Book Industry Strategy Group
Report
Government Response
June 2012
Manufacturing Policy
Department of Industry, Innovation, Science, Research and Tertiary Education
CONTENTS
Background 3
The Book Industry Strategy Group 3
Scope of the report 3
Environmental changes 3
Government involvement 3
Response to the BISG Recommendations 3
Integrating the book supply chain 3
Recommendation 1 : Book industry collaboration 3
Competing effectively in the global book market 3
Recommendation 2 : GST and price 3
Recommendation 3 : Postal rates 3
Recommendation 4 : Parallel importation of books 3
Recommendation 5 : Export support 3
Improving supply chain efficiencies 3
Recommendation 6 : Book distribution network 3
Recommendation 7 : Digital infrastructure 3
Recommendation 8 : National University Press Network 3
Rewarding and protecting creativity 3
Recommendation 9 : Digital copyright protection 3
Recommendation 10 : Lending rights for ebooks 3
Recommendation 11 : Statutory licence for education 3
Recommendation 12 : Protecting copyright online 3
Supporting the business environment 3
Recommendation 13 : Digital skills development 3
Recommendation 14 : Statistical data 3
Recommendation 15 : Small business development 3
Recommendation 16 : Book print industry reform 3
Recommendation 17 : Digital content for schools 3
Recommendation 18 : Tertiary education materials 3
Recommendation 19 : Tax support for authors 3
Supporting Australian culture 3
Recommendation 20 : Literature Board review 3
Recommendation 21 : National Book Council 3
Book Industry Strategy Group 3
Background 3
Aim 3
Terms of reference 3
Time 3
Resources 3
Background
The Book Industry Strategy Group
The Book Industry Strategy Group (BISG) was formed in April 2010 by the then Minister for Innovation, Industry, Science and Research, Senator the Hon Kim Carr, to examine the impact of digitisation on Australia’s book industry and report back to the Australian Government (Government) on its findings. The BISG terms of reference are at Attachment A.
The BISG was chaired by the Hon Dr Barry Jones AO and had membership from across the Australian book supply chain. The BISG membership is at Attachment B.
The BISG report represents the industry’s view on what needs to be done to strengthen the Australian book industry. The BISG delivered its report to Government in September 2011.
Scope of the report
The BISG report focuses on the book supply chain and seeks to identify solutions to meet the challenges brought by digitisation and globalisation of the book market. The book supply chain is defined as including all elements of production and supply from author/creator through to the consumer/reader (see Figure 1).
The report recognises stimulation of cultural and creative development as a critical input for a successful Australian book industry. However, the primary considerations of the BISG review relate to how the industry as a whole can adapt and evolve to meet the challenges of the new operating environment resulting from digital technologies. In particular, the BISG review considered ways to integrate and improve the book supply chain, protect copyright, compete globally, support Australian culture and strengthen the business environment.
Figure 1: Book supply chain
Source: Department of Industry, Innovation, Science, Research and Tertiary Education , 2012
Environmental changes
The book industry and its markets are at a crucial tipping point and rapid change is occurring in every part of the supply chain. Digitisation and ecommerce have provided a boon for consumers; but have brought new and significant challenges for book producers and sellers.
The traditional notion of what constitutes a ‘book’ has changed. The conventional depiction of a physical object bounded by two covers and containing pages of printed content, no longer holds exclusive claim to the generic title ‘book’. Not only are digital editions of printed books becoming an increasingly popular option for consumers; but enhanced multimedia and interactive components mean that content is no longer restrained by having a fixed beginning, a middle and an end.
Changes to book supply and production brought about by digitisation have coincided with a global expansion of ecommerce. Consumers are shopping in global markets with increased confidence about the security of transactions and timeliness of delivery; and local retailers have to compete fiercely. The balance between supply and demand is shifting with consumers now being able to influence the format, price and availability of book titles. Consumer power is increasing and industry is being required to better respond to consumer needs.
Efficient and timely supply is vital to the health of the industry; however achieving this requires the development of an efficient soft and hard infrastructure for print and digital production, improved metadata and the introduction of reliable industry standards.
These challenges are not unique to Australia with many other countries experiencing many of the same book industry challenges as identified in Australia.
Government involvement
Book production and distribution is a diverse topic that impacts a number of areas within the Government. Twelve Government portfolios have an identified interest in the BISG report and have provided input into the Government response through an interdepartmental committee (IDC).
Attorney-General’s Department
Austrade
Australian Bureau of Statistics
Broadband, Communications and the Digital Economy
Education, Employment and Workplace Relations
Families, Housing, Community Services and Indigenous Affairs
Finance and Deregulation
Foreign Affairs and Trade
Industry, Innovation, Science, Research and Tertiary Education
Prime Minister and Cabinet
Regional Australia, Local Government, Arts and Sport
The Treasury
Response to the BISG Recommendations
Integrating the book supply chain
The book industry is made up of several independent sectors - authors, agents, publishers, printers and booksellers. Traditionally these sectors have acted independently of each other, but the need for cooperation has intensified as a result of the global changes that are impacting the entire book supply chain. The parties often differ in their views on key issues, resulting in impasses that have the potential to hinder the efficiency of supply. An industry model which encourages effective collaboration across the book supply chain is a cornerstone of improving the competitiveness of the Australian industry. Book supply chain organisations have been established in the United States of America, the United Kingdom and Canada and have operated successfully for several decades.
Recommendation 1 : Book industry collaboration
That the Australian Government establish a Book Industry Collaborative Council with membership from all parts of the book value chain, which is tasked with implementing the industry reform priorities identified by the Book Industry Strategy Group and other issues as they emerge.
Government response
The Government supports this recommendation.
The Government proposes to adopt this BISG recommendation and establish a Book Industry Collaborative Council. This Council will have a strategic role to play in continuing the dialogue with government about book industry issues and progress the industry-led reforms identified through the BISG report. The terms of reference for the Council will include a requirement to identify options for the establishment of a sustainable and independent industry body which can support the industry over the long-term. The Council would be supported by working groups, as appropriate, to focus on key matters for the industry that require detailed consideration. The Book Industry Collaborative Council would be funded from within the existing resources of the Department of Industry, Innovation, Science, Research and Tertiary Education.
Rationale
Ongoing collaboration between the various parts of the book supply chain is vital to strengthening the position of the Australian book industry within a global market. Book supply chain bodies exist in the book industry in the United States of America, the United Kingdom and Canada. The establishment of the Book Industry Collaborative Council will ensure that the momentum gained through the BISG will result in concrete outcomes for the industry.
Competing effectively in the global book market
The ascendance of internet commerce has fundamentally changed the Australian market for books and shifted the relationship between supply and demand. Consumers now have ready access to large multinational retailers that are able to offer competitive prices and fast delivery of a wide range of book titles. The Australian industry has to compete against businesses that operate under a range of regulatory regimes which influence price, availability and distribution and can result in a competitive disadvantage for Australian operators. The global market also brings opportunity for the industry to promote and export Australian books to new emerging markets.
Recommendation 2 : GST and price
The Book Industry Strategy Group urges the Government to recognise the competitive disadvantage being imposed on the Australian book industry as a result of GST inequity. In recognition of the broad range of considerations for government on this issue, the Book Industry Strategy Group offers three alternative recommendations:
(a) That the Government take appropriate action to abolish the 10per cent GST on books purchased in Australia, noting that in the United Kingdom and Ireland, and in most OECD member countries, books are either exempt from VAT or taxed at a reduced rate; or
(b) That the Government provide greater equity in competition for Australian retailers by applying the 10per cent GST on books to overseas retailers selling to Australian consumers; or
(c) That the Government recognise the disadvantage placed upon Australian booksellers as a result of GST inequity when competing with international online retailers and supports the Book Industry Strategy Group’s suite of recommendations.
Government response
The Government has considered the issues of equity within tax arrangements for imported goods in the context of its response to the Productivity Commission (PC) review into the Economic Structure and Performance of the Australian Retail Industry, December 2011.
Rationale
(a) When the GST was introduced in 2000, the then Government resisted pressure to make books exempt from GST (as they are in the UK from VAT), but agreed to a $240 million compensation package for the book industry:
educational textbook subsidy totalling $117million paid to retailers
$48million to enhance the Printing Industry Competitiveness Scheme
$1.2million to enable the Australian Bureau of Statistics to collect data annually on book publishing and retail sales
$8million for a marketing campaign to promote books, reading and literacy
$28million in grants to all primary schools to upgrade their holdings of Australian books.
$38million for a scheme to provide further support to Australian authors – the Educational Lending Rights (ELR) scheme (funding for ELR has continued since this initial phase and in October 2007, it was announced that ELR would receive ongoing funding)
Additional exemptions to the GST would, over time, add to the complexity of the tax system, create new anomalies and lead to calls for further exemptions. In general, the Government prefers to achieve its policies by direct expenditures through the Budget process.
(b) On 9December2011, the Government released, and responded to, the PC’s final report into the Economic Structure and Performance of the Australian Retail Industry. In the report, the PC states that there are strong in-principle grounds for the low value threshold to be lowered, on the basis of tax neutrality goods sourced from overseas should face the same tax regime as goods sourced domestically.
However, under current processes, the PC estimates that collection of taxes from international parcels under the $1,000 threshold would raise approximately $600 million in revenue; but cost over $2 billion to collect – resulting in a deadweight loss on the community. Despite the inprinciple grounds to reduce the threshold, the PC recommended that the Government should not proceed to lower the threshold until it is cost-effective to do so. The Government noted this recommendation.
The PC also recommended that a taskforce be established, charged with investigating new approaches to process low value imported parcels. The Commission suggested that once the taskforce designs an improved process, the Government should reassess the extent to which the low value threshold could be lowered, while remaining costeffective.
The Government has agreed to the formation of this taskforce – the Low Value Parcel Processing Taskforce (the Taskforce). The Taskforce members are Dr Bruce Cohen, Professor Caroline Chan and Mr Jim Marshall. The Taskforce will report to Government in July 2012 on a proposed new system to process low value importations that would involve lower collection costs than under the current system. Once such a lower-cost system was implemented, the Government would be expected to be in a position to reassess the threshold. An interim report is expected after three months.
The terms of reference for the Taskforce were released on 31 January 2012.
(c) The Government will consider each of the BISG recommendations on its own merit, not as a package.
Recommendation 3 : Postal rates
That the Government initiate negotiations with the Universal Postal Union to secure amendment of the appropriate postal treaties to provide more equitable and competitive pricing for print post delivery, where Australia is currently severely disadvantaged.
Government response
The Government supports this recommendation in principle. Effecting this recommendation will require renegotiation of Australia’s terminal dues rate which is set by rules established through the Universal Postal Union Convention and Acts.
Rationale
The rates of payment to Australia Post for inward parcels are set using a formula linked to the domestic standard letter postage rate (i.e. 60¢). The Department of Broadband, Communications and the Digital Economy is actively engaging members of the Universal Postal Union (UPU) to agree a different letter postage rate to be used for terminal dues calculations in order to ameliorate the current adverse terminal dues impacts on Australia. With a membership comprising 192 countries, negotiations are complex. Potential options outside the UPU treaty arrangements are also being investigated by Australia’s designated operator, Australia Post.
Recommendation 4 : Parallel importation of books
That the Australian book industry (authors, printers, publishers and booksellers) formalise an agreed, industry-wide code of practice that will reduce the timeframe for retention of territorial copyright from 30/90 days to 14/14 days without the need to amend existing legislation. To support this, TitlePage will provide information to booksellers on the PIR status of individual titles. The code will be reviewed at the end of 12months and subsequently at determined intervals to assess its effectiveness.