Canadian Publishing

There are many disturbing signs that Canadian publishing might be in serious trouble—shrinking margins, discounts, currency catastrophes and consolidation in the bookselling sector. But assessing the true interrelation of those factors is open to interpretation, leading to varying views of just how dire things are. Last October, Canadian federal finance minister Jim Flaherty made a compelling case for the negative by citing a single example. At a news conference before a meeting with the Retail Council of Canada, Flaherty held forth a copy of Harry Potter and theDeathly

Hallows. It represented, he said, an example of price discrepancies between the same goods in the U.S. and Canada. Flaherty had purchased Deathly Hollows for $36 Canadian, whereas the same book was selling for U.S. $29.74 in Washington, D.C., at a time when the Canadian dollar was trading slightly above par with the U.S. dollar—clearly, a challenge for both Canadian publishers and booksellers to compete for consumer dollars.

Discussions with several key Canadian publishing executives, however, paint a somewhat different picture—not a portrait of an industry in decline but one with a history of resilience and varying levels of vulnerability.

The Dollar

David Kent, CEO of HarperCollins Canada, offers this analysis, which illustrates the reality of book publishing in Canada. “It's like George Burns used to say: 'I smoke five cigars a day.' 'Well, what does your doctor say?' someone would ask him—'I don't know, he's dead.' ” In other words, this is not the first time Canadian publishing has seemed to be in dire straits, and yet it survives. Kent feels the book itself is extraordinarily hearty. “When everyone jumped on the CD-ROM bandwagon, CD-ROMs were going to wipe out books. Now CD-ROMs are gone, but books are still here.”

Nonetheless, the fall of 2007 is a period that most Canadian book publishers would like to forget. The U.S. dollar dropped to par with the Canadian dollar, something not seen since 1976. No two words in the English language struck as much fear into almost every book publisher in Canada as “the dollar.” Brad Martin of Random House observes that while “the currency rate has always been an issue, no one cared when the publishers lost money when the dollar was at 62 cents.”

With the U.S. dollar falling, a requirement of the Canadian Copyright Act began to cause havoc. The act requires that the Canadian list price for imported titles not exceed the Canadian-dollar equivalent of the foreign currency list price by more than 10%. If the Canadian price exceeds this point, Canadian booksellers can source the book from outside Canada in quantity. Beyond the public outcry over the cost of books as the Canadian dollar appreciated from a low of 61.79 cents U.S. on Jan. 21, 2002, to a high of $1.1024 on November 7, 2007, the currency changes forced multinational and domestic publishers to re-price their books, lest they find themselves circumvented by retailers. While Ben McNally, of Ben McNally Books, says that he has never gone around Canadian publishers when this pricing situation has occurred, this is one of the key findings of the report on the book retail sector in Canada and a point that was reiterated by Michael Neill, president of TBM BookManager Ltd., a company that provides point-of-sale software specially geared for Canadian independent bookstores and links them closely with their suppliers. Through its PubStock services, BookManager gives current price and availability on books sold by over 200 publishers, suppliers and wholesalers. Neill says, “A number of stores started ordering through U.S. wholesalers in order to keep their customers satisfied. Their Canadian suppliers by and large resisted giving them extra discounts or lower retail prices, claiming that they could not reprint prices or accept a loss on existing stock.” Neill says that in his 30 years in the business, he doesn't recall another time when virtually the whole industry was “like a deer caught in the headlights.”

“Nobody knew the best action to take,” recalls Neill. “Christmas was coming, and so it was a free-for-all to try and save a season that started to collapse early on.”

Even if a publisher wasn't caught in the pricing vise of the Copyright Act, the plunge of the U.S. dollar still caused trouble. Random's Martin sums up the dual pricing issue: “There is deflation in the market place because of the falling U.S. dollar impacting dual-priced books.” Random House offered a number of examples of this deflation: Giles Blunt's By the Time You Read This was $32.95 in 2006 and his new hardcover this fall, No Such Creature, will be $29.95. John Grisham's TheBroker was priced at $39.95 in 2005; The Appeal in 2008 was $33.

The end result is that the decline of the U.S. dollar affected both the domestic and foreign revenue of Canadian publishing companies. Those companies exporting books into the U.S. saw the drop in the value of the U.S. dollar take what was almost a certain exchange rate gain and turn it on its head. “As someone who manages U.S. accounts, when I'm looking at them in Canadian dollars, I'm seeing a pure dollar difference swing from year over year that is quite significant,” says Judy Brunsek of Kids Can Press. Companies importing books into Canada from the U.S. have not seen the exchange rate—related windfall that some industry observers expected, as importers and distributors had to reduce list prices to comply with the Copyright Act. “Canadian prices have dropped due to the stronger Canadian dollar over the U.S. dollar,” says Les Petriw, managing director, NBN. “This has resulted in many publishers and distributors in Canada asking how they will sell more units to cover the anticipated decline in top line revenues for 2008.” NBN has reacted by reducing prices on thousands of its backlist titles, and for 2008 pricing most of its new titles at par.

If there is a silver lining to the currency issue, it is that publishers, thanks to the appreciation of the Canadian dollar, are getting some relief when it comes to manufacturing, as Canadian printers have had to drop their prices to compete with their American counterparts. The robust Canadian dollar has also made overseas printing more attractive. As Scott McIntyre of Douglas & McIntyre states: “The fact that China is more competitive now means we have had some very happy negotiations with Canadian printers. We can go to them on big books and say, 'You know the cost of doing this in China is X and you are telling us it is Y, can we get a break and keep the business here?' And that works for us.” Of course, this is tough on the printers. Altona, Manitoba—based Friesens Corporation, for one, has felt the impact. “It has slowed our growth in terms of revenue and has put pressure on margins and costs,” says Curwin W. Friesen, president & CEO. “We have implemented more lean manufacturing strategies; we have added production shifts to improve efficiencies and are undertaking a major expansion to be able to produce more books more efficiently.”

The Bottom Line on Book Sales

Michael Tamblyn, CEO of BookNet, says it still isn't entirely clear how currency parity between the U.S. and Canada affected overall results in 2007. “Unit sales through Christmas were more or less on par with last year,” he says, “but there was a lot of discounting behind the scenes between publishers and retailers that led to lower revenues.” As prices declined through the Christmas season, so did revenue. “We aren't seeing substantial increases in unit sales to make up for the revenue loss as publishers lower prices,” Tamblyn says. “You have to move a lot of units to make up for that four dollars you gave away on hardcover pricing, and we just don't see extra people flocking to the stores.”

The Value of a Book

All of this focus on price has led to concerns about the value of a bound book as perceived by the Canadian consumer.

“Except when the dollar was at its lowest, Canadians have almost always been screwed on book prices,” says George Wall, a published poet and one of the editors of BookNinja, probably the premier Canadian literary site on the Internet. Kevin Hanson thinks otherwise. Hanson, head of Simon & Schuster Canada, believes that book prices have probably come down more than any other goods in the last five years. In 2003, book prices in Canada were 1.5 times higher than in the U.S. and a $25 book would be almost $40 in Canada, he contends. Now all of those books are selling for $30. “The value of books, in real terms, has emerged, but it has just come to the public's attention with the dollar hitting par,” Hanson says. “The publishing industry in Canada has been more responsive than almost all the other consumables sectors, in part because we do dual price. By law, we are almost forced to normalize our prices against exchange rates. When we had a 65-cent dollar and there were first-time commercial novelists trying to be sold for $38.95, which is when there should have been an outcry, there wasn't.”

Random House's Brad Martin expands on this view: “I don't believe that the true reader thinks that books are too expensive. I think having books at one price in the U.S. and another in Canada has been a problem. When we were doing our surveys, what we were hearing was not that readers were concerned with the price of the book, but how they can make the right choice, as they have so little time for reading. It was 'how can you help me make the right choice so that I get the full enjoyment from the 4—6 hours I am going to dedicate to this book.' ” David Kent is more to the point: “I don't think Ulysses in hardcover at $30 is outrageously expensive—it is incredibly cheap.”

“There is some research that tells us that people's perception of the value of books is not declining in the way we might expect,” says Carolyn Wood of the Association of Canadian Publishers. “It is declining somewhat, but by and large there is reason to believe that people still think that books are valuable. The ultimate success of a blogger these days is a 'book deal'; books are still seen as the ultimate.”

The question still remains, what can the industry do to fight the idea that people pay too much for books? “I think, as publishers, we have been happy with a smaller margin than in most creative industries,” says Kathy Lowinger, publisher of Tundra Books, venting an angst shared by many in the industry. “If you were to buy a number of greeting cards and stack them together to the thickness of a picture book, you would have close to $100 in greeting cards. We have tolerated terrible returns, laughable salaries”—in order to keep the prices low.

“I think that the publishers would have been able to handle the situation much better if they had not been under siege from self-interested and short-sighted booksellers,” says Ben McNally, the Toronto bookseller. “As an industry, we missed a golden opportunity to restate to the public how important we are to Canadian culture and how inexpensively we have consistently provided a vital service. Had we been able to formulate a united coherent response, this would have been nipped in the bud. The same people who think about currency parity would seem not to have noticed that fuel prices have increased by 20%.”

George Wall says that increasing the perceived value of books depends on two things—supply and pricing. In his mind, the number of books published each year makes it seem as though anyone can publish a book on anything. “In an effort to keep throwing balls at the hoop in hopes of one going in, the publishing sector, formerly editorial gatekeepers and arbiters of taste and value, have devalued the book itself by letting everything through in hopes that one will be a runaway hit and make some money.” According to Turner Riggs, the group that performed the study of the retail book sector in Canada, he may be right. Overall title production in Canada, for both Canadian-owned and foreign-controlled firms, grew by 40% from 1998 to 2004, while the combined sales volume of publishers in Canada grew by only an inflation-adjusted 11% during the same six-year time period.

Pricing is the second problem. “The fact that books are so deeply discounted by big chain and department/grocery stores creates the impression that their prices were inflated in the first place,” he says, “and leads consumers to devalue the cost of the publishing process.”

Addressing this point, Carolyn Wood acknowledges that “we need to raise public awareness of why books cost what they do. There are short-term and long-term strategies to do this. The long-term is to make sure that kids in school are encountering books as critical elements in their lives. I think the most important thing we can do is promote Canadian books in school.”

The View from the Retailers

It comes as no surprise that life as an independent Canadian bookseller is a challenge, thanks in principal part to the ongoing consolidation in the sector. “I think the independents were hurt by the deflation in the book industry more than anyone,” says Random House's Martin. “I think good operators will continue to be there. It is a labor of love for them.”

Exemplifying this labor of love and the impact of the currency shock is Tory McNally, director of operations at McNally Robinson Grant Park. “It pains me to talk about last fall,” says McNally. “I am trying desperately to erase all memory from my mind. It was a time when books were thrown at staff, part-timers were yelled at, and in one instance, a bookseller was called out onto the street to finish what he had started—he did not go. Bookselling has never before been a contact sport and we were taken aback. Saying that, the majority of people just wanted to complain, but when push came to shove they usually bought the book. I am positive, however, that there were a lot of customers that we simply did not see because they were driven online.”

An excellent study that delves into the status of the book retail market in Canada was released in February. Commissioned by the Department of Canadian Heritage and conducted from April to July 2007, the study aimed to create a comprehensive overview of the changing book retail sector in Canada. Craig Riggs, one of the study's authors, says he sees a number of patterns establishing themselves in the Canadian market, including a growing market share for nontraditional and online sales channels, and the increasing integration between the Canadian and U.S. supply chains. On the topic of discounting, he backs up what BookNinja Wall alluded to in terms of the role of discounting. “Because of the changing channels through which books are sold in Canada, price discounts are becoming more entrenched in the market and are likely to become more so in the future,” Riggs says. “In particular, we expect that the more widespread and aggressive price discounting that we see in other major markets, such as the U.S. and the U.K., will become more commonplace in the Canadian market, especially as online booksellers and nontraditional book channels continue to gain greater market share.”

There is consensus among Canadian publishers that the day of the independent bookstore is far from over, but to survive, independents must become anchored in the community and offer excellent customer services. “The day of the store that survived because they were the closest place to buy a book is over, but it was probably over 10 years ago,” sums up Michael Tamblyn. “The key to survival is to offer more than books. The successful independents have become cultural centers, community gathering places; they are curators of new ideas and advocates of reading.”

AbeBooks.com, with 676 Canadian booksellers among its 13,500 booksellers listing books, demonstrates the success that retailers can have if they capture the “long tail” of the market. “In 2006, we sold books worth $170 million [USD] and in 2007 we sold books worth $190 million [USD],” says Richard Davies, a spokesperson for the company. “In terms of the value of books sold, our Canadian sellers saw slightly smaller growth from 2006 to 2007 than AbeBooks as a whole.”

AbeBooks has been a very attractive Web site for Canadian buyers over the course of 2007 because transactions are conducted in U.S. dollars, according to Davies. “The strength of the Canadian dollar and the weakness of the U.S. dollar have continued to have a negative effect on AbeBooks.com itself. The majority of our sales and income comes in U.S. dollars, so we lose out. However, this is nothing new and we do our best to counter the effects by hedging our U.S. dollar exposure to currency fluctuations. We enter into a series of seemingly quite complex contracts and have been doing this for over three years now. For instance, our Canadian sellers pay their monthly subscription fees in U.S. dollars and list their books in U.S. dollars. Buyers based in Canada can buy books on our site from Canadian sellers and pay in U.S. dollars.”

Ben McNally, a bookselling veteran who opened his own Toronto store in 2007, thinks the biggest challenge in the coming year will be maintaining a domestic publishing industry and a domestic retail industry contending with industry-specific deflation. “I am fortunate in having a sophisticated clientele, so the effects were minimal by comparison,” McNally says when asked how much of the impact the public uproar over the dual pricing issue had on his customer base. “This was a ridiculous situation that lent itself quite well to reasoned explanation. Small operations such as mine were better able to communicate with customers.”

Multinational Publishers

Last year was clearly a year of challenges for the Canadian divisions of multinational publishers—some had dream years, some had nightmarish ones.

Penguin: The $100-Million Year

Coming off a year that saw the company announce the topping of $100 million in revenue, top successes for Penguin in 2007 included Khaled Hosseini's A Thousand Splendid Suns in hardcover, Marina Nemat's Prisoner of Tehran in hardcover; Roy MacGregor's Canadians in hardcover; Brendan Brazier's Thrive Diet in trade paperback; Barbara Coloroso's Extraordinary Evil in hardcover; and Adrienne Clarkson's Heart Matters in trade paperback. “So as you can see the successes cross all genres,” says David Davidar, Penguin Group president and publisher.

For the coming year, Davidar believes that staying on top of the pricing issue will be a major challenge. “We're in a good position to meet the challenges if the past few months are any indication,” Davidar says. “We were among the first publishers to single-price the majority of our new titles for the spring season, and new titles and core reprints for the upcoming 2008 seasons are all equitably priced.”

“Canadian staff restructuring worked out well,” Davidar says. “We needed a specialist editor for commercial fiction because all the publishers here have elements of that on their list, which we often tacked on to other editors. Since it is such an important part of our list, it should be treated as such. We wanted to make sure we had the right editor in place.”

On the currency parity issue, Penguin says it was the dual pricing and the plant costs, rather than the exporting of books, that affected the company most. “We get some advantage with the low U.S. dollar,” says Davidar. “This is the main area for us where the dollar has a bearing.”

HarperCollins Canada: Catering to a Diversity of Tastes

HarperCollins Canada survived 2007 well thanks to a diverse frontlist. The firm had several #1 and top-10 bestsellers, especially from the Canadian roster, with the likes of Barbara Gowdy and her novel Helpless, published in March 2007, and Richard B. Wright's October, published in September 2007, along with more internationally well-known writers like Elizabeth George and J.R.R. Tolkien.

As David Kent puts it, “There were things that we expected to do well, that did. We had rock stars [Slash, of Guns 'n Roses fame], TV stars, literary books, Canadian books and U.S. books that were all bestsellers. It reflects that reading tastes in Canada are eclectic. The range of books that are sold in the country is huge.”

Kent says that “the biggest challenge going forward is the currency issue because we import from the U.S. That means we have to deal with the unpredictability of the fluctuations over a very short time.” According to Kent, HarperCollins's strategy last year was to lower the prices—prices dropped 5%—15% on its books on average.

Simon & Schuster: Can't Keep a Good Year a Secret

“We had a record year and we grew all of our lists with all of our customers,” remarks S&S head Kevin Hanson. “It was a good one, led by the performance of The Secret. We sold over half a million copies in Canada. What was happening in the U.S. with that book happened in Canada. The motivation category is very strong.”

Like everyone else in the industry, Hanson is dollar-focused. “One of the things we are watching is how Canadians are responding to price,” says Hanson. “For the type of list that we have—commercial fiction and nonfiction—as we adjusted our prices downward, the consumer responded and bought a lot of books. The volume made up for the discounted price. We actually reset our pricing in June 2007, and we were not penalized; we were actually rewarded.”

“Now that prices have normalized,” Hanson wonders, “are Canadian consumers going to continue to buy more books?” Everyone would love to know the answer.

Random House: Cautiously Optimistic

“I don't know that we had one huge book,” Brad Martin says modestly. “We had some tremendous hardcover performers, the Naomi Klein, the Jean Chrétien [former prime minister of Canada], Rick Mercer, Christie Blatchford—they all had books that sold over 50,000 copies. And then we had one that sold 80,000—Hitman by the wrestler Bret “The Hitman” Hart. We sold 500,000 each of Atonement and The Kite Runner, the movie tie-ins, and then we had three Oprah pick books, including Middlesex by Jeffrey Eugenides, a Vintage Canada book.”

But Martin sees trouble ahead. “We have the same challenges we had last year,” he says, “except that it is only going to get worse.” Martin is particularly worried about “the deflation in the marketplace because of the falling U.S. dollar impacting dual-priced books. We had to drop our Canadian book prices. Even though we hold the copyright on a book that was listed at $35 and no one questioned it, it is now sitting next to books that are $29.95. If you assume a 50% trade discount, that $2.50 we were getting, of which we paid a quarter to the author as royalties, the other $2.25 being our gross profit, we no longer get that gross profit. That is a dramatic impact on our bottom line. It changes how much money you spend on marketing; your entire business model is threatened by it because profitability has declined.” Martin adds, “We can't take a flyer on as many things.”

But Martin and his team have weathered the storm well thus far. “Our Canadian programs are profitable; we wouldn't continue to have one if we didn't meet the standards that our parent company sets—and we have met them.”

Random expected to see strong growth in the mass merchant channels (Costco, Wal-Mart, Shoppers Drug Mart), especially for its children's titles, since these retailers are becoming more aggressive in the category. Martin says that online sales are also growing, but “may have taken a hit last year as a result of political comments about book pricing in Canada and suggestions that consumers should go elsewhere. These comments showed a poor understanding of how the industry works.”

In Martin's mind, the biggest change at Random House has been how much more active and effective the marketing department has been in regards to online communities and extensions of brands into the online space. “I listen to what goes on in marketing meetings and 50% of what I hear going on is online,” says Martin, “which is good because our options and opportunities were too tightly focused before.” Tracey Turriff, v-p, director of marketing and communications, adds that Random's Insight book widget, with its browse and search features, “is tremendously beneficial.”

For the fall, the company has a number of major projects ready to go: Don Cherry's Hockey Stories and Stuffby popular hockey commentator Don Cherry, Miriam Toews's The Flying Troutmans (following on her incredibly successful A Complicated Kindness), Bonnie Stern's cookbook Friday Night Dinners, The Killing Circle by Andrew Pyper and a new James Bond by Sebastian Faulks, Devil May Care.

Domestic Canadian Publishers

Things were decidedly tougher for the Canadian houses without multinational connection.

Thomas Allen Publishers: We Want More Attention!

Authors published by Toronto-based Thomas Allen Publishers have collected a number of significant prizes over the last five years, including a Giller Prize in 2002 for Austin Clarke and two Governor General's Literary Awards, including one in 2007 for I've Got a Home in Glory Land by Karolyn Smardz Frost. “We are going into popular science this fall,” states publisher Patrick Crean. “We have a major book coming from Canadian astrophysicist John Moffat—Reinventing Gravity—copublished with the Smithsonian imprint of HarperCollins out of New York; Moffat found an error in Einstein's theory of gravity.”

Crean is to the point about the biggest challenge Thomas Allen faces this year: “getting attention for our books.” Citing no less an authority than his wife, Susan Swan—who also happens to be the Canadian Writers Union president—Crean says that 849 new Canadian authors were published in Canada last year. “There are few places to get exposure for books; newspapers have less book coverage.”

Like many others in the Canadian market, Thomas Allen had to drop Canadian list prices, and the company is examining all of its prepress costs and printing partnerships.

Fitzhenry & Whiteside Ltd.: Gearing Up for Nontraditional Channels

According to Stephanie Stewart, U.S. sales and marketing manager for Fitzhenry & Whiteside Ltd., the two titles that stand out for the company from 2007 are Bifocal by Deborah Ellis and Eric Walters, and Canada Rocks: The Geological Journey by Nick Eyles and Andrew Miall. Stewart said that the firm's strongest genres were children's nonfiction and YA fiction, but added that the science fiction and fantasy program is “rolling along” and that a fantasy imprint edited by Nalo Hopkinson for Red Deer Press has been added to the mix: “The past year has seen the company expand its subrights sales area with foreign sales to Korea and the Far East. We are also exploring a variety of overseas distribution channels.”

Stewart says Fitzhenry's challenges for the coming year are dealing with the expansion of the nontraditional marketplace as well as the slowdown of the American economy. “Nontraditional sales channels are the fastest growth area for us, but it does provide its own set of problems,” points out Stewart, citing “long lead times, short delivery windows, the demand for us to take lower margins and the risk of a short life cycle and high returns.” But she contends that the problems of working with the nontraditional sales channel are outweighed by the gains.

Over the past year, the biggest change Stewart noticed in the publishing industry was the demand from customers for advance pre-pub data. “Not just bibliographic but also extras such as images, table of contents and sample chapters. Customers who were relying on catalogues for their data are now asking for information electronically. Data, data, data was our catch phrase last year.”

As for currency parity issues, F&W has brought its U.S. prices more in line with the Canadian prices on spring 2008 titles and beyond.

Kids Can Press: A Squirrel Named Success

“It's been both a good and bad year for Kids Can,” says Judy Brunsek, v-p of Kids Can Press. “The economy and the dollar had an effect on everyone's business and we would be truly exceptional if it had not affected us. We had some great things going on despite that.”

In 2007 Kids Can had two series that performed well, Scaredy Squirrel and Kids Can Make a Difference. “Melanie Watt, author of the Scaredy Squirrel series, is just embarking on her U.S. tour. Scaredy Squirrel has been a big hit, with strong character development and great graphic treatment,” Brunsek says. Kids just released the third in the series, Scaredy Squirrel at the Beach, and the rate of sale has been “double the second book,” says Brunsek.

Last year, under the Kids Can Make a Difference umbrella, Kids Can published One Well, and this spring it published One Hen. Each book is modeled on a central metaphor that helps explain complicated concepts to kids in the 8—12 range—One Well is all about water as a valuable resource, and the press sent the author, an environmental educator, on tour; One Hen explains microlending, “and we're going back to press on that,” says Brunsek.

Although Kids Can worries, like all publishers, about the currency problems, the press doesn't encounter the degree of price resistance that has befallen other Canadian children's book publishers because of their marketing strategy—“high-quality books that are priced well,” says Brunsek.

Firefly Books: Experienced U.S. Market Navigator

“It has been a good year,” says Lionel Koffler of Firefly Books, whose publishing list reflects his interest in conservation issues. “We had a number of titles that sold out completely, with ambitious print runs and great sell-through. We have a diversified customer base—library, education and trade. We were able to spread things around so we had some good sales.” Strong-selling titles included The Firefly World of Facts; Earth Then and Now, which sold out in hardcover; and Amazing Baby by Desmond Morris.

As a Canadian company with more than half its sales in the U.S., Firefly has been vulnerable to the depreciation of the American dollar for the past four years, but according to Koffler, “in the last 18 months we got a grasp on things. We realized that the downward trajectory wasn't going to stop and we had to make some aggressive plans to cope with it. In large part, the books that we are printing off shore or buying as co-editions are denominated in U.S. dollars, so our costs have gone down.”

Koffler is not coy about the fact that revenue has suffered, forcing great discounts and lower price points to pump up the volume. “Our average discount has been going up for 15 years,” says Koffler, “with the average Canadian dollar unit revenues we are getting from ours U.S. sales going down. It's had a compounding effect. But we've become smarter with our overhead and sold more books.”

Koffler is optimistic that, even though there is talk of a recession, the core reading public will still be there, and if anything they have a little more time to read and better access to books than ever before. “That presents an opportunity for publishers,” Koffler says.

As part of a diversification process to guard against the challenges of the retail market, the company is in the process of hiring 30 rep groups in the U.S. that specialize in serving the high school library market. Firefly has done a number of tests and is hoping for multimillion-dollar sales of its sciences and nature books in this channel. “We decided that if we were going to invest in a sales force parallel to our book reps, our nature and history books could easily fit in a high school library,” adds Koffler.

McArthur & Company: Forging Ahead into the U.S.

For Kim McArthur of Toronto's McArthur & Company it was a year of bestsellers on both the publishing and agency side (in addition to publishing, the company acts as exclusive agent for Hodder and Orion of the U.K.), with numbers on numerous titles reaching into five- and six-digit territory. Maeve Binchy's Whitethorn Woods sold 150,000 in mass market at $10.99, went to #1 on the the Globe & Mail's bestseller list, and stayed on the list for 12 weeks. Ian Rankin's Exit Music sold 63,000 copies in trade paperback, while Kate Mosse's Labyrinth, published in December, was on the bestseller list through February. “We've always been known for publishing mystery and crime authors really well, and the Ian Rankin going straight to the top and staying there was the nicest surprise,” McArthur says, adding proudly, “especially since he beat out John Grisham and Ken Follett plus all the Giller shortlisted Canadians to do it.”

While many Canadian companies may have been hesitant to aggressively expand U.S. sales channels, McArthur saw this as an opportunity to do just that. The company opened new nontraditional channels in the U.S. at Target, QVC and Safeway. In fact, McArthur went so far as to hire a U.S. publicist to promote Heather Summerhayes Cariou's Sixtyfive Roses, a memoir about the Canadian author's sister's battle with cystic fibrosis.

The biggest change that McArthur sees is in the further consolidation of both retail and publishing. “Gigantic retail firms such as Indigo, and publishing firms such as Random House, HarperCollins and Penguin, mean that smaller Canadian firms like us need to be even more nimble,” says McArthur. “We're more than holding our own, but it takes a great deal of energy and creativity to compete.”

Douglas & McIntyre: A Very Good Year

You know that when you speak with someone who openly says, “In this business [book publishing], passion still trumps commerce,” you are going to get some very colorful statements—such as, “Only the book industry would be so stupid as to print prices on their product.”

That's D&M founder Scott McIntyre talking, but the veteran publisher must know a little about commerce, as his company has fared well of late. “It has been a very good year for us and I suspect that not everyone is feeling that way,” he says from his office in Vancouver. The company sold over 50,000 copies of A Long Way Gone by Ishmael Beah, and the company owns the entire backlist of environmentalist Dr. David Suzuki. “We had kind of a happy year all around,” McIntyre adds, but the company was not exempt from the dollar woes. “We are the exclusive Canadian distributor for Farrar, Straus & Giroux, and 20% of our volume is in the U.S. through Publishers Group West. The big issue is that the books are priced months in advance. You have Canadian consumers saying, 'Hey, this is a Canadian book, it was created in Canada, made for Canada, why is it 30% less in the U.S.? To help control costs and counteract foreign currency exposure, the company does some production in China and often leverages price quotes it gets from Chinese printers to get better prices from Canadian printers.

McIntyre thinks the digital change is really about to hit publishing, from both the manufacturing and distribution end, and it will present some additional hurdles. “The good news is that runs can get shorter, color is not an issue, upfront costs and time have been dramatically improved. “On the other hand,” he continues, illustrating the pitfalls and gains of electronic distribution of books, “licensing digital library databases to library wholesalers is beginning to happen. There is project in British Columbia with wholesalers buying site licenses for books made here. While it is a mess in terms of rights management, especially in terms of illustrated books, in terms of the ability of having a single digital platform and a digital warehouse to take advantage of it, it is clearly going to be a revolution.”

McClelland & Stewart: The Tradition Continues

In president and publisher Doug Pepper's eyes, there were four major successes at Toronto-based McClelland & Stewart in 2007: Elizabeth Hay's Late Nights on Air winning the Giller Prize; Christopher Hitchens's God Is Not Great, which sold in excess of 50,000 copies; Brian Mulroney's Memoirs, which at $50 is big ticket and wasn't discounted in the chains for at least a month; and Michael Ondaatje's Divisadero. “As usual, literary fiction continues to be the staple for M&S, although quality nonfiction, such as social sciences, memoir, politics and biography are gaining ground for the firm,” says Pepper, “as they are in the market in general.”

“The greatest challenge for us and perhaps for everyone else in Canadian publishing is pricing. No secret there,” he says. As for the near-term , “[Pricing] will obviously hurt the distributors more than us, but the general lowering of prices in the market is something that cannot be sustained for too long.” Pepper hopes that the issue will continue to die down and that, “As a business, we won't just jump to lower prices across the board. I also hope we can better make the case to Canadian readers that there are good reasons why our prices in Canada are higher than in the U.S..” He then makes his pitch: “For a fraction of the price of a good bottle of wine at dinner, you can buy a book that will stimulate, challenge, and better your life for years to come.”

M&S continues to have an almost exclusively domestic focus. While the company distributes selective M&S titles into the U.S. and works hard to sell through alternative domestic channels, over half its business is still with Chapters/Indigo, something Pepper doesn't see changing anytime soon, though he is working on it. “Nontraditional sales channels are very important, but it's not just a case of us taking our existing titles and getting them in there,” he says. But with the shrinkage of the independent market and the rise of wholesale and online sales, Pepper believes that the firm will eventually diversify its lists to include the kind of books that can get into nontraditional markets in large numbers. “Does it mean abandoning what M&S has made its name on?” Pepper asks rhetorically. “Hardly. We can expand our program while also keeping up our fierce commitment to quality in whatever we do.”

Raincoast Books: The Curtain Falls

“Our biggest success was the final Harry Potter,” says Jaime Broadhurst, v-p, marketing, for Vancouver-based Raincoast Books.

(Take that, Jim Flaherty, who opens our coverage here waving Harry Potter as an example of the Canadian industry's woes.)

“We sold 750,000 copies in the first 48 hours,” says Broadhurst, “up 15% from the last book in 2005. When we looked at the performance of the final book, all channels—be it indie book stores, large chains, mass retailers—did very well.”

According to Broadhurst, the company calculated there would be about a 15% increase in foot traffic in stores during the first two weekends of Harry mania. “The really smart retailers figured out that it wasn't just selling the final book of the series, it was going back and selling the six prior books and that is where the profitability comes in.” Raincoast saw a 25% lift in backlist orders leading up to the Deathly Hallows launch.

It was a fine performance for the company, which radically altered its character at about the same time. In January 2008, Raincoast announced the closing of its domestic publishing program after the spring 2008 list—“which means we have decided that we are not going to have a publishing program and instead focus on what we are the best at—book wholesale and distribution on behalf of other client publishers,” says Broadhurst. “Every year, we are shortlisted or win the distributor of the year award for the Libris Awards. I really think that this speaks volumes to what we are good at. We made the very painful decision that in the book retailing landscape in Canada, you can't be all things to all people. For us, this retrenchment is positive because it means we focus on Canada.”

Raincoast said this decision was precipitated when the Canadian dollar hit par with the U.S. dollar in September 2007. “We feel that the Canadian consumers are going to be price-sensitive, value-focused in a way they have never been, thanks to dual pricing,” states Broadhurst. “To be honest, over the last 10 years of our publishing program, we have never been profitable. The tough business decisions aren't always popular, but we wanted to do what is right for Raincoast.”

According to Broadhurst, the company saw double-digit growth in distribution business in terms of dollars, and high growth in units. The old saw again proved true: growth in volume made up for the drop in price.

Tundra: Canadian Dollar's Gain Was Tundra's Pain

According to Kathy Lowinger, publisher of Toronto's Tundra Books, 2007 was amazing in a number of ways—“in terms of the critical responses to our books” and financially—“an absolutely fantastic year, maybe one of the best in Tundra's history except for the fact that we were buffeted by the U.S. dollar.”

Lowinger said that the company's unit sales were up, but that the company was “hammered on two sides by the currency issue—on one front is the cost of the dollar and the other is dual pricing.” Tundra can't afford to do separate editions for the U.S. and Canada. “This situation has been extremely difficult to navigate. These books were costed at a particular price but sold at another.”

Lowinger is very up front with another issue that Tundra, being a children's books publisher, has to deal with—the idea that consumers won't pay for a kid's book what they will pay for an adult title. “Tundra does hardcover books that, on every level, cost as much to create as similar books for adults, but you can't charge more than two-thirds of what you would charge for an adult book.”

Tundra's strategy involves absorbing the costs when possible, being very selective editorially and grouping books into series so that the company, in Lowinger's words, “can refresh the backlist and keep it shining.”

Worthy goals for any publisher, in good times and bad.

Top Sellers Up North Canadian Bestsellers 2007

Top Children's Bestsellers, 2007

Top Bestsellers, 2007

Top Fiction Bestsellers, 2007

Top Nonfiction Bestsellers, 2007