Bye Bye Discount Books

New Israeli Law Likely to Spell End to Big Sales at Book Chains

Soon, a trip to the bookstore will be very different from what Israeli readers have grown accustomed to.

In another two months, when the Book Law goes into force, a trip to the bookstore will be very different from what Israeli readers have grown accustomed to.

Gone will be the sales that cut prices to an average of NIS 25. Instead, according to a survey of the publishing and book retail industry, the catalog prices for books will average about NIS 80. Neither of the two big chains, Steimatzky or Tzomet Sfarim, say they plan to discount them.

The new law says that in the first 18 months after a book is published, retailers are barred from selling it for less than the publisher’s suggested price, except during periods delineated in the law. Bookstores will only be able to discount older titles.

The Culture and Sports Ministry, which was behind the legislation, claims that it will lead to bookstores discounting prices by tens of percentage points off the publishers’ recommended prices, meaning books will average NIS 50 to NIS 60. By contrast, today most sales require buyers to purchase more than one book to get the discount.

However, sources told TheMarker that it is likely that the cover price of books will be a lot higher than the law’s backers intended.Publishers are already blaming the retailers for the higher prices.

“We planned to lower the price of books to NIS 55 to NIS 58 each, but because of the discount that the bookstore chains demand from us, first and foremost Steimatzky, it looks right now as if we’ll set prices at NIS 89,” said a publishing executive, who declined to be identified.

“It’s awful. It turns the law into a joke,” the source said, adding that it should have barred retail chains from demanding discounts from the publishers. But as it is, Stemitzky is seeking discounts for all titles of 63%. If it gets it, Tzomet Sfarim will want the same. “The ones who will profit from this are the chains and the ones who will suffer from the law are the consumers, who will have to pay more, and the publishers, who will get less.”

Steimatzky’s big picture

One of the reasons why Steimatzky is pushing so aggressively for discounts from its suppliers is because the Markstone private equity fund that owns it wants to put the chain up for sale in 2015, and thus wants to show strong financial results, the source said.

Iris Barel, CEO of Steimatzky, acknowledges that retail prices will be in the range of NIS 78 to NIS 80, but says it’s not the chains’ fault, it’s the publishers’. She says the law will help improve the publishers’ finances because until now, they didn’t know the size of the discount at which they sold books to retailers.

The new law fixes the level of discounting for 2014 so they can base the cover price on what they know they will be getting after the discount.

“We have asked for a discount of less than 60% on new titles and on older titles we are asking a slightly higher discount to balance the situation,” Barel said. “I don’t want to raise prices for new books. In any case, publishers will be getting a lot more per book than what they’ve been getting until now.”

She said that if turnover doesn’t fall next year with the introduction of the law, Steimatzky will take smaller discounts in 2015. But, she adds, most industry experts see book turnover dropping by some 25% in 2014.

“Anyone coming into a bookstore will see mainly new titles, and very few books on sale,” says Barel. Nevertheless, she maintains, the law will help the book industry in the long run even if high prices initially cut into book sales next year.

Avi Schumer, CEO of Tzomet Sfarim, which famously sells four books for NIS 100, is opposed to the law and is running a sales campaign urging book buyers to make their purchases before the legislation goes into effect.

“Starting in February, there will be no sales in any of our stores and we hope not to get dragged into sales after that either,” he said.

The reason, he explained, is that turnover in books is likely to drop sharply because the law makes it difficult to discount new books. However, Schumer added that he would be demanding bigger discounts from publishers.

“If a book cost NIS 80 and 60% of that goes to the chain and another 8% to its overhead, that leaves just NIS 24 including value-added tax. If we deduct the costs of translating, printing, design and what have you, there’ll be nothing left for the publisher,” he said.

Eyal Toueg