Five years ago, Canadian book publishers emerged from a horror story. General Publishing, a book distributor handling books from a number of Canadian publishers, had gone bankrupt. Book returns from the big-box bookstores had surged to unacceptable levels and payments were delayed. A number of independent bookstores had gone out of business. Reflecting on the crisis, the Standing Committee on Canadian Heritage issued a report on the Canadian book industry in June 2000, noting the problems and listing the challenges that faced the industry. A year later, Indigo acquired Chapters.
After that rollercoaster ride, it was hoped that things could settle down and Canadian publishers could get down to creating and selling books.
However, numbers released by Statistics Canada in June 2006 show a troubling tale. (1) In 2004, the total revenue for book publishers in Canada was some $2.2 billion; 47 percent of that revenue went to the 19 foreign-controlled book publishers active in Canada, and 53 percent was shared among 311 Canadian-owned book publishers.
The Canadian-owned sector is incredibly varied. At the top of the heap in terms of revenue are Thomson Publishing and Harlequin Books, each of which make a nice profit in their respective niches of professional publishing and romantic paperback fiction. But neither has dipped their toe into trade publishing, the risky field of hardcover fiction and non-fiction that most people think of when they walk into a bookstore. That is where most of the smaller Canadian-owned publishers try to compete, publishers such as McClelland and Stewart, Douglas and McIntyre, Key Porter and dozens of others. Those smaller publishers received government support of about $50 million in 2004.
From the perspective of readers looking for choice, no one can quarrel with the result. The Canadian-owned publishers originated more than 10,000 new trade titles in 2004, the great majority of them by Canadian authors. (The branch plant publishers also publish a few hundred trade titles by the better-known Canadian authors, but the Canadian-owned firms give rise to the real diversity in the system.)
But the Statistics Canada figures show an appalling truth. The median profit of all those Canadian-owned houses was less than $10,000 in 2004, even after government grants. In fact, without the support of government subsidy programs, the average Canadian-owned publishing house would have gone into the red to the tune of $150,000. And fully 40 percent of them were in the red even after receiving government subsidies. And this is not a recent development. As detailed in the Heritage Committee report, the profit situation for Canadian-owned publishers was even worse back in 2000.
All of which lends interest to a new phenomenon, the "long tail" effect, whereby the "smaller" book, the niche title and the less popular title may have a better chance of success in the future. Could this work to the advantage of Canadian book publishing?
The term "long tail" was coined in 2004 by Chris Anderson, the editor of Wired magazine. His book of the same title (The Long Tail: Why The Future of Business is Selling Less of More) was published in July 2006 and immediately became a bestseller. Anderson started with the age-old observation (often referred to by economists as a Pareto distribution) that for many product categories, including books, movies and sound recordings, 20 percent of the titles account for 80 percent of the sales. On an X-Y graph, measuring popularity versus inventory, the 20 percent of bestsellers constitute the "head" at the far left of the graph, and there is a long tail extending far to the right consisting of the remaining titles that get relatively few sales.
Anderson's new insight was that with the rise of the Internet and companies such as Amazon (for books), Rhapsody (for music) and Netflix (for DVDs), there were now new ways to market, promote and distribute these lesser-known titles. …