April 11, 2012

Indigo “blindsides” Canadian publishers by raising fees 25% … without telling them



Canadian publishers are fuming after learning that Indigo Books & Music, the country’s largest bookseller, has raised its co-op fees — over a week ago without telling them.

This, less than a year after the giant chain overhauled its co-op program, making publisher payments for co-op — short for “cooperative” promotion programs — mandatory rather for any book sold by the retailer, rather then for books sold in promotional programs, such as a front-of-store display. As we noted in a MobyLives report at the time, publishers were not happy about the fact that there was no longer anything “cooperative” about co-op, and that it represented a piece of every book sold. The strong-arming was accompanied by notice that the store was also cutting back the amount of space it dedicated to books to as little as 50% of floor space.

Now, as Stuart Woods reports in a Quill & Quire story, “According to sources contacted by Indigo, the retail chain has raised co-op fees from 4 to 5 per cent for books sold online or in its brick-and-mortar stores — an increase of 25 per cent. The new model took effect April 1, though many in the publishing community are only learning of the changes now.”

According to the report, publishers and distributors found out about the raise from an email sent late last week, in which Indigo v.p. Bahram Olfati says the increased fees were deemed to be necessary “after extensive market tests in several key stores.”

“It’s not an understatement to say we were completely blindsided by the note …” Erin Creasey of the Association of Canadian Publishers (ACP) tells Q&Q. “There’s nothing from Indigo that gives a good explanation why these [co-op] efforts now cost an extra per cent more than they did last month.” What’s more, says Creasey, the retailer has refused to discuss the program with the ACP.

“This is a blow in two ways, and it’s hard to say which one has the greater impact: it is a further reduction of publishers’ margins, and it is a further demonstration of Indigo’s absolute lack of interest in working with Canadian publishers,” says the ACP’s eecutive director, Carolyn Wood. “There is no sense of partnership.”

Meanwhile the report says more and more publishers are grumbling that “they are receiving less value for their promotional dollars,” and that Indigo is not doing all that well at selling books anyway — one anonymous publisher says “orders are way down, the returns are up, and we have to pay more for the privilege of having very few copies in the tiny book space they have left.”

“The only option [publishers] have is to not sell to Indigo, and that is not a viable option in most circumstances, not at present,” the CPA’s Wood tells the magazine. “But that may change over time.”

Especially if they’re not selling your books anyway. Which is what makes this situation different from that of American publishers, who are often urged to respond to Amazon‘s relentless strong-arming  by not selling their books to the company, leaving Amazon as a bookseller with no books. But who’s going to be the first to give up their biggest account? In Canada, as Indigo continues to sell fewer books, while simultaneously increasing costs of those books to publishers, and doing so in such a hostile, strong-arming manner, publishers may decide — as they hint above — that they have not much to lose, and they might as well do it while it still has meaning — i.e., 50% of their sales. And it’s still got the word “books” in its name, after all.

Interestinger and interestinger.


Dennis Johnson is the founder of MobyLives, and the co-founder and co-publisher of Melville House. Follow him on Twitter at @mobylives