HERI Committee Meeting

STANDING COMMITTEE ON CANADIAN HERITAGE

COMITÉ PERMANENT DU PATRIMOINE CANADIEN

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, May 9, 2000

• 1105

[English]

The Chair (Mr. Clifford Lincoln (Lac-Saint-Louis, Lib.)): Good morning. Today, as we all agreed, is a working session with the officials from the ministry to get more information from them in regard to the study we started on the Canadian book publishing industry.

We are pleased to have Mr. Michael Wernick, who is assistant deputy minister of cultural development, and Mr. Allan Clarke, who is the director of publishing policy and programs.

Before we open the floor to the officials and to your questions, there are just a few items of business we have to clear up.

Regarding the issue I discussed with you the other day on Bill C-224, which is the motion of the House of Commons to study the whole area of genocide, we need some help, because our researchers are really backed up with the book publishing study. The clerk and I and officials from the ministry met with a consultant, who has agreed to help us, but his fees are too high for the maximum allowed by the committee. It is possible to have his work funded by the ministry, at our request. We have already approached them. The problem is we have to make sure it is above board, so the consultant will be completely independent of the ministry.

Apparently this has been done before. I would like to ask the clerk to explain to you what the formula is and what the procedure would be.

The Clerk of the Committee: To retain the consultant?

The Chair: Yes, paid by the ministry.

The Clerk: I can relate, Mr. Chair, that in previous committees, the environment committee more specifically, when we came to the drafting stage, the department loaned us employees of the department. But what the committee did was adopt a motion that discussed the terms of reference of the working conditions of that person, so that the autonomy of the committee would be respected and the person would not report to the committee and report to the department at the same time.

So I would recommend, if it is the committee's wish, that you adopt such a motion, which would set out the terms of reference, and that person would then abide by those terms of reference. That is perfectly acceptable procedurally, if it is acceptable to the committee.

The Chair: Mr. Bonwick.

Mr. Paul Bonwick (Simcoe—Grey, Lib.): Mr. Chair, how much more money are we talking about? I apologize if I didn't—

The Chair: The people recommended to us by the ministry, which suggested these people would do the work for this, I think charge $1,000 a day. Isn't that right?

The Clerk: It's in excess of $1,000 a day, whereas the limit a committee has is $599, up to which you have to go to the Board of Internal Economy.

Mr. Paul Bonwick: Just on that point, what's the total price of the contract? How many days are we talking about?

The Chair: I think we're talking about $9,000.

The Clerk: Approximately $9,000 for a context paper, yes.

The Chair: So we can do it and have a complete arm's-length relationship with the ministry, in that the consultant would be working strictly for the committee.

• 1110

At first, when I found out what the fees would be, I didn't think it would be possible to get it funded by the ministry, for reasons of conflict of interest. But according to the clerk, it has been done and it can be done, so long as we clarify the relationships.

If this is the case, and if members would agree to this procedure, I would suggest we circulate to you, in both languages, the CV of the person involved and the fees, so that you can look at it, and maybe next meeting we can just confirm it. But I wanted to check whether this would be agreeable.

Mr. Paul Bonwick: Does it require all-party consent?

The Chair: Well, it requires a majority on the committee.

Is everybody agreeable? We just have to adopt a motion. I'm just telling you, because we'll have to negotiate it with the ministry as well.

The second thing is I've received two letters, one from Mrs. Lill and one from Mr. Muise, who can't be here today. Both cover the same area. I will read Mr. Muise's, which is a little shorter, but it says basically the same thing:

As you are aware, questions about the future of regional television across this country have arisen in recent weeks as the CBC ponders the future direction of their corporation.

[...]

I am concerned that many of our small, rural communities will lose their voice in Canadian society if regional programming is allowed to leave. Canadians from coast to coast could lose their ability to share their stories with people from different provinces and different cultures.

I believe this is an important issue, one at which the Canadian Heritage Committee should take a serious look in the near future. I recognize and appreciate that the agenda for the upcoming months is consumed with other very important business; however, I think we should examine the CBC and the role of regional programming at the earliest possible opportunity.

That's the sense of Mrs. Lill's letter as well.

So I would like to ask you whether you want to do this in this committee soon, in which case, as you know, we have a really tight agenda, but we'll have to find time.

Mrs. Bulte.

Ms. Sarmite Bulte (Parkdale—High Park, Lib.): Thank you, Mr. Chairman.

In my opinion, we should do it very soon. Time is of the essence. I understand the board meetings of the CBC were cancelled on Monday and Tuesday, but they have been rescheduled for two weeks later. Within a two-week framework is the time we definitely should bring Mr. Rabinovitch here to the committee. I would even suggest if possible we should call a special committee meeting that doesn't fall within the normal time.

It's a crucial issue. It is a critical issue. It affects all Canadians. If we don't do that, then I would submit we are shirking our duty under the Broadcasting Act.

The Chair: Thank you, Mrs. Bulte.

Is that the feeling of members generally? Because rather than entering into a long discussion, if this is the general feeling, then we'll find a way. You appreciate that we'll have to find time, maybe outside the ordinary hours or something. We have legislation—

Mr. Paul Bonwick: Seven-to-niners.

The Chair: Is that okay?

Ms. Sarmite Bulte: But within the next two weeks, it's critical.

The Chair: I take it there's a consensus then. If it's an evening, is that okay?

Ms. Sarmite Bulte: Fine.

The Chair: All right. So the clerk will look at a possibility very soon. We'll advise Mr. Rabinovitch and go on from there.

So Mrs. Lill, this is the reply to your letter less formally, and we'll get in touch with Mr. Muise as well.

Ms. Wendy Lill (Dartmouth, NDP): Great.

The Chair: There are just two other items of business.

Madame St-Hilaire has sent us a motion, which is now acceptable, because it came in with due notice. It was sent to all the members of the committee. It reads:

[Translation]

That the Standing Canadian Heritage Committee create a sub- committee on the status of women which would be responsible for reviewing requests made by different women's groups with regard to the World March of Women 2000. That the sub-committee be comprised of 9 members of parliament, 5 of whom are from the government and 4 from the opposition.

[English]

You have received this.

• 1115

[Translation]

Ms. St-Hilaire, do you wish to talk about your motion?

Ms. Caroline St-Hilaire (Longueuil, BQ): Yes, briefly. I did forward it, but I did not think that we would debate it today.

The Chairman: Well, we can discuss it at the next meeting then.

Ms. Caroline St-Hilaire: That does not bother me. We will have to discuss it, since the World March of Women will take place in October. I think that every member of parliament already receives demands from women's groups. Given that the groups from Canada and Québec have no intermediary to whom they may present their demands, I believe that it would be useful to establish a sub-committee. Presently, no place, consulting group or sub-committee exists. This is something to think about.

[English]

The Chair: Would the members like to ponder this and take a decision next time, or do you want to discuss it now?

Mr. Inky Mark (Dauphin—Swan River, Canadian Alliance): Mr. Chair, because we already have the Status of Women organization in place, I would suggest we have them come before the committee and find out what is going on before we take on this big task.

Mr. Paul Bonwick: Just by way of consultation or information, we should put a request through to Minister Fry's office to find out what they're doing in this regard, to make sure we're not duplicating efforts by another minister or by another standing committee. Once they come back to us, we could sort out jurisdictionally which committee should be working. I'm not questioning her motives, but—

[Translation]

The Chairman: It would be advisable to speak to Ms. Fry to learn what has done up to now before we study the motion. I would not want people to vote against it today simply because they had no information.

Ms. Caroline St-Hilaire: That's right. Personally, I hoped we would not debate it or vote on it this morning. I wanted to tell the other committee members and Ms. Fry about my motion.

I would like my colleagues to understand that the issue of the status of women is horizontal. It pertains to everything and nothing at the same time. It pertains to justice, violence, income, poverty and social income. I believe a sub-committee that would be able to hear a large number of demands could be worthwhile in the year 2000, but I do not want to vote on this when Ms. Fry is not yet aware of this approach.

The Chairman: Agreed.

Ms. Caroline St-Hilaire: We would have to see.

The Chairman: Agreed. Mr. Bélanger.

Mr. Mauril Bélanger (Ottawa—Vanier, Lib.): I would like to ask Ms. St-Hilaire a question. When I read your proposition that talks about creating a"sub-committee on the status of women which would be responsible for reviewing demands made by different women's groups with regard to the World March for Women 2000", I wonder what you mean by "demands". Are you referring to claims?

Ms. Caroline St-Hilaire: Yes, claims.

Mr. Mauril Bélanger: You are not talking about specific claims. All right.

Ms. Caroline St-Hilaire: Claims.

Mr. Mauril Bélanger: Thank you.

The Chairman: If everyone agrees

[English]

with Mr. Bonwick's suggestion, which makes a lot of sense, we'll get in touch with Mrs. Fry's office to find out what's going on, to get more information, and then at the next available opportunity we'll discuss the motion. Okay? So we'll table this for now.

Lastly,

[Translation]

my office and the clerk's office received a telephone call from the city of Jasper, from the Jasper Town Committee. We have set a tentative date for the city of Jasper to appear on May 16. We will send you a list of the people who have been invited to appear on May 16 and 17.

May 16 will be a fairly busy day. We must meet in the morning and afternoon. We had scheduled meeting the Jasper representatives on May 16. They told us that they had a committee meeting on May 16, where they would be studying the project for the bill and would not be able to come on that day. They would like to appear after May 16.

The only available date after the sixteenth would be May 18, which is the day reserved for the museums. I do not know if you would agree that we make an exception for the city of Jasper. If we do, we would have to meet these people between 9 and 11 a.m. and then go to Museum Day. This would entail an additional meeting, if you accept.

• 1120

[English]

Mr. Inky Mark: Perhaps we could meet at 10 o'clock. They probably wouldn't require any more than 20 or 30 minutes.

The Chair: Yes. Can we say that only if Jasper happens, just in case, because we're getting more names all the time, then we would have it at 10:50? Can we set a tentative agenda for all the meetings, and then you can react as soon as possible to advise the clerk?

I'm sorry, Mr. Wernick and Mr. Clarke, that we had to delay this. The floor is open to you. Do you want to make a short statement before we start, or do you want to take questions from members? How do you want to proceed?

Mr. Michael Wernick (Assistant Deputy Minister, Cultural Development, Department of Canadian Heritage): Mr. Chairman, if it's agreeable to you, I'd like to speak for just a few minutes. I promise to be brief. I will give just a quick recap statement, and then simply take questions from the committee.

The Chair: By all means, go ahead, Mr. Wernick.

Mr. Michael Wernick: Thank you.

It's been a pleasure and a privilege for the department to be of assistance to the committee in this very important exercise. I think we were your opening witnesses, and I understand we'll probably be your closing witnesses. During the course of your deliberations we've been able to provide technical briefings on a number of issues of interest to the committee, so we're pleased to come here today to offer a little bit of a recap of what we heard from this process, simply take questions, and help you form your own findings and conclusions. Anything I say in the next few minutes will be with complete deference and respect to the committee's prerogative to draw its own conclusions from what it has heard, and make its own findings and recommendations.

We will make any documentation we've provided to the committee freely available to your research staff, and my staff are available to help the researchers as they go through the process of drafting your report over the next few weeks. So if there's anything at all that would be of assistance to the committee, don't hesitate to ask. We'd like to be of service. We think this has been a very important exercise and a very useful one, both to us and to the industry that's been under the microscope.

[Translation]

Here are a few quick comments.

[English]

a sort of recap of what we've heard.

The exercise has certainly signalled how important books are as a means of connecting Canadians to one another and to the world. We've heard a lot about the success of Canadian literature and Canadian authors and our creativity. We've heard how books play a role, as well, in supporting our film and television industries by supplying material for scripts. They are part of the fuel of that success story, as well.

There is a strong link between the strategic objectives this committee set out in its report last June and the contribution the book trade, in its entirety, can make to the accomplishment of those objectives. We're heard that from all the witnesses.

Over the past 30 years, Canadian literature has grown from a very small operation with very small fragmented companies and domination by foreign literature and foreign publishers to quite a success story. Despite a number of the patterns you've heard about and the growing interest in Internet usage, books continue to be a very important media—a form of communications and cultural expression.

Looking at some of the consumer survey data, it's clear that a lot of Canadians still read books. About 61% of Canadians, in a recent survey, were in the process of reading books at the time they were surveyed. There are more than 10,000 titles published every year in Canada, and just under half of the books sold in Canada are authored by Canadians. So in comparison to a lot of other areas, this is a success story of public policy.

You set out last December, in response to a number of things you'd heard in earlier exercises, to look at how change was occurring in the whole chain of publishing distribution and retailing. The stated goal in your terms of reference was to better understand “the link between the Government of Canada's support to the publishing industry and the provision of increased choice of Canadian-authored materials to Canadian readers”. We agree very much that is the bottom line of this exercise.

• 1125

You've heard from the department, various associations, Statistics Canada, about 30 to 35 witnesses, nine round-table discussions, writers, publishers, wholesalers, retailers, and various observers of the industry. You asked five questions in your original terms of reference, and I'll just recap and give a take on each of them.

[Translation]

What do we know about publishing, distribution and retailing in Canada? What is the nature of the relationships among the different industrial sectors? What trends and challenges is the industry currently facing? What information are we missing about the industry? And here is perhaps the most important question: what role can the government play to help the industry?

[English]

What can be said about the state of publishing, distribution, and retailing? The consensus of the witnesses you've heard is that when we look at publishing it's a fragile industry, with low profitability and undercapitalization. There is difficulty in generating working capital from its own revenues, and difficulty attracting outside investment. These things make it very fragile and very vulnerable to the winds of change. It's facing many new challenges, including consolidation among the foreign publishers with which it competes, the emergence of new retailers and wholesalers, and changing technology right through the chain, from retail to the process of actually producing books.

On the state of distribution, in earlier studies in the 1990s a common analysis of the book trade in Canada was that Canada lacked an efficient wholesaling network. We've heard how difficult it was for this to come together. Until Chapters launched the Pegasus initiative, there was not a strong wholesaling entity within Canada.

On retail, it's clear there's pressure on Canada's large network of independent bookstores. There's a shift in the retail market to big-box retailing, and we're starting to see Internet trade in books. Many independent retailers are having to diversify and find their own business strategies. Some are going into online retailing, some are changing the kinds of product lines they offer, and some are closing.

On the relationships among the sectors, I think the exercise has underscored that it's difficult to look at one part in isolation of the others. The overall chain of getting books from authors to readers depends on a healthy relationship among the writers and illustrators who have the stories to tell; publishers who are willing to take risks, nurture the talent, and bring those stories to the marketplace; distributors and wholesalers who have to use the most efficient fulfilment services and technologies to distribute those books across a very dispersed country; and the retailers who are equipped to serve the individual needs of their communities and play a role promoting books, in general, and serving local talent, in particular.

What are some of the current trends that have been identified? You've heard a lot about changes to the retail environment, both in the way people look for their books and the relationship, in terms of trade, between the suppliers and publishing industry and the retail chain. It's clear that relationship is in the process of change.

You've heard a lot about changes in technology such as new publishing technologies, just-in-time print technologies, e-commerce applications, Internet retailing, and so on. You've heard about consolidation in publishing. In the worldwide book trade there is a wave of consolidation going on. This is happening in a lot of cultural and media industries as well. The size and scope of the foreign publishers active in this market have only increased their competitive advantage in the squeeze over Canadian firms, which essentially have to operate with North American prices but Canadian cost structures, which leaves them very little margin for error.

You've also heard about some opportunities and some positive trends. The big-box retailing, online retailing, and some of the efforts around marketing and promotion of Canadian books and literature have generated new interest and excitement around books. The industry is managing to attract readers and bring people in. In overall terms, stories are finding their way to readers.

Technological advances may actually create wonderful opportunities for small publishing houses and small retailers. Once you can digitize your backlist and marry it to print-on-demand technologies, you can do small print runs economically. The practice of best-sellers and big returns may become less important in the near future.

• 1130

Certainly for a consumer in any of the communities you represent, the opportunities to surf through catalogues and backlists and find just about any book you want are very interesting and exciting for the consumer.

There are anxieties, though, that you've heard about the influence of large retailers. Publishers are feeling the effects of the increased bargaining power of the large retail chains. Independent booksellers are feeling the pinch in struggling to maintain their market share in the overall system by which Canadians find their books.

The pace of technological change is particularly pressing on the smallest players. They have this problem in generating capital from their own revenues, so it's very difficult for them to find the investment required to buy new technologies and to adapt to the trends. Their disadvantage relative to the big players is quite acute in the area of adaptation.

As I said, the consolidation is putting a squeeze on the entire Canadian industry. The ability for Canadian publishers to retain talent and retain the contracts with their prime authors is under pressure as Canadian literature becomes hot. In fact, a lot of the multinationals are interested in picking up and signing Canadian authors when they become available.

On your question about what information about the industry do we lack, I'd have to say that despite all we have heard through this exercise, there is not a definitive view on the impact of the returns practice and how this practice and its impact on the relationship between publishers and retailers could be addressed. It's still an area that is not well understood, and there isn't a clear sense of what kinds of future trends there are in the area of returns.

In terms of the government role, we set for you and you have heard from others the variety of tools that are brought to bear on the book trade. The direct funding is intended to offset the challenge of operating in the Canadian market. As you know, we have an industry development program that supports publishers; Canada Council provides support for small houses and for authors; and there's an aid to scholarly publishing, which deals with the particular needs of that sector. There have been attempts in the past to address this financing issue, to increase the access to capital and to try to draw Canadian lenders into more interest in the publishing area. We've developed an innovative loan program for book publishers, and there's the cultural industries development fund, which provides loans to cultural industries at favourable rates.

Foreign investment policy maintains a Canadian presence in the cultural industries and ensures that foreign investment, where it's allowed, is of net benefit to Canada. The Copyright Act is an important part of providing fair remuneration to writers and protecting a distinct Canadian rights market for distributors.

I think the one thing we've heard from this exercise is that there's a chain from author to reader that flows from publishers to distributors and wholesalers and on through online retailers, book clubs, independent bookstores, chain bookstores, and other vehicles. This is the chain by which Canadian stories reach Canadian readers. It's probably a mistake to fixate on one part of the chain without looking at its relationship to the others.

The kinds of initiatives you've heard from witnesses and which we've been working on and which may lend themselves to your report and to your findings would fall in about seven or eight areas. I simply set them out for you. I'd be happy to take questions or discuss them. As I said, I'm not trying to pre-empt your prerogative to make your own findings and your own recommendations. If we can be of assistance in testing or kicking around some of these ideas, we'd be pleased to do so.

Basically, what we need to do, in our view, is to strengthen the entire chain, so that stories flow from authors to readers. In particular, the fragility of the independent publishing sector is of concern, and the adaptation of the retailing sector to the new technology world is of particular concern. If any part of the chain breaks down completely, everybody else in it is going to suffer.

The kinds of initiatives that we think would be of interest would be ones that promote the more rapid take-up of new technologies, ones that increase support for marketing expansion into foreign markets to generate revenues that can flow back and strengthen the capacity of Canadian publishing houses.

We should ensure that if we have policies and programs, they're not creating unintended barriers to the industry adapting and finding its own business strategies. The process of business people finding their own plans and strategies shouldn't be impeded by the rules of our programs.

• 1135

We have to continue to work on this puzzle of attracting equity investment into the book trade. It is a recurrent problem of getting lenders and investors interested in the book publishing industry. Anything that attracts new readers—marketing and promotion of literature, marketing and promotion of particular authors, book tours, Canada Book Day, the Salon du Livre—any kind of initiative that promotes books and the book trade in general is going to be a benefit to everyone in the chain.

Our view is that there's an acute need for work on professional development initiatives across the industry. People are so busy running their businesses that they're often depleting their expertise and their capital. They may not be up to speed on some of the practices that are around. So anything we can do to assist the associations—whether they're the publishers, the writers, the retailers, and others—to do professional development and training, to bring the knowledge base of their members up, will be of enormous benefit.

We want to facilitate, where we can, industry-based solutions and find ways of brokering and facilitating discussions that will improve the relationship between the publishers and the wholesalers and the retailers. It's clear that the way the industry is evolving has to be very closely monitored by the Competition Bureau, by us, by you, to see if some of the concerns and the anxieties that have been expressed are in fact coming to pass, so that they can dealt with quickly.

We don't have good marketplace data in this industry. It is not an industry like television or even music sales, where you have real-time marketplace data to tell you what's moving right now. The lack of current marketplace data is an impediment to us, and I'm sure has been an impediment to you in getting a picture of what's happening now, as opposed to the StatsCan series from three years ago. So we think that some investments in data collection, monitoring, and helping the industry bring in some of the real-time marketing analysis will be a benefit to everybody else.

Those are sort of seven or eight areas that we think could be worked on, either by adding some initiatives to the current tool kit or reallocating current resources so that some of these things are given more emphasis in the future.

With that, I think I will stop and take any questions or comments from the committee.

The Chair: Thank you, Mr. Wernick.

Mr. Mark.

Mr. Inky Mark: Thank you, Mr. Chairman.

Let me thank you both for all the work you've done for your department.

It's true that we've all learned a lot through this exercise about this sector. As you mentioned, this industry is fragile. Has this industry always been fragile?

Mr. Michael Wernick: Do you mean publishing?

Mr. Inky Mark: The publishing industry, yes.

Mr. Michael Wernick: The publishing component of it has a history of being fragile. It's basically a small-business area. The biggest companies are not very big by the standards of the Canadian economy or by the international publishing area.

There has been a series of studies, going back well before my time in the department, that have pointed to the difficulties of the publishing companies in growing and attracting investment. We have more or less the same number of publishing companies now as we did about five years ago. It's a recurrent problem.

Mr. Inky Mark: I certainly agree with you that we need to look at the complete change, from beginning to end, in this sector if we're going to find solutions.

One of my concerns is the level of support we have given to this industry. I would like you to comment on trying to move the support level from public to private, so that we have a balance and also ensure the sustainability of the industry. Perhaps you could comment on that.

The other area I would like you to comment on is the whole issue of copyright income, exemption of copyright income, and if you would perceive that as seed money for writers to basically help grow the industry.

Mr. Michael Wernick: I'll start with the first one and I'll come back to the second and ask you to clarify the question.

On the public investment, the book publishing, the BPIDP program, as it's called, goes back some time. It really depends what objective you're measuring it against. Our view is that against the objective of generating publishing activity, of creating book publishing activity, increasing the number of titles, the diversity of titles, it has been successful. There are thousands and thousands of titles published every year by the firms that receive assistance from that program.

• 1140

So if you look at it as a diversity of content initiative, we would say it's been quite successful. It compares very favourably with a lot of other initiatives. Where it's been less successful is when it's measured against an objective of the industrial structure of the industry. The industrial structure of the industry is more or less what it was about ten years ago. There hasn't been a lot of consolidation. There hasn't been a lot of entry or exit.

As we were saying earlier, this problem of under-capitalization hasn't been addressed, and it appears, if you're going to go after the issue of capitalization and sustainability, that you may need different kinds of instruments more targeted to that particular problem. What we're doing is blending cultural and industrial objectives in one program, and it's been more successful in one than in the other.

The second question I think was about copyright...

Mr. Inky Mark: Copyright income exemption.

Mr. Michael Wernick: This would be with respect to authors.

Mr. Inky Mark: Yes. Would you consider that to be seed money to grow the industry?

Mr. Michael Wernick: If I understand the idea that's floating around, the authors who receive copyright revenues could get some portion of that revenue exempted from income tax. There's no question that would be of some benefit to the authors, which would be of some value in making sure that more authors could make a living.

As to whether it have any flow-through effect to publishers, wholesalers, and retailers, that's less clear to me. I'll take your question under advisement.

Mr. Inky Mark: Okay.

The Chair: Madam St-Hilaire.

[Translation]

Ms. Caroline St-Hilaire: Mr. Wernick mentioned authors. I believe this is a source of concern for all those gathered around the table. Yes, copyright royalties exist, but do they allow the authors to earn an adequate living from the fruit of their labours? What can we do to ensure that they can? I do not know if we can do it through a method adopted by the Heritage Department.

Have you ever thought about such a method? Or, during the course of this study, have you considered a new method that would help authors, whether it is through financial deductions, an increase in copyright royalties or an improved collection system?

[English]

The Chair: Ms. Bulte.

Ms. Sarmite Bulte: Thank you very much, Mr. Chairman.

I want to build on what my colleagues across the way have asked you. First of all, thank you for your presentation. Thank you for the summary. I was asking “Where is it?” because you were speaking so quickly. There's so much information, I almost would like to digest it and then get back to you.

Four or five things came to mind as you were making your presentation. You talked about the impact of returns. I think one of things we have to look at as well, which is not clear, is how this also is linked to the payment of invoices. While we heard testimony before us that some people did not pay until 120 days, my understanding is that the standard practice in the trade is a 90-day return policy, and that's why the invoice isn't paid prior to that time. Perhaps we could examine that before we jump to conclusions, because I think it's very much linked to the payment of invoices.

Secondly, with respect to financing, I'd be interested to know—and this certainly is something I've heard from the book publishing industry and authors—how you would compare the level of support the book publishing industry gets as compared with that for television and film. That would be a very interesting statistic.

You talked about the importance of copyright, about how we need to strengthen the entire chain. You also talked about technology. I would like to ask the department when we are going to bring in legislation to ratify our WIPO convention, which we signed in 1996, especially as it deals with anti-circumvention provisions, which is integral to what we are discussing here.

• 1145

As well, with regard to extending the life of copyright from life plus 50 to life plus 70, it becomes relevant again with new technology. As new mediums are being developed, those old works are now finding new life. I don't think that was something that was discussed, but it's just key to strengthening the entire chain.

Fourth, I'm glad my other colleagues talked about this, Michael, because we've talked a lot about professional development needs for publishers. What was brought up from the earlier questions was the creator, and how this includes the creator. I think that's an integral part of the chain, and if we don't look at that in this report then we're missing a great opportunity. So when we talk about professional development needs, I would ask that it go the entire chain.

Last but not least, I have a concern and a comment with respect to foreign markets. You spoke about how important it is to export our product. Absolutely—but I think we also have to look at how our Canadian books are exported.

The fact is, most authors—and I'm not taking this away from the creator—give their Canadian rights to Canadian book publishers. I'm not saying they shouldn't retain those rights... but then international rights. But when they want to give their American rights, to be exported into the U.S. market, it's typically given to one of your transnational publishers, Michael, as you talked about.

So who is getting the benefit of the success of our Canadian authors and their publishers if it's the foreign publishers who are doing it? I know we in turn also have Canadian publishers who have the international rights to American and U.K. authors, so I'm not saying...

But I think that's a bit problematic, considering we do assist the industry with the BPIDP program. I think 85% of our publishers would not be economically viable without the support we get. I don't know how we work that in.

I guess that's all.

Sorry, Mr. Chairman. I'm just very excited about these—

The Chair: No, these are important questions.

Mr. Wernick, I know that's quite an assignment, but can you tackle these questions?

Mr. Michael Wernick: I'll do my best, Mr. Chairman.

The issue of returns really is the crux of the relationship between publishing houses and the wholesalers and retailers. There are a number of ways you could approach this.

In the shorter term, it's probably possible that the weight that this committee's report will carry could speed up the process of something like an industry code of practice that would make it clear what norms are expected—to pay your bills within a certain number of days, to operate within a certain margin of return policy, and so on. But there's a structural imbalance between very, very small publishers and retailers, whether they're big or small.

It's a very peculiar situation in the book trade, where a lot of your inventory can be out there, held by somebody else, and you don't know what the net sales are going to be until sometime later. It's hard to imagine another retail area where that's the case.

Ms. Sarmite Bulte: Michael, with your indulgence—

Mr. Michael Wernick: Sure.

Ms. Sarmite Bulte: —isn't what's missing in this part also the role that the distributor plays? The wholesaler is different from your distributor, and then the publisher and the retailer. I think that hasn't become clear in our study.

If the distributor is distributing, the publisher doesn't know how much has come back and gone out. There's almost an additional role we have to look at.

Mr. Michael Wernick: There are two parts to that middle chain, as I understand it. I'm struggling as well to better understand this middle part.

Part of it is simply a fulfilment thing, to get the books from the place where they were made to the bookstore or website where people have ordered them. So there's simply a geographic distribution role.

The distributor can also play a role in marketing and promotion, much as they do in other industries, which is to play a role, in cooperation with the publisher and the authors, in promoting the book. There are lots and lots of books out there competing for time and attention and consumer dollars. You need to do book tours, you need to do promotion, and you need to work the market. Distributors can play a role in that. The original publishing houses can play a role in that. So that middle chain is very important to the success of the whole thing.

• 1150

Just to go back to where I left off, though, it is part of the fragility of the publishers, as I think you've heard, that they can have these huge contingencies or swings where they've made a gamble to publish a certain line, and they don't know what the net sales are going to be until some time later. A bank will look at their balance sheet and say “Geez, you have an awful lot of risk”, or “You have a lot of liability there”, or “You may be very dependent on one particular wholesale-retail outlet”. That's part of the financial weakness in getting the publisher stronger.

It would probably be in the interests of the publishing industry to go through some consolidation toward bigger houses so that they are less vulnerable and can negotiate more firmly with the retailing end of the thing.

In the end, the hope is to basically leapfrog past this practice of printing lots and lots of books and then having them come back later by adapting the technologies of just-in-time printing, so that there's much more tracking of the market. You know what's moving, and you print more or less as you need it.

That's essentially what happens in the music industry. They have feedback loops from point-of-sale technology. When you buy a CD, the bar code is scanned, it goes into an industry database, the record companies get Monday morning reports that say what moved that previous week, and they can adjust their production schedules. They can say, for instance, this record is moving in Kelowna, so we'll send more discs out there.

Publishing doesn't work like that yet, but it has the potential to do so if we can get the retailers, wholesalers, and publishers working on a more modern technological basis. If you get the backlists and the catalogues mounted on servers and you marry them to just-in-time print technology, then to some extent this whole practice of returns will be curbed and become less important to the publishers. It's not going to happen overnight. The industry really has to sort of work its way through this, but I think we can facilitate that.

In the meantime, I think it's possible to establish the benchmarks and norms that say you should pay your bills within 90 or 120 days, and to try to work out a voluntary code of practice that would say these are the kinds of norms. Then if there are deviations from those norms, that would provide the basis on which to call for investigation or complaint, perhaps.

That's the returns issue. Your second question was about financing relative—

Ms. Sarmite Bulte: To television.

Mr. Michael Wernick: It's hard to make comparisons. The investment in books is about $40 million, I would guess, if you added everything up. In television it's considerably more than that. If you add the $900 million for the CBC, the $200 million television fund, and the value of the tax credits, there's more than $1 billion going out in TV support. They're apples and oranges. It costs $1 million an hour to make drama television. It doesn't cost that to make a book. It depends on how you want to measure them—by the need, by the audience, by the importance as a form of cultural expression, by the competition from foreigners. I'm not quite sure how I would compare the two.

Ms. Sarmite Bulte: It's an issue that has been raised with me.

Mr. Michael Wernick: Where I started was that all of these forms of storytelling matter. The books in fact play a role in helping film and TV. They're often the place where you go for scripts and support. Or the reverse can happen. There can be a successful TV show, and people spin off books. That particularly happens with children's programming, where you have a character who then turns into a line of children's books that complements that. There are some very interesting partnerships between TV companies and book publishers.

I'm not sure that I can help you much more with comparing the two.

There's an enormous amount of choice out there, thousands and thousands of books. You walk into one of the major retailers, and you have hundreds of thousands of titles to choose from. The competition for the reader's time and dollars is quite ferocious. Of course it's becoming that way in television as well.

I'll come back to copyright. I entirely agree with you on professional development—and I certainly defer to the expertise of the committee on this—and on helping new and even current writers with the business part of it, what to look for in contracting, how to strike the best possible deals, what the norms are, and what you can expect. I think that's something where we can be of assistance, working with the Writers Guild and others. We do a little bit of that in the music trade, the television trade, and others.

• 1155

Often the challenge is not getting that first book published, but going about the business of being an independent, self-sustaining author. There is a lot of business to it, such as how to manage copyright, how to negotiate deals, and so on. So we would certainly concur with your reading of that. At the end of the day, helping the creators is the fuel that's going to keep us all going. We're going to need lots and lots of writers.

With regard to foreign markets, I'll be happy to provide the numbers for you. The nature of books is that they're big, heavy, and expensive to ship, so rather than fill a ship with thousands of titles, you're going to sign a licensing arrangement in the Italian market, for example, for somebody to do the printing there. The royalties and payments that come back to Canada—and a lot of it does end up in the pockets of the authors—are becoming very substantial. To the extent that keeps people in business so that they don't have to be doing other things, or there can be a licensing arrangement that benefits a Canadian publishing house, it can only help. Much as it does in film, TV, and other areas, if they have a stronger bottom line, they're not rolling the company on one project. They're able to take more risks to diversify their line. It can only be of benefit.

Allan has just come back from one of the international book fairs. There's quite a network. Canada is very hot right now. These things run in waves, and we're currently doing extremely well in the international markets.

With regard to copyright, you've opened up a whole different issue about which copyright issue is the priority and how much time is left in this Parliament in which to bring legislation forward.

I get a lot of representations on copyright, and they're all different. For some people it's the anti-circumvention in music. For others it's the issues raised by iCraveTV.com. For others it's the 20-year extension the United States went through. For others it may well be the term of protection for photographs.

There's a whole tangled mess of leftover issues from Bill C-32 and the new technology issues. The treaties are a very important part of that. The government has made a commitment to implement them. It's going to take opening up that law in particular. Many of you went through the last reform. It was literally Pandora's box. We're trying very hard to find with Industry Canada some sequencing that will make sense. Rather than talking about phase three, where every issue will be on the table and it will take you three years to get through the bill, maybe we can agree to a continuous process of approval, where we take on this issue, then this issue, then this issue, then this issue. But getting a consensus on that has been very elusive.

Ms. Sarmite Bulte: Thank you very much.

The Chair: Next is Mr. Bonwick, followed by Mrs. Lill, and Monsieur Bélanger.

Mr. Paul Bonwick: Thanks, Michael, for the in-depth report you've provided. It has been very interesting. In some ways it touches on many of the notes we've taken, I'm sure, and in other ways it offers a new and complementary perspective.

What I'm trying to do in my own mind is examine what the goal is. To me, the goal is fairly simple and yet absolutely imperative, and that is connecting Canadian stories to Canadians and how we support everything in between.

There are two phases I've been trying to examine as the committee has been hearing from witnesses. The first one is what do we have in place for the creators? What do we have in place or what do we need to put in place to ensure that creators are producing stories and that it's viable for them to produce stories? Secondly, and every bit as imperative, do they have a vehicle, and will they continue to have a vehicle to deliver those stories?

I'm wondering if you might look at some of the information you've collected over the last few months and provide me with your findings on Canadian stories. Are there more or fewer Canadian stories being authored today, as opposed to ten years ago? Are there more or fewer Canadian stories being sold in Canada and abroad? As we're finding out, simply producing them, having them published, and having them returned does not necessarily mean that they're getting into the hands of the reader.

• 1200

Just to recap, are there more or fewer Canadian stories being produced today as opposed to ten years ago? Secondly, are there more or fewer Canadian stories being read by Canadians as well as internationally? The second phase of the questioning would be based on the trends you've touched on that we're experiencing here in Canada in the bookselling industry, and which seem to be in many ways paralleling the international trends as well. Could you highlight one or two specific negative impacts you feel that will have within our bookselling industry and potentially identify what you think might be a couple of solutions to resolve those issues?

Mr. Michael Wernick: As to the second part of the question, it was the negative impacts of...

Mr. Paul Bonwick: Of the trends that are in place with regard to the overall book industry itself. I would suggest, certainly based on my findings and what you mentioned earlier, that the trends within Canada are not that indifferent to the trends internationally as well.

Mr. Michael Wernick: Can I undertake to send you some tables and information that's going to give you une réponse mieux chiffrée that illustrates some of the trends over time? It wouldn't be too difficult to pull some of those together for you.

It depends in part on how you're going to look at it, whether it's a half-full or a half-empty thing. The number of titles published every year by Canadian publishing houses has held its own. It's been in the 5,000 titles a year range. The BPIDP publishing companies publish about 5,000 titles a year. It's gone up and down a little bit from year to year. There have been changes in the economic environment. During the recession of the early nineties sales went down; when the good times came back, sales went up. But we've been able to generate between about 4,500 and 5,500 titles a year from the companies that are assisted by that program.

The sales of Canadian-authored titles have been slowly growing. They were about $200 million about eight years ago. They are about $260 million now. In my view, that's not bad, but I guess the judgment you'll have to make is compared to what. The export sales, which are essentially sales of rights, have been growing very rapidly in the last few years. In terms of, as I said, the diversity of choice, the number of stories that are getting actually printed and out there and potentially available to readers, there's been a steady, slowly growing supply.

In terms of the second part of your question—that is, what are some of the negative trends—it depends on where you're going to measure it from. I think this is the thing.

Mr. Paul Bonwick: I'm focusing on the creator.

Mr. Michael Wernick: For the creator, it's not clear from anything we've heard in this process or elsewhere that it's more difficult for a writer to get their product to readers. It's happening in different ways. In many ways there may be more opportunities because of the new kinds of retail sectors. Some people are doing very well through niche selling on the web. And the more resources that are going into marketing, promotion kinds of events are of benefit.

Mr. Paul Bonwick: The reason I asked the question, Michael, was there have been witnesses coming forward representing certain sectors within the industry. For example, we've had the independent booksellers association coming in and explaining to us how they've been championing the creator and providing a vehicle for them to get their stories out, and that if present trends continue they will no longer be viable and in turn will close shop and Canadian authors, Canadian creators, will not have the same opportunities available to get their stories out. At the same time, we're hearing from others in the industry that this is not the case and that in fact there is more opportunity today than there ever has been in the past for Canadian creators.

What I'm trying to do is separate the business aspect. Do we have an inherent responsibility to protect a small independent bookseller, or is our responsibility to the creator? And I would say it's to the creator. So we have to ensure that we have our facts in order and ask if they have a good vehicle and whether they will continue to have a lot of opportunity to distribute their stories.

• 1205

Mr. Michael Wernick: The bottom line, I would agree with you, is the creator and the reader—are the stories getting from the creator to the reader? Do readers have less choice now? Is there a prospect that they'll have less choice in the next five to ten years? My answer today would be no, there's no evidence that's emerged to that.

Is the chain by which those stories get to them changing? Unquestionably. People get their books from book clubs, retailers, Wal-Mart, Shoppers Drug Mart, independent bookstores, chain bookstores, and the mix is going to change. If all the independent bookstores collapsed that would be a bad thing. If all the publishing houses collapsed, that would be a bad thing. If the mix changes... not necessarily. And what we would commend to you is practical targeted things that would strengthen the independent retail sector, probably in the area of technology, diffusion, and professional development, and things that would assist the independent publishing sector, technology diffusion, and financing.

Mr. Paul Bonwick: Thank you.

The Chair: Mrs. Lill.

Ms. Wendy Lill: Thank you very much for coming in and giving us your presentation. I'm interested also in the concept of the chain, the fact that we start from book to reader and it goes through a long circuitous process.

I want to ask you some questions about vertical integration, because we certainly heard over and over again from people that this is causing a real problem in the chain. We have heard from the Canadian booksellers that what they want from the government is an amendment to the Competition Act setting out explicitly a review of the structural features that diminish the opportunity of small and medium-sized enterprises to participate in the Canadian economy, such as the extent of vertical integration in the industry. And we have heard them also recommend that the government order Chapters to divest itself of Pegasus in order that the latter is able to function and be perceived to be able to function as a wholesaler to all retailers in the country.

We've also heard similar kinds of things from some other important voices in the industry. McNally Robinson said “Don't force us to buy from our major competitors. We ask you to halt the expansion of Chapters-Pegasus for a while.” We've heard from Charles Burchell, the owner of The Book Room, saying “Break up the overbearing market dominance of Chapters somehow to allow independent stores a chance to survive.”

You've been watching these hearings and you've heard all of this along with everybody else, and you talk about practical targeted suggestions. What we're hearing from many sides is there's a major structural imbalance now in this bookselling environment. What do you think about the vertical integration situation we're looking at? Do you think it's causing a major problem in the industry? And if so, what kinds of recommendations would you put in place for this government to deal with that problem?

Mr. Michael Wernick: I'll try to answer that, because it's certainly the question that's at the heart of a lot of the testimony. I would say that the argument that there's a need to break up or tear down or do something about Chapters or Pegasus has not been made. My own view is that if there is anti-competitive or anti-consumer behaviour, the existing Competition Act can deal with it.

So I would not recommend that there's any need for specific legislative amendments to the Competition Act. If something happens that's clearly anti-competitive, the Competition Act can deal with it.

In terms of vertical integration, the only integration that's taking place in this industry is this case of integration between retailing and wholesale fulfilment. There isn't any other of the kind that you're seeing in new media, or cable or television, or broadcasting or whatever.

Vertical integration is not a bad or a good thing unless it has an impact on consumers or it leads to anti-competitive behaviour. Sometimes it strengthens the Canadian capacity to deliver stories, and sometimes it can lead to imbalances and a negative impact on creators and consumers. In and of itself, it's not a good or a bad thing.

• 1210

If you want to help Canadian booksellers make it through the next few years and have a high survival rate and play their role in the delivery system, then it's in the area of technology, diffusion, adaptation, and professional development, and they will find their niche in the overall system.

Ms. Wendy Lill: I am interested in your comment that from what you've seen, you see no evidence of anti-competitive behaviour. I'm just not sure that case has been established yet, seeing as we do have the Competition Bureau out there apparently doing research on this very issue.

I have always seen the role of this committee in the process to be to give people a voice so they can speak out on what they're seeing in the industry and then put forward some really logical possibilities for the Competition Bureau to study very carefully and to do the work. They have the power of audit and the power to actually get to the bottom of things, whereas this committee certainly doesn't, and we've done our best.

For anyone at this point in time to simply say we have not seen any anti-competitive behaviour I think would be really pretty presumptuous, because we certainly have heard enough people say there is anti-competitive behaviour going on out there. It is a very frustrating thing for everybody in this room, because we're still not feeling as though we've gotten to the bottom of it.

I have to say, for an industry that is so heavily supported and funded and loved by our population—and I have a strong connection with the book publishing industry—it seems that we are investing so much into this industry because we believe in it, yet at the same time we may be allowing very large structural cracks to get larger and larger, which will in fact frustrate all the efforts and many of the tax dollars that have gone into this business. I worry about that, so a comment on that would be helpful to me.

Mr. Michael Wernick: Based on what we've seen at this committee and other representations, we haven't seen evidence of anti-competitive behaviour. Being big is not necessarily being anti-competitive. If there is abuse of dominant position, there are provisions and mechanisms by which the bureau and the tribunal can deal with it. It doesn't appear to us that you need to add other kinds of offences or regulation to the Competition Act to deal with it. If there is clear evidence of something that's anti-competitive, an abusive dominant position, then the act does provide the tools to deal with it, and as you said, the bureau has kept its investigation or monitoring very open.

A lot of what was actually said about Chapters and Pegasus has not been that this is happening; it's a concern that this might lead to, or it might happen, or if things develop, or if they get into other parts of the industry... Based on the body of evidence that's available to us now, there's no evidence in the public record of anti-competitive behaviour. If there is, then certainly the Competition Bureau and the tribunal would be the best place to deal with it.

[Translation]

The Chairman: Mr. Bélanger.

Mr. Mauril Bélanger: Thank you, sir.

[English]

Should the government consider amending the copyright legislation so that only publishers can have exclusive distributorship arrangements?

Mr. Michael Wernick: This question came up during the course of the hearings. Our understanding—I don't have a final legal opinion on it—was that would not be legitimate use of the Copyright Act. It would be a regulation of trade that would fall under provincial jurisdiction. It wouldn't be a copyright matter where you could use the federal head of power under copyright to do that kind of regulation.

• 1215

Furthermore, in the area of copyright, Ms. Bulte referred to the WIPO treaties. In fact, the spirit of those more recent treaties is to strengthen distribution rights, not weaken them.

Mr. Mauril Bélanger: So your answer is no.

Mr. Michael Wernick: My answer is no.

Mr. Mauril Bélanger: Thank you.

Should there be a common platform available to independent booksellers to service the Internet clientele, and should the government have any role in setting one up?

Mr. Michael Wernick: I think there's a business opportunity for collaboration among publishers and wholesalers—there are about a dozen wholesalers in the country—to provide an alternative way of fulfilment to the retail sector or to the Internet. We can, I would imagine, in cooperation with some of the economic agencies, facilitate or help backstop finance, those sorts of initiatives, but they would have to emerge from the industry.

Mr. Mauril Bélanger: Do you see a role for government in supporting this happening, temporarily or permanently?

Mr. Michael Wernick: I think a facilitation role would be appropriate, particularly, as I said, if we can help strengthen the chain, the point-of-sale technology at the retail end, feeding back to the publishers. Then it could be a win-win situation and not one where one part of the chain is getting something at the expense of others.

Mr. Mauril Bélanger: Okay.

You keep referring to a voluntary code of practice. What do you have in mind, and to whom is it directed?

Mr. Michael Wernick: I gather this is something that was raised both by Chapters and by the booksellers association. I think the committee's report can play a role in accelerating the development of some norms.

You have to be careful, as I understand it, in how far you go in terms of saying these are the business practices of a particular industry, because then you can actually be accused of collusion, price-fixing, and impeding competition. But there could be the development, I would think fairly quickly, of sort of a code on what appropriate practices are in the area of returns, and we would get the associations representing publishers, wholesalers, and retailers to sign on to it.

Mr. Mauril Bélanger: Please elaborate on the first and third of seven items that are listed on page 17 of your presentation: “promote take-up of new technologies” and “remove barriers to industry adaptation”. I'd like you to elaborate on both of those, if you don't mind.

Mr. Michael Wernick: Let me do my best.

The technologies that have or could have the most impact would be print on demand for publishing, e-commerce for the publishers and retailers, and a better system of inventory management, linking the publishers and the retailers. We could reallocate some resources within the current programs, or if new resources became available, put a more substantial investment into directly helping companies buy and acquire the technology. A little bit of that happens under BPIDP. We've been working on multi-publisher arrangements.

[Translation]

There is a bank of French titles.

[English]

which is an effort to complete an inventory of all the French-language books that are available, to make it easier for people to look, and so on, and we're working with the industry on the development of a kind of software that could become an industry standard in terms of point of sale and inventory management. So it's certainly an area where more could be done in the next little while.

Sorry, that was the first item. What was your other question?

Mr. Mauril Bélanger: It was on industry adaptation. What barriers in particular are you referring to?

The Chair: Mr. Wernick, that's the third item.

Mr. Michael Wernick: Okay, sorry.

What we've heard is that the way we've structured the book publishing program over the last few years, in a sincere effort to help the smallest of the small, we weight the sales that are calculated in the program so that small publishers get a little bit more of the program than they normally would. So instead of just measuring sales in a straight way...

I should back up a bit and say that as you know, the program basically works on a formula where your sales in the previous year essentially determine what you get the following year. So it rewards success; it rewards people who sell more. But we put in some weights and factors to help the really small publishers.

• 1220

What that may be doing, we're hearing from the publishers, is making it uneconomic to do mergers and consolidation. We have lots and lots of very small companies, and maybe eight to ten of the bigger ones—all in the $10 million or $15 million range, if I remember my numbers—and we may be preventing people from going out and finding their own mergers and partnerships. So we're working with the two publishers associations, ACP and ANEL, and seeing whether we can phase out or provide grandfathering so if two publishing companies come together they aren't penalized under the program. That's essentially the main part of it.

As we improve marketplace information, research, professional development, and technology, then the industry itself, whether you're talking about publishers, wholesalers, or retailers, will probably be able to adapt more quickly. There is a lack of information about what's going on compared to say the music or television industries. There just isn't as much good data available. If we were able to improve that, probably each of the business people running these companies would be able to make better decisions.

The Chair: Before I pass on to Mr. Mark, I'd like to ask you three brief questions in regard to things that have been brought up during our hearings that I'm interested in finding out your reaction on.

First is the question of data collection and statistics that you referred to quite a few times. I understand one of the big weaknesses is the coordination of statistics and data collection among Statistics Canada, Industry Canada, and yourselves. For instance, we've been trying to ask what a market share is. Chapters says the market share is a certain percentage, and another one says it's three times as much. Do you agree that this is a priority item for coordination and that it should be accelerated? Could we provide a recommendation that would really help in regard to speeding up the coordination of the data collection system among the various agencies?

Second, evidence came from some witnesses that in Quebec they have a special tax incentive program for creators, as I understand it. They also have a system of favouring book sales by two public libraries where they identify some of the smaller players so they get a chance at sales to public libraries. I wanted to get your reaction to those. Do you think that would help the chain system?

And finally, if the GST were removed on books, would that be a plus for the chain system to work better, and would it help all the various components?

Mr. Michael Wernick: I'll try to be brief. I know time's passing, Mr. Chairman.

Data collection and a window into the marketplace is absolutely crucial. So yes, I agree that it's an area that needs a lot of attention. It sounds a little boring, but in fact it's absolutely crucial for public policy makers and for industry actors to make good decisions. They need real-time data, and we're working very hard on this. I know your report last June drew a lot of attention to this. We actually have a small project team at work on conceptual and feasibility work on a cultural observatory for Canada.

We're plagued with data problems in all of the cultural industries. We have to do better, and we're working hard with Statistics Canada and other agencies. Sometimes it's not Statistics Canada; sometimes it's the marketplace that will provide the data.

I keep referring to point-of-sale technology, because I was quite struck by how in the music industry that provides real-time feedback. As they scan the CDs, they're creating real-time information about what's working. We think there's opportunity to do that in other areas. So we certainly welcome whatever support the committee would throw at this effort.

I'll deal quickly with the GST. Essentially, it's a very blunt instrument. There's about $2 billion worth of book sales. If you removed the GST, there would be about $140 million cost to the treasury of doing that in revenue forgone. That would be a very blunt and indirect way of addressing any of the issues you've heard.

• 1225

About half of that would be a windfall to the foreign publishing houses, because their sales would be a little bit cheaper. There's no way under trade law to discriminate and provide the break only to Canadian book publishers and not to foreign publishers.

It wouldn't, in any direct way, flow money to creators, publishers, or retailers. So while the whole system might be a little better off, because book consumption might go up a little bit if books were 7% cheaper, our view is that for $140 million, you could probably do a lot more good in more targeted applications.

I'm not sure I can add much more to that.

The Quebec system is a fascinating one.

[Translation]

I admit that I am not aware of all the details, but regulations in the sectors fall under provincial jurisdiction.

[English]

It's regulation of trade and commerce, which the federal government really doesn't have any tools to do anyway.

There's been a very interesting consultation process in Quebec flowing from previous public policy in Quebec. There was un sommet du livre. There have been task forces and consultations. And what's really interesting—and I don't mean this in any critical way at all, because the Government of Quebec has made a lot of effort to strengthen the book trade—is that there are still recurrent problems. Despite all of this help and effort, the most recent snapshot showed that about half the book retailers in Quebec were in financial difficulty. So it's elusive. It's very difficult to find solutions to the financing problem.

In terms of specific tax incentives, what you would have to ask yourself is “To do what?” You could imagine equity-financing kinds of tax credits along the lines that the publishers have suggested to attract people to invest in book companies. You could think of tax breaks to authors, as was raised earlier. You could think of labour cost models, where some of the costs of production are eligible for tax credit. Those tend to generate more activity, but they don't tend to actually change the financing structure of an industry.

It's hard to find a tax measure that will do all things. If you want to consider making tax recommendations, I would just recommend you spend some time on asking the question, “To do what? To what purpose?”

Allan, did you want to talk a little bit about the...

Mr. Allan Clarke (Director, Publishing Policy and Programs, Department of Canadian Heritage): I get to comment on the boring things, so I'll talk about statistics.

I have one comment on that, if I can speak selfishly. If I were going to make a recommendation on statistics, I would probably extend it beyond just collaboration among the agencies, because there is a lot of that happening now between us and the Canada Council and Statistics Canada. Part of the problem with sharing data is that we have different data sets and we're collecting different data. So to the extent that we can exchange the data, we do.

What is more important, I think, to some extent, are the things Michael is referring to, like the point-of-sale data. It's not only the things we're doing now that we could do better, but also the things we're not doing. We could do a lot more.

I think part of the problem with saying whether or not something is happening in this industry is that we just don't have a lot of information about what is happening at the retail level. So how can we say this is bad or good? It's hard to say, because we don't have the information. We have a lot more information on the production side, on the publishing side, than we do on the retail side. More information on that side would certainly help us understand this industry a lot better and be a little bit more instructive about what some of the issues are.

The Chair: Thank you.

Mr. Mark.

Mr. Inky Mark: Thank you, Mr. Chairman.

Because of the changing technology in the marketplace and the shrinking of the world, I would like you to comment on foreign ownership, whether it would be positive or negative, and whether you have an ideal number we should be looking at.

Mr. Michael Wernick: It's a very good question.

I think if you were going to make recommendations on foreign ownership, you'd have to be more specific about whether you're talking about the publishing industry, wholesaling and distribution, or retailing; and you would have to be more precise about whether you're talking about the ability to establish new businesses and come into the Canadian market, or the ability to acquire. Then you could come to a view on those.

• 1230

It's certainly been the government's view that Canadian control of both the publishing and the retailing sector is important to maintain. That's current public policy. You may want to make recommendations on that.

There is a classic foreign ownership versus concentration in Canada issue that comes up in a lot of industries—airlines, banks, television, and others. If your view as a committee is that there is a real shortage of places for publishers to go for wholesaling and retail, then an option that is available is to add to the pool of competition through relaxing the foreign investment restrictions on at least start-up of new wholesaling and retailing things. But what you'll get for that is more pressure on the independent booksellers, because they won't only have Chapters to deal with, they'll have Barnes & Noble and others. So you're caught between two difficult choices there.

Mr. Inky Mark: Okay, thank you.

The Chair: Mr. Bonwick, and then if there are no more questions we'll close with this.

Mr. Paul Bonwick: Mine is more for clarification than anything else, and both for Michael and Allan and for the committee's staff people as well. It's in response to a comment Ms. Lill made.

I commend her for the commitment she's shown over the last few months in supporting the creators and trying to find a better role for the government to play in ensuring creators have an opportunity to make their stories. However, she did make a statement that we all—as in all the committee—have misgivings or have seen evidence or witnessed evidence that there is in fact anti-competitive behaviour. I don't think that's fair. Certainly on my behalf that's not fair, because as a member of the committee I have not witnessed that. I've seen anecdotal evidence at best that would support that, and a lot of it has been hypothetical and speculative at best insofar as where there may be or may not be anti-competitive behaviour.

I just wanted to clarify that. I don't believe that all the committee, or necessarily even the majority of the committee, believes that there is anti-competitive behaviour. If in fact there is, we've had discussion around it before that there is a mechanism in place to deal with those findings or those speculations or opinions.

I come down to what our role is insofar as creator versus story getting to the end. I haven't witnessed that. I say it just so that we don't have our staff people or the heritage people stating that all the committee feels that there actually has been evidence provided to show that. I don't believe that to be the case.

The Chair: Thank you, Mr. Bonwick.

[Translation]

Mr. Bélanger, you have the floor.

Mr. Mauril Bélanger: Sir, with regard to this subject, I agree with my colleague. It is not for the committee to say or declare whether anyone in the book industry is guilty of unfair competition. It is not up to us to say so, because we have neither the authority to do so nor the authority to conduct an investigation. Therefore, it is impossible for us to say whether someone is guilty or not.

I think that it would be better if we say that the committee did its duty by asking the parties concerned to appear before it. They did so and we shared the information we had with them. The Competition Bureau is responsible for uncovering the truth and to say whether, yes or no, there was unfair competition. It is not up to us to do so, one way or another.

I wanted to speak once more to see if our researchers have any questions they would like to ask the ministry representatives. Now would be the time to ask them, if there are any.

[English]

Mr. Joseph Jackson (Committee Researcher): I think at this stage actually you've been very helpful today in answering some of the lingering questions we've had so far with regard to the many issues that have been brought before us.

I don't personally have any questions. However, should we have anything to follow up on, we'll contact you directly to get some responses.

Mr. Michael Wernick: We are at your disposal. We are very respectful that you're working for the committee. If you have any questions, if you need any data, we're at your disposition.

The Chair: I think it's been an extremely useful session, Mr. Wernick and Mr. Clarke. I think we have learned a lot of things and it's cleared up a lot of issues in our minds. So thank you very, very much for your contribution today; we really appreciate it.

[Translation]

Mr. Michael Wernick: Thank you, sir.

[English]

The Chair: The meeting is adjourned.