HERI Committee Meeting

STANDING COMMITTEE ON CANADIAN HERITAGE

COMITÉ PERMANENT DU PATRIMOINE CANADIEN

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, March 21, 2000

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[English]

The Chair (Mr. Clifford Lincoln (Lac-Saint-Louis, Lib.)): I declare open the meeting of the Standing Committee on Canadian Heritage.

[Translation]

The committee is meeting today for this round table to pursue its consideration of the Canadian book publishing industry,

[English]

to continue our consideration of the Canadian book publishing industry.

[Translation]

We have many witnesses today.

[English]

We are really grateful and very privileged to have you here with us today. I thought rather than me introducing you, it might be nice to go around the table, for our guests. Please introduce yourselves briefly, starting with Monsieur Cabral.

[Translation]

Mr. Louis Cabral (Chief Executive Officer, Association pour l'avancement des sciences et des techniques de la documentation): Thank you, Mr. Chairman. I wish to thank you—

The Chair: Mr. Cabral, could you simply introduce yourself for the time being?

Mr. Louis Cabral: Sorry. I'm Louis Cabral and I'm the Chief Executive Officer of ASTED, the Association pour l'avancement des sciences et des techniques de la documentation.

The Chair: And could you please introduce yourself, Madam.

Ms. Carole David (Writer and Professor, Union des écrivaines et écrivains québécois): I'm Carole David and I'm from the Union des écrivaines et écrivains québécois.

[English]

Ms. Vicki Whitmell (Executive Director, Canadian Library Association): I'm Vicki Whitmell, executive director of the Canadian Library Association.

Ms. Leacy O'Callaghan-O'Brien, (Associate Executive Director, Canadian Library Association): I'm Leacy O'Callaghan-O'Brien, associate executive director, Canadian Library Association.

Ms. Victoria Ridout (Executive Director, Periodical Writers Association of Canada): I'm Victoria Ridout, executive director of the Periodical Writers Association.

Ms Penny Dickens (Director, Writers' Union of Canada): I'm Penny Dickens, executive director of the Writers' Union of Canada.

Mr. Christopher Moore (Chairperson, Writers' Union of Canada): I'm Christopher Moore, the national chair of the Writers' Union of Canada.

[Translation]

The Chair: Mr. Cabral, we'll let you open this meeting, but before that I'd like to explain to members of the committee

[English]

that Mr. Cabral produced a brief that is in French. As per our resolution of the past, it should have been translated before, but we only received it now. So I would like to ask for unanimous consent for the brief to be distributed today en français, subject to translation that will be sent to you afterwards.

[Translation]

Mr. Pierre de Savoye (Portneuf, BQ): Mr. Chairman, I wasn't comfortable because you know how much I insist, when briefs are presented in English only, that they be presented in both official languages out of respect for those who can't read the brief in the other language. I would feel to be in a reverse situation to the one that we usually go through if I were to accept that the brief in French, which I can read perfectly well, be distributed to people who might not be able to read it. So you see me under the obligation to abstain from voting and let my colleagues decide.

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The Chair: Agreed.

Mr. Mauril Bélanger (Ottawa—Vanier, Lib.): Mr. Chairman, maybe it is because we have a new clerk, but unless I am mistaken, the members of the committee unanimously decided during their first meeting that the documents would not be distributed if they were not available in both languages. I would point out once again that, last week, we got a BBC document that was not translated. I hope the unanimous decision of the members of this committee will be respected: the documents shall not be distributed unless they are in both of Canada's official languages.

The Chair: Agreed, but that does not prevent me from asking for the unanimous consent of the members of the committee. If they prefer to hold to the motion they passed, I'm quite in agreement with them. Fine.

[English]

Mr. Dennis J. Mills (Broadview—Greenwood, Lib.): I think we're all sensitive to the fact that all documents have to be in both official languages, but we don't have a perfect system. So if this happens the odd time, I don't think we should shut down the system. We should receive the document and then proceed. Most of us can read in both languages; it's just that sometimes we have problems speaking in both languages. So I think it would be useful to have the document.

The Chair: I don't see unanimous consent to change our resolution, so I'll guess we'll just—

Mr. Dennis Mills: It's an exception. We're not changing the resolution.

The Chair: I'll ask again. Is there unanimous consent? No. So we'll proceed.

Mr. Cabral.

[Translation]

Mr. Louis Cabral: Thank you, Mr. Chairman.

I would like to thank you for having invited the library community to speak with the members of the Standing Committee on Canadian Heritage about the problem of marketing books in Canada. The presence, at these hearings, of the Library of Canada, the Canadian Library Association and the ASTED today is testimony to the Committee on Canadian Heritage's clear interest in discussing things with all of the communities concerned by this problem as well as a clear will to undertake a broad reflection on all facets of book dissemination in Canada.

The invitation sent to ASTED for this fourth round table by the clerk of the committee indicated that today's meeting would concern librarians, and I quote, "who are responsible for a major portion of public book buying in this country". This assertion is a real one and addresses an important reality concerning the participation of libraries in the book marketing process and this is a dimension that is too often underestimated. Our colleagues from the Canadian Library Association have shown me very revealing figures. I will pass over this aspect as they will be presenting a broad outline of the situation.

You will also allow me not to answer the first two questions you put to us having more specifically to do with the creative aspect and the interests of Canadian authors. I'll try to show that libraries are first-line agents dedicated to developing writers and their works.

As to the question of the position of libraries concerning the interests of Canadian authors and readers, I think it is important to insist on the function of promotion of cultural activities that Canada's public libraries mainly assume. These institutions are user-friendly popular places for the whole community. They are community institutions and, in many regions of Canada they are managed by the community itself.

But how does one prove the impact of libraries in our communities? The 21,000 Canadian libraries no longer have at their disposal, and have not had for some years now, recent statistics on their activities, as Statistics Canada used to compile them in the past. Mr. Roch Carrier, who came before this committee last March the 2nd, actually mentioned this lack of data to measure the impact of libraries on the publishing community. ASTED subscribes to this proposition entirely and hopes that the committee will make this one of its recommendations to government, because the libraries are looking for valid indicators that would allow them to measure their impact on the cultural, scientific and even economic life of this country.

So our first recommendation is that we have available the tools necessary to properly measure the activities of libraries in the form of statistics that can adequately reflect the impact of libraries on Canadian cultural life and that this task be given to Statistics Canada.

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As for the partnership scenarios between the library community and the publishing community, we insist on the fact that the question we are debating today, that of the dissemination of books and their commercial impact, is primordial. The cultural stakes for the community, however, seem to have been put on the back burner. I will illustrate our perception of the matter with an example that occurs in Quebec and deserves closer inspection.

In Quebec, the government has decided to adopt a policy on reading and books. The inclusion of these two aspects in the same piece of legislation is not a semantic whim. It actually describes a reality which cannot be dissociated from the basis of a cultural enterprise like publishing, which only exists insofar as it answers the needs of its readers. The clients and users of bookshops and libraries will be readers and people who know how to read. The institutions have to meet the educational and personal development expectations of all of their users.

The link between the ability to read and a predisposition to buy books as well as the frequenting of libraries has been clearly established in different studies. I quote them in my brief. Basically, one should remember that from 20 to 26% of people using libraries buy books. So there is a spin-off effect and the two entities are not competing one against the other. The policy on reading and books has made "knowing how to read" a social, economic and cultural issue. This policy was deemed to be necessary when it was found that a good proportion of the population did not have enough reading ability to be functional in everyday life.

Thus, our second recommendation: That the Standing Committee on Heritage seriously consider recommending that the government of Canada establish a national reading policy; the latter, besides promoting broad objectives of reading ability, would also lead to a series of recommendations on the book publishing industry.

Also, in the document I was not able to distribute this morning, I give an idea of how this policy would work in the area of publishing.

In conclusion, ASTED thinks the best way of supporting literary activity and creativity, beyond the equitable financial resources that must be invested in helping creation, is to promote authors and have that as a constant concern in library promotional activities.

For example, I highlighted the Canada Book Day and the Journée mondiale du livre, which are activities that are organized by publishers, distributors, bookstores and libraries, in conjunction with authors. An entire day is devoted to books and reading.

We would like the Standing Committee on Canadian Heritage to consider making the government aware of some specific expectations with respect to the development of a reading policy in order to promote access to books and encourage literacy initiatives, as well as measures designed to increase the reading public in Canada.

The Chair: Thank you very much, Mr. Cabral. Before giving the floor to our next guest,

[English]

I'd like to mention that we will confine ourselves to one spokesperson per group, so we can allow the maximum time for questioning. Also, I would ask you to confine your remarks to between 5 and 10 minutes. We would really appreciate it, so we have ample time for questioning.

I'd like to turn the mike over to Ms. O'Callaghan-O'Brien, on behalf of the Canadian Library Association, or Ms. Whitmell.

Mr. Vicki Whitmell: Good morning, Mr. Lincoln and members of the committee.

The Canadian Library Association is a national English language library association representing Canada's 58,000 library workers. It welcomes the opportunity to participate in this committee's consideration of the Canadian book publishing industry, or, as national librarian Roch Carrier has referred to it, the study of the ecology of the book industry in Canada.

It is worth noting at the outset that public libraries are the most heavily used cultural institutions in many Canadian communities and a significant consumer of the publishing industry's products.

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Each year, the 19 million Canadians holding library cards borrow 276 million items. In 1996, libraries spent more than $320 million to expand their collections and between $2 billion and $4 billion in total.

Libraries in Canada are an essential component in the dissemination of Canadian writing. Looking specifically at the importance of public libraries in making Canadian books available, a 1998 study found that 33 large urban public libraries purchased more than 12,000 copies of 100 mid-list Canadian titles that were published in 1996 and 1997. This study is an excellent example of how research, in this case sponsored by the Association of Canadian Publishers, supported by public libraries and funded in part by Heritage, can demonstrate what is actually happening in publishing. CLA urges Canadian Heritage to become more active in promoting and funding research on book publishing, book distribution, and reading in Canada.

Don't forget libraries when undertaking this research. One recent example is that the study, “A profile of the Canadian Book Wholesaling Industry”, which was prepared by Heritage in November, urges that a standard bibliographic format for the database of record for available Canadian books be developed and implemented. The report suggests this should be done in consultation with Canadian publishers, wholesalers, and retailers.

Canadian libraries, especially the National Library, can make a significant contribution to this process. Bibliographic records are, after all, our stock in trade, and it was in fact the library sector that pressed for a database of record during the consultations on the parallel importation regulations.

Public libraries play the essential role of making books freely available in our communities without commercial consideration. It can be said that a big-box bookstore is at its best the day it opens. From there on, the stock is diminished as titles are sold and not reordered, or reordered and not supplied.

Library collections, in contrast, get better with time, as they make available the current and out-of-print, the popular and the esoteric. When libraries maintain books long past their commercial lifespans, writers are served by both the continued availability of their work and the ongoing flow of public lending right payments, which in many instances will exceed royalty payments over time.

It is necessary to dispel the myth that big-box bookstores—or independent bookstores for that matter—and libraries are in competition. Apart from the fact that we have fundamentally different purposes, our relationship is in many ways symbiotic. Readers are often both book borrowers and book buyers and use both bookstores and libraries, as Mr. Cabral has noted. Indeed, both libraries and big-box stores are learning from the best practices of each other.

The public library is the only institution in our society that is dedicated to bringing pre-school children and books together. If a child is not familiar with the joys of reading and books by the time he or she reaches the formal school system, it is often too late for reading to become an enduring part of their life.

CLA, in partnership with Canadian publishers, is currently seeking funding from the Department of Canadian Heritage to assist with startup costs for a books for babies pilot project, to deliver library cards and gift books to new mothers across the country. This is an initiative that could pay significant social dividends.

The ultimate success of pre-school literacy programming is greatly dependent on corresponding initiatives at the elementary and secondary school levels. CLA shares the deep concern that the national librarian has described to this committee with respect to the problems faced by school libraries in this country, from meagre book collections to the erosion of expert staff. CLA urges the federal government to identify ways and means it can ensure, in partnership with the provincial ministries of education, publishers, and the library community, that school libraries have the print collections and staff resources, as well as the technology they need, to properly serve students.

The focus of the committee's hearings to date has been on the impact Chapters and Pegasus have had on the publishing and distribution of books in Canada. Libraries acquire their books from a range of sources, including publishers and their agents, library wholesalers, general trade wholesalers, independent bookstores, and, yes, Chapters and Pegasus.

Pegasus is clearly intent upon becoming the dominant force in library wholesaling in Canada. Its emergence may well result in the disappearance of existing wholesalers, mirroring the impact of Chapters in the retail environment.

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As institutions supported largely by local taxes, libraries must apply objective criteria in determining where to buy books. Based on early indications, Pegasus will receive serious consideration by libraries as a book supplier. However, this does not mean that Canada's libraries do not share some of the concerns expressed by the Canadian Booksellers Association and the publishers' associations with respect to market share concentration and the longer-term implications for publishing and book pricing.

The federal government, through Industry Canada and HRDC, is playing a significant role in assisting libraries in incorporating the technologies necessary to connect Canadians to the Internet. Other than Canada Council support for author visits, there is very little funding for public and school library maintenance and promotion of conventional print collections.

In a society where too many decision-makers are prone to make the assumption that the Internet will replace libraries and books, there is a role for the federal government in assisting libraries in Canada, particularly in conducting research into its workforce and the role and importance of libraries as key distributors of government information and as public access Internet sites.

It is easy to slip into the eternal publishing mindset described by Robert Fulford, that “things are bad today, they are about to get worse and then they will get truly dreadful”. From our perspective as librarians and as readers, Canadian writing is stronger today than it has ever been, with Canadian-authored work acclaimed internationally and many of the key players asserting that more books are sold in the Canadian market than ever before. Chapters and Indigo deserve some of the credit for this increase in sales volume.

The challenge facing us all is to ensure that changes in retail and wholesale structures do not undermine the development, publishing, and marketing of high-quality Canadian books. The first essential step is to ensure that we have an objective understanding of what is happening in the marketplace. This is one area where this committee can clearly have a positive influence.

Canadian libraries are dedicated to working with writers, publishers, distributors, retailers, readers, and the government to ensure that the gains of the publishing industry over the past three decades continue. Thank you.

[Translation]

The Chair: Ms. Carole David, from the Union des écrivaines et écrivains québécois.

Ms. Carole David: Thank you for having invited me to appear before this committee. I do not have a brief, and I will answer the questions in the order in which they were presented on the invitation.

I also represent the Union des écrivaines et écrivains québécois on the Larose committee, which is a committee that was set up in Quebec by the SODEC, the Société de développement des entreprises culturelles (cultural enterprises development corporation), and which is currently studying business practices in the book industry in Quebec. The committee was set up primarily to explore the different avenues that could help us save independent bookstores in Quebec.

Quebec authors are very worried by what is happening today in big box retail stores, as well as by changes that have been noted in the Quebec and Canadian publishing industry in general. Over the past few years, we have been observing what is happening mainly in France, England and English Canada. We have noticed, for example, that publishers are interested first and foremost in making a profit. Authors expect publishers to promote people who do not write bestsellers as much as they do people who do write them. They also expect publishers to be interested in authors who publish in genres that are not necessarily profitable, like poetry, theatre or essays.

Authors expect Canadian publishers to ensure that they too can be read, that they can be features, and to ensure that they will be able to compete successfully with other literature, be it American literature or literature in translation. It is increasingly difficult for authors to get their work published, for all of these reasons, and also because of globalization.

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The second question read as follows: to what extent do Canadian bookstores serve the interests of authors? It is clear that authors expect their books to be sold and promoted. They do not want them to be banished to the back of the bookstore. They want them to be displayed, not by the spine, but from the side. Many authors are currently under the impression that bookstores are focussing primarily on making a profit and that they are not interested in presenting literature which, for them, will not make money, and that is precisely because of the proliferation of big box retail stores.

We are particularly interested in that aspect. We have noted that there is now a culture of bestsellers, in other words, novels or books that are all put together according to more or less the same model. This is not a uniquely Canadian or Quebec phenomenon, but an international one.

As for the proliferation of big box retail stores, I am thinking of Costco or the bookstores that have merged. I am referring to Chapters in English Canada and Archambault and Renaud- Bray, among others, in French Canada. These are book superstores that are currently killing off small independent bookstores, bookstores that keep several titles by authors in stock and that do not focus on new releases and bestsellers. Generally speaking, authors feel that they are not being respected in this change in the book business, in this transformation of the book industry, and that emphasis is being placed primarily on the big-name authors.

We have also noted that form has been winning out over substance and that the main focus is money. The book trade is obviously a business, and we cannot be naive, but authors feel that the entire publishing industry revolves mainly around that. We have also noted that there is now two-speed publishing: publishing that is profitable and publishing that is not. This proliferation of big box stores has resulted in two types of publishers.

All of that leaves a very small slice of the pie for independent bookstores that want to serve their clients who are looking not only for bestsellers, but also for works that are more profound or specialized. Small bookstores have a considerable amount of trouble keeping pace with this transformation in the book trade.

Big box retail stores have the power to negotiate with publishers and distributors; small bookstores obviously do not have this power. You just have to look at what happened in Great Britain or in France, especially in Great Britain, where business for small independent bookstores has plummeted over the past five years because of price liberalization.

Here is what we would like to see. Libraries have an essential role to play. It is not the same as the role played by the big box retail stores. As other participants in this round table have already mentioned, libraries have an important role to play. First of all, they must encourage people to read—I am thinking about children—and educate readers. They are also important as information providers. Libraries must advise users and encourage them to read works that go beyond bestsellers.

Libraries have a very important role to play with respect to readers, but also with respect to bookstores. In Quebec, for example, we have Bill 51, which was adopted to protect publishing in Quebec. Libraries often buy from small bookstores; they privilege small bookstores. At present, the opposite is occurring: by offering service to communities, the large chains are currently taking money away from the small bookstores, and that was money they had to survive in this jungle. People have said this before me and others will surely repeat it. I want to emphasize the very important role that libraries will play in future years, since we are currently experiencing standardization in the book world.

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As for the relationship among the different communities, relations are very strained among authors, bookstores, big box stores, publishers and distributors. You could call it a Pandora's box. The most underprivileged, with the lesser status, is always the author, the creator, who is at the end of the chain and who earns very little money, because that is the main value at the end of this process. The distributors and some publishers are the ones who are fully controlling the market, as are the book superstores that negotiate directly with them.

All you have to do is look at what has happened in the United States. Bookstores are now ordering directly from publishers. Publishers ask them if such and such a title will sell well, and if it does not, the publisher does not publish the book in question. The market is quite unruly and can be very difficult for all of the stakeholders in the book industry.

So the relationships among the various communities are currently very strained. It would be a good idea for this committee to hear recommendations from the different groups so that there is a consensus to at least save Canadian publishing and independent bookstores.

What role should the Canadian government or governments in general play? The government should start by developing a clear policy. In that regard, the political world is often criticized for its apathy. This is an industry that does not necessarily generate much money, and so we are under the impression that many politicians are not very concerned about it.

There is another approach to consider: the whole issue of whether there should be a single price for books. This is a question that has been asked for a long time. In France, for example, there is a single price for books. In Great Britain, this no longer exists, nor does it in the United States. There are lessons to be learned from what has happened elsewhere. If a single price were adopted, to what extent could this protect writers and small bookstores?

It would also be helpful if the agreements between publishers and distributors were respected. It often happens that superstores order directly in Europe or obtain very attractive discounts by negotiating directly with the distributor. It would perhaps be appropriate to legislate or to pay special attention to this aspect.

There is also the whole issue of e-commerce. If we began discussing this subject here, we could go on for a long time. I will only say that e-commerce is a threat to all the links in the book industry chain. Thank you.

The Chair: Thank you very much, Ms. David.

[English]

I'd like to turn the mike over to the Writers' Union, Ms. Dickens and Mr. Moore.

[Translation]

Mr. Christopher Moore: Thank you.

I would like to begin by saying that, like our colleague Mr. Cabral, we too have a brief that has not yet been translated. I hope that it will be translated soon and be made available to everyone.

[English]

We're very glad to be here today.

I'd like to say, on behalf of the Writers' Union of Canada, that we assume that what we've been calling the big-box book retailer is here to stay. We notice that the government has been investigating concentration in the print media and in the media for about 30 years, and the concentration continues to increase. We suspect, in fact, that something similar is likely to occur.

We've been interested in the consequences of the arrival of the large bookstore in Canada, rather than in trying to make it go away. We've certainly been aware that there are some benefits to the large bookstore. We've certainly noticed that Chapters and its competitors have created a kind of buzz about book retailing in Canada in recent years. They have been drawing people into bookstores who perhaps didn't go into bookstores previously, and in some cases they have probably sold more books than were being sold previously.

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To cite a case from my own experience, last year I wrote a book called Canada: Our Century, which was something of a best-seller. We sold nearly 50,000 copies of this book last fall, and I don't think we could have moved that many copies that fast without the distribution power of the big stores like Chapters. In fact, Chapters and the stores like them are extremely useful for moving large numbers of best-selling books in short periods of time when a book becomes a hit, and I think that's an example of the kind of benefit Chapters has created, of moving more books faster.

Nevertheless there are some negative consequences I want to emphasize today. I wish to address two of them: the financial consequences and the promotional and distribution and developmental consequences. Then, finally, I have some thoughts about what the government's role might be in this process.

I think you heard a good deal from Canadian publishers about the pressures placed upon them and the financial squeeze upon them from the market dominance of Chapters/Pegasus, of the squeeze upon their revenues because of the pricing policies that Chapters and Pegasus have been able, in effect, to impose upon them. I don't know how much it has been raised yet, but it's a point I wish to raise with you, that clearly that process is rebounding on authors and writers as well. We see this not only from our own members, but from writers' organizations in Britain, the United States, and elsewhere. The cost squeeze that has been created by the big-box bookstore phenomenon internationally clearly is having an impact upon writers' incomes.

In our brief, we have a case of a book published by one of our members a year or so ago that sold 10,000 copies. This was a substantial success for this particular writer. When her royalties came through quite some time later, it turned out that less than 1,000 of those 10,000 copies had in fact paid full royalties. There is a complicated process in book contracts by which, when a book is sold at a very deep discount, a much smaller royalty is paid than the usual royalty. This has always been a minor sideline. We've never liked these kinds of clauses, but they've always been a very special circumstance.

What we're seeing from a number of publishers is that they're now squeezed by large discounts from publishers, and they're clearly passing those discounts on. We're glad to say some publishers have said they will not use these clauses in sales to the retail trade and in sales to Chapters, but clearly others are using it.

In a number of other ways, we see examples from other countries and hear that the cost squeeze upon publishers is being passed on to writers.

We find that quite unacceptable. It seems to us if there are going to be cost savings due to the phenomenon of the big-box stores, it has to come from real savings; it has to come from real economies. It can't be done simply by expropriating part of the royalties the writers are entitled to. We've been discussing this with our members and with publishers, and we intend to continue discussing this with the Association of Canadian Publishers and with the Canadian Book Publishers Council. But clearly, whatever happens to the cost structure of Canadian publishing, it seems to us completely unacceptable that authors should be expected to subsidize the discounting that goes on in the big-box retailer.

The second point I want to raise is really about the promotional and developmental impact. In the past 30 years we've seen a remarkable flowering of writing in Canada. The success of Canadian writers in reaching audiences both here and abroad has really been one of the great Canadian cultural success stories, and I think we should all be determined to see that this success continues on into the next generation.

We see and have seen independent bookstores as being a vital and important part of that achievement. Independent bookstores have been deeply committed to linking readers and writers in this country, to discovering new voices, and to presenting a wide range of Canadian voices to their consumers. They're invariably the ones that present authors to their readers in a manner conducive to encouraging, to enhancing, the literary experience.

In the last couple of years, we've received innumerable complaints from our members about the attempts of the large bookstores to mimic that kind of individual promotion of authors. One member reported a tour of six bookstores—three big-box stores and three independents. In each of the big-box stores she in effect stood about while the usual busy flurry of activity that goes on in a Chapters or an Indigo store swirled on around her. In each one of the independent stores, the bookstore had done its marketing, had talked to its audience, had brought out an audience that was interested in that book and that author, and really brought the authors and the readers together in a way they had been doing for a good many years.

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Even in my own experience...again, I travelled from Halifax to Vancouver, and to most of the major cities in between, to promote Canada: Our Century last fall. Every single place where I talked with individual readers who came out to an audience, it was an event organized either by a public library or by an independent bookstore.

Whatever their intentions in that regard, we just don't think Chapters and Indigo have the same ability to put individual Canadian writers and Canadian readers together the way the independents have done, in effect by hand-selling, by word of mouth, by the diversity of that network where different booksellers identify different books as being of interest to their readers and begin to start a buzz and a word of mouth that then begins to translate around.

The network of independent stores, which runs from The Book Room in Halifax, to the Different Drummer in Burlington, to Pages in Calgary, and Munro's in Victoria, just to name a few examples, really has been vital in connecting readers and writers in Canada. Most often this is where breakout best-sellers are launched by word of mouth and by the hand-selling efforts of individual bookstores. We really don't see that the big-box stores are going to be able to match that, whatever their intentions, because it's a paradox of the big-box phenomenon that whatever the size of the stock they have, they're really committed to best-sellers at 30% off. They're really committed to the book that is a major best-seller and moving large quantities of them. They haven't the same kind of resources to discover, circulate, promote, and hand-sell individual Canadian works, often from small presses, in the way the independent bookstores do.

If we end up with, in effect, only one bookstore and all bookstores look the same, we're going to have a real problem in doing that kind of distribution, of getting individual writers, particularly the less known, the breaking out, the emerging Canadian writers, from the unknown stage to the known stage. I think the independent bookstores have played a vital role in that over the last 30 years, and to see them vanishing one by one gives us great concern.

Finally, we ask ourselves, if it's true that the network of independent stores that have done so much to develop Canadian writing in the last generation are indeed fading away under competition, what might government's role be in responding to that?

It seems to us, first of all, that there is a desperate need for government departments to recognize that cultural marketplaces are perhaps different from other marketplaces. We participated in the Competition Bureau's investigation of Chapters/Pegasus last year, and they told us that domination in a marketplace does not necessarily require or mandate intervention by the Competition Bureau. But it seems to us that in a cultural marketplace, there has to be a measure beyond that straight fiscal concern, that cultural complications of losing our network of independent stores involves a measure of competition other than the one the Competition Bureau is using.

Beyond that, I think the role of the Department of Canadian Heritage must be to ensure the remarkable growth of Canadian writing that we've seen in this country in the last 30 years, nationally and internationally, continues on into the next generation. We think the independent bookstore has been a vital part in the success of that process. If we're losing those, well, it's back to government, to what other kind of measures government can do.

In your report, A Sense of Place, A Sense of Being, from last summer, you did notice that creators are in need of enhanced grants. You listed a number of programs where the government can support the development of culture and writing in this country. In other words, your committee has already recognized that there is a role for government to play in this regard. If we're losing the independent store as part of that network of promotion and distribution, it seems to me it merely emphasizes the role of government to continue its traditional role as a supporter and marketer and distributor of writing and books in this country and beyond.

We highlight such things in our brief as providing a tax deduction for copyright income. In the province of Quebec, the tax system has recognized the special place of copyright as a kind of property that vanishes soon after the death of the writer, of the copyright holder, and the special role of copyright creators in creating economic benefits for the whole string of people who publish our works. Perhaps it's time for the Government of Canada to look at that same thing, a copyright income deduction to support writers in Canada.

We have a public lending right system in Canada. Last year, the rates of payment by Canada to writers declined by about 15%. We think there is a place for bumping back up the funding for the public lending right program. We think increasing again the base funding of the Canada Council, as was recently done, is always a very valuable option. The Canada Council is one of the vital supporters of the development and flourishing of writing in the arts in Canada and will continue to be.

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We think the Copyright Act should be the sole responsibility of the Department of Canadian Heritage. We would like to see a cultural component, as I said, for the Copyright Bureau to ensure that diversity is protected in any cultural marketplace.

Again, we see the big-box bookstore as something that is here in our landscape and that has some positive aspects to it, but we do see some threats from it, particularly with regard to the financial pressure. But also we think there's the threat of losing that network of independent bookstores, and that will have a direct impact on our ability to continue circulating and developing Canadian books in the way we've been able to in recent generations.

Thank you very much.

The Chair: Thank you, Mr. Moore. You've raised many challenging questions, and I think it will be extremely helpful to us in our questioning.

Next is Mrs. Ridout of the Periodical Writers Association of Canada.

Ms. Victoria Ridout: Thank you. I'm here representing the Periodical Writers Association of Canada. Our members primarily identify themselves as magazine and newspaper writers, just as the Writers' Union members primarily identify themselves as book writers. However, in reality most writers do a combination of the two in order to earn a living. So the separation is largely an artificial one.

The Writers' Union has already done an admirable job of summarizing our shared concerns about the issues that are before this committee, and for the sake of time I'm not going to repeat those concerns.

Our organization is here primarily to place these issues in a larger context. The effect that the new technologies and large chain bookstores are having on Canadian magazine and newspaper writers is also being felt by Canadian book writers. Again, the separation between the different kinds of writings is artificial.

The issue of how this technology is eroding the rights of writers and therefore the income of these writers has a direct effect on Canadian writers across the board on every level. A case in point is our organization's recent dispute with Chapters online over the contract their Internet arm is insisting freelance writers sign. By demanding that writers sell all of their rights to their work and in addition waive their moral rights to the work, they are in effect sidestepping the Copyright Act.

There are currently no standards in the area of electronic publishing, and both publishers and writers recognize that. However, organizations such as Chapters, through their sheer size and the power that size gives them, are attempting to set standards that are extremely unfair to writers and that will eventually put them out of business.

The Copyright Act recognizes that intellectual property is fundamentally different from other kinds of products on the market. That is why it has long been the practice in print publishing for writers to license their work for a certain period of time, much like one would rent out a piece of property. Publishers are now demanding that writers sell their work outright, just as you would sell your house, which is not such a bad thing, but they're insisting that writers do so at rental prices rather than at sale prices. Therefore, they are eroding the ability of writers to earn an income from their work.

Like the Writers' Union, we're not trying to make these realities go away. We recognize that the new technologies and the large bookstore chains are here to stay, but we feel it's necessary to create an even playing field if these new developments are not going to severely damage the writing and publishing community.

We believe the government can assist by supporting and strengthening the organizations that represent these writers so that they have greater leverage to negotiate fair standards in the area of electronic publishing.

The Chair: Thank you very much, Mrs. Ridout.

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I'd like now to turn the meeting over to questions by members. I'll start with Mr. Mark.

Mr. Inky Mark (Dauphin—Swan River, Ref.): Thank you, Mr. Chairman.

I'd certainly like to welcome all of our witnesses here today. I personally believe authors and libraries will always have a future in this country. I think the challenge is the kind of vehicle that's going to change in terms of how the story is told.

We're here to discuss the problems that exist at this time in our publishing industry because of businesses such as Chapters. But I believe the debate is really minor compared with the challenge that lies ahead of us and that I think is just around the corner, which is the development of e-book technology. I think our last speaker alluded to that. I believe everyone, including Chapters, is going to have a challenge facing them. As you all know, recently Stephen King became the first to release a best-seller exclusively in digital form.

My personal belief, having read a number of articles regarding the industry, is that perhaps 20 years from now it may be difficult to buy a book, the way things are planned out. High-tech companies, such as Adobe, Fatbrain.com, Everybook, glassbooks.com, Softbook, are racing to develop software and hardware to revolutionize the publishing industry.

The first issue I'd like you to comment on is e-technology. Do you see it as a friend, or are you afraid of the changes that are going to occur?

Mr. Christopher Moore: Our reaction to e-technology is, I think, a hopeful one, if e-technology is to become a new transmission network to bring writing to more audiences in a different format that may be convenient in some ways. I know that I have occasionally gone off on holiday with a bag full of hardcover versions of all the latest books. If I could put 12 books and a few magazines on a convenient piece of technology, I could see the advantage of that. Frankly, if writers get paid for the electronic use of their material, I think then it may well be a very good way for writers to join with their readers.

Certainly, there will be concerns down the line. I'm sure that Stephen King is getting well paid for the e-book version, which is only available electronically. Whether smaller publishers and smaller writers will have the same access to that technology is clearly going to be a problem. There may need to be at some point a granting process to support the development of small works in the electronic form.

The electronic form itself is not a threat to writing. The electronic form is simply another technology to distribute words of writers. The consequences are, frankly, who controls it and who's getting paid for it. If we can develop an electronic system that produces a diversity of Canadian writing and delivers it in a way that the creators are paid and the readers have easy access to it, I think that's a wonderful prospect, rather than a threat. Again, we need to worry about market dominance and about who is going to control and whether the rights are going to be paid on them.

Thank you.

The Chair: Ms. Ridout, do you want to comment?

Ms. Victoria Ridout: We agree that the new technologies can be of benefit to writers, and we're not against the technologies themselves. But what has to be recognized is that it upsets the whole system that has been in place in publishing for a number of years. In the area of book publishing, for instance, writers could always depend on making more income from their work by separating out their rights, selling rights to foreign publishers separate from Canadian publishers, and so on and so forth. With the new technology, the idea of borders is completely eliminated, so there you have an automatic reduction in the market value of a writer's work.

Publishers are not likely to start paying writers more money for fewer rights. In fact, the amounts are staying the same, and they're insisting they have to insist on having all rights to the work because the boundaries don't exist any more. Of course, the same applies in magazine and newspaper writing. Again, the key issue is payment, whether or not writers are being paid fairly for the rights they are forced to give up by the existence of the new technologies.

Mr. Inky Mark: In a recent magazine ad, the computer software giant Microsoft laid out some timelines for the rise of electronic publishing. I'll read them. In the next three years:

2001—Electronic textbooks appear and help reduce backpack load on students.

2002—PCs and e-book devices offer screens almost as sharp as paper.

2003—E-book devices weigh less than a pound, run eight hours and cost as little as $99.

• 1200

My question is, should the government be helping you to deal with Chapters at this time, which I understand is a transitional problem, or should the government be helping the industry deal with the changing technology?

Ms. Victoria Ridout: Why does it have to be one or the other? I think these two things go hand in hand. Obviously, it would not be realistic for us to expect the government to take sides in these issues. Again, the new technology and the bookstore chains have upset the apple cart so that we are now in a situation where there used to be certain rules everyone followed and now there are no rules. It's open season. To some extent you have to let the market settle down and eventually settle these issues. What has to be recognized is it is an extremely unfair playing field, where the writers are put at a severe disadvantage.

From my organization's point of view, the only way the government can affect this situation without actually imposing contract and fee standards, which is not likely to happen, is to strengthen the organizations that represent these writers so that those organizations can become more collective bargaining organizations negotiating contracts and the rights of writers than they have been in the past.

The Chair: Do any other members want to add to what Ms. Ridout said?

[Translation]

If not, I will turn the floor over to Mr. de Savoye.

Mr. Pierre de Savoye: Thank you, Mr. Chairman. It is very interesting to hear what you have to say this morning, because you are giving us the views of the people who create all these books that we can read, and not those of the people who distribute and print them, although they too are important.

I was struck by one thing in particular. I suspected this, but you expressed it very well, Mr. Moore: I'm referring to the precarious situation of authors with respect to their rights. In French, we use the term droits d'auteur or "author's rights", whereas in English we use the term "copyright", which refers to reproduction rights.

I quite understand where you are coming from when you state that there is something wrong when writers have their royalties reduced so that a distributor can give discounts. For example, if I were an employee of a company, and that company sold its dingus at a discount, I would not expect that my salary would be reduced at the end of the week.

But employees who work for companies are usually unionized. At the very least, employees have some power to resist actions by the employer aimed at undermining their employment conditions. To what extent are authors and writers in a position to hold out against those who, at all levels of the production chain, would like to take part of what belongs to them?

Mr. Christopher Moore: I think that it is in part up to you to help us in such circumstances.

[English]

It seems to me that the place of Chapters/Pegasus' market concentration and their impact upon the publishing system and whether this is a threat to publishers has been a matter of public debate. I think we need to include in that public debate the place of payments to authors. I think if we understand, as you said a moment ago, that it's not acceptable to finance discounts in the retail bookstore trade on the backs of rights holders and authors, then we can use that influence. I think when we discuss it with the publishers' organizations we can make a very strong case for that. I think it's need that's squeezing them towards this. I think when we understand that it's not acceptable to push for efficiencies in the bookstore trade on the backs of creators, when that becomes part of the public debate, then I think we'll be able to make that point with publishers.

I think, by and large, we work quite well with a great many publishers, and publishers frequently wish to do well by their authors. If they're being squeezed, sometimes there are publishers who want to get that book out there, and they'll do anything they can. If they think they're making some sacrifices, they'll think the author should make some sacrifices too.

• 1205

I think when we emphasize the unacceptability of this, we expect to make that point. But I think with the support of your committee in this, if it becomes part of the public discourse about the situation, we'll be able to make that case. As you said, writers are not syndicalisés; we're not a unionized organization. And whether it's Stephen King or a minor unknown Canadian author, the leverage of individual writers is quite different. But I think our organizations will be able to make that point, and we intend to make that point quite firmly.

Thank you.

The Chair: Thank you, Mr. de Savoye.

Ms. Penny Dickens: I'd like to make a point, which you will see when you see our brief. The problem for the authors in the sample we cited, and with a small publisher, was that the publisher's income goes down 10% with Pegasus' demand for 50%, but the author's goes down 50%. That is unacceptable. That's an unacceptable level.

[Translation]

Mr. Pierre de Savoye: A few minutes ago, Ms. David, you raised the possibility of two-tier publishing: large runs, large bookstores, and smaller runs that are less profitable or not very profitable, that would not be found in the big-box stores, but most likely in the small bookstores. Now, there could perhaps be two- tier publishing, so why could there not also be two kinds of retailing? I am well aware that I can go to a Zellers or Sears store, or to a superstore, and buy clothing or other goods, but I also know that I can go to shops where I will get a more specialized product that better meets some of my expectations as a consumer. Are we not witnessing the introduction of two types of retailing? Would this not be the best approach? I would like to hear your views on this subject.

Ms. Carole David: As you say, it is true that the independent bookstores, for example, will survive if they are able to find a niche and serve a very specialized, very specific clientele. What you say is true. What this means, then, is that there really will be specialized bookstores for specific kinds of titles.

However, the bookstores also have to sell bestsellers to survive. Before there were any superstores, this is what allowed these bookstores to survive. Sales of bestsellers have now been entirely eaten up by the superstores. Yet, small bookstores also need these bestsellers in order to continue serving their clientele, even though it is a very specialized one. This is a problem which is truly difficult to resolve.

Mr. Pierre de Savoye: I would be grateful if you could explain that to us. Other witnesses have mentioned this problem facing our bookstores. It is a fact that the two-tier market could become a single-tier market, with the second being completely, or nearly completely, eliminated from the game.

I would like to come back to the question asked by my colleague from the Reform Party on the subject of e-commerce. We are not talking about e-commerce alone; there could also be electronic publishing. One could assume that certain writers, if unable to find a publisher because of weak sales potential, might consider publishing their work on their Internet. They could do it themselves, but they are not specialists in the field. Do you think that the Internet could make up a third tier for very small, very specialized, very specific print runs targeting a global clientele?

Ms. Carole David: As far as the Internet is concerned, there are, of course, already writers who publish their works themselves on the Internet. However, it's madness on the Internet at this time. We have to wait until the dust settles, to find out what we are left with. However, one thing that can be said is that, at present, e-commerce is truly turning upside down the notion of territorial ownership of copyright, as others pointed out earlier.

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As the representative of the UEEQ, I am concerned with the holding of copyright. The concept of author is gradually disappearing. This is not the case for a writer like Stephen King, for example, who has some control over this, but for other writers, this concept is completely disappearing. We think that we will find mainly school textbooks on the Internet. We may be wrong, but that is what we predict. Therefore, as another witness said earlier, the information for students would be lighter. What types of books will be found there? We don't have many details yet, but what we do know is that there is a real threat to writers.

Mr. Pierre de Savoye: How much time do I have left?

The Chair: Mr. de Savoye, you will get another chance.

[English]

Ms. Bulte.

Ms. Sarmite Bulte (Parkdale—High Park, Lib.): Thank you, Mr. Chairman. Thank you all for coming to join in this round table discussion of the Canadian publishing industry.

Mr. Moore, I would like to congratulate you on your book, Canada: Our Century. I must say that a number of my friends and family were beneficiaries of that book. I must also tell you I did buy five copies in Chapters and five copies in Indigo. At Indigo they were 30% discounted. At Chapters they weren't. That's just for your own information.

I want to talk a little bit about the role of the author and the publisher. I met with a number of your members during the recess week to informally discuss the questions that had been posed by the committee. One of the things I found quite fascinating, in light of the fact that when we first started our discussions we had an overview of the Canadian publishing industry, was that it was pointed out that without government assistance, 81% of those publishers would be unprofitable. Of course, their role is to assist the emerging artists, and I think it's a very important role, as you know.

One of the things I was quite surprised at was that I had always assumed—and perhaps the more successful writers can dictate this—that once a writer gave his or her rights to a publisher, those were international rights. Yet that's not the case at all. Their government is subsidizing and helping those publishers to assist them in producing the first book, but the moment that author becomes successful, our Canadian publisher can no longer compete with what the American publisher is giving those authors. I found this comment that with the royalties that were being promised in the American editions, our Canadian publishers couldn't....

I'm concerned about that. I understand that the author should make as much money as possible, but at the same time, what's the role of that Canadian publisher we're supporting as a government?

With respect to contracts, you talked about the cost squeeze, how the author is expected to subsidize the cost of the distributor. But again, is there not a role with the author and the publisher to ensure that there are certain contracts you make that cannot be upset by the distributor?

Thirdly, with respect to electronic commerce, I notice, Mr. Moore, you said that perhaps the government can help the small publishers with the electronic form. Again, are we going to help the small publishers only to see that when the author becomes successful they will go to the American publisher so that they can be internationally seen? I wonder if you could help me in that area.

Mr. Christopher Moore: About 80% of our members, and we represent 1,350 writers and book writers in Canada, are published by Canadian publishers. There's a very close relationship between the extent and diversity of Canadian writing and the survival and flourishing of Canadian publishers. I think that's why we've always supported the programs the Department of Canadian Heritage has had to support Canadian publishers. We do think it's important that there be indigenous domestic Canadian publishers.

On the other hand, we don't think it's necessarily a bad thing that there should be some competition between subsidized indigenous Canadian publishers and publishers who come here and identify the success, the promise, and the potential of Canadian writing and set themselves up in business in Canada because they see an opportunity in Canadian writing both for the domestic audience and overseas.

As you recognized, it's not for me to say the writer should hold themselves back from a large advance, or a large offer, from a foreign-owned publisher when that offer comes along. The fact remains that the vast majority of Canadian writers are published by Canadian publishers, and that's the link we want to maintain and we need to maintain.

• 1215

Your second point was about contracts. Part of the problem, of course, is that these contracts for books may have been made several years ago, and the clauses that make possible deep discounting of authors' payments may have been signed at a time when there weren't any retailers or distributors demanding these very deep discounts. Sometimes it's contract clauses that were developed for previous circumstances. The point we're really making is that the situation in the marketplace has changed and the terms of publishing are going to have to change along with that.

You had a third point about e-commerce.

Ms. Sarmite Bulte: Is that something you can negotiate with, let's say, your American publishers? Are the Americans at that stage with respect to...? You may have your American rights or your British rights with their different publishers. Is that becoming a standard form contract with your American publisher? You mentioned Stephen King.

Mr. Christopher Moore: No, it isn't. In many ways, it's not really clear at the moment who will be the e-publisher. Traditional book publishers may indeed see themselves selling that right in the sense that we may publish a book with a book publisher but the movie rights may be sold to someone else completely differently.

In some cases, writers use the publisher, in effect, as their agent, and the book publisher then sells the film rights to a film production company. It could be that in some cases a writer would license his electronic rights to a book publisher, who would then sub-license him to an electronic publisher. Or it may be that the author and his or her agent would hold on to those rights and market them separately.

At the moment, we've been encouraging our members usually to hold on to their electronic rights rather than giving away a sort of blanket licence to the publisher to represent the author's electronic rights. Given the degree of flux in electronic publishing at the moment, you can only make an agreement on a particular offer, on a particular kind of electronic distribution, rather than general electronic rights.

I don't think it's entirely germane, the question of whether it's a Canadian publisher or a foreign publisher. I think the really important role of government with regard to electronic publishing is to ensure that copyright can be enforced and protected. We understand that authors own their works when they're published in books and magazines. We need to make that equally clear in the electronic environment. No matter how those works are being distributed, ultimately the creator of the work has an ownership right and is entitled to be paid for that.

You can't have a marketplace unless contracts can be enforced. It goes back to Adam Smith. In the electronic environment we need a way—and there's a role for government in this—to ensure that copyright is enforceable and that copyright can be collected for in the electronic environment, just as in the other environment. Otherwise, you're not going to get material produced. You're not going to get the material unless you pay the creators. Thank you.

The Chair: Ms. Ridout, briefly.

Ms. Victoria Ridout: In addition to working for the Periodical Writers, I have also been a literary agent for a number of years and I've negotiated hundreds of contracts between publishers and authors. I'd just like to make a few comments.

I understand what you're saying. Is it fair that you're withholding some rights and not giving your Canadian publisher all of the rights? The general rule of thumb I look at when I'm negotiating a contract is this. What is the author getting in return for giving up the rights?

If a publisher is offering a decent advance and decent splits on foreign-right sales and if the publisher has the ability to go out and make those subsidiary-right sales and act as the writer's agent in that regard, there's absolutely no reason not to give that publisher all of the international rights. However, if a publisher clearly does not have the staff that has the ability to negotiate those rights, has no plans for what they're going to do with those electronic rights when they're demanding at a 50-50 split, then the author is better to hold onto those rights, maybe have a professional agent represent those rights on his behalf.

There are all sorts of compromises that are available. One of the most reasonable ones is that you give a publisher certain rights for a certain period of time. If they don't use them, say within two years of publication, the author has the right to revert them. It's very fair. You want these rights; do something with them.

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Those are the problems the writer is facing. Is a publisher going to sit on his rights and do nothing with them? Is he going to go out there and aggressively sell them but only give the author a very small cut? As an agent, if I can't negotiate a higher split on those subsidiary rights, then I'm going to try to keep them for my author.

Ms. Sarmite Bulte: Thank you.

Ms. Victoria Ridout: I have a couple more comments.

The Chair: Ms. Ridout, please, we have a line of people who want.... Maybe you can bring in your points when other questions come up.

Mr. Bélanger.

[Translation]

Mr. Mauril Bélanger: I have a quick question for the Quebec writers. Do you think that there will be a third threat in the form of printing on demand?

Ms. Carole David: Printing on demand does constitute a threat. We are looking into it, both e-commerce and the e-book. There is also printing on demand, which is already being done in the United States. This is a problem similar to that of photocopying, and Copibec is already monitoring this aspect. So yes, we are studying that also, because the author will obviously no longer have control over his or her work.

Mr. Mauril Bélanger: Okay. You are dealing with that.

Ms. Carole David: Exactly.

Mr. Mauril Bélanger: My other questions are for Mr. Moore.

[English]

I've been focusing on the Chapters/Pegasus relationship and the vertical integration scenario. I've said time and again that Chapters and Indigo have done good things in terms of shaking up the retailing end of things. That's what I presume, because I haven't seen them. You seem to acknowledge that in them helping you sell your book last year, but you can't have your cake and eat it too.

I want to explore the example you bring to us today of the author—I don't know who—who had 10,000 copies of his or her book sold and was paid for essentially the equivalent of 1,000. Can you please provide more detail on that and in particular what role Pegasus may have played in that?

Mr. Christopher Moore: Yes. There has been a traditional, long-standing, old-fashioned custom in book contracting that one of the minor clauses way down in the bottom of the book contract frequently specifies that when a publisher sells copies of a work at a much greater than usual discount.... Sometimes the figure is specified at 50% and sometimes it's a larger percentage. They vary depending on the contract, depending on the publishing house. When a publisher sells copies of the work at a very large discount, it seeks the right to pay the author royalties—a 10% royalty is standard—not on the list price of the book, in other words not on the retail price of the book, but on the actual receipts the publishers receive. They're frequently called net receipts clauses.

If you imagine a $30 book, an author usually assumes, on a 10% royalty, to receive a $3 royalty on every book that sells. There have been clauses traditionally existing in the publishing industry where a publisher sells some copies of the work at a very deep discount and it will then pay on its net receipts. Its net receipts on a $30 book are probably $15 a book with the 50% discount from Pegasus. In that case, the royalty would then be $1.50 instead of $3. It's a 50% cut in the royalties.

Mr. Mauril Bélanger: You're talking about a 90% discount here. You said 10,000 books were sold and the equivalent of 1,000—

Mr. Christopher Moore: Let me finish. Traditionally, those have existed only in special circumstances. Generally publishers have not sold their works at these deep discounts because they're in business to make money, you might say. However, in occasional special circumstances, they wanted to have those clauses there. We never liked them, but we accepted them and they usually only applied in a small number of circumstances.

Clearly, we don't know where those books went in this particular case. Of the 10,000 copies that were sold, 980 paid a full royalty. It was a $25 book and those paid in effect a $2.50 royalty. The other copies, slightly more than 9,020, paid a royalty on net receipts. In other words, they paid $1.25 instead of $2.50. The loss to the author was on what you would have expected to get. Getting $2.50 on every $25 book, you would have expected a royalty payment of about $28,000. The actual cheque was for about $14,000. Her royalties were in effect cut in half, because 980 paid a full royalty. The royalty statements don't say who all the books were distributed to. It's clear that in that case, this traditional, old-fashioned clause was applied to the 50% discount that went to Pegasus.

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Mr. Mauril Bélanger: The question is, who can trigger that clause? Is it the publisher or is it the person buying the book?

Mr. Christopher Moore: Oh, the publisher. This is the publisher's responsibility.

Mr. Mauril Bélanger: What would cause a publisher to do that?

Mr. Christopher Moore: Well, in the past, it was very special circumstances essentially where they saw they could extend their print run somewhat by making a very deep discount sale. In this case clearly I have no doubt at all that they were able to distribute 9,000 copies of that work through Pegasus to Chapters, but they weren't able to get it to sell elsewhere.

Mr. Mauril Bélanger: I want to make sure this is not just hypothetical. I want facts if possible.

Mr. Christopher Moore: Okay, yes.

Mr. Mauril Bélanger: What I'm hearing is the publisher of this person is broke. Discussions with Pegasus would have arrived at an arrangement where her royalties would have been reflecting deep discounts.

Mr. Christopher Moore: I'm not sure Pegasus would have known anything about the royalty relationship between the author and the publisher. Pegasus would have required a 50% discount from the publisher. The publisher would then have said “That entitles us to trigger the net receipts clause.”

Mr. Mauril Bélanger: Absent Pegasus—let's assume for a second Pegasus did not exist and you just had the Chapters retailing empire—could that have happened as well?

Mr. Christopher Moore: Well, that depends on what discount the publisher gave to Chapters, I suppose. But clearly it's the addition of the distribution function of Pegasus that gives them the extra discount that pushes into the net receipt territory.

Mr. Mauril Bélanger: In this document we will receive, are you actually saying the existence of Pegasus caused, in this instance, a deep discounting of the royalties paid to the author as well?

Mr. Christopher Moore: I have no doubt about it whatsoever.

Mr. Mauril Bélanger: Thank you.

[Translation]

Thank you, Mr. Chairman.

[English]

The Chair: Mrs. Ridout, briefly please. We have other questioners and time is moving.

Ms. Victoria Ridout: In contracts the deep discount clauses specifically say those deep discounts cannot apply to any book sold through traditional retail outlets. That is why it would not have happened if Pegasus did not exist, because Pegasus is now the distribution arm of Chapters.

Mr. Mauril Bélanger: Is it possible, Mr. Chairman, to receive copies of the standard of these contracts, the blank ones—I don't know if they exist—just to get a sense of these?

The Chair: Sure. That's a very good idea.

[Translation]

Mr. Mauril Bélanger: And the same applies to Ms. David. Would it be possible to receive documentation or some information on what is being done on the issue of printing on demand, or the Larose committee, if I noted the name correctly? I think that it could be useful for committee members to have documentation from Quebec writers.

Ms. Carole David: For the time being, what happens in this committee is secret. We are not allowed to disclose anything, but the committee will submit a report at the end of its work.

Mr. Mauril Bélanger: Thank you.

The Chair: Ms. David, naturally, we are not asking for anything that is confidential, but the usual thing, standard contracts and so on. If you could send us some standard documents, for example,

[English]

and Mr. Moore and Mrs. Ridout the same, that would be extremely helpful. You could send it to the clerk of the committee, who will distribute it to the members.

Mr. Christopher Moore: We could certainly do that.

Having said that so clearly, I would also like to say we have had discussions with some publishers who have stated absolutely and under no circumstances would they trigger a net receipts clause through a dealing with Chapters and Pegasus. Some publishers are biting the bullet on this and understanding their obligation, their fiduciary duty, to their authors. It's not universal in the publishing industry. That's the point that needs to be emphasized.

A voice: Yet.

Mr. Christopher Moore: Yes, yet.

The Chair: Thank you.

Mr. Muise.

Mr. Mark Muise (West Nova, PC): Thank you, Mr. Chairman.

Thank you to our guests today.

A couple of weeks ago we had the independent booksellers before us, and they were telling us basically the arrival of Chapters and Pegasus was putting in danger the independent booksellers and ultimately the authors, or not-as-well-known authors, just because the independent bookstores usually promote these.

Mr. Moore, today you said you feel benefits are created by the buzz with the big bookstores, and in turn more books are sold. But on the other hand, you say they don't hand-sell, so they don't promote as well. I'm trying to understand this reality. I appreciated Mr. Bélanger's question, because I'd like to know more. I'd like to get what the reality is vis-à-vis the industry and the arrival of Chapters and Pegasus. As a committee member, I'd like to know if the benefits outweigh the risks and what we should or can do in this direction. I ask this to whoever feels they would like to answer.

• 1230

Mr. Christopher Moore: It's a paradoxical thing, because a Chapters store or any of its competitors—Barnes & Noble in the United States or fnac.com in France, which is now an international phenomenon—have huge numbers of books in their stores. You can wander up and down the rows. But there is research—particularly in the United States, but it's coming from other countries as well—that the big-box book retailer is very closely linked to the growing power of the big publisher and the big-name author. In other words, as the big-box bookseller becomes a bigger force in the industry, the proportion of total book sales taken up by Danielle Steel and Stephen King and a small number of superstore authors clearly goes up.

In other words, despite the rows and rows of backlist titles in a Chapters store or an Indigo store or a Borders store, clearly the real success and the real impetus of the big store is to move best-sellers at 30% off. So there is in fact a narrowing of the market. The big store and the big publisher and the big author do seem to go hand in hand. That seems to be the research coming in all around the world.

And in some sense this was the book that was designed for that kind of phenomenon. But I don't think we want to see a Canadian book community where that's the only kind of book being produced. I think we need the diversity of writing and publishing we've seen developing. That's the part that's gone hand in hand with the independent bookstore, and that's the part we see threatened.

Mr. Mark Muise: I think we're recognizing that, but as a committee, what direction should we go in? Give us some guidance, if you would.

Ms. Victoria Ridout: Right now, because of their size, Chapters and Pegasus are able to coerce publishers, if they want to stay alive, to give them bigger discounts than they give to independents. Again, I introduce the phrase “even playing field”. Perhaps some limitations should be put on the ability of the chains to act with such unfair advantage over the independents, in the interest of preserving Canadian cultural diversity.

The Chair: Are you saying in effect, Mrs. Ridout, you want a change to the Competition Act as it stands now? How do you do that? I understand what you're trying to say. How do you effect it?

Ms. Victoria Ridout: We're pointing out there is a distinct unfair advantage that is to the severe detriment of Canadian cultural diversity. As Chris Moore pointed out, around the world there's a movement towards everything being under one roof—one big distributor, one big publisher. You see this in films, where they produce everything; they control every arm of the industry. That's where the Canadian book industry is going. The fewer elements involved in the industry, the less diversity, and you have one large company setting the agenda of what gets published, what gets distributed, and so on and so forth.

I don't know the complexities of the Competition Act. That was the best answer I could come up with.

The Chair: Thank you.

Mr. Moore, briefly.

Mr. Christopher Moore: To answer your question, and also to Mr. Muise, we've built this book world and we've built this book community and this book industry one writer at a time and one book at a time and one bookstore at a time, almost. If the bookstore part of the equation is threatened at the moment, basically we just need to carry on. We need to do what we can to maintain the diversity of writers, to support the writers who do exist.

I don't think every independent bookstore is going to vanish, and maybe some of them will start to come back. Maybe we'll start to see people get a little tired of the big-box phenomenon. They may, in a few years, if we can carry on the Canadian writing and the diversity of Canadian writing and publishing....

So the best role of government may well be the traditional role. The Canada Council thirty years ago was clearly helping to bring writing into being, was helping to support writers and support writers to get around the country, and gradually there came to be a network of bookstores.

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Even if the network of bookstores is under threat at the moment, those traditional means that the Department of Heritage and the Canada Council and other agencies of government have used may well be the best thing we can do in these hard times. The strong role of the Government of Canada as the supporter of Canadian writing and Canadian culture has worked. It has paid off in the last 30 years. One of the things we may need to do is to continue, and even redouble, those efforts in the meantime, and hope that if we continue the diversity of Canadian writing, we'll see a resurgence in the bookstore area.

The Chair: Briefly, Mr. Muise.

Mr. Mark Muise: I don't know this, but if what you're saying to us is that the existence of Chapters and Pegasus is creating this problem and you're saying, well, on the one hand what we should do is promote the individuality and keep going in that direction.... If you have one good thing on one side and a bad thing happening on the other side.... I know what you're saying, but I'd like you to go further.

Mr. Christopher Moore: The way to go further, I guess, is to talk to the Competition Bureau about its criteria for what constitutes market dominance. At the moment, they do not believe...or at least their ruling last summer was that Chapters does not have market dominance such as to trigger their intervention. If they interjected a larger cultural role in what constituted dominance and damage, there may be a role there.

The Chair: Briefly, Mrs. Dickens.

Ms. Penny Dickens: The Competition Bureau does talk about the cutting off of new initiatives. If you had a cultural component to your Competition Bureau criteria for looking at a scenario, the diversity of voices being introduced into the marketplace would be.... If there are no new voices, that is cutting off initiative, and I think you must have a cultural component, because it's not a “widgets” market and it's vital to the country.

The Chair: Mr. Bonwick.

Mr. Paul Bonwick (Simcoe—Grey, Lib.): Thank you, Mr. Chair.

I'm going to focus my short questions on the Canadian Library Association. The discussion or the debate so far has been, to a certain extent, a philosophical debate about globalization and the free market society. Ms. Ridout and, to a lesser extent, Mr. Moore have put forward their vision, not in detail, but they have put forward their concerns, if I may, about market dominance and level playing fields.

Sadly enough, I guess, the debate is, what is the government involvement in a free market society? In business there are very few level playing fields, by virtue of competition. People tend to continually offer more and more to get to the consumer, but it's an incredible philosophical debate and it's difficult to spend only five minutes on it when you're responding in your questions, so I feel for you in that regard.

Mr. Moore, very briefly, I'm going to go to the library people first, but I'm just going to leave you with this, and if there's time at the end, you could respond to it. You used a quote or a percentage, and I always get nervous when people use one example of a percentage. You said that about 80% of your authors are published by Canadian publishers. This is confusing, and I'm looking for some clarification, because if the 80% of your authors are only producing 20% of the books in Canada and the 20% that are left are producing 80% of the books in Canada and they're using foreign publishers, then the results are all skewed and it's sort of an irrelevant example. So if you will, you might put some thought into that and respond accordingly.

From the libraries' perspective, you've put out a request that the federal government work more closely, perhaps, with their provincial counterparts to assist libraries. Some of the information I have been provided with over the last while has been that provinces in Canada, more specifically some provinces in Canada like Ontario and British Columbia, have the lowest level of funding per capita, per student, or per user on the North American catchment basis. I'm looking for you to substantiate that. Also, maybe you have some specific examples of how we might work with our provincial counterparts to increase that funding.

My second question, again to the library people, would be about it also being my understanding that libraries get back approximately half of the GST they pay when they're purchasing books for their inventory. Could you verify that? Secondly, would you envision any significant impact if purchases were totally free of GST?

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Ms. Vicki Whitmell: In regard to the first question on school libraries, again, it's very difficult to know what statistics are. As Mr. Cabral has pointed out, there are various statistics available on funding of libraries and on the overall library industry in Canada, so I can't substantiate the dollar figures. I assume you're talking about school libraries in that situation.

Mr. Paul Bonwick: The numbers are available. I just wasn't sure if you had them or not.

Ms. Vicki Whitmell: There certainly have been significant funding reductions in school libraries over the past few years, which are directly the result of provincial government decisions, and they are significantly impacting the quality of the school library systems. They're impacting the type of education the students are getting. Certainly it's more apparent in some provinces than in others. I can't substantiate the figures you have in terms of B.C. and Ontario.

Part of the problem, I think, is addressing the issue of the importance of school libraries. I think the federal government can play a strong role in that, because the decisions have quite often been based on dollars rather than on the quality and the importance of information to the students and how that impacts their future schooling and education—and the overall impact of our ability to have educated people in our society.

Quite often—and I mentioned it in our brief—the decision is made that, well, everything is going to be on the Internet, therefore we can get rid of our book collections. That happens time and time again. Once that decision is made in the school library or a business library, in anything like that, then it's very difficult to go back and start again because the collections are at the point where they can no longer be maintained and they don't have the quality. So you have to start again, and there are large funding implications for that.

The other issue is staffing. Certainly the print collections, if they're downgraded.... The decisions are being made to take the teacher-librarians out of the libraries themselves and put them into the classrooms. That results in a real loss for the students. They in turn are going to the public libraries to try to get the information they need.

As Ms. David has pointed out, libraries do an excellent job in terms of being advisers to people. There's so much information. We've talked about the amount of information that's now coming from the Internet and from information technology through e-commerce. How is a person able to evaluate what kind of information they're getting? Is it the right kind of information? Where is it coming from? Is it valid information?

Mr. Paul Bonwick: I don't mean to minimize the impact of provincial decisions on these libraries, but describing them to me is like describing municipal issues as well. You're talking about provincial domains. That's what I'm trying to clarify.

You said there was a role for the federal and the provincial governments, and I'm wondering if you might provide some examples of how you envision us working with the provincial governments to raise the level of priority or put it up on the priority scale somehow. I don't know. You give me the examples. But providing me with examples of what impact provincial cuts in funding have had.... I can't tell the provinces to increase funding to libraries.

Ms. Leacy O'Callaghan-O'Brien: Perhaps I might just add something. If we do want to look for a model, we might look at the one area of library development that has been undertaken by the federal government, in the area of connecting Canadians. Perhaps you would like to look at some of the Industry Canada models for federal-provincial partnerships for the delivery of cultural products to libraries across the country. We'd certainly be interested in carrying out some research and developing some models.

Mr. Paul Bonwick: Thank you.

The Chair: Did you have a question to Mr. Moore as well?

Mr. Paul Bonwick: Well, I just wanted a further breakdown on the small statistic or percentage he threw out.

Mr. Christopher Moore: Anyone who likes can open a publishing house in Canada. It has been the experience in Canada in the last 30 and 40 years that the publishing houses that have developed, discovered, published, and made successes out of Canadian writers have tended to be Canadian-owned publishers, Canadian publishers that are indigenously owned.

Now the success of those publishers has certainly inspired a number of foreign-owned publishers to set up branches in Canada. They now employ editors and other people in Canada, and they recruit Canadian authors as well and publish them in Canada. So—

Mr. Paul Bonwick: That wasn't my question.

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Mr. Christopher Moore: I'm sorry. Try your question on me again.

Mr. Paul Bonwick: You said 80% of Canadian authors use Canadian publishers. My point was, what percentage of that 80% actually makes up the total amount of publication of Canadian authors? You could have 80% of your authors producing only 20% of the work, in which case the number really has no relevance here at the committee.

Mr. Christopher Moore: I see what you mean. It's not a figure I have with me. But, in fact, Canadian-owned publishers continue to publish Margaret Atwood, Michael Ondaatje, the kids' book author Robert Munsch, and so on.

Mr. Paul Bonwick: Specific examples, I understand. I was looking—

Mr. Christopher Moore: Alistair MacLeod, a difficult serious literary novelist, published a novel last fall called No Great Mischief. I think it sold 30,000 or 40,000 copies in Canada alone. It has been translated into German, French, and Gaelic, in any number of copies. That's a Canadian-owned publisher that has worked with and developed that writer over the generations and is now reaping the benefit of it.

So we still find that most Canadian writers are published by Canadian publishers. That includes big successful ones as well as small ones.

As to the actual breakdown in terms of number of books moved, I know the Association of Canadian Publishers, which represents the Canadian-owned publishers, and the Canadian Book Publishers Council, which generally represents the foreign-owned ones, have been in dispute about exactly the numbers that each sell, and I'm not sure I want to get into the midst of that numbers battle.

But I think it has always been understood as a matter of cultural policy that it's good to have a Canadian-owned publishing industry along with the foreign-owned one, and not make us entirely dependent on the branch plants, who historically did not develop Canadian writing but in a sense marketed foreign product here.

Mr. Paul Bonwick: Thank you.

The Chair: Mr. Moore, before we close, I'd like to ask one question about your example that Mr. Bélanger picked up on, the author who sold 10,000 books and received royalties on the equivalent of 1,000 books.

Would you say an example like that, which is so striking, represents some form of technical end run around the copyright laws? In your view, does it represent some sort of coercive way to beat the copyright laws, which leaves the author no choice?

Mr. Christopher Moore: No, I don't think it does. It represents the collision of an old-fashioned, traditional, what used to be a dead clause in the back of a book contract with a new reality in the marketplace, and some publishers are taking advantage of it at the moment. In effect, I think it's an issue between writers and their publishers. Chapters/Pegasus and its ability to demand very large discounts from publishers has certainly helped to create the pressure so that we're down into those circumstances, but it's a matter of contracts being misapplied. But the contracts are there, and I think what we really need to do is put an end to those clauses. We need a commitment from the publishing industry that there's no longer a place for those clauses, because discounting is now rampant rather than unusual.

The Chair: Mr. Bélanger, do you have a question or comment?

Mr. Mauril Bélanger: I want to pursue that a bit. I asked Mr. Moore if in this document we'll be receiving he had identified the publisher and the author, and the answer is no.

Mr. Chair, you will remember that at the last meeting we indicated, or I had indicated, that unless the publishers and the authors are prepared to come out with some substantiated examples that can be documented, or that are documented, this committee may not be able to pursue this beyond where we've gone so far.

I've heard again this morning Madame Ridout make comments that are general allegations. I would implore people to bring specifics to the fore. Otherwise we won't be able to bring forward recommendations to deal with them. If all we hear are generalities or allegations.... We've had a few specifics so far, but to my mind, certainly not enough.

There's another question I want to put. Most people have gone to bookstores and have seen these hardcovers sold for $3.99, $4.99, and so forth. I guess Smithbooks, which is part of the Chapters chain, is the one where I've seen it done the most often. What happens to the rights when books are sold for that price, which is even more than a 50% discount?

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Mr. Christopher Moore: The usual circumstance there is that basically if there's a market of 10,000 for a particular book and the publisher happened to print 15,000, 5,000 are essentially pulp. Whether you send them back to the print shop to turn them into pulp or you sell them off for a few pennies at a retail book store, really the theory is that those are surplus stock, they are remainders that there is no longer a market for, and you're really getting rid of them. Authors usually get zero on those copies. They are essentially unsaleable at a retail price, and therefore they're being distributed at, as you say, a couple of bucks, rather than being turned back into pulp. In the magazine industry it's the same thing. They're essentially thrown away once they're unsaleable.

Mr. Mauril Bélanger: Thank you.

The Chair: Thank you very much.

I'd like to express my special thanks to you. I know you came last week, and because of circumstances of the House of Commons last week you couldn't appear. I know it was a lot of inconvenience. Besides that, we had a change of clerks due to our previous clerk being sick. I know the transition made it so that you weren't notified for a few days to invite you to appear today. So I'd like to thank you very much.

[Translation]

Thank you for your understanding and thank you also for travelling here twice. I know that it's a real nuisance. I appreciate it very much and I think that committee members appreciate it also.

[English]

I think it's really been a very interesting session and informative for all of us.

[Translation]

I would like to offer all of you my heartfelt thanks.

[English]

Thank you very much on behalf of the committee. Thank you.

The meeting is adjourned.