Judging a book by its discount: Publishers and retailers are ready for battle over the 100-year-old Net Book Agreement. Nick Bryant sets the scene

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The Independent Online
BATTLE-LINES are being drawn up in the apparently genteel world of publishing. A decision by the head of the Office of Fair Trading, Sir Bryan Carsberg, to refer the Net Book Agreement (NBA) to the Restrictive Practices Court means that there may at last be a showdown between advocates of the current book pricing system and their opponents.

The NBA, devised in 1890 by Sir Frederick Macmillan, the uncle of Harold Macmillan, and adopted at the turn of the century, gave publishers the right to fix minimum prices for most books which retailers were not allowed legally to undercut. Introduced at a time of intense competition in the publishing industry, which was forcing many small booksellers out of business, the agreement aimed to stabilise the market and encourage shops to stock a diverse range of titles.

No publisher was required to sign the NBA and there would be no collective mechanism for determining prices. The NBA simply ensured that if a publisher decided to publish a 'net book', as most ended up doing, competing retail outlets would have to sell it at the same 'net' price.

For over 100 years the NBA has survived largely unaltered, despite its anomalous position - only non-prescription pharmaceuticals are similarly protected - and close legal scrutiny. The last time the matter came before the courts was in 1964, when, after lengthy deliberation, the Restrictive Practices Court ruled that it was not contrary to the public interest. In 1989, after another lengthy examination, the Office of Fair Trading decided against referral to the court, despite a claim by the Institute of Economic Affairs, the Thatcherite think-tank, that the NBA was a cartel operated by 'Hampstead socialists'. The agreement has also come under fire from the European Commission, which ruled in 1989 that it contravened the Treaty of Rome.

In addition to withstanding legal moves for its abolition, the NBA has survived attacks from some retailers - notably the Pentos Group, owner of Dillons, Hatchards and Claude Gill - who view it as a drag on the potential growth and profitability of the book industry. They argue that ending price controls, together with more imaginative marketing and promotion, would make books cheaper and attract more customers, benefiting publishers, retailers and consumers alike.

Pentos fired its first salvo in 1990 by cutting the prices of books shortlisted for the Booker Prize. The following year it cut 25 per cent off the prices of 20 best-selling titles, most of them from the Reed International stable, which includes the authors Sue Townsend and Roddy Doyle - Reed is a 'non-net' publisher.

But with Britain's biggest bookseller, WH Smith (which also owns Waterstones), and most of the publishers lined up on the other side, the main difficulty for opponents of the NBA will be to persuade the Restrictive Practices Court that the advantanges to the consumer of abolition outweigh the disadvantages.

'The NBA is a restrictive practice which is well out of date,' Julian Rivers, group marketing director of Dillons, says. 'We want to promote our products in the same way as other high-street retailers, with air miles schemes, cheap rates for students and OAPs, and loyalty offers. But at the moment we have a product which we are unable to promote through price.'

Dillons has seen sales increase up to five times on discounted titles. 'But the crucial point,' says Mr Rivers, 'is that half the people who bought a discounted book also purchased, on average, 2.5 books at the same time. We increased the sales of one book, while at the same time broadening the market for other books.'

Yet both the Publishers' Association and Booksellers' Association, which represent the majority of publishers and bookshops, claim that if the NBA were abolished, retailers would discount popular new titles and reference books such as dictionaries, but recoup their margin elsewhere. After all, 60 per cent of profits come from 20 per cent of the most popular titles.

Ten years ago retailers might have found a relatively painless way of recouping this loss - they could simply have raised the prices of backlisted authors, such as TS Eliot or Charles Dickens. Now, though, the success of 'classics for a pound' and other discounted titles has closed this route. Instead, retailers would have to increase the prices of more recent but less popular titles and general textbooks - or simply reduce their ranges of titles.

The Booksellers' Association points out that while Pentos may have boosted its sales in the short term by cutting prices, it would soon lose its competitive advantage if other retailers also jettisoned the NBA. The association claims that retailers currently cutting the cost of a book by 25 per cent would then have to sell three-and-a-half times as many copies to make up the margin.

There is also the possibility that publishers might respond to tougher trade conditions from retailers by raising their recommended retail prices on dust jackets. This would make 'discounts' spurious.

Peter Kilborn, of the Publishers' Association, says: 'You would see discounts on new titles and best-sellers, but there would have to be price increases on less popular books. In the long run it will therefore harm the consumer. Quite simply, there would be fewer bookshops and fewer books. Publishers and booksellers would concentrate on books with a guaranteed fast sale. Many authors will not get a chance to publish and fringe titles will virtually disappear.'

So would many specialist and academic bookshops, and the effects would also filter through to the second-hand market. 'The information advice and book-ordering service which the small specialist bookshops offer would simply disappear,' says Tim Godfray, of the Booksellers' Association. 'Is that in the best interests of booksellers? We think not.'

Opponents of the NBA point to the United States, where the book industry is not subject to price maintenance and specialist booksellers are flourishing. Yet the ethnic and social make-up of the US lends itself more to niche marketing, both by publishers and booksellers. And, as many Americans will tell you, good bookshops with a wide range of titles are difficult to find outside New York, Boston and other major cities.

While small bookshops could be hit by abolition of the NBA, specialist publishers seem less concerned. 'Over 70,000 new titles are published each year and that is too many,' says Robert Baldock, of Yale University Press. 'To use a slightly crass phrase, we would all have to become leaner and fitter.' Mr Baldock says that many texts, especially PhD theses and specialised research, could be published electronically, especially as the use of new technology becomes more widespread. 'It would be far more economical and save an awful lot of trees.'

Similarly, Manchester University Press, which publishes over 120 titles a year, some with print runs of just 500, does not seem too concerned. 'Experimentation may become a problem,' says Glenn Innes, of the MUP. 'But people don't buy our books because of the price. They buy them because they want, or have, to read them.'

In deciding for or against abolition of the NBA, the Restrictive Practices Court may find the experiences of other countries instructive. After abolition of price maintenance in Australia, booksellers reduced their ranges, concentrating on bestsellers at the expense of fringe titles, and many bookshops had to close. The ones that survived pushed for bigger margins from publishers, who responded by raising recommended retail prices.

In 1979, the French abolished their version of the NBA, only to restore it two years later after hundreds of small bookshops had been forced to close. Germany, widely considered to boast the best bookshops in Europe, also operates price maintenance.

Yet critics of the NBA claim its abolition will actually improve the quality of publishing in this country. 'There is too much 'me-too' publishing in this country,' says Mr Rivers. 'How many vegetarian cookbooks do we need? Far too many books are being published, and publishers will be forced to drop the dross.'

Some believe that by 1997, when the Restrictive Practices Court is likely to deliver its judgement, the NBA will be defunct anyway. 'Off the record, most of the major publishers will tell you the the NBA is non- commercial,' says Mr Rivers. 'I fully expect many of them will go 'non-net' within the next few months.'

As in all trade wars, both sides are claiming to represent the consumer. It is high time that we, the book-buying public, got to grips with the issues and decided where our interests lie.

(Photograph omitted)