Amid Book Week Celebrations, a Battle Over Discounting

Publishers say the bargains are threatening to put them out of business; culture minister Limor Livnat is coming to the rescue with price controls.

This year's Hebrew Book Week, which opened Wednesday with festivities throughout the country, takes place under the shadow of fierce competition between the two bookstore chains constituting a duopoly in Israel: Steimatzky and Tzomet Sfarim.

Several publishing houses have been claiming for years that they're closer to losing money than profiting from Hebrew Book Week. However, they still make the effort to operate stalls at the countrywide fairs "in order to uphold the tradition and enjoy the book festival," according to one source. It's easy to understand their concern: Tzomet Sfarim estimates sales of 1 million books in June, while Steimatzky anticipates that a million of its club members will buy books at its stores this month.

"Anyone hearing these figures would think we're living in a country with at least 30 million people, and even then it's hard to believe such numbers of books being sold here," says a publishing house executive. "These are ridiculous numbers and aren't a source of pride but precisely the opposite - it would be easy to confuse a kilogram of cucumbers with a kilogram of books."

"The market is controlled by Steimatzky and Tzomet Sfarim, who hold more than a 70% share in revenues - in an industry with annual turover in excess of NIS 1.2 billion at the end of the last decade," according to Eyal Yanai, co-CEO at the BDI-Coface business information group. "We estimate the chains' net profit margin to be about 3%," he adds.

"The significant price promotions in the book industry - like the 4 books for NIS 100 promotions - have a certain effect on the chains' revenues, but most of the costs are passed onto the book publishers," adds Yanai. Confirming this, some of the publishers report making about NIS 4 on each of their books sold in the chains, with another NIS 1 to NIS 2 going to the author.

The publishers also claim that the price printed on the cover, usually around NIS 90, is completely fictitious, and only appears there for the promotion. "When it's the chains that want to dictate the promotion - and therefore the price - we haven't any choice but to gross it all up together. And to provide room for the discount, we're forced to quote a high price," says another top publishing house exec.

Culture and Sports Minister Limor Livnat is now trying to ensure that the so-called "Book Law" for protecting Israeli literature and writers - which passed its first reading in the Knesset last July - passes the second and third readings by the end of the current Knesset session next month.

Under the proposed legislation, the price of books would remain fixed for 18 months from their date of publication - except for a 10% discount permitted before the Rosh Hashanah and Passover holidays, as well as during Hebrew Book Week. During the same period, writers will be entitled to an 8% royalty from the book's list price on the first 6,000 copies sold, and 10% on any additional copies sold.

According to Livnat, part of the opposition to the law is rooted in its interference with free market forces. "We have no choice but to protect literature, poetry, and their authors," she explains. "Otherwise we won't have cultural treasures. I'm not even talking about a decent living, but about a disgraceful situation of earning a shekel or two per book while losing publishing houses that are unable to survive and releasing just three or four books a year."

Other provisions in the law would prevent stores or publishers from continuing to reward store clerks for recommending specific books, and stores will no longer be allowed to discriminate between publishers in the placement of books on display. This is meant to address the Kinneret Zmora-Bitan Dvir problem arising from the cross-ownership between Tzomet Sfarim and the publishing company, and the chain's undeniable desire to sell as many of its own publisher's books as possible.

Steimatzky, meanwhile, has for years been known to be closely tied with the Yedioth Sfarim book publishing company. Investigations have shown that most of the books found at the front of the chain's stores belong to this publishing house.

Livnat emphasizes that the book bill won't spell the end for Hebrew Book Week or affordable prices and discounts. "The protection provided by the law won't affect old promotions on books that they want to clear from the store rooms," she says. "To the contrary, Hebrew Book Week will return to its original format. Whoever wants to put out old books and sell them 4 for NIS 100 will be able to do so. In addition, the initial price will go down to around NIS 50 to NIS 55 per book."

Tzomet Sfarim: "We don't set the price"

Avi Shumer, CEO of Tzomet Sfarim, said in response that the chain has no issue with Livnat's bill and isn't working against it, but insists that, in its current format, it won't solve the problems of writers and book publishers. What will happen, he claims, is that the famous authors who do well in any case will continue making money, but the publishers won't release new books because they won't sell at a high price.

"The publishers don't care about the authors and never did. They just care about themselves," says Shumer, in an attempt to dispel the theory that it's the publishers who are the injured party. "It's not us who set the price of the book and the royalties, but the publishers. And despite this discussion, I don't recall one publishing house having shut its doors in recent years."

With regard to cooperation with publishing companies, Shumer says: "This claim doesn't hold water. The publisher selling the most books by us in the last month was Yedioth Sfarim, and depends on the assortment that the publisher has at any given moment and what the best-sellers are."

Steimatzky CEO Iris Barel says that if the bill doesn't pass, a commission of inquiry should be appointed to find out why. Regarding claims about preference given to a certain publishing house, Barel says the books put out by Keter Publishing House and Yedioth Sfarim are sold by the chain in an equal manner as all the other titles, and that employees don't receive bonuses related to the sales of any specific publisher, but just in general. 

Daniel Tchetchik
Daniel Bar-On