People of the Increasingly Expensive Book

Israelis are buying fewer books, but the bookstore chains are earning more – publishers and retailers are divided on whether the Books Law should be shelved.

Yohai Nevo

Israelis are buying fewer books, and they’re paying more for each one. The number of books bought from January-May 2015 was down nearly 20% from the same period of 2013. That was before the so-called “Books Law” came into effect, banning a book from being sold at a discount within 18 months of its first publication.

According to the Steimatzky bookstore chain, new book sales fell 35% in 2015 compared with the same period of 2013 – yet its turnover shrank by roughly 11%. That’s because the price of a new book rose from about 30 shekels ($7.82) before the law to about 68 shekels ($17.72) after. Also, the chains have stopped offering cutthroat discounts.

The number of books sold in 2014 dropped by 10% compared with the year before, the bookstore chain Tzomet Sfarim told Haaretz – but its revenues stayed about the same.

The Books Law, officially named The Law to Protect Literature and Authors in Israel, was enacted in 2013 and came into effect in February 2014. It requires retailers to sell new books at a fixed price during their first 18 months, and sets a minimum rate for royalties to Israeli authors. The main idea was to encourage writing and literature, lest authors be deterred by the thought of starving to death as the chains savaged each other with discount wars.

One upshot was to reduce sales of new books. Tzomet Sfarim estimates the drop to be tens of percent. The “casualties” were mainly new authors and writers of children’s books, sales of which fell by 25% to 30%, Steimatzky estimates.

Despite the figures, at both Steimatzky and Tzomet Sfarim they’re trying to remain positive, and say Israelis are starting to digest what the Books Law means. “People are already getting used to paying full price for new books, which now constitute almost 50% of sales,” says Avi Shumer, CEO and owner of 50% of Tzomet Sfarim, adding that, despite the challenging year, the chain opened new stores. (The other 50% of Tzomet Sfarim is owned by the Kinneret Zmora-Bitan Dvir publishing company.)

Initially, Shumer was appalled by the Books Law. He had been the person who brought aggressive discounting into Israeli book retail, inventing the deal “four new books for 100 shekels,” which Steimatzky wound up aping. By now he’s grown accustomed to the law, but when asked if he was wrong to oppose it, he says, “Make no mistake. Consumers now pay more and authors sell fewer books.” New authors are suffering because people don’t want to pay full price for an author they don’t know; and they aren’t keen on paying full price for children’s books either, he says. “I don’t know if the law should be abolished, but discussion on it should be resumed. This may not be the outcome [the legislator] wanted.”

Itzik Shalev, commercial manager at Steimatzky, thinks one tweak the law needs is to extend the period of time during which new books can be offered at a discount – for instance, during Hebrew Book Week.

The book chains probably haven’t come out openly against the law, and settle for muttering that consumers are getting used to it – mainly because, at least ostensibly, their situation has not deteriorated following the law. Revenues from sales of books did decline here and there, but profitability was not affected. If anything, it improved: the chains are paying the publishers the same amounts as before, but they get to charge more. Also, the bookstore chains are getting into new, profitable activities.

Reading at your leisure

Shumer lists Tzomet Sfarim’s expansion plans, starting with the fact that the business isn’t just about books any more – it’s about leisure. The chain thought about its mix and now also offers games and music, he says. Tzomet Sfarim is a bookstore chain no more; in his mind it’s a leisure chain, which is what bookstores around the world have been doing. “If, a year ago, 90% of our sales were from books and 10% was from other products, this year books are 65% of our sales and other products are 35%,” says Shumer. Moreover, he thinks the trend will just increase. The stores now devote 25% of their shelf space to nonbook products, versus 10% the year before.

That process is even stronger at archrival Steimatzky, says Shumer, adding that in his opinion they’re “less connected to books than we are.”

He’s been in the book business for 34 years, since buying his first store in Ramat Eshkol, Jerusalem. It was called Yarid Sfarim, and in 2002 changed its name to Tzomet Sfarim (from “Books Fair” to “Books Intersection”). He isn’t thrilled about the focus change away from books, but survival is key and he has 1,000 employees to keep in clover.

Coffee, tea or a good read

Steimatzky has no intention of turning its outlets from bookstores into gift shops. If anything, their strategy is the opposite of Tzomet Sfarim, they say, remaining focused on books.

Under its last owner, the Markstone private equity fund, Steimatzky had been losing tens of millions of shekels a year. But it’s breaking even now, the company says. Achieving that required, among other things, reducing headquarters administration from 110 people to 68, closing stores that were losing money and opening new ones, and improving the commercial terms under which it rents its stores.

Different companies try different strategies, says Shalev. U.S. bookstore Barnes & Noble leaped into toys, and now 40% of its product mix is digital stuff, toys and coffee. The WH Smith chain in Britain started in books and is now basically a chain of convenience stores that also happens to sell books (about 30% of its product). U.S. retailer Kitson also started with books and now sells children’s clothing as well, plus lip gloss and pop culture artifacts.

Not Steimatzky: It sees itself as following in the footsteps of U.K. retailer Waterstones – by which it aims to have 75% books and 25% games and music. And reading glasses, bookmarks, reading lamps, etc. The thing is, according to surveys Steimatzky read, people shopping for books want a store that looks like a bookstore, not a drugstore or some version of FAO Schwarz. However, the company definitely does intend to get into candy, drinks and other “impulse” yummies, Shalev adds.

Come August, new books that were published at the Book Law’s enactment will lose protection, which means the stores can discount them. Today, they sell for full price, but in two months’ time they could be half price. Nobody knows how clients will behave.

Meanwhile, Hebrew Book Week began last Wednesday. It actually lasts two weeks, but let’s not quibble. So far, sales have been so-so, though it’s the only legal way for the chains to offer new books at a discount (20%).

Free to offer any discount on books published before February 2014, Steimatzky and Tzomet Sfarim are offering the exact same deal on these “old” books – three for 99 shekels.

Meanwhile, it may well be that the new justice minister, Ayelet Shaked – aided by MK Yoav Kish (Likud) – will cancel the Book Law. Shaked tried to get it ripped up even before she became a minister, in the last government. She thinks new books should be available for discount from the second they’re published, and not have to wait 18 months.

Kish says that having studied the market thoroughly, new book sales clearly are down.

The publishers, however, are conflicted. Dov Eichenwald of Yedioth Books thinks the law should be given a chance to work. “The cannibalization within the industry was threatening to ruin everybody,” he says. “It isn’t free of problems, but it should be fixed and left to stay in force for three years,” which was its original term anyway.

Although he’s not a fan of government intervention in book prices, Eichenwald believes the alternative is worse. “It’s true there has been a drop in the quantity of books people buy, but now there’s more order and internal logic, not endless competition,” he says.

Another major publisher who favors the law spoke with Kish, hoping he’d change his mind. To no avail. The publisher feels the answer lies in constraining gross profits by the bookstores, which normally run at about 40% in the rest of the world, compared with 55% in Israel.

Then there’s Eran Zmora of Kinneret Zmora-Bitan Dvir, who thinks the law should be axed. “You can’t deny that it hurt the people for whom it was enacted,” says Zmora. “The consumers pay more for books, so buy fewer. And the authors are selling fewer books.” A writer who sold 20,000 copies of a new book before the law might sell 7,000 copies today. “Don’t tell me that’s success,” says Zmora. “For a whole year, consumers have been buying fewer new books. Those are the facts, there is no debate here. The chains were not hurt. Most of the publishers were, because when sales volume drops, so does revenue. I think publishers who support giving the law a chance don’t get it. It’s been a year and we can see the results.”

The new culture minister, Miri Regev, doesn’t like the law as is either, but told Haaretz she is studying it. But even before that, the ministry’s job is to get people to read – and higher book prices can’t be the way to do it.