The Economics of Canadian Children's Book Publishing By Rick Wilks Co-director, Annick Press Ltd. Volume 13 Number 6 1985 I attended my first International children's book fair in Bologna, Italy in 1978. As I visited publisher after publisher, tentatively awaiting judgement on our first two publications, I unconsciously started to tally up the ways in which publishing in my country was an anomaly. One of the most memorable examples occurred while I was visiting a Finnish publisher. He examined one of our books very thoroughly, asked a couple of questions about royalties, then requested a quotation on thirty thousand copies. As I was confident that his English was not as accurate as he thought, I prepared a quotation on three thousand copies. After all Finland had a population of four million, compared to the roughly sixteen million English language readers in Canada. We still joke about my mistake when we meet at book fairs, and from time to time he will remind me that still no other country but his is publishing books in Finnish. "As long as the Russians don't adopt a new national language," he told me, "my publishing/retail business should prosper ." While the giant that lives next door to Finland may be resting peaceably, (linguistically speaking), our neighbours' influence has not been nearly as benign. Throughout our publishing history, Canada's literary output and pricing structure has been shaped by the massive domination of American and British books in our marketplace. Up until about ten years ago, our inability to penetrate this country's bookstores rendered our indigenous industry small, generally conservative (non risk-taking), and constantly in financial turmoil. Of even greater consequence, young Canadian readers had only minimal opportunities to read books that reflected their own culture. Their sense of being Canadians in a pluralistic society was not chronicled in the books they received. In effect, young readers were beamed the message that somehow Canada, and thereby their own experiences, did not measure up to those they read about in other countries. I find it fascinating, and pivotal to an understanding of our industry, that Canadian publishing for children grew out of a response to this latter concern. Publishers were motivated by an ideological, or editorial point of view, and, dare I admit it, a financial naivety . Over the years the economic growing pains and obstacles have been enormous. We have lost some publishers, such as PMA, who had made very important contributions, but somehow an industry that is second-to-none has persevered. Best of all, Canadian publishers have achieved much of this without sacrificing their beliefs in content and quality. These successes notwithstanding, I regret that we cannot yet declare the battle won, the economic tale of woe resolved. While I do believe that children's books can pay their way (though let us be clear that at best we are talking about fame, not fortune), there are some difficulties that even the most tenacious publisher grows weary of. We are publishing for a constituency that has no voice in society and whose members are generally regarded as second-class citizens. They are young, financially dependent, and have little economic clout. The vast majority of their books are bought by adults who are parsimonious when it comes to kid lit . "Things for children should be cheaper," we have been told . Yes, ideally they should; and they are . But it costs almost as much to produce a full-colour picture book as an art book for adults. While an adult will happily, more or less, spend $30 or more for those beautiful colour plates, they will rebel at a $1295 picture book price tag. And we will not consider which purchase is most likely to be the first to be dog-eared and well worn. Children's books are undeniably good value, especially when seen in terms of the time, talent, love, and expense built into their creation. Compare the long-term value of buying a book for a child with going to a movie, out for dinner, or even ordering a pizza . How can we justify these priorities? If price is a deterrent for much of the public and if teachers and librarians keep telling us to hold or reduce costs, why can publishers not do more to help everyone stretch their dollars? Amid an array of factors, publishers do strive to keep prices as low as possible. For example, I am certain an examination of the average industry salary, in comparison with a teacher or policeman with similar time on the job, would reveal that one of the subsidies being applied is coming from the publisher him or herself. I think the best way to demonstrate the dilemma of children's book pricing is to present a sample cost analysis. I have rounded off the numbers on what I feel represents a typical Canadian picture book. COST SHEET $10.95 picture book, full colour, 5000 copies I . Design and typesetting ................................ .30 2. Production.............................................. 2.35 (paper, printing, binding, colour separations) 3. Promotion............................................... .40 4. Sales and Marketing .................................... .64 (should be 10% of net) 5. Fulfillment ............................................. .83 (generally about 13% of net) 6. Average Discount ........................................ 4.60 (42% of list, often greater) 7. Author and Artist royalty ............................... 1.09 8. Publisher's Overhead .................................... 2.10 (rent, editorial, financing, salaries) PROFIT (LOSS) .............................................. (1.36) The bottom line reveals that it costs us $1.36 every time we sell a book. Now you can see why whenever we are referred to as entrepreneurs, we have to blush a little. Of course, these figures do not tell the full story. On the positive side children's publishers do receive government assistance for their publishing program. (In its earliest days the Canada Council hoped to cover deficits, now it manages to defray about forty per cent of costs.) In addition, publishers are increasingly generating spin-off revenue in the form of film rights, records, foreign licences, etc., but these are difficult to come by and are rarely the bonanza one would hope for. On the negative side, this financial scenario assumes all the print run is sold. This simply never happens as the publisher is obliged to send out review copies. The budget is also based on selling enough books to make the best-seller list. A brief survey of Canadian publishers has determined that a first run sale of approximately fifteen thousand copies is necessary for a cost recovery budget . The fact emerges that the book that initially seems expensive, is in fact priced in a way that would be deemed unacceptably low by most other publishing industries in the developed world. The pricing formula used in Britain and the United States is based on multiplying production costs by seven to obtain a retail price. If we were to apply this to the above budget, the selling price of the book would be $18.55 . American publishers have told me that if a competitive retail price is not achieved using this formula, the book is not published. In Canada our prices are determined by the competition in the marketplace. Many economists, (and consumers), would say that is a good thing. To a point I agree, but let us look at some other factors. Our Canadian marketplace has traditionally been dominated by large American and British houses who are producing between two and three thousand books annually . Each of these titles is printed in substantially greater quantities than those of their Canadian competitors. Therefore, by comparison, our manufacturing costs on comparatively short print runs force the price much higher than a comparable British or American book. So, in order to be competitive in price, Canadian publishers must cut their profit margin. Reduced profits, (actually, it is usually none at all), mean that publishers are unable to invest in the variety and quality of books they would like to publish, and Canadian children deserve. You can see the Catch 22 that is developing; shorter print runs lead to higher prices that ultimately lead to fewer sales and thereby shorter print runs. In addition, to sell a lot of copies a publisher must promote the book widely. But if the value of the book is low, the funds are not there to do the job properly . A similar dilemma exists in the children's book manufacturing sector. If printers could depend on a steady flow of full-colour books, they might have an incentive to acquire better equipment and offer more competitive prices. The problem is especially acute in the bindery, where dated equipment results in a process that is more expensive than a comparable foreign binding and of a quality that is barely acceptable to librarians or publishers. Canadian publishers have shown great ingenuity in tackling these economic pitfalls. While this is the subject matter for another article, encouraging developments include: more efficient and effective distribution-the building of strong backlists, the work of the Children's Book Centre; more and more international co-editions in which another publisher's edition is printed at the same time as the Canadian edition, thereby sharing the fixed costs, and, of greatest importance, the joy and respect that Canadian writers, illustrators, and publishers have generated both domestically and internationally. The industry's unparalleled recent growth demonstrates that there are many thousands of people who will buy our publications if they can get them easily and at a good price. The days of buying a children's book because it is Canadian are gone. Now, buying that book makes sense because it is the best possible buy you can make for your money. The more this discovery is shared by schools, libraries, and the book-buying public, the more rapidly Canadian children's literature will achieve dominance in the marketplace. As this process continues to develop, we will all enjoy a wide body of literature produced by a vibrant and competitive Canadian publishing industry.