An Israeli Approach to Author’s Rights

price control

On February 6, 2014 the Law for the Protection of Literature and Authors in Israel (Temporary Provision), 5773-2013 will come into effect.

This Act is expected to revolutionize the Israeli book market by introducing new regulatory requirements with respect to publishing, distribution, sales and profit allocation across the book supply chain.

The act is a protectionist measure to protect authors from market forces in a dysfunctional market dominated be a cartel of two main chains of bookshops that control over 80% of the Israel market.

Protecting authors from having their work discounted will, of course, increase costs of books. The Law is interesting in that it is an attempt to address a perceived problem. The period over which the Law will affect book prices is 18 months.

What is refreshing about this law is that it aims to regulate the first 18 months of sales. I think that this sort of time span is relevant. This contracts strongly with Copyright, which, in Israel, is called, more accurately, ‘Creator’s Rights’. Copyright lasts life of author + 50, 70 or 95 years. This is an area where reform is needed since if there is still an interest in a work 10 or 20 years later, the author will invariably have been financially compensated.

Main Provisions of the new act

Under the Authors Act, book prices will be ‘protected’ for 18 months from the date of first publication. During the Protection Period publishers must set a retail price for each book, which must be marked on the book. The retail price for printed books may be different from that of e-books. The publisher may not change the retail price during the Protection Period.

During the Protection Period, bookstores may not sell books at a different price from the retail price set by the publishers. Not only regular discounts are illegal, but also special offers of the type common by Israel bookstores, such as “buy one get one free” and promotions such as “four for 100 Shekels” are not allowed.

The ‘no discounts’ and ‘no bundling’ has some exceptions:

  • A discount of up to 20% of the retail price may be granted during the annual Hebrew Book Week. A discount of no more than 10% of the retail price may be granted by an online bookstore, and a discount of no more than 20% of the retail price is allowed for a single entity not allowed to return the books.
  • During the Protection Period a publisher must pay an author no less than 8% of the retail price for each of the 6,000 first copies sold, and 10% of the retail price for each copy sold over 6,000 copies. However, for his/her first book, an author will only be entitled to minimum payments equal to 80% of these percentages. During the seven years following the Protection Period, a publisher will pay an author no less than 16% of the actual payment received by the publisher for the books sold.
  • Once a year, publishers and bookstores will enter into a written agreement setting the discount at which the books will be sold by the publisher to the stores during the relevant year. Bookstores are prohibited from requesting, and publishers are prohibited from granting, any further discounts beyond the margins set in the annual agreement.

The Authors Act will be in force for a trial period of three years at the end of which its impact will be assessed and the Act will be re-examined.

The Authors Act contains other provisions, such as a prohibition on remunerating salespersons for recommending a specific book or a specific author; allocation of shelf space and display space between books published by different publishers, oversight, enforcement and sanctions.

COMMENTS

The goals of the Authors Act, as stated in Section 1 of the Act are:

“to ensure Israeli authors proper pay for their creations, to promote literature in Israel, to preserve cultural diversity in publication and distribution of books… to provide readers an opportunity to choose among a wide range of books according to their wishes and tastes and enable competition between publishers and bookstores with respect to quantity, variety and the quality of books offered to the consumer.”

In the notes accompanying the proposal we learn that

“Books and literature are regarded as products of a definitive cultural value that many countries in the western world recognize the need to preserve. These countries rejected the approach pursuant to which a book is a commodity that should be subject to free market conditions. In the State of Israel there exists a unique situation in which the conduct of the book market is dictated by a cartel composed of two chains of bookstores that controls 80% of the market. One of these chains is controlled by a book publishing company. This situation causes serious harm to the principle of free competition… a serious failure in the book market was caused…”

The main aim of this legislation is to help authors, making it possible for them to profit from their creative output. It has been argued that without this additional protection, there will not be sufficient incentive for them to write.

I dispute this. I don’t think that the size of the market has any effect on quality literature. I don’t think that a law of this nature is required to make authoring books sustainable. I note that Iceland has a population of 300,000 of which 10% are authors. The profitability of writing has little effect on the amount of books written and less effect still on the quality of the literature and its cultural contribution.

If the problem is that two chains dominate the market, then perhaps the chains should be split up? If a publisher controls one chain, then it seems difficult to follow the argument that the chains are in a too strong negotiating position with respect to publishers.

Nowadays anyone can self-publish, and with two chains controlling the market, presumably the authors and publishing houses can choose to work with one chain only and can create contracts regarding discounting, so it is difficult to see how this law provides leverage hitherto unavailable.

Any protectionist measures that help authors will invitably be at the expense of the consumers, i.e. the reading public.

It is, of course true that the people who bundle books in the “buy one get one free” or “4 for 100” promotions are not literature experts and their decisions on such promotions derive mostly from business considerations. It is, however, not true that such promotions force high-quality literary works out of the public eye.

People may be encouraged to buy certain books by price, but quality literature will never sell at the rate of trashy romances.

It has been argued that if the large chain bookstores are not allowed to give discounts and new books will be sold for a fixed price, independent bookstores will have a better chance of competing with large bookstores. This argument can be extended to other areas. Perhaps fixed prices across industries is a good thing. Adam Smith and Milton Freedman would disagree, but perhaps Carl Marx would approve.

It is expected that book prices will increase and, as a result, book sales will decrease. This may adversely affect the variety of books available and it may become more difficult for new authors to get published.

2 Responses to An Israeli Approach to Author’s Rights

  1. Benny says:

    I’m pretty sure this is a “lobbyist” law that hasn’t been thought through to its’ conclusion.
    Book sales will decrease, of course, because not only will customers buy less books for the same cost, but also because the perceived cost of the books will increase – discouraging the purchase.
    Authors will not benefit from this law – people who previously would be willing to buy an unknown author just to fill the fourth slot in the “4 for for 100” promotion will pass. Under the previous arrangement, the author would get 1% profit. Now the author gets 0%, not 8%.
    The publishers are no fools, either. They wil probably print, say 500 copies of a new book (all they can expect to sell at full price), and 18 months later issue a reprint of 6000+ copies to be sold at discount.
    Bottom line, publishers and bookshops do not really sell books. They sell bundles of paper. Their profit is based on the quantity of paper shifted over the counter – the words actually printed on the paper have little impact on the balance sheet. “Pile ’em high, sell ’em cheap” has long been a recipe for financial success.

    • It is a lobbyist law. I am impressed that the legislators are prepared to give it temporary three year status, but am inclined to agree with you that it won’t have desired effect. Rarely does protectionist measures have the desired effect.

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