The Productivity Commission’s recommendations concerning the parallel importation of books are a sad indictment on the state of public policy in this nation.

The Commission states:

Most of the benefits of (parallel import restriction) protection accrue to publishers and authors, with demand for local printing also increased.

Most of the costs are met by consumers, who fund these benefits in a non-transparent manner through higher book prices.

Some of the effects represent transfers from book purchasers to local copyright holders, but the restrictions also cause economic inefficiencies and a significant transfer of income from Australian consumers to overseas authors and publishers.

Yet one of the most significant effects of the Commission’s recommendations is the redistribution of wealth: not just away from investors (publishers) to another sector within the publishing industry (authors, printers), but out of the industry entirely (Big W, Woolworths, Coles, K Mart, Target and Dymocks — at least the latter has an interest in books).

The logic is simple:

  1. Australian publishers derive nil local market revenue on imported books (they will/should derive licensing revenues).

  2. Parallel importation can (and will) be used by local retailers to negotiate more favourable wholesale terms, which will exert pressure on publisher margins.

Outcome: all things being equal publishers will have less capital to invest, or, in order to release investment capital they will need to cut costs. That means any number of things, including job losses, reduced marketing spend, compromised editorial standards and so forth.

Our government should be particularly concerned about any policy that provides a disincentive to investment or that reduces the volume of investment capital in any industry.

It is ironic that the Commission, which I view as having an economic rationalist bias, would recommend policy that is effectively anti-capital investment; anti-capitalist if you like.

It would also be wonderfully ironic if a leftist government repudiated the Commission’s recommendations, leaving the free market to resolve any imbalances caused by legislatively imposed copyright territoriality. In any case that is exactly what the global/non-territorial distribution of digital content will do within the next 5-7 years.