Saturday, September 25, 2010

France and the rise of the e-book

France has an interesting law that bars heavy discounting on books. The law passed in 1981, and prohibits the sale of books for less than 5% below the cover price. A publisher typically offers bookstores a profit margin of between 30% and 40%. The idea behind it is that shops will be able to compete with large chains. Booksellers now hope that it will also protect them from a new threat: the electronic book.

In the US, independent bookstores and small publishers are subjected to the market forces. The UK is the only large European economy that allows retailers to discount books freely, according to the Federation of European Publishers.

"France has long believed that a book is not just business," said lawmaker Hervé Gaymard, who has published research on France's fixed book prices. "It's a cultural identity."

But small French book businesses fear a repeat of the price war that erupted when e-books arrived in the U.S. for reading on computers, e-readers like Amazon's Kindle and, eventually, tablets like Apple's iPad. Trying to compete with e-books, big retailers like Wal-Mart and Target allowed shoppers to buy printed books at steep discounts. Prices at smaller bookstores, already struggling against big chains, were massively undercut. Publishers, meanwhile, worried that the low prices undervalued their books.

French Senator Jacques Legendre has proposed a new law that would allow publishers to set the retail price of e-books. His bill will be debated in Parliament next month. It will face criticism, since it’s difficult to determine what regulations apply to e-books. France's competition authority therefore recommends waiting two years to see how the market for e-books will evolve before implementing any laws.

E-books are fastest growing, but are still only less than 1% of the $2.2 billion book market in France (according to French Booksellers Union). Electronic readers are also not heavily promoted yet.

Hachette Livre, France's biggest publishing house, supports Mr. Legendre's proposed law - quite likely in an effort to have control of the pricing of their books and keeping a vast network of bookstores in operation is in their interest. Hachette Livre, a unit of Lagardère SCA, recently signed a deal to sell about 8,000 French books through Apple's store for e-books. Amazon doesn't yet sell French e-books.

French lawmaker Mr. Gaymard is proposing another law that would reduce the value-added tax on e-books. France currently taxes e-books at 19.6%, like most other consumer products, while printed works are taxed 5.5%. This proposal would partly offset the effects of Mr. Legendre's anti-discounting law.

Booksellers are afraid that an anti-discounting law isn't going to save them. Some independent bookstores are banding together to create their own website,, which is scheduled to start selling printed books and e-books at the end of next month.

No matter what, France will have to face the rise of the e-book.

No comments: