Companies & Industries

It’s alive! Canadian book publishing stirs

Outlook for publishers improving

(Photo: Hamin Lee)

(Photo: Hamin Lee)

At first blush, 2012 was not a good year for independent Canadian book publishing. It began with Random House, owned by German conglomerate Bertelsmann, finally and completely swallowing up McClelland & Stewart, the iconic publisher once as central to Canadian culture as the CBC. It ended with 42-year-old Vancouver-based Douglas & McIntyre, the largest independent publisher in the country, home to such household names as David Suzuki and Douglas Coupland, essentially filing for bankruptcy protection. Reports in the Toronto Star and The Globe and Mail portrayed an industry in apparent free-fall, undone by a weak global economy, digital disruption and a diminished retail market. Then, as if to fulfil its own doom-and-gloom prognostication, at the beginning of 2013, the Globe itself sent its longtime books editor, Martin Levin, packing—reassigning him, with unacknowledged irony, to the obituaries page.

But there are very few years that could be considered “good” for English-language Canadian publishing. In 1963, Clarke, Irwin was the largest Canadian-owned house in the country; 20 years later, devastated by changes to the education market, it was in receivership. M&S, which essentially created what we know as CanLit, was almost always undercapitalized and in crisis; federal and provincial governments frequently bailed it out. In 1985, philanthropist and real estate magnate Avie Bennett bought the company, and then in 2000, in a deal widely thought to circumnavigate foreign ownership laws, sold 25% of it to Random House, donating the remainder to the University of Toronto. Despite the minority stake, Random House’s control of the company—both editorially and financially—was never in doubt, and gradually grew until the government-sanctioned takeover last year. House of Anansi, a beloved indie and the publisher of last year’s award-winning bestseller The Sisters Brothers, faced collapse too until it was rescued in 2002 by poetry-loving industrialist Scott Griffin. And just as M&S was slowly disappearing, other venerable Canadian indies, including Key Porter and Stoddart, went out of business, victim of poor, or non-existent, succession plans—a perennial problem for an industry that largely was created 40 years ago.

But the story is far more complex than the Chicken Little narrative routinely indulged in. While Scott McIntyre, Douglas & McIntyre’s co-founder, is understandably glum about Canadian publishing, it’s not difficult to find insiders with a more optimistic outlook. There are now approximately three times as many Canadian-owned publishers as there were 25 years ago. There are four times as many books published every year by Canadian companies—at least 10,000 Canadian-authored books annually. Profit margins remain consistent, around 11%, and the number of Canadian-controlled publishers had increased marginally. While BookNet Canada, a non-profit organization that tracks book sales across the country, has reported a drop in print sales in the first quarter of this year (down more than 10% in volume), the vagaries of the industry are such that a single title—Fifty Shades of Gray, say—can dramatically skew the data. As well, comprehensive e-book sales data are still not available, and it’s difficult to discern exactly how much e-books are making up for that decline. (BookNet estimates that the e-book market currently represents about 17% of sales.) The National Reading Campaign, a consortium of volunteer librarians, writers and publishers, offers a more encouraging stat: its most recent annual survey finds that Canadians borrow or buy 3.4 million books a week.

While Douglas & McIntyre’s debt—$6.3 million, half of which was owed to the Bank of Montreal—finally forced the company to sell off its assets, those assets were quickly purchased by two sympathetic, smaller B.C. presses, Heritage House and Harbour Publishing, committed to keeping them intact. D&M would no longer exist as it once did, but its three core elements—the books, authors and many of the employees attached to those elements—would survive. “It turns out the collapse of D&M wasn’t a disaster after all,” says Roy MacSkimming, author of The Perilous Trade: Book Publishing in Canada 1946–2006. “The story is not one of unrelieved gloom and tragedy.”

And the rapid reanimation of its constituent parts also gives evidence of an industry of significant durability. D&M’s demise did not necessarily mean that the publishing industry as a whole was in crisis, just that a single company was. “The verdict on whether Canadian publishers can operate independently is in,” says Jared Bland, the Globe’s new books editor and a former editor with Anansi. “More will close, and more will open. But the end of one publisher isn’t going to change anything.”

Canadian publishing has long been a tale of two industries. On the one hand, you have local arms of the major multinational companies, all with foreign owners: Penguin Random House, HarperCollins Canada, Simon and Schuster Canada. On the other, there are hundreds of much smaller, often regional, Canadian independent publishers. While the former tend to publish the writers everyone knows—Atwood, Ondaatje, Munro—it’s the latter that do the hard, often financially risky work of publishing books with limited commercial prospects but significant cultural impact: experimental poetry, provincial history, political philosophy. They also publish early works by the writers everyone knows, before everyone knows them. The indies publish about 80% of the books written in this country. “There’s a very vibrant, independent, small-press biz in this country,” says Sarah McLachlan, president of Anansi. “This country needs the independents to cultivate the young and new voices.”

In 2012, Douglas & McIntyre was the largest, and arguably most successful, of these presses, with revenue of around $10 million, significant international sales and a storage locker’s worth of prizes and awards. For decades, McIntyre had aggressively expanded the company, striking innovative partnerships with art galleries, insisting on the highest standards for editing and design, and trying, quixotically, to outbid major houses on potential bestsellers. Not content to be a regional publisher, he took the company national, and then international. “I’m a competitive guy,” McIntyre says, “and it seemed to me that our competitors were the multinationals.”

But competing at that level was always demanding, and then, finally, impossible, to sustain. Before its recent financial trouble, D&M had twice been bankrupt on paper. McIntyre and his wife mortgaged their home to keep the company afloat. After trying unsuccessfully for years to create what he calls a “Canadian major” in partnership with the likes of former M&S owner Avie Bennett or Key Porter founder Anna Porter, McIntyre sold his majority shares in 2007 to a set of private investors. “We had our financial backs to the wall,” he says now, of his wife and himself. “We had nothing. When you’re in your 60s, that’s a pretty stupid way to live.” The exit strategy didn’t unfold like McIntyre (who stayed on as CEO) hoped. The new investors didn’t put in the equity expected. At the same time, McIntyre says, sales were declining, and the company’s capital base was stretched. “I took my eye off the ball,” he says.

The year 2011 was particularly tough; the company didn’t have any breakout hits and, like other publishers, had to contend with the collapse of both the U.S. book chain Borders and Australia’s Angus Robertson, and, closer to home, a dramatic “reshaping” of Indigo in which books took a greater backseat to bath and beauty products. Finally off its bank covenants, McIntyre’s only option was to sell the company. But protracted discussions with potential buyers ultimately went nowhere.

“If there’s a lesson here,” says Stuart Woods, editor of the publishing trade journal Quill & Quire, “it’s that there’s never been a more difficult time to be a medium-sized general trade publishing house.” But this middle ground is a very specific territory. The most important lesson learned from D&M might be that publishers should aim for prudent, realistic growth. It’s almost axiomatic that the maximum sustainable size of a successful independent is around $3 million in revenue. Anansi’s at that level, as are other major indies like ECW, Dundurn and Orca. While the limiting factors that keep those publishes at that size can be somewhat nebulous, they’re also numerous: the modest size of our market, the difficulties of distribution, the sheer amount of editorial talent available and, possibly, the nature of the government granting system—a company that decides to publish twice as many titles in a given year does not receive twice as much subsidy.

McIntyre refused to play by those particular rules but knew that to run a press of a substantial size you need to be very well capitalized—and indigenously owned publishing has never been very well capitalized. Borrowing usually is out of the question, as banks never have looked particularly kindly upon the publishing industry, with its unpredictable cash flows and unorthodox business practices. (This is an industry where retailers can return to the manufacturer anywhere from 40% to 60% of unsold product.) David Caron, the co-publisher of ECW Press, a Toronto-based house whose list ranges from poker and wrestling books to literary fiction, says he spends a lot of time educating his bankers about the “levers” of the industry. “We’re a business,” he says, “and every business has its own quirks.” What he would like to see is something like Farm Credit Canada, a credit agency run by people who understand the specific needs of the agriculture sector. “Something like this should exist for all cultural industries,” he says.

At points during D&M’s struggles, Anansi seriously contemplated buying the B.C. publisher, but eventually demurred, thinking such a move was “overreaching.” “Growth is a challenge,” McLachlan says. “You have to manage your growth. It has to make sense to the organization. It would dramatically change the nature of this joint if we doubled in size.” The question of scale might just be a theoretical one. Any publisher trying to expand could easily end up suffering the fate of D&M. “Publishing is not dead,” Bland says. “But maybe it’s dead as an extreme growth industry. You have to accept moderate success.” In other words, accept that the phrase “cottage industry” isn’t necessarily an epithet. While publishing is, to Caron’s point, certainly a business, business success is better measured not in terms of profit, but whether a company is publishing meaningfully. “If you look at any Canadian publishers’ list,” Anansi VP Matt Williams says, “there are an awful lot of books there that would never make financial sense. You can grind P&Ls, you can cut costs, but it’s never going to make sense to publish a book of poetry. That’s not why we’re all doing it. We’re all in it for the cultural reasons.”

The market for print books has undeniably shrunk, and while digital is obviously growing, it still represents only about 20% of most publishers’ sales revenue. But digital has certainly provided a sense of stability, and the book industry, unlike the music or magazine industries, has been much quicker to capitalize on emerging technologies. Digital greatly reduces inventory and distribution costs (always high in a country as large as Canada), eliminates the historical problem of returns, and increases the possibility of direct-to-consumer sales. Ultimately, even if print sales have declined, readership hasn’t.

The name Douglas & McIntyre, as well as its back catalogue—which focused primarily on First Nations, art and fiction—and the books it had under contract, are now owned by Harbour Publishing, a Sunshine Coast–based press well known for its books on B.C. history and culture. D&M’s other imprint, Greystone Books, which specialized in nature and environmental titles, is now owned by Victoria-based Heritage House and Greystone’s founder, Rob Sanders, who has been reinstated as publisher; the company’s 20-year partnership with the David Suzuki Foundation has also been renewed. For an industry in supposed turmoil, that’s a pretty good outcome.

“It’s not the palmiest of times,” says Howard White, who owns Harbour with his wife, Mary, “but it’s really not as bad as people who read the tragic headlines think it is.” White will maintain D&M as a separate company, and while the purchase was certainly a major investment and undertaking, the D&M imprint is no greater an entity, financially speaking, than Harbour is—around $2 million. White expects to keep it around that level, and is not terribly daunted by the prospect. He hired back most of the D&M staff and, while he’s roughly the same age as McIntyre, says he has a solid, “much younger” management team. “It’s a bit scary,” he says, “but we’ll just do it in a way that works for us. I very much have faith in Canadian publishing.”