FIXED BOOK PRICE SYSTEM IN GERMANY

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1 FIXED BOOK PRICE SYSTEM IN GERMANY International Forum on Fixed Price Law in Rio Joachim Kaufmann Representing: Bonnier Books and Carlsen Publishing in Germany German Publisher s Association (Börsenverein) International Publisher s Association (IPA)

2 WHAT TO EXPECT? The German Book Market History of Fixed Prices in Germany Current System for Fixed Prices International Overview Market Effects of Fixed Prices INTERNATIONAL FORUM ON FIX PRICE LAW, RIO 2

3 THIS IS BRASIL & INTERNATIONAL FORUM ON FIX PRICE LAW, RIO 3

4 THIS IS BRASIL & THIS IS GERMANY INTERNATIONAL FORUM ON FIX PRICE LAW, RIO 4

5 THIS IS GERMANY 80 million Germans do not only love football, they also love books INTERNATIONAL FORUM ON FIX PRICE LAW, RIO 5

6 SOME FIGURES ABOUT THE GERMAN BOOK MARKET Size 10 bn. Euro (30 bn. Reais) Third biggest book market of the world 1,3m titles 100k new titles per year (without self published books) About booksellers About publishers (8.000 with more than 10 titles) INTERNATIONAL FORUM ON FIX PRICE LAW, RIO 6

Arts, Music 5% Non- Fiction 9% Education 9% Travel 6%

7 MARKETSHARES (TRADE CHANNELS) IN PRODUCT GROUPS Social Science, Law, Economy 3% Sciences, Medicine, Technology 4% Arts, Music 5% Non- Fiction 9% Education 9% Travel 6% Guidebooks 14% Adult Fiction 34% Childrenbooks, Young Adult Fiction 16%

8 German Publishers and Booksellers Association, founded in Leipzig in 1825 (similar to Brazilian Book Chamber) Our members represent all sectors of the book industry: Publishers Retail Booksellers, Antiquarians Wholesalers members (companies) Organizes: Frankfurt Book Fair Peace Prize of the German Book Trade German Book Prize Custodian of the Fixed Price System INTERNATIONAL FORUM ON FIX PRICE LAW, RIO 8

9 HISTORY OF FIXED BOOK PRICES INTERNATIONAL FORUM ON FIX PRICE LAW, RIO 9

10 HISTORY OF FIXED BOOK PRICES IN GERMANY 1888: fixed retail prices were incorporated into the statutes of the Börsenverein After World War II Germany divided in four occupied zones, no possibilities to maintain this system 1958: anti trust law includes a paragraph permitting publishing houses to fix book prices 1965: Börsenverein introduced a contractual book price system which had to be watertight, meaning publishers must bind EACH vendor to sell at the price the publisher has set Börsenverein introduced Sammelrevers (umbrella agreement covering a number of individual price-determining contracts) 1993: creation of the European Union lead in the following years to discussions mainly about the treatment of cross-border sales within the homogeneous linguistic area of Germany, Austria and Switzerland 2002: Price Fixing Law come into force INTERNATIONAL FORUM ON FIX PRICE LAW, RIO 10

11 WHAT IS REGULATED BY THE LAW? Publisher must set retail price for each book (including ebook, music scores, maps, globes - not audio books, calendars) Prices may be changed by publisher Prices may be cancelled after 18 months Different editions of same work may vary in price Limited types of discounts (high quantity, series, subscription, libraries) Mandatory fixed discounts for schools INTERNATIONAL FORUM ON FIX PRICE LAW, RIO 11

12 POLITICAL ASSUMPTIONS/BELIEFS BEHIND THE SYSTEM OF FIXED BOOK PRICES 1. Books are inevitable for our society s and individuals cultural development 2. A strong network of book stores with a great variety of books would be most effective for enhancing the distribution of books as an object of our society s culture 3. The system of fixed book prices is the best instrument to achieve such a network All major German political parties (conservatives, social democrats, green party, liberals, socialists) strongly support that law INTERNATIONAL FORUM ON FIX PRICE LAW, RIO 12

13 EFFECTS ON THE INDUSTRY Booksellers of all sizes profit from calculable margin on bestsellers Retail competition for selection, variety of books, customer service, reading acitivities not mainly for price No destructive competition for brick&mortar booksellers regarding the prices of only a few bestsellers, offered by supermarkets, internet retailers, other vendors outside book industry Bestselling books allow publishers to cross-subsidise other works INTERNATIONAL FORUM ON FIX PRICE LAW, RIO 13

14 BENEFITS FROM A CULTURAL PERSPECTIVE Dissemination of Culture Wide variety of books: 1.3 million titles in print Large range of small and large publishing houses 20,000 publishers in Germany (of which 60% have less than 10 titles available) Efficient logistics system Wholesalers have around 500,000 titles on site 97% of all orders can be fulfilled by the following morning Strong network of about book shops promoting diverse and colourful range of books INTERNATIONAL FORUM ON FIX PRICE LAW, RIO 14

15 FIXED BOOK PRICES IN OTHER COUNTRIES Very long tradition Denmark 1830 Germany 1880 UK 1900 (until 1995) Recent Spain 1975 Portugal 1996 Italy 2005 Move from contract to law to avoid anti-trust issues INTERNATIONAL FORUM ON FIX PRICE LAW, RIO 15

16 OVERVIEW OF CURRENT FIXED PRICE SYSTEMS COUNTRY PAPER FIXED PRICE? PAPER BOOKS FIXED PRICE SYSTEM DETAILS LEGAL BASIS DURATION OF APPLICABILITY MAXIMUM DISCOUNT EBOOK FIXED PRICE? IF YES FOR BOTH, SAME SYSTEM? TEXTBOOKS INCLUDED? ARGENTINA Yes Law 18 months after publication 10% during book fairs, book festivals; 10% for schools and libraries, 50% for public entities. Yes Yes AUSTRIA Yes Law 2 years after publication 5%; 10% for libraries No FRANCE Yes Law 2 years after publication, 6 months after 5% (consumers), 9% (libraries) Yes No last supply to booksellers. GERMANY Yes Law Minimum 18 months No discounts Yes Yes GREECE Yes Law 2 years from publication 10% Yes Yes No ITALY Yes Law 20 months after publication and 6 months from last bookstore purchase 15%; 20% for books sold during Book fairs or trades fairs. No Yes JAPAN Yes Resale Price Maintenance Agreements It depends on the agreement It depends on the agreement No LEBANON Yes Decree of Ministry of Economy 20% to schools, distributors and booksellers. No Yes NETHER- LANDS Yes Law Publishers can reduce prices every 6 months NORWAY Yes Agreement between Until 30 th April the year after publication. publishers and booksellers ass. 5-10% discount for students. No No 12.5 % for book shops, 20% for libraries. Yes Yes No PORTUGAL Yes Law 18 months 10%; 20% for libraries and during No No No book fairs. SLOVENIA Yes Law 6 months 0%; 20% only for book fairs, book Yes Yes Yes series and subscriptions. SOUTH KOREA Yes Law 18 months 19 % Yes Yes No SPAIN Yes Law 2 years after publication, 6 months after distribution in bookstores. 5%; 10% for World Book Day and Book fairs, 15% for public entities Yes Yes No 16

17 SWITZERLAND Fixed Book Prices until 2007, referendum in 2012 decided against a law for fixed book prices High discount for bestsellers, in general higher prices for all other books (no good figures due to currency matters) Amazon delivers from Germany and sells with (at least) 20% discount for ALL books More and more independent book stores had to go out of business, the two biggest book chains ( Orell Füssli and Thalia.ch ) merged in 2013 INTERNATIONAL FORUM ON FIX PRICE LAW, RIO 18

18 COMPARISON GERMANY VS. UK Germany (Fixed Prices) UK (Net Book Agreement until 1995) Number of independent bookstores: Marketshare independent bookstores: 31 % Average retail price: 10,56 Marketshare Amazon print books: 14,9% Marketshare Amazon e-books: 46 % Number independent bookstores: 987 Marketshare independent bookstores: 3% Average retail price: 7,70 GBP (10 ) Marketshare Amazon print books: 27% Marketshare Amazon e-books: 84% According to Buch und Buchhandel in Zahlen 2013 & GfK mediacontrol According to several sources like Nielsen, Bowker INTERNATIONAL FORUM ON FIX PRICE LAW, RIO 19

60% 50% 40% 30% 20% 10% 0% 6 26 4 12 7 31 3 21 Germany 2013 UK Jan-Jun 2014 31 4 8 14

19 Copyright 2012 The Nielsen Company. Confidential and proprietary. SALES CHANNELS UK VS GERMANY 100% Channel share of volume within format 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Germany 2013 UK Jan-Jun Internet-only retailer Book club/direct Other shop Supermarket Bargain bookshop Independent Chain bookshop 20

20 Copyright 2012 The Nielsen Company. Confidential and proprietary. AVERAGE SALES PRICE VS. AVERAGE RECOMMENDED RETAIL PRICE IN UK 11,000 10, ,000 9,86 10,01 10,04 10,14 10,12 10,27 10,47 10,52 10,47 10, ,5000 9,000 8,5000 8,000 Germany 8,28 7,5000 7,78 7,000 7,61 7,53 7,57 7,48 7,43 7,51 7,59 7,49 7, ASP Average RRP 21

21 SUMMARY A Fixed Price System does not lead to higher prices in average, only bestsellers are not that much discounted This saves a countrywide distribution, supports cross-subsidization and mainly helps booksellers to be able to compete with pure E-Commerce companies and supermarkets INTERNATIONAL FORUM ON FIX PRICE LAW, RIO 22

22 QUESTIONS?

23 MUITO OBRIGADO!

Global Fixed Book Price Report

Global Fixed Book Price Report 23 rd May 2014 1 INTRODUCTION Fixed book price (FBP) systems have existed for more than 150 years. Most countries with a significant book industry have, at one time or other,