The Australian book publishing and printing industries may be successful in their efforts to preserve parallel import restrictions (PIRs), with the Federal Government set to reject the Productivity Commission’s recommendation to lift those restrictions. It remains to be seen how those industries will cope with the threat of digital distribution, which makes the current debate about PIRs look so last century.

The business model for much of the Australian book publishing industry is based around re-packaging and ‘localising’ foreign content. That model relies on PIRs. That is, if an authorised local edition of a book is released within a 30-day window of its first publication overseas Australian copyright law can generally be relied on to prevent local booksellers from sourcing cheaper, and in many cases better quality, foreign versions of the book than the local authorised version.

This model, which clearly benefits the local publishing and printing industries and authors, also—according to the Productivity Commission (Commission)—results in economic inefficiencies and ‘a significant transfer of income from Australian consumers to overseas authors and publishers’.

And it is potentially under threat from the grey market and digital distribution.

The grey market

If the Federal Government were to listen to the Commission, PIRs would be phased out over the next few years. Books would then be treated in the same way as other cultural artefacts such as disks containing music or computer games, for which PIRs were abolished many years ago (although DVDs containing movies and TV shows would remain in a privileged copyright position).

The Federal Government seems unlikely to do any such thing—for now. Books are a significant cultural good and any change that might be seen to impact on the production and consumption of local books could prove unpopular. For the prosecution, it will be claimed that it is not just the Australian industry but our cherished cultural heritage that is at stake: if local publishers stop publishing local authors, or our works become increasingly homogenised for a global market, we will all lose.

None seriously deny the cultural value of books, and the Commission (whilst noting that J. K. Rowling may have done more to encourage Australian children to read books than any Australian author) does not doubt the legitimacy of promoting the production of culturally significant Australian works. The Commission sees PIRs as a blunt and inefficient instrument to pursue that goal: these do not discriminate between local and foreign publishers and authors apply regardless of whether the work is of cultural significance. And consumers pay a high price. The Commission would prefer the government, on efficiency grounds, to create incentives to produce culturally significant works by offering direct subsidies to local authors.

The debate about lifting PIRs is emotive, generating more heat than light. The justification of our current copyright laws on preservation of culture grounds appears difficult, given the matters raised by the Commission. For the Federal Government, it is likely that they are more concerned not to damage the local printing and publishing industries.

But the government cannot protect those industries from the future, and digital distribution is the elephant in the room in the current debate.

Digital distribution

Google has spent several years digitising vast numbers of books, and defending a class action copyright claim brought on behalf of affected US author and publisher interests. Google was recently reported as having reached a provisional settlement in the matter. It is still not out of the woods, as it faces the prospect of claims on behalf of copyright interests (such as non-US rights holders) who will not be bound by the settlement. However, it is clear that its ambitious model of digital storage and distribution of books will increasingly threaten more traditional models in the industry—including Amazon’s now ‘traditional’ model of distributing physical books over the Internet.

The physical book is a resilient medium. One would be foolish to predict its imminent demise. However, the view that digital distribution of books will not pose any existential threat to traditional book publishing in the foreseeable future, especially in niche markets such texts and other reference books, may be too sanguine. The latest generation of e-book readers is already changing the way Americans consume the written word. Amazon has achieved some success with its ‘Kindle’ e-book reader in the US market, and have just made the product available in Australia this month. Presumably competitors such as Sony, (which in August 2009 released a new ‘Sony Reader Daily Edition’ which can read e-books published in the open EPUB format—a format adopted by Barnes & Noble and Google) will also enter the local market in the short term. With the money being invested in e-book readers and digitisation of books, who can predict what the market will look like in 10 years?

From the perspective of copyright law, what we can be confident of (ironically given all the hand-wringing over the Commission’s report) is that in the digital domain it is irrelevant whether the Federal Government removes PIRs, because territorial copyright will apply to digitally distributed works. Just as we in Australia cannot lawfully download TV shows from Apple’s US iTunes store, we cannot download e-books for the Kindle from Amazon’s US store. Seen in this light, the debate we are having about territorial copyright seems very 20th century.

Digital distribution will allow publishers to control secondary markets. The second hand sale of a physical book will not infringe Australian copyright laws provided the book was initially sold lawfully in Australia. However, a digitally distributed book cannot be further distributed or sold (other than, perhaps, with the original media on which it is stored) without infringing copyright.

Digital distribution creates opportunities as well as challenges for book publishers (although they will face similar challenges to the music and film industries in persuading users to pay a reasonable price for content they may be able to get for free). However, these opportunities may provide cold comfort to that part of the local industry whose profits largely derive from marketing and distributing foreign literary works in expensive, and sometimes weighty, physical containers. Digital distribution of that foreign content is likely to mean lower prices for content, and a less significant role for local publishers who are not generating their own IP.

Happily for Australian consumers, in meeting the threats of the grey market and digital distribution, it will be more important than ever for Australian publishers to be able to source and market compelling new Australian content.