A Supplier-Centered Fixed Book Price System Cannot Revive the Publishing Market

The fixed book price system introduced in 2014 is expected to remain in place. Although it had been scheduled to sunset in November 2020, the Ministry of Culture, Sports and Tourism has decided to maintain the current price regulation. Consumer dissatisfaction was so high that a public petition calling for the abolition of the fixed book price system garnered 200,000 signatures, but in the end it was not reflected in policy.

Supplier-centered policies like the fixed book price system are having negative effects on both consumers and the publishing market. The Ministry of Culture, Sports and Tourism and supporters of the fixed book price system present increases in figures such as the number of publishers, the number of bookstores, and the number of new titles published as positive signs. If price controls reduce competition among bookstores and among publishers, it is only natural that this will benefit suppliers and lead more suppliers to enter the market. It is unreasonable to judge the success of a policy solely by supply-side outcomes while ignoring consumer welfare.

Consumers are experiencing considerable inconvenience because of the fixed book price system. Whether they go to a neighborhood bookstore or use an online bookstore, they have no choice but to buy books at the same price. Their right to choose cheaper books through price comparison has been infringed upon. As book prices rose, consumers immediately began to cut back on spending. For books they absolutely need, they are turning to the used book market or nearby libraries. If consumers are not buying books, what is the point of having more publishers and more bookstores? In fact, the number of books read by Koreans has been declining sharply every year, reaching 8.3 books in 2018 and 6.1 books in 2019. That means they are not even reading one book per month.

There is also a strong possibility that the fixed book price system will further worsen conditions for small publishers and bookstores. The temporary effect of regulation may make it appear that suppliers’ profits are increasing, but this is difficult to sustain over the long term in the market. As competition declines and profits rise, more publishers and bookstores will continue entering the market, and competition within the market will ultimately intensify, making it harder for small and medium-sized publishers and bookstores to survive. To rescue them, even stronger regulations that interfere with consumer choice may become necessary.

Therefore, policy must consider consumer welfare rather than suppliers if it is to avoid failure and produce clear results. After all, protecting publishing culture or small merchants is only possible if there are consumers. If we rely on policies like the fixed book price system, which legally encourage price collusion, we cannot bring back consumers who have already left. Rather than focusing on reducing competition within the publishing market, it would be more effective to find solutions that can compete with and prevail over cheaper and more useful cultural content such as films and YouTube content.

Before the 2000s, anyone who wanted to buy a book had to visit a bookstore. But now we live in an era in which it is natural to order books online from home and to obtain information through channels other than books. What will bring these consumers back to offline stores are attractive bookstores, content more useful than YouTube, and things like these that can make consumers who have turned away willing to open their wallets to buy books again.

The fact that the fixed book price system will remain in place for three more years is unfortunate for both consumers and the publishing market. Going forward, the effectiveness of policy needs to be judged from the consumer’s perspective, and the decision whether to maintain or abolish the system should be considered accordingly.

Eun-kyung Kwak, Head of Corporate Culture Division, Center for Free Enterprise (CFE)

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Original title: 공급자 중심 도서정가제로 출판시장 살아날 수 없어

Author: Eun-kyung Kwak

Date: 2020-11-18

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=23262