Publishing industry drives hard bargain with its novel approach

Discount retailing is about to hit our book stores but will it lead to a better deal for the literate layman?

There is something immensely appropriate about the final abolition of the Net Book Agreement (NBA) coinciding with the latest wave of metrication. I fully expect this manoeuvre to lead to books not so much being priced as weighed.

“I’ll take half a kilo of Jeffrey Archer, please, and the same of Martin Amis.”

“That comes to a little over one kilo, sir, but it’s a round 10.Will that do?”

I think it’s an agreeable prospect. Bookshops will become like butchers’ shops. “I’ve got a lovely bit of Mrs Thatcher left over there, nearly three quarters of a kilo – call it a fiver. It’ll be lovely with a bit of Nigel Lawson’s Diet. Or I’ve got some scrag end of Jeannette Winterson.”

I’m not sure I buy the line that the abolition of the NBA will destroy publishers’ ability to produce esoteric and obscure titles and encourage new talent. There was never any price cartel when Caravaggio sold paintings to his patrons. If the market can decide the price of motor cars, deodorants and electricity, the market can decide the price of books. This is not merely scrag end of Thatcherism, it is prime-cut New Labour. What I do know is we should observe the classic rubric of broken cartels: Beware retailers bearing gifts.

The obvious point is that publishers such as Harper Collins, Random House and Penguin, and retailers such as WH Smith and Dillons, are not doing this because they have suddenly seen the light of mass literacy, nor because they have had their hand forced by competition regulators, but because they can make more money this way.

Discount retailing has come to the book trade, just as it came to the grocery trade. Nothing wrong with that, so long as one is sure that the market is likely to get a better deal than it did from the old price-fixing days. It can by no means be taken as read that cartel busting leads to more competitive pricing. Or, rather, that competitive pricing leads to better consumer service.

Look at the building societies. There is every indication that the mortgage buyer received a better service and, in some cases, a better rate of interest, from the old system in which societies agreed the going rates together. One should look at the characteristics of the retail trade in question before assuming that life post-cartel will automatically be better.

The abolition of the NBA has been widely presented as abandoned by publishers who want to sell more books through discounting, with a newly compliant retail trade and readers who receive better deals and only express some concern that their choice of poetry and Himalayan travel anthologies may be restricted. But, as I say, look at the characteristics of the retail trade.

Who is the prime mover in mass-market book retailing? Why, WH Smith, which also owns Waterstone’s. I have bookish friends who are sniffy about Waterstone’s, but I must say that I find the whole experience of shopping there rather pleasurable – rather as one expects, but rarely finds, a bookshop in a great university town to be.

It is the classic and clever retail trick of making big chain shopping feel like browsing in a one-off specialist store. Sainsbury’s made mass-market vegetable retailing feel cosy and Waterstone’s does it with books (come to think of it, Sainsbury’s will as well now). But the point must be that WH Smith has some 25 per cent of the retail book trade and is an enormous power within that trade.

Now, where have we heard this before? Ah, yes, in record retailing. When the Monopolies & Mergers Commission examined the record industry, and the pricing of CDs in particular, it found that WH Smith was something of a scale monopolist. In the record market, WH Smith’s Our Price chain of outlets is the Waterstone’s equivalent, meaning that in both books and records WH Smith has enormous high street control. What record companies have found is that discounting CDs is not necessarily passed on at retail level. The powerful retail chain simply enjoys a wider margin.

One wonders if life should be any different post-NBA for the likes of Random House and Penguin. The issue is made all the more critical by the growing convergence of book and record retailing. While WH Smith owns Our Price, note that Thorn EMI owns Dillons. What goes for records, goes for books.

It may be some time into the next millenium that CD-Roms – or whatever the format evolves into – become a big enough medium to threaten the book. But, then again, the next millenium is only half a decade away and the CD-Rom publisher is already a reality. Dorling Kindersley recently saw annual pre-tax profits jump 41 per cent to 12.7m on the back of CD-Rom ventures. Little wonder Microsoft has a stake in it.

This throws the nature of tomorrow’s “book” shop into question – far more likely to be a multimedia emporium than a Waterstone’s as we know it. And it will be the retailers with muscle that have their names over the door. In itself, that is not necessarily a bad thing. All I am saying is that it will be worth keeping an eye on the book market once it has settled down after the hype of NBA abolition. Publishers may yet rue the day they effectively passed pricing responsibility to the retailers.


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