Israel's New Book Law Bans Discounts (Except It Doesn't)

As the new rules went into effect this month, the big chains were offering 'buy one, get one free' promotions.

The law says that discounts for newly published books are banned, but the market is saying something else.

That is how things are just one day after the Law for the Protection of Literature and Authors in Israel, popularly known as the Book Law, went into force. The law bars retailers from selling new titles at a discount or through any other kind of special offer, for 18 months after they are first published. But that hasn’t stopped both of Israel's two largest bookstore chains from running “buy one, get one free” sales this month.

This might not make sense to anyone unfamiliar with the country's book industry, but, simply put, the lawmakers' intentions were one thing, while reality is quite another. The Book Law aims to ensure that authors are paid fairly for their work, by setting a minimum level of royalties they receive from publishers during the first 18 months their books are on the market. In effect, that means bookstores are prohibited from selling new books for less than the publisher’s suggested retail price, except under certain conditions. 

Publishers claim that since the law doesn’t prohibit booksellers Steimatzky's and Tzomet Sfarim from demanding discounts for the books they purchase, they needed to find creative ways to get around it. One was to publish as many titles as possible in January, before the law took effect, exempting them from the new restrictions.

“In January I released all the books I intended to publish until Hebrew Book Week in June,” says Ziv Cohen, who owns the small publishing house Sela Books. “Another trick is to release books with minimal distribution. The publication of a few copies is enough to have the book listed as having been released before the law came into force. Or the book can be printed now and released later. All publishers have by now grasped that the law can’t work the way it was written, so they’re looking for ways around it.”

The bookstore chains scornfully say it is absurd that publishers who whined about sales promotions and supported the Book Law are now circumventing it. But the publishing houses claim they have no choice, because of the markdowns demanded by the chains.

Special deals

One major publisher says he agreed to give a 55 percent discount to the large chains on the sale of new books and 60 percent on old books, steeper reductions than the half-price discounts he had been giving on both new and old titles. “Since most of the money from the book’s full price remains in the hands of the chain, the previous situation was better for us.” MK Nitzan Horowitz (Meretz) submitted a bill on Monday to amend the law by limiting publishers' discounts to retailers to 40 percent.

Publishing house Yediot Books says it will release new titles for between 50 shekels ($14.20) and 68 shekels depending on various factors. But other publishers claim Yediot Books received better trade terms from Steimatzky's and therefore cannot meet its prices.

“The price for a standard book will be around 68 to 78 shekels and 85 shekels for thicker ones,” says Benjamin Triwaks, one of the principals of Matar Publishing House. “Reference books will cost 89 to 98 shekels, much like their cost until now.”

In recent years more than 75 percent of retail book sales have been made at a discount or through other promotional channels. Now the bookstore chains will need to convince customers to buy new books at list price, or settle for buying older titles. “Until May, we’ll run promotions as usual, and in March we’ll invest in direct marketing to our 440,000 club members,” says Steimatzky CEO Iris Barel.

Aiming to improve conditions for Israeli authors, the new law stipulates that the writer receive at least 8 percent of the book’s catalog price for the first 18 months after its publication. This is much more than they received until now: Well-known authors have been quoted as saying they earned just one shekel on the sale of each book. Publishers and book chains claim, however, that the law will hurt unknown authors.

“Up until now, I made it a principle to publish several books by unknown writers each year on the house, but this year I won’t, because it isn’t economically feasible,” says Cohen of Sela Books. “I do care about culture, but this is ultimately a commercial business.”

“New writers will find a way to sidestep the traditional publishers by publishing privately through digital marketing,” according to Eitan Zinger, an owner of Probook and chairman of Dionon Publishing House.

Sales decline expected

“This law came about because the market was in the process of collapse; its goal was to improve the situation. But what is happening is the opposite,” says a major publisher. “The money intended for writers and for literature was stolen by the chains. The consumer will pay more, the writer will sell fewer copies, publishers will receive less in commissions, and fewer books will be sold. There is just one beneficiary: the Steimatzky – Tzomet Sfarim oligopoly.”

There are publishers, however, who still support the law and claim it will not worsen their situation. Before the law took effect, new books were put on special immediately after publication, according to Triwaks, and the discounts publishers gave chains during the promotion were around 76 percent – so in fact, publishers won’t need to give higher discounts on new books. The problem, he says, is with older books where the discount was lower, but he hopes that if sales of these books increase, it could compensate for this.

Triwaks also notes that under the new law, a bookstore chain may only allocate up to 20 percent of its list to any one publisher. “Tzomet Sfarim, according to the law, can only carry up to 45 percent of selections from the Kinneret Zmora-Bitan Dvir and Modan publishing houses (who are part owners in the chain) so perhaps there will be more room for books of other publishers,” he says.

“Over 95 percent of new books released in 2013 were included in sales specials, and the discount given to the chain in promotions is 73 to 78 percent,” says Steimatzky’s Barel. “So the discounts from publishers have dropped dramatically.”

During the past few months, the chains have been consumed with the problem of how to deal with the expected drop in book sales over the next several years. “I am anxious about 2014,” says Barel. “This will be a year of adjustment and a particularly hard year for bookstore chains, because our expenses haven’t changed. We still have rent, electricity, and air conditioning to pay as always.”

The Kravitz stationary chain recently said it will start selling books, while Steimatzky is looking into the possibility of expanding into Kravitz’s turf of writing supplies. Many in the industry believe Israeli bookstore chains will be forced to carry a broader range of products, as they are elsewhere in the world. “Books will be pushed aside,” says an executive at one of the chains.

The Culture and Sports Ministry responded: “We are aware that the law’s coming into effect changes the rules of the game in the book industry. Ridding it of its market failures will obviously be done on a gradual basis, and we believe Israeli culture will come out ahead once this is over.”

Tali Mayer