal-Mart, although they're the largest toy retailer in this country, would not actually be viewed as competition.
If you go into—as in preparation for our discussions—a Toys-R-Us, you'll see they carry 24,000 SKUs in toys. Wal-Mart carries 6,000. But actually, Wal-Mart's a bigger toy retailer.
Mr. Paul Bonwick: I can save both of you some time here.
First of all, we don't consider Toys-R-Us a critical part of Canadian culture. We do consider the bookselling industry a critical part. It's not a fair comparison at all.
What I'm looking for are general trends. Is there a general trend in the U.S. and in Europe for a broader-service, larger bookstore, whether it be Chapters or “ABC Bookstore”? And in turn, is there a general trend for larger bookstore retailers to get involved with publishers directly—
Mr. Larry Stevenson: Let me answer the first part of that question, then let me turn it over to Pegasus.
Yes, there's been a gain in share by the large book superstores in the United States. There's been less of that trend in Europe. But if you look over a 10-year period, the two fastest in growth and gaining share in the U.S. market have been book superstores, led primarily by two companies, Borders and Barnes & Noble, and non-traditional retailers led by the warehouse clubs. Those have been where there has been explosive growth.
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So there has been consolidation, if you look at the U.S. But you
really need to look at the U.S. on a region-by-region basis, because a
company like Books-A-Million has a very, very high market share in the
southeastern part of the United States, but it wouldn't factor in
national statistics, given the size of the market.
Mr. Denis Zook: In regard to the wholesaling business, in both Europe and the United States there has always been a much larger wholesale segment than there has been in Canada, and it continues to grow. In the United States, between 30% and 35% of all the books that a retailer or library purchases are purchased through a wholesaler rather than directly from the publisher. It's close to the same statistic in Europe. And in both of those cases the wholesalers are continuing to do more and more business. There has been some consolidation among those wholesalers, with a larger presence of the Ingrams and the Bakers and Taylors. But actually, even in the United States today, there are many, many regional wholesalers that continue to sell books to independent bookstores and to the large chains. I ran one of those in the United States myself.
Also, the market for me is much bigger. In regard to the debate with Chapters over what percentage of the market share they have, I as a wholesaler do view everything as my market. My goal would be to try to sell books to every segment of the book market. Anybody who buys books I would like to have as a customer. So when I look at it for myself, I would view all of those as potential customers.
The Chair: Mr. Limoges.
Mr. Rick Limoges (Windsor—St. Clair, Lib.): Thank you, Mr. Chairman.
At the outset, I apologize for coming late. I unfortunately had a conflict in another committee going through new legislation clause by clause, which takes precedence. As a result of that I missed the initial presentations, and my questions may be redundant, but I would ask them in any case.
Some of the people who came before us had a nagging concern about the financial viability of Chapters-Pegasus, and they used as evidence of that the fact that you seem to be using their money in order to operate your businesses by slowing down your payables—their receivables—to an unacceptable level, and in fact treating their product as if you're hanging onto it on consignment. I'd like to hear your response to that. In particular, that is problematic in view of the fact that you're perceived to have market dominance. They quote figures that are much higher than those you quote, but of course they define it a little bit differently by taking out textbooks and things like that.
Could you comment on that, please?
Mr. Larry Stevenson: We also take out textbooks, so that's a red herring. I've not seen any facts that support some of the numbers that people have mentioned in front of this committee. They're staggering to me, and I just hope you will ask them for the facts to back those up.
Mr. Rick Limoges: Maybe you can aspire to—
Mr. Larry Stevenson: I wish I had that market share. We'd be much better at marketing if that were true.
There are two things, I guess. First is whether we are using our suppliers to finance us. It's actually the other way around. As I presented in my original submission, we are financing the inventory to the tune of 75 to 90 days. So if you look at how often we turn the inventory, it's the exact opposite. The person who is getting the deal here is the consumer.
The consumer is actually getting to go into these stores that turn their inventory less than twice a year...and we obviously don't pay them in six months, and therefore, by definition.... If we paid them in six months, neither one of us would be financing. If we paid them in a year, they would be financing. But we are definitely the ones who are financing.
Frankly, that has not changed. That was true five years ago. If this committee had been sitting at the time of the merger, the number one issue you would have heard is, “Can you make Chapters pay faster?” You could not have any retailer here, let me tell you.... Call Wal-Mart, just for the hell of it. Call them in here and ask what their suppliers would like them to do. It would be buy more and pay faster. In our case, we have buy more, pay faster, and return less—because the books are returnable. That's a perennial complaint.
In terms of our financial position, I think this is going to be a tremendous challenge not only for Chapters, but for everybody. Clearly, we're a public company, so it's out there. We are going to have to lose a ton of money if Canada is going to have an on-line bookselling alternative. I'd love to look you in the eye and say, “I can figure out how to make money.” I cannot today. But I believe the entire viability of our company depends on us having an in on that strategy.
So, yes, we lose a lot of money. We will have lost close to $35 million this year trying to compete with a giant. I wish you would call them here. Why can't you stop them selling here, so that maybe I could raise the prices? Unfortunately, the consumer is winning big time here, and we will need to have either an on-line alternative and lose $35 million until we get to a sustainable scale, or not be there.
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What's really clear is that Chapters has done better financially. We
have made money in every single year. People who use seasonal
statistics take a quarter and say, “You lost money in the last
quarter.” I say, “Yes. Everybody in the book business loses money
in three of the four quarters.” But if you look at our performance
vis-à-vis the U.S. players, we don't make as much money as they do. I
think part of that is scale and part of it is that we could probably
operate better.
But I actually think there's no question about our financial viability. The biggest question is how rapidly will the market change to things like the Internet? How many authors will do what Stephen King has done and say, “You know, I really don't care about you and I don't care about the poetry books you carry. I'm going to bypass you completely.” That's a fact of life. I can't stop Stephen King, John Grisham, or anybody else from doing that.
So you should be applauding us as a retailer and saying, “What can you do to survive in a world where people like Stephen King will choose to not pay you any money to sell their books?”
Mr. Rick Limoges: I would rather ask what type of strategy you have, as a Canadian organization in a cultural industry, to ensure that our authors and our creators are protected and have an opportunity to sell their products as widely as possible within this market.
Mr. Larry Stevenson: I think it's a great question. Everything we do should be focused on the Canadian author. I think our competitive advantage when people walk into a Chapters is, “Boy, you have a lot of authors, but you have more Canadian authors than anybody else.” When they go to Chapters.ca, I honestly think if all we are is a Canadian-owned Amazon, we won't win.
If you look at our website, we feature Canadian books. There's always a “buy Canadian” feature on the front page of the website. Why? It may not sell as well as Stephen King, but it's part of who we are. We chose to call it Chapters.ca rather than Chapters.com because we want people to know we are the Canadian alternative to those other things out there.
The made-in-Canada program has been wildly successful. I shared some statistics last time I was here. It's the same with the Write From Canada program. I think our sponsorship of the First Novel Award is very important. We don't sell a lot of copies, by the way, unless it happens to be an Ann-Marie MacDonald or an Anne Michaels. By and large, first novelists do better than first poetry books, but not a lot. But I think that is important because they are the next generation of Margaret Atwoods. It's very important for us and this committee to figure out how we can do some of those things.
The idea of making sure libraries have all the Canadian books is important. We, as a retailer, will lose with our customers if we don't do everything we possibly can to support Canadian authors—and we do that. The fact that more than 90% of our 18,000 events were Canadian shows...we are trying to emphasize that. Most of the poets who appear in our Oakville store, let me tell you, aren't flying up from New York to do those kinds of appearances.
If you were trying to figure out funds, you could make funds available to the writers' trust, so more of their authors could do tours of Canada. They could not only visit our stores, but visit independent bookstores and do more readings. It's very tough, if you're going to sell 30 copies of a poetry book, to make it out to Calgary. So there are things that can be done.
The Chair: Mr. Limoges.
Mr. Rick Limoges: I just have a statement. Many of the publishers are very concerned about your size; it scares them, frankly. Is there anything in your policy or your actions, to which you would be willing to confess, on using your size to punish some of the publishers who maybe don't want to give you the terms you're insisting on?
Mr. Larry Stevenson: First of all, I don't have anything to confess. Let me tell you, we do use our size. I'll give you an example where I think we use our size—it's not a confessional. We're big, and when a big-name author comes to town, we like to get our fair share of that author's appearances. So I would personally call up the publisher if I found out that a big-name author—
Mr. Rick Limoges: What about demanding terms or prices?
Mr. Larry Stevenson: By and large, the terms are there. I like to get the best terms they can possibly give us. But having said that, they have a monopoly product. I said it the last time I was here. This is not like any of the other retailers. One of the actual defences almost anybody has is, “I can't get the 20 books Howard sells from anybody other than...Howard”. So I have a choice of either not having his 20 books or doing business with him. That's very different from most other sectors.
So there's actually a balance, despite our size. There's a reason why there's no publisher we have never done business with.
It's not like we've cut somebody off. Ask that of Wal-Mart, Home Depot, or Loblaws. The reason we can't is because we need their products. If you came into our store and we said, “Oh by the way, we don't carry this publisher because we couldn't agree on terms”, you wouldn't come as a consumer to our store. So we don't actually have as much power as some folks would believe.
The Chair: Wendy Lill.
Ms. Wendy Lill: Thank you.
Mr. Aster, I have a couple of questions. First of all, I'm very happy that you publish first-time poets. You used the example of the ma-and-pa bookstore in Oakville. I don't know the store. You say they would buy only one of your books. That doesn't seem to be what we've heard over and over from the bookstores. It seems to be a different experience. Maybe you have a different kind of bookstore there.
I'd like to know whether there's been any change in the percentage of royalties your writers have received since you've been involved with Chapters. You say you're focusing on the big one—on Chapters. We have heard that larger discounts by the publishers are impacting on the percentage of royalties to their writers. I'd like to know whether that's the case.
I find it very curious how you seem to be in a very different mindset. You seem to have quite a bit of animosity toward the other Canadian publishing groups. I'm just wondering why that is. Could you let us know about that?
Mr. Howard Aster: Let me address the royalty issue first. We still pay 10% of list price. That's just a policy we've adopted. We set the retail price, so we build that into the retail price so there's enough margin for us to continue to pay the authors 10%. Then we have a sliding scale and if we, God forbid, sell more than 2,500, it goes up.
We sell a fair number now to Doubleday Book Club in New York. We just sold a Canadian book, Harry Rasky's book on Tennessee Williams, to Doubleday. They're giving us a $3,000 advance and a 6% royalty. So when you're dealing with some people, when you're selling rights, the royalty rate is negotiated between the publisher and who's buying the rights. But we always offer, for our edition, 10% of the list price.
I can't tell you about other publishers. I've heard stories that other publishers are trying to squeeze the authors. We won't because we can adjust the list price.
Let me make a quick comment on the costs of publishing. Paper printing and binding in Canada is astonishingly cheap. In fact, when I tell my colleagues and friends in the U.K. and France about our unit costs for paper printing and binding, they say, “We'll print in Canada”. So we don't feel the squeeze at all. We're quite content the way we operate.
Let me address the issue of my perspective on book publishing in Canada. I don't feel any animosity toward fellow publishers because I don't spend a lot of time going to meetings or listening to them. I just don't. Does that mean we're immunized from all of the sort of talk and perspective? No. I think we operate in the United States effectively. We operate internationally. We attend the international book fairs in Mexico, where we sell rights, and in the United States. I just don't hear the babble and the talk.
There is fear, clearly. I can't tell you why. I think this is a terrific time to be a Canadian publisher, on a certain scale. I think the cottage scale is really the innovative, creative edge of Canadian publishing.
The Chair: Mr. Aster, you've taken quite a while, but you haven't answered the question on why you don't join the publishing associations.
Mr. Howard Aster: I'm trying to avoid it.
The Chair: Yes, I know.
Mr. Howard Aster: I'll be very frank. We were members of the Association of Canadian Publishers and the Literary Press Group. I'm really going to make some enemies now. I don't believe federal government money or provincial government money should be poured into special interests in the publishing industry, period. Quote me on that. I left the LPG because I thought it was bad public policy for public money to be poured into an organization like that.
We were members of the Association of Canadian Publishers. I didn't want to spend our hard-earned money, which could go to authors, on supporting what I thought was a lobby group. It was a personal decision and I have no regrets about leaving either of those two associations.
The Chair: I have a request from Mr. Muise whose turn is coming up and I have a request from Mr. Shepherd and Mr. Bélanger. In fairness to the other two witnesses, time is running on and I don't want to see the session finish and not give them a chance.
[Translation]
I suggest that we hear our last two witnesses, first Ms. Morency, then Mr. Zook. I will invite them to briefly give us the highlights of their presentation before we go on to questions with Mr. Muise, Mr. Shepherd and Mr. Bélanger.
[English]
Is that okay, Mark?
Mr. Mark Muise: Are you telling me that my last round of questioning was not short enough, Mr. Chairman?
The Chair: No.
Mr. Mark Muise: I really tried hard. I just don't know. I can't ask a question in two words, unfortunately.
[Translation]
The Chair: Ms. Morency, if you will.
Ms. Carole Morency (Director of Communications, Groupe Renaud- Bray): Mr. Chairman, ladies and gentlemen, good morning. I am stunned to learn how different book marketing and processing are in Quebec and in English Canada. Our market is very small. I was very surprised by the numbers given by Mr. Stevenson earlier. He was saying that there were 42,000 new titles each year in North America.
We receive in Quebec some 26,000 of the 32,000 French titles produced in Europe, in addition to which we have 8,000 Quebec titles. I was therefore very surprised to learn that, whereas we receive 34,000 new titles each year in such a small and concentrated market, the English-speaking market gets 40,000 new titles, over and above those from Europe, I imagine. It goes without saying that our commercial policies reflect more those of our European colleagues whereas those of English Canada reflect more the Americans'. We live in two very different worlds.
You no doubt remember that, on my first attendance, I was constantly referring to discounts given to bookstores and I had recommended that lower discounts be given to superstores such as Costco and Zellers. We get a 40% discount on general literature and a 30% discount on dictionaries, computer books, etc. The superstores which were previously getting 20 to 30% discounts ten years ago are now getting 30 to 50%. If Costco raises the cost price by 10% and that we get only a 40% discount, we lose throughout. I believe that for us, the book retailers, to survive, such businesses should only get maximum-controlled discounts. This is most important.
I had the opportunity to talk to Mr. Bélanger earlier. This morning, I was thinking that this study is again emphasizing our two solitudes. Things are so different between Quebec and English Canada. I cannot help myself from bringing up this image.
Canada should perhaps promote books on a country-wide scale, just as the Canadian Heritage Department does when it promotes well-known characters of Canadian history. We should promote reading and our authors in this way in Quebec as well as elsewhere in Canada. In Quebec, the approach would surely be different from the one used in the rest of Canada. Canadians are much more nationalistic about their authors than Quebeckers are in relation to their own authors.
This ends my presentation. I will now gladly answer any question you may have.
The Chair: I could see Mr. Bélanger eying you when you spoke of English Canada. He always raises the fact that....
Mr. Mauril Bélanger: I will not rise on a question of privilege. I will wait my turn, but I will address the issue.
The Chair: Yes, he will surely raise this aspect.
Ms. Carole Morency: Excuse me. I did not....
Mr. Mauril Bélanger: You will understand.
The Chair: He will explain to you his point of view. You will also hear from Mr. Limoges and Mr. Muise, who are close to both cultures elsewhere in Canada.
Ms. Carole Morency: May I add something?
The Chair: Yes.
Ms. Carole Morency: Mr. Stevenson mentioned earlier the GST on book sales which should in our view be abolished as was the Quebec sales tax, to everyone's advantage.
[English]
The Chair: Mr. Zook, would you like to give us a few remarks. If we could have the last half an hour for questions, it would be great.
Mr. Denis Zook: Thank you for the opportunity to come back. I did hand out a statement, but rather than reading that, in the interest of time I'll try to more quickly just cover the points.
The first point I'd like to cover in trying to answer some of the things that have come up since our last time here is that the formation of Pegasus actually puts into the market a new source of buying books for independent bookstores, for other retailers, for schools and libraries, which wasn't there before the formation of Pegasus. Pegasus did not take any source of buying books out of the market.
For that reason, it's fundamentally different from the situation in the United States that it's been compared to Barnes & Noble and Ingram. In the case of Barnes & Nobles and Ingram, Ingram had been in existence for more than 30 years. It was the largest wholesaler of books in the United States. It had 10 distribution centres throughout the country and it did business with virtually every independent bookstore in the United States. For some of them, it was the only source they had for buying books. It was also a large source of books for Borders, Borders.com, and Amazon.com.
So Barnes & Noble buying that company was taking out of the market one of the largest sources of buying books that there was. Again, Pegasus is adding to that, not taking it away.
The second point I'd like to cover is that Pegasus does not have the exclusive distribution rights to any product or book it carries. There have been some conversations about people having to buy from Pegasus and therefore somehow having to contribute to Chapters.
Of the almost half a million books and other media products that I carry, there isn't a single product that you can't buy from somebody else. You can buy them from the publisher, you can buy them from other distributors, you can buy them from other wholesalers. For that reason, no one has to do business with me that doesn't want to, whether that be on the publishing side or on the retailer side.
We have said publicly over and over that we are a wholesaler not a distributor. We don't seek exclusive distribution rights that a distributor or an agency would, nor do we have any plans of doing so in the future.
Point three is about discounts, and there's been a lot of confusion about this. The confusion is between a wholesale discount and a retail discount. They are two completely different things. They're different in the book industry. They're different in virtually every industry that has a wholesale segment, which is most industries.
The wholesalers receive a greater discount from the manufacturer, or in this case the publisher, because they then act as the middle person doing all of the work of selling and fulfilling the orders for those products. For that reason, they receive a greater discount than a retailer would who is buying direct from the manufacturer or publisher.
In our book industry, if you took a $10 book, I would buy that book as a wholesaler, as would any wholesaler in Canada, whether that be myself, North 49, Book Express, or all of the other smaller ones, at a 50% discount. This would be the standard wholesale discount from the publisher, meaning that I paid $5 for that book.
If I were to purchase that into Pegasus...say I were to buy 1,000 copies of that. If the publisher were to sell that same 1,000 copies to the retailer direct, they would sell it at a 45% discount in most cases. If you would like, I can provide many examples of the written discount schedules of publishers in Canada, which show their discount rates ranging from 40% to 48%, depending on the volume of what's bought. So they would have sold the book for 50¢ more if they had sold it to the bookstore rather than to me.
But when they sell the book to me, first of all, I have bought that book. It's not on consignment. I've bought it. It's now on my inventory. I'm financing that inventory. I have all the costs of financing it. I have the warehouse that I have to pay for and all of the space to hold this inventory.
• 1230
I have a sales and marketing staff, which we touched on earlier,
currently of 10 people whom I pay for...as well as paying commissions
to independent sales forces to go out and sell these books. If I get
an order, I bear all of the costs of picking that order, of packing
it, all of the packing materials, all of the boxes, all of the
corrugated cardboard, and I now pay for the cost of shipping that book
to anywhere in Canada. The publisher pays none of the costs of what I
just described. So with that 50¢ extra discount that I had from the
publisher I have now taken on all of the work of selling and providing
fulfilment for that book on that 50¢.
So what has been said in some of the testimonies of comparing my discount to a retailer's and saying I'm asking for a greater discount than an independent bookstore is absolutely correct, because I'm not a bookstore; I'm a wholesaler, and I'm taking on all of that work.
The other thing I'd like to point out that has not come up in any of the other discussions about this is that many of the independent CBA member bookstores with only one location are themselves a wholesaler. One of the most vocal people on this subject, Nicholas Hoare, is a wholesaler—and there are many other examples of this. Out of the backroom of their single independent bookstore they have declared they are a wholesaler and asked for and received the same wholesale discount that I receive and that Book Express receives and that North 49 receives.
The Children's Bookstore, a long-heralded bookstore in Toronto that just recently closed doors because of retirement, had a wholesale division, which I purchased. In purchasing that, I have invoices to The Children's Bookstore where they received a greater discount as a wholesaler than I receive as a wholesaler.
So I want to be clear on the point that this is not unusual. There are wholesale discounts that are published. They're published in the catalogues of the publishers, and I can provide as many examples as you would like. I can also provide examples from the CBA's journal, which each year publishes what the discount schedules are.
I'm being asked to hurry.
The Chair: Considering it's your second time, I just want to leave some time for questions; otherwise you won't have time for questions.
Mr. Denis Zook: I will do one more that came up, and that's on royalties.
To the best of my knowledge, and also with over 20 years in this book industry, there is not a difference of royalties paid whether the book goes through a wholesaler or whether it's sold direct to the retail store. There has been some talk about the royalties being tied to deep discounts. Those refer to the retailer, not to the wholesaler. Some publishers have a clause that says if the book has not sold and therefore the publisher asks, in conjunction with the retailer, to mark that book down and the publisher is paying part of the cost of that markdown, then they will reduce their royalties because they have paid more to sell the book at retail. So again there's a confusion between that and wholesale.
I can provide, if you would like, several examples of contracts from publishers in Canada, all of which show a standard royalty schedule similar to what was already talked about.
With that I'll answer any questions.
The Chair: Thank you.
Mr. Muise, it's your time, and of course you may direct your questions to any of the panel members.
Mr. Mark Muise: Mr. Zook, you made a comment earlier that you've bought these books and you now own them and you will pay all the fees of distribution that come from that point on. Can those books be returned?
Mr. Denis Zook: Yes, in the entire book industry there is returnability. There is returnability whether or not you are a retailer and there is returnability if you're a wholesaler. If I have sold a book to a retailer, they have the right to return that book to me because they bought it from me. So if I sold the book to you, you would return it to me. I would have the option of returning it to the publisher, if I cannot resell it to somebody else.
Mr. Mark Muise: If you bought that book and then phoned the person you bought that book from, could you not tell them that you have the choice of either sending the book back to them or keeping it if you can get a better price? Could that—
Mr. Denis Zook: Could that happen? It could happen, and it happens at the retail level as well. A bookstore owner can ask the representative of a publisher whether they could get participation and mark-down money from the publisher to sell the book off at the store level rather than returning it. That's actually the example I just gave on the royalty answer.
So that can happen. I can tell you that it doesn't happen very often, because typically the publisher does not want to do that.
Mr. Mark Muise: From that side, okay. On your side, could you tell us how often that happens?
Mr. Denis Zook: It hasn't happened to this point, and I haven't asked for it.
Mr. Mark Muise: Okay.
Mr. Aster, I'm not going to ask why, but you made a comment earlier that your returns are about 11%. We heard Mr. Stevenson say that Chapters' returns in general were 32% last year and 30% this year. I'm wondering—
Mr. Howard Aster: We're better than average. We are.
Mr. Mark Muise: I guess I'm going to ask why.
Mr. Howard Aster: I can only speculate. We publish Canadian-authored books in certain genres and we get reorders. The first orders we get from head office at Chapters are reasonable, and if they sell out, the store managers then reorder. So our returns are fairly modest, I think.
That's not true in the United States, because we're trying to sell Canadian books into the American marketplace. Our returns in the United States are higher than they are in Canada.
Mr. Mark Muise: I know you're saying you're an independent, and I understand what independent means, but does Chapters or Pegasus have any ownership in Mosaic?
Mr. Howard Aster: None at all. We don't even sell books to Pegasus at the moment. We sell directly to Chapters and we deal directly with the other wholesalers, library wholesalers, and independent booksellers.
Mr. Mark Muise: Do you have ownership with them?
Mr. Howard Aster: None. We're totally independent.
Mr. Mark Muise: They were sure—
The Chair: You have progressively breached your contract there.
Voices: Oh, oh!
The Chair: Mr. Shepherd, who do you want to question here? I just want to find out.
Mr. Alex Shepherd: Everybody. Mr. Aster and Mr. Zook, I guess.
The Chair: Oh, I see. I think Mr. Bélanger wants to do the same before they leave. If you could just split your time before they leave, it will be short. We'll start with you.
Mr. Alex Shepherd: You said something interesting: you do not sell to Pegasus. Mr. Zook, in the rationalization of the book publishing, using your arm as wholesale, why not? Why isn't there a relationship there?
Mr. Denis Zook: I can answer from my side and I'll let Howard answer from his side.
We would love to have Howard's products in Pegasus. We'd like to have virtually all publishers' products within our company. I think for publishers there are a few.... Again, this may be because of size, but at a certain small size they can develop a very good distribution system without spending an inordinate amount of money to build it. As a publisher gets a little bit larger and gets to what I would call medium-sized to larger, because they are doing so much more, it becomes much harder and much more expensive to do that distribution. The publishers tend not to be able to do it very well, to be honest with you.
Mr. Alex Shepherd: What's your discount with Chapters?
Mr. Howard Aster: We give Chapters 48%. They would want 50%. It's not the two points that bother us.
Over the past three years, I think we've developed very good relations with the buyers at Chapters. When I was in Chapters' head office to sell our spring list, I asked the buyers there whether they would advise me to go through Pegasus. I thought they answered very intelligently. They asked if I was dissatisfied with the arrangement at the moment. I said I was delighted: “I pitch our books, Canadian-authored books, to you people and you're selling our books.” I'm delighted with the volume, which is always rising. At the moment, I'm perfectly content to leave it as it is.
• 1240
We also sell directly to other wholesalers, library wholesalers,
throughout the country. We sell to Nicholas Hoare. We sell directly
to his competition and we give them anywhere between a 44% and 48%
discount.
If Pegasus came to us and said they wanted 50% but they would increase our volume by 30%, then I would talk to them.
Mr. Alex Shepherd: Mr. Zook, what's the percentage of your sales to Chapters?
Mr. Denis Zook: Because we're just starting out, it's very high virtually all of the Christmas season. As I explained the last time I was here, we had many publishers who did not sign up Pegasus and sell to Pegasus for the fall season last year. Since I wasn't buying their books, I couldn't go out and sell them to other customers.
Since then we've opened up quite a lot of library accounts. We're shipping out every day to libraries throughout Canada. We're also selling to gift stores and we're selling to some larger retailers. We're out every day trying to get more and more accounts.
Mr. Alex Shepherd: But virtually 100%.
Mr. Denis Zook: It's not 100%. It's been going up each month in the other part.
The Chair: What is it? Is it 80%?
Mr. Denis Zook: It would be far more than 80%. As I said, it's really only been in the after-Christmas period that we've been able to go out and try to open up new accounts.
Mr. Alex Shepherd: What kind of terms does Chapters get?
Mr. Denis Zook: Chapters and everybody gets.... I believe I explained this the last time I was here. We have standard terms that we have published—
Mr. Alex Shepherd: But how many days' sales are in receivables? How many days' sales in receivables do you have right now to Chapters?
Mr. Denis Zook: What is their average payment? I couldn't tell you what the average time of payment to me is.
The Chair: Monsieur Bélanger.
[Translation]
Mr. Mauril Bélanger: How much time do I have?
The Chair: Some people must leave and I hope....
Mr. Mauril Bélanger: I will use some of the time given to me to make a comment on an issue that has no bearing on the question at hand because, although I will remain polite and gentle, I would like to quibble with Ms. Morency.
I would like her to note that the phrase "Quebec—English Canada" excludes many Canadians. I am a French-speaking Ontarian and I represent an Ontario county where 40% of electors are French- speaking. There are 700,000 Francophones in Ontario and one million Francophones in provinces other than Quebec. There is one officially bilingual province, and that is New Brunswick. There are two territories where French is an official language. You exclude these Francophones when you speak of Quebec as opposed to English Canada. You also exclude English-speaking Canadians living in Quebec. I therefore invite you to change your vocabulary, if you would be so kind. If you absolutely must use the term "English Canada", you must also accept its counterpart "French Canada", with which I can identify.
Ms. Carole Morency: Mr. Bélanger, please accept my apologies. I had no wish to offend you. I was not referring to people, but rather to a different reality in distribution and publishing. One speaks of English book and French book publishing. I apologize and I assure you I had no intention of making such a distinction.
Mr. Mauril Bélanger: I understand, but you must not forget that there are more than 7 million French Canadians living elsewhere in Canada. French Canadians living outside Quebec often have a hard time getting books in French, including from Chapters for example. The Chapters branch here in Ottawa, at the corner of Rideau Street, sells books in French, but the four other branches do not, despite the high percentage of Francophones living near the branch located in the eastern part of the city. It is all a question of distribution and costs. I am in complete agreement with you that we must try to make improvements at this level and I will encourage the department to do so. I agree with you when you say that we should do more to encourage reading. On this, we are of the same mind.
Ms. Carole Morency: I'm really sorry to have....
Mr. Mauril Bélanger: No. Think no more about it.
Ms. Carole Morency: I listened to what Mr. Zook from Pegasus and Mr. Aster from Mosaic Press said. This publisher sells directly to bookstores, whereas our own bookstores cannot buy directly from publishers and cannot negotiate good terms. In our province, the distributors make all the profits, and we must be satisfied with discounts. Your questions reflect exactly the point I was trying to make.
Mr. Mauril Bélanger: Yes, and I think that we have much to learn on the subject of the book industry in Quebec, including the way distribution is managed.
• 1245
Mr. Chairman, I would now like to return to the subject under study.
[English]
I agree with some colleagues that ours is not to find Chapters-Pegasus guilty or not guilty, if you will, of any business practice. That's not our job. That would be the Competition Bureau's job. They have expressed, with all due respect, some concerns since the creation of Pegasus and an ownership by Chapters.
If there's anything we've accomplished, I would hope that it is that the bureau would finish this question and not let it drag on, because it's been dragging on for too long. Either it's fine or it's not. I would hope that our efforts in the past two months would have prodded them into completing that work, if it's at all possible.
I had a question for Monsieur Aster. I wanted to get his views on the returnability of books. Should we look at changing that? Should we reduce the returnability of books? Should we do so at the retail level? Should we do so at the wholesale level?
I'll leave these questions pending. I have others that are perhaps of a nature that this committee should address.
For instance, would someone care to comment as to why, in some jurisdictions, retailers are not allowed to own wholesalers? For me, this has been the crux of the matter—the difficulties that poses. I suspect that some jurisdictions, some not far from here, have said, “Thou shall not”—a retailer shall not—“own a wholesaler.” I was wondering if you want to comment on that.
Then there's the other one. This is a far-ranging discussion. There are those who would argue, rightly or wrongly, that a mistake might have been made in 1995 in allowing the merger that created the company that we know as Chapters.
I know you dispute that, sir, but the bureau recognized that it—the company that they allowed to be created by the merger—had a dominant position. Theoretically, they should have done something about that, but they did not, except that they watched you for a number of years, I gather.
So if one agrees that there might have been a mistake made, one would have to go back and check it out and look at the situation at the time as to why it was allowed. Was it that Borders was knocking at the door at the time and there was a sense that perhaps we needed a Canadian equivalent to fend off Borders? Should that be revisited? Should we allow companies like Borders in today? I'm not advocating that, but those are questions that I think legitimately have to be put on the table.
Should we try to correct a mistake if a mistake was made in 1995 by allowing this merger? How would we address that? Should the role of Pegasus be restricted so that it tends more to service Chapters, its owner, as opposed to the entire industry?
These are the types of questions that I think have to be put on the table. They're difficult and I don't have the answers, but in this exercise this committee has engaged in now for almost two or three months, I believe these are some of the questions that get to the core. I would hope that we'll have some opportunity for your remarks, perhaps not today if there's no time, but over the next month before we concoct the report.
[Translation]
Thank you, Mr. Chairman.
[English]
The Chair: Does someone want to address this?
Mr. Larry Stevenson: I will address just a couple, and I apologize, but I do have to bolt.
The first one is this referring to other jurisdictions that have not allowed a retailer to own a wholesaler. That is not true. They did not allow a company to buy another company, which you're allowed under merger and acquisition policy. What you had was a removal, and therefore a removal of an option that would have put a lot of competitors at a disadvantage, because you were removing an option they had.
I am not aware of any law in the United States that does not allow a retailer to own a wholesaler. I am aware that in regard to the number one retailer wanting to buy a specific wholesaler, which, by the way, was the number one, and represented, in many cases, 100% of people's sales—including their biggest competitor on the Internet, Amazon, and its majority sales—they decided that actually would be anti-competitive because it was taking away an option.
They did not rule on whether, if they had built, if they had invested their own money like we have done and added an alternative, they could not do that. I am not aware of that. So that is completely unclear to me.
Second, I can state as a fact that when the Competition Bureau looked at the merger, they did not approve the merger because they believed that Borders or Barnes & Noble were coming. In fact, they called those companies, and they said they had no intention of coming. The merger was not done under any of those auspices.
• 1250
It was that there was tremendous competition already, primarily from
the non-traditionals. They looked at the Wal-Marts, the Loblaws, and
the Costcos that were coming in and deep discounting. There was
tremendous competition already.
My understanding of what they required at the time was not that somebody was about to come in and they therefore had to allow this to happen, but that you had a company, folks, that was losing $8 million—SmithBooks—so the question was, can there be viable competition when you have one company that is basically going out of business, or should those two get together and at least be able to invest money to build these book stores?
I think the ultimate question in regard to whether they should have allowed it is this: is the book industry stronger today than it was five years ago? I would challenge this committee on any dimension. Tell me. Are more books sold? Are more Canadian books sold? Are there more royalties to authors? Are consumers getting better prices? Are consumers getting more books? On which dimension would you like to measure that? The answer is absolutely and positively yes, on every single question.
The Chair: Mrs. Lill has asked me for a brief question, Mr. Stevenson. I hope you have James Bond's car waiting outside if you have to catch a plane at 1:15.
Mrs. Lill, who is your question to?
Ms. Wendy Lill: Well, it's a comment and a question. I'm trying to figure out what we've learned here today. We've had one publisher here—and I'm sorry that he has already left—who in fact.... I mean, the whole purpose of our investigation is to discuss the relationship between Pegasus and Chapters and the impact it's having on the publishing industry. We have one publisher here who does not use Pegasus, who goes, in fact, directly to Chapters, so he is really not involved in the equation that seems to be so troubling to so many people.
Why are there not more publishers here at this table who are saying what you're saying? Why is it that the only publisher here at this table is one who deals directly with you and not with the wholesaler that is causing people so much trouble?
Mr. Larry Stevenson: Ms. Lill, first of all, I think it's a tribute that he can do business like any other publisher can, direct with us or through Pegasus. He has chosen to do business that way, and he obviously, for his business reasons, thinks that works. We will buy books whichever way they'd like, either through Pegasus or direct, as he has said.
The reason I think you don't have a lot more publishers.... I'll give you a concrete example. I got a fabulous letter—which just happened to coincide with this committee meeting—from a publisher, thanking us for having supported a specific Canadian author, thanking us for what we had done to make that author known. I thought, wow, this is great timing. I'm going to forward this to the chairman. But since it was a letter to me from this publisher, I called the publisher and asked if he minded if I forwarded it to the heritage committee, because, as I said to him, they are meeting to talk about what Chapters has done for Canadian culture. The answer was “Absolutely not. That cannot be public, because if that went public, every independent bookstore would boycott us.”
Now, listen, there's a freedom-of-speech issue, which is that.... Yes, people are unwilling to say some things that offend either one side or the other. I agree that it goes both ways. Most publishers are not going to sit here and say that they think Larry Stevenson is this and that. I mean, we are a large customer of theirs. By the same token, they're not going to offend Costco either, but they're also going to try not to offend the independent bookstores. I don't blame them. I think that is smart business. They're trying to straddle the fence.
Just as many publishers are very positive about what we've done, that's why I do encourage.... In regard to your comment that it is not a court of law, I agree, but I also think the innuendo is very dangerous, the innuendo where we actually don't get to hear the facts. I heard an author come here and say we had not bought her book. I provided this committee.... We bought 311. We sold her book. I don't know where she got the statistic. If you give me the concrete example, I'll give you the facts. I'm just saying it's very dangerous to say that such-and-such an author said this or so-and-so a publisher said that, but “we can't tell you who said it”.
We've been pretty open about what their complaints are, and I agree. Most of them are business complaints. They'd like us to pay faster, buy more, and return less. I understand that.
Mr. Denis Zook: There's another thing I'd like to bring up. We've talked in other sessions about the top 100 publishers, which were the ones that I was dealing with most in the early days of Pegasus, but I've actually had more than 200 publishers call me, rather than me call them, asking if they could get together and do business with Pegasus. I've also had more than 200 send me letters asking if they could do business with Pegasus. So it's not that every publisher out there is against doing business with us: we get requests every day. As a matter of fact, we fell behind on those requests and had to hire more people to keep up with them.
[Translation]
The Chair: Mr. de Savoye, briefly please.
Mr. Pierre de Savoye: First, I would like to tell Ms. Morency that Mr. Bélanger should have thanked her for reminding us, in relation to the subject at hand, that there is also a French book industry, which allowed him to mention in his turn that there also was a Francophone public in the rest of Canada. One must recognize this. During all these meetings that we have had, if it weren't for your presence, the subject of French-book publishing would never have come up. At least, no one had mentioned it up to now.
• 1255
That being said, I would like to correct my colleague, Mr. Bélanger,
who said there were 7 million French Canadians in Canada. I must
mention that some French-speaking Canadians are not French Canadians.
Many of them, living in Quebec, come from elsewhere. I agree that
there are French-speaking Canadians, yes, but they are not all French
Canadians. Even some Quebec Francophones are not French Canadians. I
am one of them.
Now, Ms. Morency has asked a question which seems important. There is, outside of Quebec, a French-speaking market which has not been mentioned.
Ms. Carole Morency: Absolutely.
Mr. Pierre de Savoye: You have not mentioned this, or perhaps you have. Chapters mentions it but in a way that could be improved upon. However, I do not think that Chapters does business in Quebec.
How do you see your presence in the rest of Canada and that of Chapters in Quebec in the years to come?
Ms. Carole Morency: I think I understand where you are going with this. Our customers in the rest of Canada are libraries. We open accounts in New Brunswick and all the rest. Thus, we do concern ourselves with French-speaking Canadians, with people who speak French and live outside of Quebec.
We also have a Net site that we use for our promotions outside Quebec. We have teams on the road who meet with bookstore owners. We do a lot of that and we go as far as the United States. This distribution activity is important.
That being said, the Chapters store on Saint-Denis Street, in Montreal, has at least 5,000 square feet devoted to books in French. We try to sell a bit more books in English in our branches, on the one hand because the discount is much more interesting and on the other hand because many Francophone readers are asking for books in English, for example in computer science, because by the time these books are translated, they are already obsolete.
Could you make your question a bit more precise? I have the impression that I am on the wrong tack.
Mr. Pierre de Savoye: Do you intend to compete with Chapters in the rest of Canada? Also, do you think that Chapters will come to Quebec to compete with you?
Ms. Carole Morency: We cannot compete with Chapters in the rest of Canada. There are Francophones all over the country, as was mentioned earlier, but their number is not sufficient to justify the opening of a store or a specialization. We would then have to increase our inventory of English books, and we are not interested, at least not at the moment. It is a fact that Chapters is treading on our patch in Montreal. We cannot ignore such a big competitor.
Mr. Pierre de Savoye: Thank you.
[English]
The Chair: Mauril Bélanger.
Mr. Mauril Bélanger: Has Pegasus ever bought, or tried to buy, an entire Canadian print run, or whatever the terminology is?
Mr. Denis Zook: No; neither. Actually, what's more common is that publishers will decide, with us, what it is they're willing to sell us. That we could take an entire print run just simply would not happen.
Again, I can provide you with written examples from within the last month where publishers will not even sell us what it is we want. The publishers are very protective to make sure they're not putting more books into Pegasus than what they think we can sell, because they want to sell those books elsewhere.
I can also provide you with examples of where, if a publisher came to us and thought we had a couple of extra weeks of supply of a book that they were running out of and were going to do a new print run on, we would actually ship them books back so that they would have them for other customers, with their promise that they would get them back to us when the new print run happens.
Mr. Mauril Bélanger: Merci.
The Chair: Mr. Bonwick, you asked me for a quick question.
Mr. Paul Bonwick: It's actually not a question for the witnesses. Instead, Mauril brought up a very good point that I don't think we addressed in its entirety.
• 1300
Several witnesses have come forward to address the issue that the
same group or the same owners have both the publishing arm and the
retail arm. In their minds, certainly, it's raised significant
concerns.
My point is simply an observation that I think it's important that the committee recognize the fact that this isn't unique to the book industry. It happens in the oil and gas business. Many oil producers own many gas stations. Many furniture manufacturers own many retailers. General Motors owns General Motors car dealerships. The list goes on and on where both producer and retailer are owned by the same people, in part or by majority. I think it's important that we recognize that point.
Mr. Denis Zook: In the book industry, the largest publisher, Bertelsmann, is a publisher, is a wholesaler, has book clubs, has retail stores, and owns part of barnesandnoble.com. So in fact everyday bookstores throughout the world—
Mr. Mauril Bélanger: Not in Canada.
Mr. Denis Zook: Not in Canada, correct.
Mr. Mauril Bélanger: Okay. Because if we're going to get into a debate—
The Chair: I think that point is very important, but I think there was a point made, too, that in the other industries we're not talking about Canadian culture.
Mr. Mauril Bélanger: Well, there is that, but if we're going to get into a debate, let's not forget that over the last five years the reality is that independents have been closing more than opening, whereas Chapters has been growing.
So let's not forget that. If we're going to get into a debate, I'm quite prepared to do that, but we weren't quite there yet.
Mr. Denis Zook: On the issue of closing, as part of writing my business plan for Pegasus, as I said, I look at the entire market of anybody who can sell books. I would debate this mass closing of independent bookstores. I would like to see it proved. My research, looking from 1990 to 1994 and from 1994 to 2000, shows that the Chapters chain closed at a far greater rate than did the independent bookstores. Actually, while there have been closings, less than 20% of the bookstores have closed during the last six-year period of time.
The Chair: I think we'll leave it there.
[Translation]
Ms. Morency, I would like to thank you very sincerely for having taken the time to come and meet with us again.
[English]
Thank you very much, Mr. Zook.
I would like to thank Mr. Aster and Mr. Stevenson in their absence.
This has been very instructive for us.
[Translation]
Thank you very much for coming.
I will now give members of the committee the opportunity to pursue their study on this subject so important to us all.
[English]
Mr. Denis Zook: I would say just one more thing, if you would acknowledge me.
The Chair: Please, Mr. Zook.
Mr. Denis Zook: There seems to be this idea that Pegasus, because of its size, is therefore not interested in the book industry or in books or authors. I would really like to correct that. Within Pegasus, I have more than 20 years in the book industry. I chose to be in the book industry. I've spent my whole life in the book industry. I collect books.
My vice-president of buying has 35 years in the book industry, 25 of those in Canada. My vice-president of sales and marketing has 25 years in the book industry. He has worked in publishing and has worked in retail.
We're not a company that is not interested in books and in the promotion of books, Canadian books, within Canada and outside of Canada. It's a misconception that we somehow are not interested in the promotion of the culture within Canada.
The Chair: Mr. Zook, nobody has suggested that, or not that I heard. If you make a pitch now, Mrs. Lill wants a question, and we'll never end. I'll allow her to finish the meeting, because otherwise we'll go on, and I think we have other business to do.
Ms. Wendy Lill: In terms of the work we have done, we have to tell you that we have heard many, many viewpoints that were different from what you're giving us now. We have heard from small publishers in this country, many of whom say their sales have in fact dropped in half. We have heard of many bookstores that have gone under because of the situation with Chapters.
So we have to leave it on the record as well, very clearly, that this is what this is all about. We continue to have major concerns.
The Chair: Okay.
Mr. Zook, thank you very much.
[Translation]
Thank you very much, Ms. Morency.
• 1305
I would like members of Parliament to stay for a couple more minutes
so that we can discuss certain matters.
[English]
As members will appreciate, we have to plan our business for the return of the session so that the clerk knows what we are going to be doing from the time we return in May until the end of session in the middle of June.
Mr. Zook, why don't you make an appointment to make your pitch later?
Voices: Oh, oh!
The Chair: You're a very persuasive person, but we have business to do right now. Thank you.
[Translation]
This is what we must now do.
[English]
We have to plan our business very carefully, because between the time we return and the time the session ends in June we'll have just so many weeks. There's one week of recess in May, and we have four or five projects to undertake between now and June that we've committed ourselves to.
[Translation]
We must first study Bill C-224. A unanimous resolution of the House asks that we hear stakeholders in relation to this bill concerning a museum on genocides. We have no other choice but to hear them, because the House has instructed us to do so before June 15. We have no choice in the matter.
We must also examine Bill C-27 concerning parks.
[English]
That will come to us very soon for study.
Mr. Inky Mark: Mr. Chair, could Mauril confirm the dates on Bill C-27, when it's going to come back to the House?
Mr. Mauril Bélanger: No. It's the will of the House, and I do not presume to dictate or to know of or to anticipate the will of the House. It is the hope of the government that the House would deal with Bill C-27 at second reading rapidly, certainly earlier than later. There are some discussions around hoping to make that happen, but they have not concluded yet.
The Chair: But we're hoping it'll come here sometime in May. With goodwill on all sides, it should come to us in May. We assume it will come to us reasonably soon.
We have also agreed that we would have a session with the museums on a one-day basis to celebrate International Museum Day.
Finally, we have to finish our study on book publishing and also hear from the National Capital Commission.
[Translation]
Mr. Pierre de Savoye: Mr. Chairman, I had also asked, and I thought everyone had agreed, that we examine the issue of community television and CRTC regulations. I see it nowhere in the agenda. I am both surprised and sorry and I must insist.
The Chair: Yes, you are right. We certainly have not forgotten you, Mr. de Savoye. We have tried to put on the agenda the issues we thought we had the time to go through before the end of the session. If, everyone willing.... Let's start first with the unavoidable.
We must also study the subject matter of Bill C-224 and Bill C-27. We must finish our study on the book publishing industry, a matter which we cannot escape. Let us start with what we have here and we will see later on.
Mr. Mauril Bélanger: I do not know if my colleagues would accept the following suggestion, but I will make it just the same. We have heard almost all the witnesses. As I understand it, there is only one left. Am I right?
The Chair: Yes. We had foreseen—it says so here—six more hours, which should be sufficient to end the study and to write the report.
Mr. Mauril Bélanger: I would like to suggest that we invite officials from Heritage Canada, those who are in charge of the programs, to try to wrap up what we have heard and done instead of relying strictly on what our researchers have provided. Would this be possible?
You will remember that a witness said she could not comment on potential policies because she didn't have an overall view. Would it not be more appropriate to take one hour to hear what people from the department have to say and perhaps their suggestions? We could incorporate it into our report, if we judge it appropriate. Would it be useful to devote one hour to this?
[English]
Mr. Inky Mark: Mr. Chairman, I certainly concur. I believe that with where we are right now in the study on publishing, we need to complete it and do the right thing, instead of doing a little here and a little later and it becomes a big mess in the end. So I would put my priority first on what we're doing right now with book publishing.
But also, the estimates are in the House and have been voted on, and most committees of this place have met with many ministers for the estimates. So I would suggest that we ask the minister to appear. That's a formal request on my part.
The Chair: There have been two requests that I know of for the—
Mr. Mauril Bélanger: [Inaudible—Editor]...the end of May, correct?
A voice: Yes.
The Chair: Okay. So you agree with Mr. Bélanger.
Does anybody not agree with Mr. Bélanger? We'll start with that.
[Translation]
Mr. de Savoye.
Mr. Pierre de Savoye: Mr. Chairman, I return to the issue of community television. For a while now, we have been avoiding the subject. I will readily recognize that we must do what has been asked of us, but this should not prevent us from doing something else that seems extremely important to me. In short, I agree to a meeting with department officials. However, before deciding on the agenda, I would like to see my community television included, with dates, before we leave this afternoon.
The Chair: Agreed. I totally agree with you.
Then,
[English]
on the book publishing study, you have two options: either we add one hour or we just work within those six hours, one of the two. Regardless, if we do six hours—and we have looked at the maximum time we could use between now and the end of June, and this is the number of hours we could find—
[Translation]
We have two choices.
[English]
Either we could have three separate meetings, which would include hearing the ministry people and looking at the draft report, or we could circulate the report and let the members react to it. Then of course we would have less time to spend on reviewing it, because we wouldn't do it just page by page. We'd leave it with the members to study on their own and then come back and react to it. That way we might save a little bit of time. Which option do you prefer?
Mr. Paul Bonwick: Well, first of all, I don't see any room whatsoever on this for any new work, not unless we're going to come in and meet on Saturdays. That part is not going to work.
What I was going to do, Mr. Chair, is make a suggestion that you check with the whips and see about possibly taking the Wednesday meeting and running a couple of four-hour meetings with a lunch and seeing if we couldn't incorporate and get Bill C-224 out of the way as quickly as possible.
The Chair: That is option 2, really. You can see, for instance on Bill C-224, you have two options. We could have separate meetings, which would mean three separate days of meetings of two hours each, or we could just sit for one day, Monday afternoon and evening, and have lunch provided and just get it out of the way.
Mr. Paul Bonwick: Yes, that's my suggestion.
An hon. member: Hear, hear!
The Chair: Is that the wish of the committee? I sat on the transport committee as a replacement the other day, when they had a big hearing on ADM. They went from 9 o'clock in the morning until 2 o'clock in the afternoon, they had a lunch in between for the members, then they started at 3:30 again and finished around 6 o'clock. So if we agree to do this, we can take care of Bill C-224 in one day. Is that the general consensus? Okay.
• 1315
On Bill C-27, again we will have to have 12 hours to meet with the
witnesses, which means six separate meetings of two hours, or we can
have two days of hearings, but then it means again sitting for two
days, if members agree. It would seem to me that's what we should be
doing. I know it's a bit of punishment for us, but at least we'd get
this stuff out of the way.
On book publishing, again we could try to cram it in. If we take the three we have to do—Bill C-224, Bill C-27, and book publishing—do we agree to try to do one or two days of work, as much as we can with lunches, and then for whatever time is left before June, we will take the cable distribution and the NCC? And if we can't give a commitment to Mr. de Savoye and the others that we will meet on specific dates, then do we agree that the first time we come back, these will be the items?
I can't commit myself to fitting them in. We have to leave some flexibility. If, for instance, we ask for the parks and we have a list of witnesses that is bigger than we thought, I can't just make a commitment today that we'll be able to have the NCC or the cable distribution.
Monsieur Bélanger.
[Translation]
Mr. Mauril Bélanger: Could we come to an understanding on the following procedure? One day would be devoted to Bill C-224, if everything goes well; we would hear witnesses on Bill C-27 when it is deferred to us, which has not yet been confirmed; we would do what you have suggested on the issue of the book industry; and, in priority, we would discuss expenditure forecasts, as you wish, if I understood you right. Then, we could do the study on the CRTC and community television networks. The NCC would be third.
The Chair: Agreed.
Mr. Mauril Bélanger: This matches your wishes.
[English]
Mr. Inky Mark: I would suggest, Mr. Chairman, that Dennis not schedule any sports meetings on Wednesdays, if you're going to have meetings on Wednesdays, because I'm there and he's there.
The Chair: Yes, all right. Fair enough.
[Translation]
Mr. de Savoye.
Mr. Pierre de Savoye: I would like to mention to Mauril Bélanger that it would be no doubt useful to give the clerk the name of witnesses we would like to hear concerning community television to make sure that, when the time comes, nothing will prevent us from going ahead.
The Chair: How much time do you think we will need and how many witnesses do we have to hear? It will depend to some extent on how much flexibility we have.
Mr. Pierre de Savoye: I imagine that at least Rogers and Vidéotron will have to be heard. The CRTC will want to come. The Fédération des télévisions communautaires du Québec will certainly want to be heard.
In the rest of Canada—I was going to say in English Canada, Mauril—, I'm not sure who to invite. That is why I'm asking you to think about it. Later, we can see exactly what awaits us.
The Chair: Can we come to an agreement today?
[English]
For Bill C-224, can the clerk go ahead and set up a day's meeting? Then we might have to listen at the end to the Museum of Civilization, which will be involved. They'll have to come separately, after we've heard and digested everything. Then for Bill C-27, as much as possible we'll try to see, with the members, if we can do a full-day meeting. Then we'll do the same for book publishing.
Do we agree that we'll distribute the report for you to study individually so that we won't spend time looking at paragraph after paragraph here?
[Translation]
Mr. Mauril Bélanger: Mr. Chairman, on this subject, you said at the last meeting, I think, that our researchers already had a paper detailing the recommendations, suggestions and comments we heard. Maybe we could have it right now so that we can start to give it some thought.
The Chair: I agree.
Mr. Mauril Bélanger: If we ourselves have suggestions and recommendations when we meet with departmental officials, as soon as we are back, the first week, we should come to conclusions rather quickly.
The Chair: I also have a suggestion that was made to me by researchers. To better understand the new Pegasus facility and its size, of which we know nothing, we could do what the clerk has suggested to me, that is send a researcher there to see what there is to see and then report to us. This would seem like a good idea and our budget seems to be able to accommodate it.
Mr. Mauril Bélanger: I myself would like to see it.
The Chair: If you all agree, we will do it.
Mr. Mauril Bélanger: If this took place during the two weeks when the House is not sitting, maybe some of us could also go.
The Chair: Yes, certainly.
If we can come to an agreement,
[English]
we're just going to tackle Bill C-224, Bill C-27, and the book publishing. The International Museum Day I think would be really useful to do, and then we'll provide the time for the table distribution work. If it means sitting more time, we'll have to do that, if that's what you want to do.
Why don't we let the clerk get back to us with an outline, which would basically be this, but giving you dates so that you know exactly where we are? Then you will have this in your ridings and will know from the time we start in May that this is what our commitments are.
Mr. Pierre de Savoye: Will we have that next week? Where do we get them?
[Translation]
The Chair: We will have them during the break, as soon as possible.
Mr. Pierre de Savoye: During Holy Week.
[English]
The Chair: Wendy.
Ms. Wendy Lill: I have some questions about the book publishing report. First of all, I want to make sure we all feel that we've seen everybody we need to see, and I specifically think about the researchers. I remember during the culture report every once in a while we came up against things for which we just didn't have all the facts; we just didn't have them for various reasons. I don't want to come up against the sane thing here. In our report we didn't have all the facts, and therefore it doesn't have the power it could have.
We were left with a Chapters representative telling us that the sales of Canadian books are up, that everything's coming up rosy. That clearly is not the same as some interpretations of the events.
So I really want to know that we have the facts, that we have the statistics about book sales, about Canadian titles, so that we can somehow show something real that would meet the needs of some of the people who were here in camera and talked about their book sales being halved. But who do we need to have in here? What additional research do we need to do to make sure we have something, that we have some beef?
Mr. Rick Limoges: Mr. Chair, on that same issue, Ms. Lill has brought the matter up a couple of times with regard to people's sales being halved. I believe the submission was that their sales to Chapters or Chapters-Pegasus had been halved from one year to the next. What we ought to make sure is if there are variances such as that, in some cases they're explainable variances. For example, when they're in a period of expansion, it's not unusual to buy a lot more than what you would in a normal period of just having to replace, because you're filling an entire store, or in this case numerous stores. Your sales would go through the roof. The next year you're only replacing what is sold and keeping up with your stock. This very easily explains why your sales to an individual customer would drop, especially given what they went through during that time period.
I think we have to keep in mind that there are some variances that are explainable.
The Chair: I should remind members that when we started this study with an in camera session, a lot of people came and gave us information. This is a public meeting here, so....
I think what I wanted to address is that we have two choices. We close, say, in the middle of June. One choice is to get the researchers to produce a draft document that we will study. There is a lot of information and statistics. I have a whole host of recommendations made by different people. We've heard Chapters and Pegasus again today. If when you get this document you feel it doesn't satisfy you in the sense that we should postpone it till September and go at it again later on, then the choice is to say, fine, we want our recommendations now, but we'll have better recommendations later.
• 1325
There are choices to make. We win on one side, we lose on the
other—both ways. The advantage of finishing in June is that now we
have developed a lot of interest in this. The Competition Bureau is
interested in it again, it seems, and there might be momentum going
for us to produce something by the end of the session. At the same
time, if you're not satisfied with the report the way it's drafted to
you and sent to you, and you say it's not satisfactory, let's leave
it. Then we have choices to make.
So I think we should start with that and see what we have so far. It's obviously not going to be a report that will cover all the bases in three months. It's impossible. But maybe there will be enough in there to send some broad recommendations for further action by the government one way or another.
[Translation]
Mr. de Savoye.
Mr. Pierre de Savoye: It would no doubt be useful, when we have been given the first draft of the report, to sit together for half and hour at the end of a meeting to put our heads together....
The Chair: Yes.
Mr. Pierre de Savoye: ... in order for the second draft of the report to be even better. By this exchange, maybe we can also make sure that our views converge or diverge. The sooner the better, naturally, so that the researchers are quickly informed of our views or positions.
The Chair: You have made a very positive comment. I would like to ask the researcher
[English]
when do you think you'd be able to produce a first draft, some first sketch of that?
Mr. Joseph Jackson (Committee Researcher): I think, allowing for translation, we can have one for mid-May.
[Translation]
Mr. Mauril Bélanger: Mr. Chairman, we had agreed to hear some sort of presentation from departmental officials.
The Chair: Yes.
Mr. Mauril Bélanger: I hope we will hear it.
The Chair: Yes.
Mr. Mauril Bélanger: Secondly, I agree with what my colleague is suggesting. I would go even further; I would suggest that researchers call committee members to get their suggestions and comments in order to be able to integrate them to the report immediately. The drafting would take even less time.
[English]
The Chair: O.K.
Mr. Mark.
Mr. Inky Mark: Mr. Chairman, I would ask, perhaps through the clerk, if we could ask the witnesses, who today indicated they would volunteer databases to support their statements, to do so. I think that would be useful to our researchers.
The Chair: Yes, we'll follow that up.
Mr. Mauril Bélanger: I would hope that our final report when it comes out will be in the form of a book.
Mr. Pierre de Savoye: Who would distribute it?
Mr. Mauril Bélanger: We'll shop it around.
The Chair: Can we leave it like this, Wendy, that we are going to produce a draft and then we'll look at it and see, and then decide after we've gotten together again?
Merci beaucoup. The meeting is adjourned.