International Management of Publishing & Rights

Recommended texts & resources 

Each chapter within this course has a dedicated bibliography at the end, as well as further reading. These sources were originally selected from the Oxford Brookes University library collection and we are conscious they are somewhat UK-centric. 

The following two books are used as the set texts to accompany the MA course.

Selling Rights by Lynette Owen

International Business by Stuart Wall

Further to these, we highly recommend the online PA Export Toolkit and The Oxford Handbook of Publishing, edited by Michael Bhaskar and Angus Phillips, which is a comprehensive review of the business of publishing and includes chapters on copyright, rights, economics, strategy, globalization, corporate social responsibility, and the market sectors.

The publishing business

Clark, G. and Phillips, A. (2020), Inside Book Publishing. 6 ed. Abingdon: Routledge.

Phillips, A. and Bhaskar, M. (2019), The Oxford Handbook of Publishing, Oxford.

Woll, T. (2014), Publishing for Profit, 5 ed, Chicago Review Press.

Copyright, contracts and licensing

IPA, 2022. Copyright [online] International Publishers Association. Available at: https://www.internationalpublishers.org/our-work/copyright-enforcement [Accessed: 21 February 2022]

Jones, H. and Benson, C. (2016), Publishing Law, 5 ed. London: Routledge.

Owen, L. (2020), Selling Rights. 8 ed. Abingdon: Routledge. 

Owen, L. (2022), Clark’s publishing agreements: a book of precedents. London: Bloomsbury Professional.

PLS, 2022 Introduction to Rights Management, Acquiring Rights, and Licensing Rights to Others [Online Training Course] Available at: https://pls.thinkific.com/. [Accessed: 21 February 2022]

Stokes, S. (2019), Digital copyright: law and practice, 5 ed. Oxford: Hart Publishing.

WIPO, 2022. Publications [website] World Intellectual Property Organization. Available at: <https://www.wipo.int/publications/en/> [Accessed: 21 February 2022]

Finance and international business

Atrill, P. and McLaney, E. J. (2022), Accounting and Finance for Non-Specialists. 12 ed. Harlow: Pearson.

Wall, S. (2015) International Business, 4 ed. Harlow: Pearson.

Digital Publishing

Hall, F. (2013), The Business of Digital Publishing. London: Routledge.

Thompson, J. B. (2021), Book Wars: The digital revolution in publishing. Cambridge: Polity.

1.1. Chapter Aims

This chapter introduces the opportunities and challenges encountered by publishers who seek to operate in international markets. It explores the range of possible strategies for the exploitation of intellectual property assets in international settings and investigates the reasons for selecting a particular approach. This chapter is designed to equal approximately 5 hours of independent study and as you work through the chapter you will find skills builder exercises that will help you to develop what you have learned in a practical sense.

1.2 Introduction – The Link between International Business and Rights Management

This course brings together two aeas: International Publishing Management and Rights Management. Although the nuances will vary according to the size, sector and location of different publishers, the relationship between these two areas is an important one to understand. The more complex aspects may often be distilled into the simple dilemma – whether to undertake something oneself or whether to license someone else to do it. In other words: whether to export/build an international sales/publishing operation and to form an international business, taking the risk and reaping the reward, or whether to license the rights to a third party allowing them to take a higher proportion of the rewards of success while bearing the risk.

Publishers must follow complementary strategies when managing the exploitation of their rights and when planning international development. The publishing company will need to consider both strategic objectives and immediate commercial aspects when making decisions in these two interconnecting areas. There may also be organisational or motivational implications to these decisions. Take, for example, a situation when the Rights team in a US-based publishing company is incentivised to maximise income from selling foreign language rights globally and the business development team is charged with developing a local publishing subsidiary in Spain. 

The rights team might be tempted to sell to a Spanish competitor the rights to publish a Spanish translation of the very works which the fledgling Spanish subsidiary intended to exploit in translation in order to develop the local publishing business. This potential conflict situation is entirely manageable through careful planning, coordination and monitoring. However, it illustrates the importance of aligning the objectives and the plans for rights and for international development. In assessing the best solution to a complex situation such as this, an approach that takes into account both strategic and commercial considerations is needed.

Case Study – Advantages and Disadvantages of Reprint Licensing

The following case study explores an academic publisher’s decision about whether to accept a proposal from a third party to reprint low priced copies of textbooks for the Indian market. Analysis of the case requires both a commercial and a strategic perspective. The case is intended to tease out some of the questions that publishers must answer for themselves in making decisions on international strategic matters.

A medium-sized UK based academic publisher in engineering and science is approached by its Indian third party distributor with the observation that the prices currently asked by the publisher for its books when exported to the Indian market (typically £29.95) are much too high to secure adoptions at universities in India, and with the proposal that the publisher license to the distributor the reprint rights for 50 of its technical titles. The distributor proposes to print 500 of each of the titles using its own imprint, to price them at 595 Indian Rupees (approximately £6) and to pay the publisher a royalty of 10% on net sales, with an advance against future royalties on signature of the agreement of £150 for each title. The distributor predicts that the average market discount on sales of the reprint would be 35%, yielding a net receipt per copy of: £6 x 65% = £3.90. Currently, the average volume export sale per title into the market is 50 copies, at an average discount from the publisher to the distributor of 65%. The unit cost of the books that are currently exported into the market is £5.00, and export sales attract a royalty to the author of 10% of the publisher’s net receipts. Note that licensed subsidiary rights, including licensed reprints, attract a 50:50 split with the author.

Skills Builder 1: Make notes on the following questions

1. How might you evaluate the respective financial attractiveness of the distributor’s proposal?
2. What are the arguments for and against accepting the distributor’s proposal?
3. How might the publisher address any commercial and strategic concerns through negotiation with the distributor?
See Sample Answer.

1.3 The Economic Value of Intellectual Property Rights

This section looks at the value built up by a publisher in the creation and development of intellectual property (IP) and the opportunities that exist to exploit that value in an international setting.

The value of an intellectual property (IP) asset, such as a book or journal title or a publishing list or even a publishing company, can be increased by extending beyond the domestic setting. Publishers very often identify opportunities to grow revenues and increase the value of their IP assets by selling or licensing them into overseas markets or by developing their business internationally.

This move for additional sales from international markets may be driven by very different motivations. Examples of such motivations might be:

1. The perception that achieving some more sales by exporting the original editions of books into other English language markets would be a small, incremental, and low cost step and that selling into the overseas market will be relatively easy.
2. The assumption that demand exists, just waiting to be satisfied.
3. Pressure from authors or agents to achieve wider international exposure.
4. The need to satisfy shareholders’ expectations by continuing revenue growth after domestic sales have reached saturation.
5. The desire to build a valuable international business.
6. The opportunity to leverage brands, content, technology or other assets in new markets.
7. The fear that if the Publisher doesn’t do it, their competitor might.
8. Some of these, for example, 5 and 6 above, are more long term and strategic; others might be considered to be more short term and tactical.

Case study – International Versus Domestic Value of IP Ownership

The next skills builder uses case studies to consider the international versus the domestic value of the ownership of a particular asset. These cases show how publishers have extended the value of their IP assets internationally and demonstrate strategies for building value. Among such strategies are:

• Extending existing products and brands into new markets
• Realising revenue synergies by adding similar content to sell through an existing channel
• Realising economies of scale by leveraging the adaptation of content, or the reuse of technology platforms

Skills Builder 2: For each of the four growth examples listed below and using the web links, identify the possible strategies being followed by each. You may also find it useful to refer to the list of seven drivers above, but you may also identify other drivers. Please make your own notes.

STM Journals
See the NPG website, and regional websites, for examples of how a journal STM publisher has been able to extend the Nature brand into India, China, Japan and Middle East markets
https://www.nature.com/siteindex

Professional Databases
See how LexisNexis has extended its brand and reused its platform in different geographical markets
https://lexisnexis.com/
http://www.lexisnexis.com.cn/zh-cn/home.page
http://www.lexisnexis.jp/ja-jp/home.page

Trade Books
Check out the global roll-out of the For Dummies series by Wiley
https://www.dummies.com/
https://www.wiley.com/WileyCDA/Brand/id-9.html?category=For+Working
https://www.wiley.com/en-gb/search?pq=dummies%7Crelevance%7Cseries%3A3054
https://www.wileyindia.com/for-dummies

Textbooks
Examples of how Pearson has developed international adaptations of a core marketing textbook:
https://www.pearson.com/us/higher-education/product/Kotler-Marketing-Management-15th-Edition/9780133856460.html
http://catalogue.pearsoned.co.uk/educator/product/Kotler-Marketing-Managementp4-European-Edition/9781292248448.page
https://www.flipkart.com/marketing-management/p/itmfbrtt4zuqassj
See Sample Answer.

1.4 International Opportunities to Exploit Rights

The sales potential outside the home market for different publishers varies according to their area of publishing and the nature and the level of their customers and their publications. Thus different companies have very different international opportunities. Indeed, different lists published by the same company may have different potential in international markets. Certain types of publication travel perfectly well in their original editions into international markets, others require translation, or adaptation, and others again have very limited potential either for export or for licensing or adaptation. Furthermore, each international market has its own unique attributes, meaning that the shape of demand from each for a particular product will vary greatly. A publisher hoping to exploit their intellectual property assets in international markets must thoroughly research the needs of the various markets under consideration.

Skills Builder 3: Evaluating International Market Strategies

For each of the following six publishers make notes on their possible opportunities in international markets, considering both ‘same language’ markets and ‘other language’ (or translation) markets.

1. A UK publisher of illustrated craft books
2. A UK professional accountancy publisher
3. A US publisher of fiction for young adult readers
4. An Australian based publisher of a series of 100+ self-help books
5. A higher education business textbook publisher based in France
6. A UK secondary schools publisher 

a) What is the scale of the opportunity that might be available in international markets for each?
b) What might be the most appropriate strategy to address the same language markets (eg for UK or US publishers, the English language markets?
c) What might be the most appropriate strategy to address the other language markets (eg for the French publisher, the English language markets?

When thinking about the most appropriate strategy, consider where the opportunities might lie for exporting original editions, licensing of reprints or translations, and agreeing co-editions.
See Sample Answer.

1.5 Introduction to International Markets 

All geographical markets are different. Although we often use generalities when discussing international markets, it is a fundamental principle when looking at publishing markets to recognise that they are all different and that generalisation can lead to dangerous assumptions. Geographic, cultural, political, economic, religious, educational, language and other factors all shape the unique characteristics of each market. Going further, it is misleading to speak of publishing markets as though they were homogenous within a country. There will be regional and economic variations in a given country. In addition, different market sectors are shaped in different ways. Thus the trade/consumer market in a chosen country will have important differences from the schools market, from higher education and from professional or STM markets.

The International Publishers Association (IPA) estimated that in 2012 the total global publishing market at consumer prices was Euro 105,614 Million. The first link below provides more details about this estimate:

https://www.internationalpublishers.org/images/press-releases/2012/global_statistics.pdf

The second link below takes you to a more recent data collection exercise by the IPA and the World Intellectual Property Organisation (WIPO) showing 2016 revenues of US $41.9 billion in the 11 countries from which data was reported:

https://www.wipo.int/publications/en/details.jsp?id=4251

In the third link below, their 2020 report showed trade and educational revenues were $50.3bn in 2018 - from 19 countries reporting:

https://www.wipo.int/publications/en/details.jsp?id=4488

In developing strategic plans for international markets publishers must consider the current situation and the important trends which are likely to shape the market in the future.

1.6 Introduction to Market Entry Strategies

A publishing company operating only within its own national borders is limited in its growth opportunities. In such a situation revenue growth can only be achieved if the market itself is growing in size or if the company is able to take market share from a competitor. Many smaller companies are content to publish from a national base and to reach international markets by exporting, with sales handled by third party representatives, agents or distributors. However, quite frequently companies recognise the advantages of establishing their own sales and publishing organisations in overseas markets to maximise sales into export markets and to generate real growth. Oxford University Press, which we explore below, is a great example of this.

Many UK publishers have sought to establish their own operations in North America in order to access the world’s largest English language market. US publishers have sought to do the reverse by setting up operations in the UK. In doing this both have been able to capitalise on their advantage of already publishing in English. This language opportunity is less available to publishers in other languages and from other countries. Sometimes companies seek to enter a new market by buying an existing company that is already operating in the target market.

Case Study – Oxford University Press

Over a considerable length of time, Oxford University Press has successfully expanded its operations to include over 50 countries worldwide. This now enables OUP to exploit its assets in all major markets without the need to sell rights to other parties or to rely on third-party distributors. See the following link for a brief history of OUP and a video of the company’s global vision.

http://global.oup.com/about/?AB=A&cc=gb

Skills Builder 4: 

1. What are the drivers behind OUP’s international development?
2. What future priorities might you expect OUP to pursue in international markets?

See Sample Answer.

Case Study – International Growth by Acquisition

The following links describe the acquisition by two UK based academic publishers of businesses with strong US bases.

The Acquisition by Taylor & Francis of CRC Press in 2003

http://www.publishersweekly.com/pw/print/20030310/24950-taylor-amp-francis-to-acquire-crc-press.html

Bloomsbury Publishing plc’s acquisition of Continuum International Publishing Group in 2011

https://www.publishersweekly.com/pw/by-topic/industry-news/industry-deals/article/47941-bloomsbury-buys-continuum-for-20-million.html

What would have been the international strategic reasons for Taylor & Francis and Bloomsbury to make these acquisitions?

Both Taylor & Francis and Bloomsbury wanted to develop their North American operations, as until this point they lacked scale in the largest academic market in the world. Without a strong North American operation under their own control, they lacked the presence to sell products originating from the UK and they would have been less able to attract North American authors.

Prior to the acquisitions, in order to maximise sales in North America, both companies would either have relied on distributing via a third party, with the resulting reduction in control and probably with suboptimal sales results, or they would have made rights or coedition agreements with North American publishers on a title by title basis. Such a co-editioning approach might have been successful for a small proportion of top titles, but it would not have achieved the overall sales result desired. Both models (third party distributor and co-edition partner) require the sharing of revenue and profit with another party, meaning that financially the arrangement was less satisfactory.

From a publishing perspective, only by establishing a significant presence in North America would they be able to attract North American authors and develop a local North American publishing programme. Taylor & Francis through the acquisition of CRC Press was able to present itself in the North American market as a US publisher. This will have had significant benefits in terms of both sales and publishing. Bloomsbury, through the acquisition of Continuum, hoped to obtain a substantial position in the US to serve as a base for future growth.

1.7 Development of an International Publishing Business

In chapter 9 of this course we explore in more depth the growth of global publishing businesses. At this introductory stage however it is appropriate to gain an initial understanding of some of the thinking about global and international strategy. To do this we use a case study from the Science Technology and Medicine (STM) publishing field.

Firstly, it is important that we present a brief overview of global synergies. As firms expand internationally, they may begin to look at how they might reconfigure their value chains in order to raise overall profitability – such opportunities for scope may not exist within a domestic-only market. As such, these ‘global synergies’ may be developed in the following ways:

• Localisation on a global scale – a business may disperse value-creating activities to the most effective locations around the world.
• Economies of scale – whereby a firm can operate at such a size that all available economies of scale are achieved within the value chain upon becoming an international company.
• Geographical reach – the application of distinctive core competencies in new geographic markets resulting in higher return.
• Non-organic growth – whereby organic growth is insufficient, and an agreement within an overseas firm is necessary in order to reach key business objectives.
• Economies of scope and experience – upon becoming an international business, the most appropriate mix of activities within the value chain can be selected.

The global synergies that a ‘multinational’ (such as RELX below) may be able to exploit through its international business operations are comprised of four generic strategies – Global, Transnational, International and Multi-domestic. Companies adopt one of these strategies according to whether cost competitive pressures and local responsiveness pressures are low or high.

Let’s look now at Elsevier, part of the Anglo-Dutch firm RELX, which is one of the largest health sciences publishers in the world. The company has built up a global health sciences publishing business by exporting internationally, by acquiring existing publishing businesses in international markets, and by developing local businesses organically in many different countries. The local businesses sell products which originate in the European and North American publishing centres, they adapt or version products for their own markets and they create their own publishing programmes to meet local needs.

The following websites will help you understand more details about the company:

Refer to the Elsevier web site to develop a picture of the organisation, focussing especially on its health sciences book publishing and look at what the company is doing in India, Brazil, South East Asia and Europe. http://www.elsevier.com/about/at-a-glance

A list of Elsevier’s international offices may be found at: https://www.elsevier.com/about/our-business/locations

Let’s consider where Elsevier is in terms of its global strategy. Like many other sectors within publishing, the market for textbooks in nursing and medicine might probably be considered to be relatively high on the need for local responsiveness. Local variations in language, education and professional clinical regulation may mean that products and services must be adapted for local markets. Elsevier competes in each local market with local competitors and other international publishers, very often on the basis of price. Thus it is important for the company to contain its costs, and cost competitive pressures might also be considered to be relatively high. Therefore, when developing its international businesses Elsevier’s health science’s book business might be placed in the transnational box of the strategy grid. In building up its international business Elsevier Health Sciences has made significant efforts to repurpose content that originates in the UK and US by publishing local versions of its English language texts. However, a high degree of local customisation is still required.

1.8 Chapter Summary

This first chapter has discussed how publishing companies can approach international markets in order to derive the maximum value from the intellectual property rights that they control. In this chapter we have also introduced the idea that when developing internationally publishers choose between selling/exporting, licensing to third parties, or building local operations. A single approach is not suitable for all situations, and all publishers will employ a range of different approaches for different markets and segments.

• Demonstrate an understanding of the international market context in which publishers operate, the opportunities presented by international markets for the exploitation of intellectual property assets, and the challenges in the development of an international publishing business.
• Critically evaluate different international rights management and international development strategies followed by publishers and the reasons for following these strategies.

Further Reading

Clark, G. and Phillips, A. 2020.  Inside Book Publishing 6th Edition London: Routledge.
Hall, F. 2013. The Business of Digital Publishing. London: Routledge
Jones, H. and Benson, C. 2016. Publishing Law Fifth Edition. London: Routledge
Owen, L. 2019. Selling Rights Edition 8th Edition London: Routledge
Upshall, M. 2009. Content licensing Buying and Selling Digital Resources. Oxford: Elsevier
Wall, S. 2015. International Business, 4th Edition. Harlow: Pearson

Skills Builder 1 – Sample Answer

This activity highlights both commercial and strategic aspects when considering whether to license reprint rights.

1. How would you evaluate the respective financial attractiveness of the proposal?

First, using the information as to the quantity, price and discount calculate what the sales revenue for the publisher would be both under the existing export model and under the proposed reprint licence. Then deduct costs to arrive at an evaluation of the likely gross profit for the publisher of each model. Note in the table below negative numbers appear in brackets/parentheses.

Note that the Advance paid on a signature would be shared 50:50 with the author.

Based on the above calculation of profit you might conclude that the most advantageous approach would be to continue exporting because this approach yields £11,086 gross profit compared with £4875. The publisher should assess the strategic and financial dimensions of the decision.

2. What are the arguments for and against accepting the distributor’s proposal?

Arguments for:

• Commercial
• Money up-front in the advance of £150 per title, with a guaranteed income stream.
• Less administration and less cost – no need to worry about selling copies, printing copies, shipping books, collecting debts
• Less financial risk.
• Strategic
• Allows for the books to be priced to market
• More copies will be sold and textbook adoptions obtained
• Authors may prefer the higher-profile resulting from greater visibility in the market

Arguments against:

• Commercial
• Would yield less income overall to the publisher, £9750 compared with £26,206
• Reprints would be a subsidiary rights deal and as Publishers’ author agreements typically specify that subsidiary rights income is split 50:50 with the author. As a result the publisher’s income would be halved to £4875. This level of profit compares with Gross Profit of £11,086 from selling copies of the original edition, although such sales are fewer in number and not guaranteed.
• Strategic
• Most of the revenue and profit upside of reprinting is to the benefit of the local distributor
• The imprint on the books will be the distributor’s, therefore publisher would not gain any recognition for its own brand
• Licensing the local distributor to reprint may build up a competitor in the market. This may not be consistent with the publisher’s longer term objective of establishing its own publishing operation in India. Also there are possible risks with low-priced editions of them being imported into higher-priced markets.

3. How might the Publisher address any commercial and strategic concerns through negotiation with the distributor?

The publisher might seek to rebalance the relationship by:

• Asking for a higher royalty, perhaps 15%, and a higher advance
• Limiting the term of the licence say to two or three years
• Insisting on a joint imprint
• Excluding strategically important titles

Skills Builder 2 – Sample Answer

STM Journals

Key Drivers – leverage of a strong brand in new market (Nature); leverage of technology platform; combination of global and local content; building an international business

Professional Databases

Key Drivers – market extension; leverage of technology platform; combination of global and local content; leverage of a strong brand in a new market (LexisNexis); building an international business

Trade Books

The rights in the For Dummies titles are controlled by Wiley. The series was originally launched in the US. Titles have been developed locally in Germany, India, the UK and elsewhere as well as being exported. This is a classic case of brand extension

Textbooks

Key drivers – leveraging economies of scale; exploitation of key assets; building a global brand; gaining competitive advantage.

Skills Builder 4 – Sample Answer

Your thinking may have included some of the following areas

Question 1: What are the drivers behind OUP’s international development?

• The need to continue driving revenue growth. OUP is a major contributor of funds to the University.
• Revenue growth is primarily achieved by exporting and by developing local businesses, not by licensing out IP to others.
• Shareholder/owner pressure – OUP as part of the University of Oxford plays an important part in promoting the profile and reputation of the University internationally.
• Exploiting the awareness of and confidence in the Oxford brand worldwide
• ELT publishing provides an entry which leads to the publishing of other educational resources in international markets.
• The opportunity to leverage assets such as: educational IP, reference IP, the technology platform for dictionaries.
• The opportunity for digital growth in the area of academic publishing.

Question 2: Future Priorities

• Growth in fast-developing markets e.g. China, India, Latin America will be central to OUP’s strategy. Likely to be driven by developing local publishing, very often starting with ELT leading then into educational.
• Establishing operations in new markets in Africa, Central and East Asia, ahead of the competition and wherever commercial opportunities exist
• Maintaining OUP’s position as the leading University Press in the US (the largest academic market) will be a priority.

2.1. Chapter Aims

This chapter aims to explore the principles of copyright; national copyright legislation; the international copyright conventions and international issues; the moral rights of the author; the author-publisher contract – licences versus assignments; and some understanding of the processes involved in the management of subsidiary rights. This chapter is designed to equal approximately 5 hours of independent study and as you work through the chapter you will find skills builder exercises that will help you to develop what you have learned in a practical sense.

2.2 Introduction – The Principles of Copyright

What is Copyright?

Copyright is a form of intellectual property – other categories include design rights, patents and trademarks. Copyright is the mechanism generally used to protect the content of literary works, and also computer programmes – it also covers dramatic, musical and artistic works and the rights of performers (the latter generally referred to as neighbouring rights). It is therefore the framework whereby authors can decide which uses of their work are permitted, and which are not. It enables rights holders to negotiate a fair reward for the use of their work by authorised licensees, and to take action against unauthorised use of their work.

Who Owns Copyright?

The first owner of copyright in a literary work is normally the author as the creator, although some national copyright legislations specify exceptions to this – for example, in the UK, copyright in a work written as part of the author’s normal employment belongs to the employer. US copyright legislation provides for copyright in works “made for hire” to belong to the entity which commissions the work.

If copyright belongs in the first instance to the author, he or she can then choose to make contractual arrangements with authorised producers of their work such as publishers. Contracts normally follow one of two models – a complete assignment of copyright ownership to the publisher, subject to agreed payments to the author – this is common in the area of educational, academic and professional publishing. Assignment involves the complete transfer of copyright ownership from the creator to a third party – in the publishing context, from an author to a publishing house. In most cases, the author will have a continuing financial interest in the work in terms of an advance and royalties on sales of the work, and a share of income from any subsidiary rights licensed. Subsidiary rights are ways of licensing the work to third parties to be produced in separate print or non-print form (e.g. translation rights, large print rights, film or TV rights).

In trade (mass-market) publishing, a more common model would be for the author to retain ownership of the copyright and to grant an exclusive licence to a publisher to publish the work in the original language in agreed format/s for an agreed period of time in an agreed list of geographical territories. An author could thus make separate exclusive licences with, say, a UK publisher to publish in the UK and Commonwealth territories, and a separate licence with a US publisher for the US market. The author could also decide to grant each licensee the right to exploit an agreed range of subsidiary rights within the agreed territory. Alternatively – and particularly if they are represented by a literary agent – they may decide that some or all of the subsidiary rights would be handled by the agent.

Contractual arrangements between an author and a publisher will normally be on the basis of the publisher agreeing to remunerate the author; the exact financial terms are negotiable and much will depend on the type of work, the expected sales and the status of the author. The most common model is an advance payment against a royalty, payable on actual sales of the work and based either on the retail price or on net receipts, plus an agreed share of any income generated from the sale of subsidiary rights. In a smaller number of cases, the payment might be made on the basis of an outright fee, with no further remuneration – this is often used for authors providing a contribution to a multi-author work. The authors of journal articles in academic journals are not normally paid for their contributions.

National Copyright Legislation

The exact conditions for copyright protection will depend on the provisions of national copyright legislation in the country of which the author is a citizen, where he/she is domiciled or where the work is first published. There are variations in copyright protection from country to country – what categories of work are entitled to protection, whether any formalities are required to secure protection (e.g. registration) and the duration of protection. For example, in the United Kingdom (the first country to introduce a copyright act, in 1710) copyright protection lasts for the lifetime of the creator plus 70 years; similar periods apply in all the countries of the European Union and also the United States. By contrast, the period of protection in Japan and China is the lifetime of the creator plus fifty years, so copyright in an American, British or European work would expire in those countries sooner than in its country of origin.

In the UK, no formal procedure is required to secure copyright protection – a work is protected as soon as it is created. For many years, the USA required registration of a work with the Library of Congress to secure protection; this is no longer compulsory but is still considered advisable. Aspects of UK copyright legislation have been regularly updated, often as a result of EU directives, but also to take account of the need to continue to protect copyright in the digital age.

Each country may introduce in its national copyright legislation exceptions, which would permit the use of copyright content in some contexts without permission from or payment to the rights holder: for example, in the UK there is an exception for visually impaired people, and other new copyright exceptions have been introduced by Statutory Instrument in 2014. There are also provisions for fair dealing, where limited amounts of copyright material can be used without permission or payment (but with due acknowledgement) for certain defined purposes, such as criticism or review; but it is rare for fair dealing to apply to use in a commercial context. Copyright exceptions may vary from country to country even within the European Union, and in some cases they may be subject to the so-called “three-step test” of the Berne Convention, which requires that the use of copyright material should not be detrimental to the normal commercial interests of the rights holder.

Copyright recognition between countries

There is no such thing as international copyright law, but countries recognise the intellectual property rights of other countries through mutual membership of one or more of the international copyright conventions. The Berne Convention (1886) currently has 167 members; the Universal Copyright Convention (1952) has 100 members, whilst the more recent World Intellectual Property Organisation (WIPO) Copyright Treaty (1996, in force since 2002 and reinforcing copyright protection in the digital age) currently has 91 members. A state which ratifies a convention agrees to provide to copyright works from member states of the same convention the same level of protection which they accord to the works of their own citizens; this is termed national treatment. Relatively few countries remain outside membership of all the conventions.

International Conventions

There are several international copyright conventions in existence, for instance, one of the most well-known is the Berne Convention which was established in 1886 as a multilateral copyright treaty. The aim of the convention was to establish minimum standards of copyright protection. Its main features are that no formal procedures are required (such as registration) for copyright to be secured – and that for the majority of works, copyright lasts for the lifetime of the author, plus fifty years.

Skills Builder 1: Conduct your own research into the other copyright conventions and treaties using the internet as a guide. As you are doing this research you might consider (a) whether the convention requires a minimum term of copyright protection under the legislation of each member state; (b) whether the convention permits a copyright registration system in order to secure copyright protection; (c) whether the convention has any further requirements such as the inclusion of a copyright notice in each work; (d) whether any of the conventions include special provisions for developing countries.

So developing our thinking on this further, why do you think a country might remain outside the membership of any of the conventions?

Let’s think about the answer to this question together. Perhaps a country may have disputed political status (e.g. Taiwan); or has an inability to meet treaty requirements (e.g. Berne requires a minimum period of copyright protection of the life of the creator plus 50 years); or perhaps there is a reluctance to pay for intellectual property from abroad.

The Moral Rights of the Author

These are a range of rights which are personal to the author and which are quite separate from his/her economic rights (the right to receive fair remuneration for the use of his/her work). Moral rights appear in the national copyright legislation of many countries; they came relatively late to UK national legislation, appearing for the first time in the 1988 Copyright, Designs and Patents Act, and were a result of the UK joining the European Union. Moral rights are a key feature of the legislation of EU countries, which follow the civil law model which treats the author’s rights as a human right, and in those countries moral rights are inalienable and perpetual. By contrast, the common law tradition which applies to the Anglophone countries considers the author’s rights as property which can be traded. Moral rights do not exist as such in US copyright law.

2.3 The Author-Publisher Contract

The basis of the business relationship between an author and a publisher lies in the contract signed between the two parties. The contract (usually drafted by the publisher) should be acceptable to both sides and should outline the obligations of both parties – the author to write and deliver an acceptable work in acceptable form by an agreed deadline, and (if accepted) for the publisher to publish the work in its original language in agreed format/s in agreed territories for an agreed period of time, subject to making appropriate payments to the author. If agreed, the publisher may also be given control of exploiting subsidiary rights in the work, paying an agreed share of any proceeds to the author.

The contract should clearly state the situation on ownership of copyright in the work. In the case of trade titles (books for the general reader, whether literary or mass market) the author normally retains ownership of the copyright, and grants the publisher an exclusive licence to publish the work in agreed format/s in agreed territories for an agreed period of time. A well-established author, particularly if represented by a literary agent, could make several exclusive licences for the same work in the English language, e.g. with a UK publisher for the UK and Commonwealth markets, and with a US publisher for the US market. The contract may also include control of an agreed range of subsidiary rights in the agreed territories; alternatively, a literary agent may choose to handle some rights e.g. first serial rights (pre-publication extract rights to newspapers and magazines), film and television rights and translation rights, rather than include them in the rights granted to the original language publisher.

By contrast, when signing author contracts many Anglophone educational, academic and professional publishers acquire ownership of the copyright in the work by assignment, so any copyright notice will appear in the name of the publisher. This policy is particularly appropriate for large multi-author works, and also enables the publisher to take swifter and more effective action against piracy without the need to consult or obtain any support documentation from the author. Assignment is not normally an outright purchase of the copyright – the author will normally have an ongoing financial interest in the work in terms of royalties on sales of the original edition and a share of any subsidiary rights revenue. By contrast, contributors to academic journals – who are often asked to assign their copyright – traditionally receive no payment for their work but achieve academic visibility through publication in a reputable journal.

Take a moment to consider the following: Drawing on your own experience, what do you think are the relative benefits to the author of (a) retaining ownership of the copyright or (b) assigning the copyright to the publisher, if in both cases the author would receive an advance and ongoing royalties?

Let’s consider the answers.

1. Retaining ownership of copyright would enable the author to make several separate arrangements for publication of the book in certain markets. If subsidiary rights are not granted to the publisher, the author would receive all proceeds from the sale of such rights, less any commission charged if a literary agent is involved.
2. Assignment is usually more convenient and required for individual contributions to multi-author works; it is also often requested by educational, academic and professional publishers as it enables them to take quicker and more effective action against piracy. The publisher will normally retain a share of any income from the sale of subsidiary rights.

Whether the contract is by licence or assignment, the usual payment model for primary sales of the work is an advance payment, set against percentage royalties on actual sales of the work, and an agreed share of any rights revenue. Royalties may be based on the retail price or on net receipts (the latter is common in educational and academic publishing, and trade publishers may also work on this basis for high-discount sales). In some cases, an author might receive an outright fee – this is often the case for contributors to a multi-author work, where payment of tiny royalty percentages to each contributor would be impractical.

The contract should also cover warranties and indemnities from the author that the work is original and will not result in any legal action; what would occur in the case of breach of the contract by either party; what will happen if the publisher is no longer active in publishing or exploiting the work; provisions for arbitration in case of a dispute, and a statement of which national law covers the contract. Some publishers will wish to include a restriction on the author producing a competing work for another publisher (often required in educational and academic publishing) and an obligation for the author to update the work if required. Many publishers will wish to have an option to consider the author’s next work for publication.

Countries operating under common law (e.g. the United States, the United Kingdom and many English-speaking Commonwealth countries) regard contracts as a matter for commercial negotiation between the two parties. By contrast, in countries operating under civil law there may be provisions in domestic copyright legislation which regulate what can be included in an author-publisher contract, e.g. the duration of the contract, provision for financial terms to be renegotiated if the book becomes successful, and restrictions on contracting for future works etc.

Skills Builder 2: Royalty or Outright fee?

1. Compare the benefits of an advance against a royalty arrangement to: the author and the publisher
2. What might be the benefits of an outright fee arrangement to: the author and the publisher?
See Sample Answer.

Control of Subsidiary Rights

In addition to the author contract granting the publisher primary publication rights as outlined above, the author may also choose to give the publisher control of an agreed range of subsidiary rights in the work. A contract where full copyright and all other rights are assigned to the publisher will give the publisher total control of all such rights, usually subject to paying an agreed share of revenue to the author. A licence arrangement may also include a wide grant of subsidiary rights, but for authors represented by literary agents, the agents may prefer to handle many of such subsidiary rights themselves.

Subsidiary rights may include the right to licence the work in the original language to a publisher in another country (e.g. in English to the US or to India; in Portuguese by a publisher in Portugal to a publisher in Brazil), serial rights (pre and post publication extract rights sold to newspapers and magazines), anthology and quotation rights (aka permissions), reprographic rights (including collective licensing of extracts via a national Reproduction Rights Organisation such as CLA in the UK), translation rights, audio rights, single-voice reading rights for radio and television, stage, TV and film rights, merchandising rights, electronic rights and rights for the visually impaired. Some of these rights may lie more naturally with the print publisher, whilst other categories (e.g. film, television and merchandising rights) might be better handled by a specialist agency.

Many publishers employ specialist rights staff to promote and negotiate the sale of rights; literary agents may have specific staff designated to handle translation rights or film and television rights.

2.4 Licensing and Subsidiary Rights

Licensing rights may come about in a variety of ways. If the author concerned already has an established reputation, potential licensees may approach the publisher or the author’s agent when they know a new work is imminent. However, the majority of licences result from proactive marketing by rights sellers, who keep regularly in touch with potential licensees, keeping them informed of future publications by a variety of means and meeting many licensees personally at international book fairs and on sales trips. Licences for translation rights and reprint rights are covered in more detail in chapter 6.

The sale of rights can be a significant source of income for a publishing house, although much will depend on the bundle of rights they have secured under their contract with the author. Educational, academic and professional publishers tend to secure a full range of rights directly from the author, but their publications lend themselves less to the licensing of categories such as audio, film and television, merchandising and serial rights and the initial publishing decision will rarely be dependent on rights revenue. By contrast, trade publishers may acquire a more limited range of rights from the author’s agent but may be able to generate substantial revenue from the rights they do control, and this may influence a publisher’s decision on whether to bid for the rights.

Rights income is often wrongly compared with sales turnover – the correct comparison would be between the share of rights revenue retained by the publisher after paying the author’s share, and the profit element on direct sales of the original edition. Rights income retained by the publisher is often referred to as “other trading income” and can be a significant contribution to profitability once the cost of running a rights operation has been taken into account.

Licensing can also form an active component of a publisher’s strategy. Many multinational academic publishers whose overseas subsidiary companies have local language publishing programmes may acquire translation rights in key titles from the parent company in order to enhance their local publishing programmes and to keep key titles “in the family” rather than licensing them to third parties, some of whom may be the subsidiary companies of direct competitors. Some publishers may themselves produce translations of their books – for example, the children’s publisher Usborne produces some of its titles in a range of European languages in addition to English.

The handling of permissions (the right to reuse limited extracts from a book in another context) is normally reactive rather than proactive, and is usually handled by a special department within the publishing house. Collective licensing (licences to produce limited amounts of copyright material by the educational, government and business sectors (e.g. for student course packs, or for use by legal firms of pharmaceutical companies) is often handled via a national reproduction rights agency (e.g. CLA (the Copyright Licensing Agency) in the UK, CCC (the Copyright Clearance Center) in the USA, VGWort in Germany etc.). This will usually involve publishers mandating the agency, i.e. authorising them to include the publisher’s repertoire in their licensing activities; payments are then collected and distributed to authors and publishers (to authors via ALCS (Authors Licensing and Collecting Society) and to publishers via PLS (Publishers Licensing Society). Revenue from collective licensing can provide significant additional revenue, in particular to educational, academic and professional publishers.

Handling serial rights, stage, film, television and merchandising rights involves dealing with a range of different industries. Dealing with technology companies (e.g. Amazon, Apple, Kobo or aggregators of e-books for supply to libraries) also involves working with companies with very different business models; most publishers view these as sales channels to market rather than as licences and they are usually handled accordingly.

2.5 Book Fairs and Sales Trips

Book fairs have traditionally been a major marketplace for the sale of rights, although the choice of the most appropriate fairs to attend may depend on the type of books in question and the key markets the rights sellers wish to address. Rights sellers may also make sales trips to individual markets to visit potential licensees on their home territory.

Skills Builder 3:

Drawing upon your own research and/or knowledge take a moment to:
1. Identify the book fairs you think are most useful for rights sellers and why.
2. List the key activities for rights sellers at book fairs and why they are important. What other aspects of book fairs can be helpful?
3. Time and funding permitting, why do you think a sales trip to a particular country might prove more effective than meeting potential licensees from that country at an international book fair like Frankfurt?
See Sample Answer.

2.6 Chapter Summary

This chapter has explored the main principles of copyright; national copyright legislation; international copyright conventions and international issues. You should now be able to:

• Explain the importance of copyright for both authors and authorised producers of their work (e.g. publishers) 
• Demonstrate an understanding of the principles of national copyright legislation and the international framework for copyright recognition via membership of the international copyright conventions 
• Understand the personal or moral rights of the author under national copyright legislation 
• Understand some of the processes involved in licensing subsidiary rights 

Further Reading

Clark, G. and Phillips, A. 2020.  Inside Book Publishing 6th Edition London: Routledge.
Jones, H. and Benson, C. 2016. Publishing Law 5th Edition. London: Routledge
Owen, L. 2019. Selling Rights  8th Edition London: Routledge
Upshall, M. 2009. Content licensing Buying and Selling Digital Resources. Oxford: Elsevier

Skills Builder 2 – Sample Answer

1. The author receives an initial payment and then has an ongoing financial interest in the book if it is successful. The publisher makes an initial investment in the advance, but will only pay continuing royalties if the book is successful.
2. The author receives a lump sum even if the book is not successful. The publisher limits his investment and has nothing further to pay, whether the book is successful or whether it fails.

Skills Builder 3 – Sample Answer

1. Frankfurt and London are key rights events; Bologna is vital for children’s publishers and BookExpo is particularly useful for UK/US business. For other fairs, much will depend on which markets are crucial to the rights seller, and whether the time and cost of attending a “national” book fair is justified. Smaller such fairs often enable rights sellers to gain a more detailed view of the market, to see a wider range of local publishers and to allow time for market research to find new contacts.
2. Once rights business is established, the bulk of time at a book fair will be spent in conducting appointments with potential buyers. However, book fairs also provide opportunities for market research, gaining better insight into the chosen country of honour, attending relevant seminars (e.g. the annual Frankfurt Rights Directors Meeting) and social functions which allow for networking opportunities.
3. Visiting customers on their home territory will often provide a much better insight into their resources and capabilities, and usually allows for a much longer meeting than would be possible at a book fair. Visiting local bookshops can give a general overview of what is being published. Making the effort to visit a country (particularly a distant one) also shows a serious commitment to the market, so has high PR value with customers.

3.1. Chapter Aims

This chapter provides a grounding in different theories of International Business and applies them in a publishing setting. It explores the internationalisation of publishing and provides a brief overview of the global strategy of publishing. This chapter is designed to equal approximately 5 hours of independent study and as you work through the chapter you will find skills builder exercises that will help you to develop what you have learned in a practical sense.

3.2 The Internationalisation of Publishing

So how do businesses internationalise? Very broadly, there is often a sequence in the process: that is, the progression from exporting, through ‘knowledge agreements’ such as licensing and franchising to direct investment in a joint venture or an alliance. This sequence is known as the establishment chain. Although it is over-simplistic to explain internationalisation as a simple linear progression, there is some empirical evidence to support the relevance of this model to publishing. Aspects of this sequence are returned to elsewhere in this course. 

Thinking about the internationalisation of business and its relevance to publishing it is important to note that STM (Science, Technology and Medicine) publishing has many of the characteristics of an internationalising industry. The principal players (Elsevier, Wiley, and Springer-Nature) operate globally in terms of both the distribution of their products and the sourcing of content. All of these three publishers have sought to establish alliances and joint ventures in China, and have built their international presence by acquisition. Additionally, they rely increasingly on ‘off shore’ editorial and production services, often in India to obtain lower costs.

Higher Education publishing also operates in a global marketplace, meaning that students worldwide learn much of the same corpus of knowledge and increasingly use the same resources. Pearson, McGraw Hill, OUP, Macmillan and Cengage all serve a global higher education market, selling the same textbooks, or local variations of them, in multiple markets. As with the STM publishers, the development of resources, websites and the design and composition of Higher Education textbooks are frequently handled offshore in order to keep costs down. Printing of books, especially in colour, has been sent offshore for several decades, with China, India and Eastern Europe being popular lower-cost locations among British and American publishers.

It is less accurate to describe trade publishing as a global industry, although some trade publishers are internationalising very effectively building up or acquiring businesses in international markets – consider Penguin Random House or Hachette who might be described to be global players.

Let’s think more about international trade, comparative advantage and international outsourcing. Specifically, when considering ‘revealed comparative advantage’ of (say) the UK and US with regards to the export of its intellectual property. We might also reflect on whether such competitive advantage is sustainable in the long run. Michael Porter’s key variables (see Figure 1 below) notably his four key determinants of competitive advantage represented in the diamond shape – demand conditions, firm strategies, related industries, factor conditions - provide a framework for thinking about this.

Let’s make this more specific. Review the following examples of internationally based suppliers to the international publishing industry.

http://adi-mps.com/
http://www.edanzediting.com/
http://www.hunghing.co.uk/Home

Now reflect on the idea of comparative advantage and the application to publishing of the concept that countries (and companies) gain from trade by specialising in those products and services in which they have a lower opportunity cost (i.e. a comparative advantage) as compared with other countries. To help focus your reflection, consider these questions and their answers:

1. The comparative advantages of the three example service companies/countries might be considered to be:

• the availability in India of low cost highly educated labour to undertake highly skilled scientific work; and the adjacent geographical location of editorial and composition services (Human capital as described in the reading)
• the presence in Japan and China of local demand conditions, most efficiently serviced by a local language service that offers a bridge to the global publisher
• the availability of favourable factor conditions: low labour and energy costs in China

2. The benefits to the Publishers

• ADI MPS – a low cost service delivered by highly educated, technically sophisticated, English speaking workforce in India
• Edanz – low(er) cost and highly educated subject matter experts managed within the same countries (China and Japan) as the authors who write the papers and need the language polishing services
• Hung Hing – cheaper printing and labour costs

3. The comparative advantages of the USA and Europe for Springer and Pearson

In both cases the key publishing, marketing and product design functions are undertaken where the demand conditions are the strongest, where the proximity of product design to its customers will ensure that the product best meets the customers’ needs, and where there has been a sustained pattern of innovation, maintaining competitive leadership.

If we look at Pearson and US Higher Education publishing we can think about it in the form of Porter’s Diamond model for national competitive advantage, but the model does not precisely fit.

• Firm Strategy structure and rivalry – In the US there are established players competing to be the best.
• Demand Conditions – closeness to the customers in the biggest market
• Related and Supporting Industries – authoring is mainly done in the US
• Factor Conditions – the human capital of the knowledge workforce is the most important factor

3.3 Global Strategy Theory

Several of the most important and useful strategic analysis tools are: SWOT and PESTLE Analysis, Porter’s 5 Forces, Boston Consulting Group Portfolio Analysis. Three theoretical models of strategic choice are: Ansoff’s Product market strategies, Porter’s Generic Competitive strategies, and institutional strategies. If you are not already familiar with these tools and theories it will be worthwhile conducting some research online  about what they entail and how they can be used. You can return to these later if time is short now.

Generally, there are considered to be five potential sources of ‘global synergies’:

• Localisation on a global scale
• Economies of scale
• Economies of scope and experience
• Non-organic growth on an international scale
• Increase in the geographical reach of core competencies

And also four international business strategies:

• Global Strategy 

Efficiency is emphasised in this strategy, whereby a product can be standardised and sold in a range of geographical locations.

• Transnational strategy

Often described as a series of actions defined by a firm in order to initiate and maintain operations in foreign companies; commonly a central location, or headquarters, is maintained.

• Multi-domestic strategy

Generally, this strategy is based on marketing tactics that are based on the cultural and traditional needs of the market – essentially marketing is targeted towards the specific needs of specific locations.

• International strategy

Frequently referred to as ‘exporting strategy’, the fey characteristic of this is a focus on export of products into foreign markets and business objectives usually remain focussed on the home market.

But how might we apply these four international strategies to the world of publishing? Let’s look at several publishing companies that operate internationally (e.g. Pearson Education, Springer Nature, (discussed above) and look also at Thomson Reuters and Hachette). Below we will consider which of the four international business strategies is the most relevant for each and identify which of the five sources of global synergies are being sought.

Referring to the four global business strategies, an STM journals publishers’ global strategy (e.g. Springer Nature) might be interpreted as the ‘International Strategy’, the consequence of low cost pressures and a low need for local responsiveness – STM journals being essentially a global product without the need for localisation. This is evidenced by strong central control.

By contrast, when looking at professional law publishing (Thomson Reuters), educational publishing (Pearson) and trade publishing (Hachette) you might conclude that the ‘multi-domestic Strategy’ is the most appropriate way to model these publishers’ global strategies, concluding that the pressures of local responsiveness are high, requiring the development of localised publishing programmes. Remember that in chapter 1 we saw that Elsevier’s approach to Health Sciences publishing could be regarded as multi-domestic. This illustrates that within a large organisation that has different publishing models and markets there may be a need for different strategic approaches.

When considering the sources of global synergies, it could be argued that only the STM publishers may successfully pursue economies of scale, and economies of experience. The Professional Law, Education and Trade publishers are more typical of the publishing industry generally. They have access to fewer synergy opportunities: Non-organic Growth by Acquisition is one route that publishers frequently follow in building globally, and the increase in the geographical reach of core competencies is another. We discuss growth by acquisition in the next section. The increase in reach of core competencies might best be illustrated by the green field publishing start-ups in new geographical markets, e.g. Oxford University Press establishing operations in numerous different countries, or Hachette creating a publishing business in India.

3.4 International Strategy Decisions in Publishing

The discussion up to this point has been about the extent to which the publishing industry is becoming a global industry and about the development of global publishers such as Hachette, Pearson, Elsevier and Thomson Reuters. We have seen that different segments of the industry have different characteristics and require different strategic approaches to the challenges of competing and growing in global markets.

However, publishing remains a highly fragmented industry, with thousands of participants. The barriers to entry into publishing are relatively low and new companies with innovative ideas are able to start up with relatively little investment. In this section, we look at the strategic decisions faced by publishing businesses of all sizes when contemplating the internationalising of their business. 

Larger publishers with international affiliates, such as those discussed in earlier sections of this module, often have more options available. But many of the strategic decisions are essentially the same for all companies, large or small.

Barriers to Internationalisations: For small to medium-sized enterprises (SME), barriers are likely to exist which inform the extent to which access to international markets may be achieved. 

The Organisation for Economic Co-operation and Development (OECD) and its Centre for Entrepreneurship, SME and Local development (CFE) compiled a report (OEDC, 2009) that listed the top 10 barriers for SMEs as:

1. Shortage of working capital to finance exports
2. Identifying foreign business opportunities
3. Limited information to locate/analyse markets
4. Inability to contact potential overseas customers
5. Obtaining reliable foreign representation
6. Lack of managerial time to deal with internationalisation
7. Inadequate quantity and/or untrained personnel for internationalisation
8. Difficulty in matching competitors’ prices
9. Lack of home government assistance/incentives
10. Excessive transportation costs

(OECD, 2009, 9)

Skills Builder 1: Drawing on your own experience, imagine you are the Sales Director of a small-medium trade non-fiction publisher. Which of these barriers might be more significant? Is the ranking relevant in the context of the publishing industry? What resources might you turn to in order to address the major barriers?

The Decision to Export – Marginal Costs

As discussed earlier, the first step in internationalisation is (usually) to engage in exporting. The ‘establishment chain’, referred to above, distinguishes between intermittent exports and more organised exports through agents. This distinction and other aspects of exporting are discussed in greater depth in chapter 5.

Publishing businesses, like other businesses, will always seek to grow their revenues faster than their costs. There is typically a significant fixed cost associated with publishing a book title. This fixed cost might include the author’s advance, origination costs, design costs and other prepress costs. It also includes all the in-house editorial and management time spent developing an idea, negotiating with the author and bringing a project to publication. It is therefore quite rational that the publisher would seek to sell more units in order to spread those fixed costs across a bigger print run or revenue base. The additional cost of selling more copies is often termed the marginal cost. This is an important concept. The marginal cost is defined as ‘the change in total production cost that comes from making or producing one additional unit’

 https://www.investopedia.com/terms/m/marginalcostofproduction.asp

It is important to understand the strategic importance of marginal costs. The following case study will illustrate this by looking at a single product, which if magnified to an entire list or business would have a material impact.

Case Study – Marginal Costs

A UK based publisher of a non-fiction paperback title is able to sell 3000 copies in the domestic market at an average discount of 50% and could sell a further 2000 of the same version into export markets at an average discount of 70%. The fixed origination costs are incurred whether the publisher sells overseas or not, the variable costs of printing and the royalty costs are determined by how many the publisher decides to print and how many they sell. If they print 3000 they have a manufacturing cost of £2400, whereas if they print 5000 the manufacturing cost is £3700. The author’s royalty is 10% of Net receipts.

Skills Builder 2: Using the framework in table 1 below, calculate the revenues and gross profit the publisher would make in the home market and then calculate the gross profit they would make in the export markets and combine the two to see the overall impact on the gross margin for the title. What is the marginal cost of selling into export markets?

See Sample Answer.

Table 1: Revenue and gross profit calculator framework.

The Decision to License

The opportunity is often available to publishers to licence foreign language translations, co-editions, reprints or adaptations into overseas markets. The decision to licence is most often taken when the publisher itself is not able to exploit the value of intellectual property fully in a particular market, either because it has no presence there or because to achieve its potential the title must be translated or versioned for the local market. The processes and pitfalls of licensing are discussed in greater detail in chapter 6. At this stage we seek to position the licensing decision in the strategic context.

Case study – Licensing

Together, let’s identify the strategic reasons for licensing translations of children’s books such as the licensing by Hachette of translations of the popular children’s author Enid Blyton’s stories.

For background information refer to the Hachette website:

https://www.enidblyton.co.uk/

A search on Amazon shows 640 Enid Blyton titles in French, 452 in German, 170 in Spanish, and translations in many other languages. Look at the publishers in these and other languages to deduce their relationship with the Hachette group.

The following are the most common reasons for choosing to license, and would apply in the case of Hachette and the writings of Enid Blyton:

Low cost and low risk – the publisher incurs only the cost of negotiating and managing the licence contract. All the costs of publishing and marketing are taken by the licensee.

Visibility – Penetration of markets where the publisher’s own English language editions will not gain the readership or compete on price. This will often be important to authors who love to see their work translated.

Incremental income – from advances and royalties for both publishing rights holder and author (or in the case of Enid Blyton to the author’s estate)

Pre-empts Piracy – By officially licensing a reputable publisher the rights owner is able to reduce the risk and the impact of illegal unauthorised reproduction or versioning.

Drives other Subsidiary Income Streams – Increased recognition of characters in overseas markets, which may lead to greater success of the characters in other formats (e.g. films, television, games, merchandise etc.)

Prepares the way – Licensing is sometimes a deliberate precursor to market entry. A publisher might in the future plan to enter a market and to regain control of the rights that were previously licensed. Most licenses are for a finite period, in the case of children’s books this might typically be for three or five years. Note that many of the French licenses for the Enid Blyton titles are held by other Hachette companies.

The Decision to Invest Abroad

There are many different variations of overseas investment, or ‘equity based methods’, from setting up a sales and customer relations office, to participation in a joint venture with a local partner, to acquisition of an indigenous business. The establishment of such an operation might be through partnership with a local firm in a joint venture, or through a new ‘green field’ start-up initially of a sales operation progressing into local publishing, or by the acquisition of a local publishing house. However, all of these routes come with significant investment requirements. In chapter 9 we discuss this in greater depth. At this stage we are again putting this decision in the context of the international strategy.

Simplest and most common in publishing is the setting up of a sales office within the destination country. This is likely to be a progression from exporting and working with local importers either on an exclusive or a non-exclusive basis. Such a sales office would then transfer the responsibility for managing relationships with local distributors and resellers from the third party importer to the company itself. 

By establishing its own sales operation in an overseas market, a publisher is able to gain many of the same revenue advantages of exporting via third party distributors or of licensing to third party publishers, but without sacrificing margin to the third party or relinquishing control of Intellectual Property Rights. It would also ensure that knowledge about the local market is acquired within the firm.

The worked example below takes the single non-fiction title example discussed above in the section on export strategy, and shows theoretically what the gross profit would look like if the publisher made the sale through its own sales network based in the overseas market rather than exporting into the market through a third party importer. The business model for trading would be similar in many respects to the export model discussed above, as the titles are developed and published in the home country and the manufacturing and origination costs are treated in the same way. 

Instead of allowing a discount of 70%, the publisher might expect average discounts into the market of 50%. This would have a very positive impact on the gross profit for the title in the export market, almost doubling it to £7655. However, the model does not include the very substantial investment and overhead costs of setting up and running one’s own sales and distribution operation in the territory. Nor does the model cover differences in taxation regimes. Chapter 9 has more information on these.

Table 2: Gross profit example via publisher own sales network based in the overseas market vs. through a third party importer.

3.5 Case Study: International Strategy

Cambridge University Press (CUP) operates globally with sales and publishing offices in many countries throughout Europe, Asia, Africa and the Americas.

By researching on the Cambridge website and reviewing the Annual Report develop a picture of Cambridge’s international position and strategy and formulate answers to these questions:

1. Which divisions are the principal drivers in shaping Cambridge’s global profile?
2. What international strategy is being followed by Cambridge?
3. Where would you place Cambridge on the ‘establishment chain’?

Refer to the Global page on the CUP website and look at the approach taken regionally by the Press.

http://www.cambridge.org/files/9714/0861/0074/About_Web_2014.pdf
https://www.researchinformation.info/news/cambridge-university-press-reports-strong-growth
https://www.facebook.com/CUPeducation/

Also look at the following two Press releases about Japan and India.

Press release on CUP India: http://www.cambridge.org/gb/about-us/media/press-releases/manas-saikia-md-cambridge-university-press-india-announces-retirement/

Press release on CUP Japan: http://www.cambridge.org/gb/about-us/media/press-releases/ryoji-fukada-appointed-chairman-cambridge-university-press-japan/

What do press articles such as this indicate about Cambridge University Press’s international profile?

https://www.theguardian.com/education/2017/aug/21/cambridge-university-press-to-back-down-over-china-censorship

Let’s consider the answers to these three questions:

1. Cambridge has offices in 50 countries around the world and makes 90 per cent of its sales outside the UK. Publishing is organised into three Divisions: Academic, Educational and English Language Teaching. Its International operations are located in countries primarily where the demand for ELT materials is high and where Cambridge can supply local education needs. The Academic Division derives a large proportion of its revenues from sales in the US and Europe.
2. Our analysis of Cambridge’s global strategy suggests that the strategy of the ELT business is essentially a ‘Transnational’ one driven by pressures of cost competitiveness and local market responsiveness and that it is not striving for economies of scale. On the other hand the Academic division is probably following the strategy described by Wall et al as International Strategy, shaped by low pressure for cost competitiveness and local responsiveness. This Division develops centralised products and services, e.g. Cambridge Core, which is the universal digital platform for the distribution of Cambridge’s journal content. The organisation may find that the presence within it of these two different strategies leads to tension as international development objectives and priorities may not always match between the Divisions.
3. We believe that Cambridge is in the fourth stage of internationalisation – foreign direct investment in the overseas market with sales and publishing offices in many different countries worldwide. In India the acquisition of Foundation Books illustrates the importance of Cambridge’s overseas investment.

3.6 Chapter Summary

This chapter has worked to provide a foundation in the various theories of international business and apply them in a publishing setting. You should now be able to:

• Demonstrate an understanding of theoretical models relevant to international business
• Demonstrate an understanding of how the theoretical thinking may be applied to the publishing industry
• Apply the theory to publishing case studies.

Further Reading

Clark, G. and Phillips, A. 2020.  Inside Book Publishing 6th Edition London: Routledge.
Jones, H. and Benson, C. 2016. Publishing Law Fifth Edition. London: Routledge
OECD. 2009. “Top Barriers and Drivers to SME Internationalisation”, Report by the OECD Working Party on SMEs and Entrepreneurship, OECD
Owen, L. 2019. Selling Rights Edition 8th Edition London: Routledge
Porter, M. 1990. The Competitive Advantage of Nations. Harvard Business Review. No. March–April
Wall, S. 2015. International Business, 4th Edition. Harlow: Pearson

4.1. Chapter Aims

The aim of this chapter is to showcase the range, complexity and opportunity of international markets and, through case studies, to explore the analysis and evaluation of geographical markets for publishers.

This chapter is designed to equal approximately 5 hours of independent study and as you work through the chapter you will find skills builder exercises that will help you to develop what you have learned in a practical sense.

4.2 Introduction to International Market Research

Market research is a key component of the umbrella term ‘marketing’, which is defined by the Chartered Institute of Marketing as ‘the management process responsible for identifying and satisfying customer needs profitably’. As an integrated activity taking place throughout an organisation, marketing has many facets – market research falling within the analysis activity.

We will look at market research specifically and this is entirely focussed on the process of gathering information about the firm’s customers and environment. Research may involve the usage of existing data from a variety of third party sources, or through the collection of primary data from customers. To understand this further, and in the context of publishing, we turn now to a case study.

Case Study: Marshall Cavendish

In this scenario you are the International Development Director of Marshall Cavendish, the leading schools publisher in Singapore of Maths and English resources. http://www.mceducation.sg/about-us/introduction

You are looking into the opportunity of expanding into other English language markets and have identified South Africa as a strong prospect. You need to establish the attractiveness and viability of South Africa as a market for Marshall Cavendish’s educational publishing.

1. What are the key questions you will need to answer?
2. What categories of essential data about the South Africa market do you think you need?
3. And where might you turn to, what are the sources for the data needed?

Let’s work through the answers.

First define the questions you need to answer to establish the attractiveness and viability of the market. The questions that you would need to address might include: 

• Are there any fundamental political or other factors that would rule out the South African schools market, e.g. a requirement that all resources must be published in South Africa? 
• Is English the language of instruction? 
• How is education structured? Are schools organised nationally, regionally, locally? 
• Are there multiple schools systems – state funded, private education, international schools? 
• What is the market size? Number of schools, number of learners? 
• What curriculum is taught? Is it international, national, regional or local? 
• What systems of assessment are there? 
• Who makes decisions about what resources are used and purchased: schools, regions, states? 
• What is the market in money terms? How much will schools pay for reading and Maths resources? 
• What resources are currently provided? Who currently publishes them? What are they like? How good are they? 
• What is the fit of Marshall Cavendish’s existing products to the market? 
• How does the market work? What are the channels? Who are the intermediaries? 
• Without being able to answer all these questions (and probably more) you will not be able to form a view on the viability and attractiveness of the South Africa market. 

To answer the above questions the following data would be essential: 

• Demographic, political and economic information on South Africa: eg language, education, income levels 
• Information on South Africa’s schools system(s) and curriculum 
• Information on existing resources and educational publishers 
• Information on the structure of the market, and the players in the supply chain 
• Information on the strength of copyright protection in the market 

As a first overview, to establish the shape and size of the market and general trends, you might start with desk research using the Global Publishing Information (GPI) report available from the PA web site. Country reports as part of the Export Toolkit - https://www.publishing-export.org.uk/country-profiles/

You would also consult the OECD database for demographic and economic data. http://stats.oecd.org/ 

To gain a more detailed understanding of the structure of the market and to find data on item B above you would need to research the websites of international and South African organisations and agencies. 

To build a picture of existing resources and educational publishers, web based research will be useful initially. However, it would be essential to make a field visit involving conversations with teachers, people in the schools system and in the educational supply chain in order to validate your desk research.

4.3 Political, Economic, Social, Technological, Legal and Environmental Analysis (PESTLE)

It is important to remember that, no matter where they are in the world, every single multinational enterprise (MNE) still must operate within the business parameters of the nation-state(s) – each of course having its own laws, governance and institutional frameworks. It is therefore imperative that any company considering an international future be acutely aware of these different factors.

It is in this scenario that the approach of PESTLE analysis is undertaken – it is in such analysis that businesses work to assess the political, economic, social, technological, legal and environmental landscape in which they wish to grow.

It is also important to remember that businesses should also take into account political risk. Analysis of such risk is best undertaken in the early stages of projects, rather than waiting until projects to internationalise are already well underway. Here are some examples of political risk and the impact that it may have on firms, adapted from Wall et al, 2015.

1. Civil wars – Impact: Destruction of property, lost sales, disruption of production, lower productivity.
2. Inflation – Impact: Higher operating costs
3. Increased taxation – Impact: Lower after-tax profits, relocation to locations with lower tax regimes
4. Expropriation/confiscation of companies by foreign governments – Impact: Loss of sales, loss of assets, loss of future profits.
5. Campaigns against imported goods – Impact: Loss of sales, increased PR initiatives
6. Mandatory labour benefits – Impact: Increased operating costs
7. Violence – Impact: Disrupted Production, increased security costs, increased managerial costs
8. Current depreciation - Impact: Reduced value of repatriated earnings
9. Currency appreciation – Impact: Less competitive in overseas markets

4.4 The Socio-Cultural Environment

Not only is it important for businesses moving towards internationalisation to have an understanding of the PESTLE landscape, but it is also critical to consider the international socio-cultural environment too. As social beings, we are undergoing constant interaction with each other, and naturally, this has huge implications on how business is done and its success. Take a moment to ponder why an understanding of the socio-cultural environment is so important.

4.5 Market Mapping

Having looked at how political, economic, legal, technological and socio-cultural factors may have an impact on conducting international business, we now turn to the mapping of markets as a strategy tool. The purpose of a market map is to organise information visually to support analysis and decision making. Market maps can be especially helpful when looking at international markets, perhaps with the objective of prioritising countries for market entry, or of deciding on the appropriate strategy.

Market maps are typically not maps at all, but visualisations of how different markets or segments compare with one another according to more than one criterion. To create a map one might look at several relevant dimensions of each market and use them as the axes of a graph to show the differences between markets. 

For example when looking at Global education markets one might compare spending on education per capita with population data. This would quickly identify potentially the most interesting education markets. This can be done using a high degree of statistical precision, or it can be done more impressionistically, such as in a simple four box matrix in order to present a simple picture.

4.6 Chapter Summary

This chapter has explored the range, complexity and opportunity of international markets and, through case studies, has also explored the use of tools for the analysis and evaluation of geographical markets for publishers.

You should now be able to:

• Demonstrate a broad understanding of international publishing markets and some of the major differences between them
• Demonstrate an understanding of tools and resources used in analysing markets.

Further Reading

Clark, G and Phillips, A. 2020. Inside Book Publishing 6th Edition. London: Routledge.

Wall, S. 2015. International Business, 4th Edition Harlow: Pearson

5.1. Chapter Aims

This chapter is designed to give you an understanding of exporting as a business development strategy. It explores the reasons why publishers seek to sell their products into international markets and looks at the practical, operational, and financial aspects of exporting. It also discusses different export sales management models and aims to develop ideas on market prioritisation, partner selection and export management. 

This chapter is designed to equal approximately 5 hours of independent study and as you work through the chapter you will find skills builder exercises that will help you to develop what you have learned in a practical sense.

In this section we will be referring to the UK Publishers’ Association Export Toolkit https://www.publishing-export.org.uk/

5.2 Why Export? Selecting and Prioritising Markets

The term ‘export’ has a broad definition, typically to ‘sell products outside one’s domestic market’.
This section explores the reasons why publishers of all types seek to develop export sales and the reasons for focussing on exporting to certain markets. 
The advantages to a publisher of exporting are typically seen as:

• Access to large ‘same language’ markets
• Opportunity to gain additional sales for existing titles
• A potential quick-win opportunity
• Lower administration costs than other options
• Revenue and margin opportunity
• Brand/imprint development opportunity

It is important to remember that the opportunity to export books, whether in print or electronic form, is always subject to the rights that the Publisher actually owns. Clearly, if a Publisher has world rights, that Publisher is free to export into any market. However, if the rights owned by the Publisher are UK/Commonwealth only, then the US rights and others are under the control of a different rights holder and the Publisher may not export into the US and other markets. The reverse would also be true.

Referring to the PA Export Toolkit, take a look at the pages on consumer publishing by following this link https://www.publishing-export.org.uk/resourceins/in-depth-toolkit-consumer-publishing/

The pages on education publishing contain a great deal of detail and may be found here:
https://www.publishing-export.org.uk/resourceins/in-depth-toolkit-education-publishing/

When considering export possibilities, a publisher must address the following points:

The export potential of its products – some books have much greater export potential than others. If the company’s products are parochial or otherwise unsuitable then export may be a waste of time.

Prioritising markets – choices have to be made about where to place resources: what to do and what not to do. So, markets have to be prioritised. Criteria to use when prioritising markets would typically include:

• Market size
• Profitability
• Creditworthiness
• Ease of Access – availability of suitable distribution channels
• Demand and fit of the products a publisher has to the market

Research is needed into the potential markets to investigate the market size, the routes into the market, prevailing discounts and credit terms, returns expectations, censorship issues.

Skills Builder 1: Consider the potential for developing an appropriate export strategy into different geographical markets for three different profiles of publishing business.

(a) A UK publisher of primary school maths and literacy textbooks
(b) A Singapore-based publisher of trade business books
(c) A US publisher of higher education textbooks in engineering

In addressing the following markets for each publisher - Canada, the Caribbean, Eastern Europe, India, Australia/New Zealand – which among these would you identify as high priorities for the development of an export plan, and which would you consider to be low priority, and why? Develop your own notes in table form only.

See Sample Answer.

5.3 Export Sales Management

This section introduces different models for managing export sales and explores the reasons for selecting each of them in choosing an approach to an export market.

The models are:

1. Passive or casual open approach to the market
2. Active Open Market
3. Agent/Representative
4. Agent/Distributor
5. Own Salaried Employee(s) based in the market

Please read the following description of the five export models and then check out some real publishers to identify what their approach is to exporting.

There are different models and degrees of engagement that publishers use to approach export markets. These may be considered as being on a spectrum. At one end is a low level of market involvement and customer contact, with low associated costs, and very often a corresponding low level of expected sales. At the other end the involvement and costs are high but the sales expectations will also be higher.

These models can be represented on a spectrum as:

Low Cost ---------------------------------------------------------------------------------------------- High cost

1. Passive Casual – publishers who do not actively seek export business but respond to enquiries and orders. Such an approach may be appropriate in poor or high credit risk markets for small and medium sized publishers. Usually orders are supplied on a pro-forma basis (i.e. paid in advance by the customer). Indirect export channels such as UK exporters, wholesalers and library suppliers are often useful when using this model. This approach can be cost-efficient but it does limit the amount of business that can be generated.

2. Active Open Market – this model would also be known as selling directly into the market. The publisher has no formal agency or distribution arrangements in place but sells to whichever retailers and wholesalers exist in the market. The publisher manages the market remotely through email and telephone and by visits and meetings at book fairs.

This model can be effective in smaller markets when the publisher has strong product lines that are in regular demand and there are easily identifiable customers who respond to direct approaches. Despite the high cost of travel this can be a profitable model for both the publisher and the customer because there is no middleman in the supply chain. But it does require a significant amount of management and administrative support. It can also be hard to achieve real volume without local sustained representation on the ground.

3. Agent Representative – Publisher’ agents and representatives are commission based freelance sales people who cover the markets within a given region (e.g. South East Asia, Middle East and so on). They are typically sole traders or partnerships who are either based locally or who make regular visits to the market on behalf of a group of publishers. Most agents are focused on trade calling (selling to retailers and wholesalers), but some undertake college calling or library visits. Representation can also be agreed with a larger publisher that has a sales team in place either based locally or making regular visits to the territory.

4. Agent Distributor – Full service, locally based agency and distribution facilities are offered in some markets by either large groups or independents such as APD in Singapore or Research Press or Viva in India. This is an effective way of entering the market and the publisher’s product is immediately positioned strongly alongside established lines via a well-established sales and distribution channel. But to get the attention of such groups it is necessary to have volume sales potential or a particularly strong niche product that fits the distributor’s market positioning.

5. Salaried Staff – More common for larger publishers and some specialist publishers in key export markets is to hire local representatives in local markets where local knowledge and presence are at a premium. This approach is expensive and a good base level of sales is required to make it economically viable.

The task of the Export Sales Manager or Sales Director is to determine which of these models is appropriate for each geographical territory. Many publishers find that their approach will change over time, often moving progressively along the spectrum from left to right.

Skills Builder 2: 

Look at the following publishers’ websites and by investigating their international activities identify which approach along the above spectrum each of them is taking in the following markets: Canada, Australia, Eastern Europe, India, Caribbean, Spain, Middle East and South Africa, and consider their reasons for taking such an approach in each case.

Kogan Page – UK Business Book Publisher
https://www.koganpage.com/page/contact
Usborne – Independent UK children’s publisher
https://usborne.com/misc/usborne-worldwide-representatives-and-distributors/
Edinburgh University Press – Scottish academic publisher
https://edinburghuniversitypress.com/information/sales-distribution/sales-reps-by-region
Jessica Kingsley Publishers
https://uk.jkp.com/pages/distributors 

See Sample Answer.

5.4 Choosing Distributors, Agents, and Representatives

The exporting publisher must take decisions in every market as to how to operate and with whom to trade. Such decisions can only be taken after developing an informed picture of each market and of who is operating in that market. This section provides an opportunity to look at the profile and activities of a selection of real sales agents and distributors in export markets and to match the capabilities of typical agents/distributors with the export needs of a publisher.

In appointing a new sales agent or distributor a publisher would likely consider criteria such as:

• Capacity - how many and which publishers does the agent already represent? What is the size of its existing business? Will the publisher’s list be swallowed up by competing products?
• Financial Security - Are they financially secure and stable?
• Cost- What commission rate does the agent expect? 10% of sales is quite usual. Some agents demand 12.5%.
• Category - What are the agent’s category specialisations? Are existing product lines complementary?
• Promotional Activity - what activity does the agent undertake does it match the requirements of the publisher’s list – e.g. library visits, college calling etc.
• Interest level – How committed are they to the product?
• Communications – do they attend the Frankfurt and London Book Fairs? These would be important moments to meet. What sales and marketing reporting will they provide?
• People chemistry – what is the vibe?
• References – It’s always useful to obtain and to check out references from other publishers

Now look at the websites of several organisations that offer either agency sales representation or distribution (or in some cases both), including the following that might be considered typical, although there are many more.

http://vivagroupindia.com/viva.aspx
http://www.apdsing.com/
http://www.gunnarlie.com/
http://www.tulapublishing.co.uk/ 

Skills Builder 3 – Needs Analysis and Criteria for Selecting Export Partners

Now draw up a list of the key criteria you would employ in selecting an agent or distributor in (a) Spain and (b) South East Asia

1. For a small UK children’s illustrated book publisher
2. For a specialist UK based medical publisher

Consider for each of these the advantages and disadvantages of taking the agency or the distribution route and of taking an exclusive or a non-exclusive approach.
See Sample Answer.

5.5 Working with Export Partners and International Customers

Successful exporting is all about relationships and relationship management. This Section considers the practical aspects of working with the many and different Representatives, Agents, Distributors, Importers and other customers in your export markets. Having decided how one is going to operate in each market and with whom one is going to form a relationship, the publisher then has to ensure that all the relationships are managed effectively so that sales can then take place.

Aspects of the practical relationship include: agreeing trading terms, agreeing sales objectives/targets, maintaining regular personal contact, appropriate selling activities, information flow about products, marketing support, customer service, logistical aspects, obtaining market feedback, ensuring that payment is made on time, and monitoring performance. These activities can be clustered into three key areas (1) Providing effective sales support, (2) Two-way information flow, (3) Performance management.

The publisher must always be aware of and respect the relevant cultural differences in each of the markets in which they are operating. This includes knowledge of the appropriate social and business behaviours and protocols. 

Case study – Develop and Outline Export Plan

Boydell and Brewer is a mid-sized UK based academic and upper-end trade publisher in the humanities and social sciences. Up until now the company has not employed any sales representation in Central and Southern America. Export sales into these markets have been handled directly by the US office. The company has now decided to appoint representatives in the territory and has chosen Cranbury International, who handle sales on behalf of a range of publishers with a similar profile to that of Boydell & Brewer.

https://boydellandbrewer.com/
https://boydellandbrewer.com/sales-representation
https://www.publishersglobal.com/directory/supplier-profile/2426

1. Compile a list of the principal steps to be taken by Boydell & Brewer (the Publisher) to get the arrangements with Cranbury up and running effectively.
2. How should Boydell & Brewer manage the ongoing relationship to ensure that it operates smoothly and successfully? Make a list of the controls you would put in place.

Let’s explore the answers.

• Agree commercial terms, probably a commission, 10% of net sales made directly by the publisher would be typical, and a discount of 60% on books that are sold to Cranbury as distributor
• Agree sales targets and growth objectives. These would be based on current sales levels with an agreed uplift
• Draft, agree and sign a contractual Agreement. The contract would include the commercial terms, the duration of the Agreement (perhaps two years initially), termination and notice period (probably 6 months).
• Supply information on current customers and recent sales made directly by the Publisher into the market. Provide well-organised electronic information on the Publisher’s list including complete title lists, bestsellers, key new titles, forward programme. This must be done in the manner/format requested by Cranbury so that the information can be smoothly integrated into Cranbury’s systems and processes.
• Ensure that the appropriate Sales Administration, Customer Services and Credit Control personnel are fully briefed on the new arrangement and properly introduced to Cranbury.
• Announce the new arrangement to existing customers, include it on the Publisher's website and catalogue etc.

2. Ongoing Relationship Management

• Check that the product information flow is working well
• Confirm with Cranbury that the marketing support in place
• Check that the operational aspects are working smoothly – are credit limits set at the right level? Are orders processed accurately? Are books delivered on time? Are commissions paid on time?
• Ensure good personal relationships exist at both Senior Management and operational levels.
• Regular personal contact, including scheduled visits by Publisher to the territory, attendance by Cranbury at Publisher’s Sales Conferences and meetings at Book Fairs. These meetings should always have specific objectives and follow- up but should also have a social dimension to build the relationship.
• Monitor performance: track monthly sales and key title sales/orders.
• Formally review results with Cranbury against agreed objectives after one year and identify learning points and follow up actions.
• Keep communication and activity proportionate to agreed expectations. South America is not a large market and Cranbury work on behalf of many publishers; therefore the share of their attention given to the Publisher will be proportionate to the size and market relevance of the Publisher’s products.

5.6 Exporting Digital Products

In this section we address the export of digital products. Under this heading we are overviewing the sale of ebooks, of ejournals and databases into export markets. The sales of journals and databases into institutional export markets is typically treated by both publishers and customers as an extension of the sale of print subscriptions, and is frequently handled by intermediary subscription agents. But larger publishers often sell directly to institutional libraries and to consortia of libraries.

The sale of digital products is subject to the same principles, with regard to territorial rights, as the sale of print. However, the practicalities are different because of the removal of many of the barriers that exist with the movement of physical items and because of the emergence of multiple business models. The landscape is changing constantly in terms of technology, business models, and active participants.

Journals and database publishers, with a market among academic, government and institutional libraries, are likely to rely to a greater or lesser extent upon the larger intermediaries who make it their business to provide subscription and other services to institutional and academic customers. Largest among these is EBSCO operating internationally. Two illustrative regional specialist agencies are: Maruzen in Japan and Allied in India.

The academic library business has become more concentrated with specialists such as these. These subscription agents have extended their range to include aggregated collections of ebooks and databases and are the preferred vendors as far as many libraries are concerned for electronic products.

Skills Builder 4: The role of subscription agents in facilitating export sales of journals and databases

Look at the websites of a large international subscription agent and two regional specialists and list the advantages to the customer of sourcing their subscriptions to journals and other electronic products through these vendors.

http://www.ebsco.com/publishers
http://yushodo.maruzen.co.jp/corp/en/aboutus/corporate.html
http://www.alliedpub.com/Form/Home.aspx
See Sample Answer.

5.7 Financial Aspects

This section covers some of the financial matters to be taken into account in both setting up and managing the export aspects of publishing. We look here at

• Discounts,
• Gross Profit,
• Sales Commissions, and
• Marketing Support costs.

Discounts

Customers in export markets will purchase either at net prices (an agreed base purchase price to which the customer will apply a mark-up to set their own local resale price) or, more usually, at agreed levels of discount off the Publisher’s list price.

The level of discount is the subject of negotiation between the customer and the Publisher, often with the Representative acting as intermediary. In some markets (such within the USA) the level of discount must by law conform to a discount schedule which is publicly available and applied to all customers within the same category regardless of their size. Such requirements are intended to ensure a level playing field among large and small players.

Information on discount levels, along with other commercial information relating to actual trading between parties, is highly sensitive commercial information. Therefore all our examples are theoretical ones.

Discounts vary among countries and product types and would typically be formulated into the form of a discount matrix. The Table below is an illustration of a simple discount matrix belonging to a publisher of educational, academic and trade books. The discount levels in the matrix would be applied to the list price or Recommended Retail Price (RRP) of the publishers’ titles when sales of books are invoiced by the publisher to the customer or distributor. This example publisher exports via an exclusive distributor in the US and exports directly to customers in Europe, the Middle East, South East Asia and India.

Skills Builder 5:

Reflect on the variations in levels of discount in the table above and consider specifically the two questions below, making your own notes.

1: Why are the discounts for customers in India and South East Asia so much higher than for customers in Europe?

2: Leaving aside School textbook titles, why are the discount levels applied to Textbook and Trade titles higher than those for Reference and Monograph titles?

See Sample Answer.

Gross Profit

The management of the Gross Margin achieved on export sales is an important responsibility of the Export Sales Manager or Director. The opportunity to make a sale must always be evaluated as to its profitability. Sales into some highly price-sensitive markets often may only be made by increasing the discount offered so the distributor can sell in the market at a level that is normal in that market. Examples of such markets would be South Asia, Africa and parts of the Middle East. The gross margin implications of this must always be understood. On occasion, an export customer may make an offer to purchase copies of a book at a price which has a significant impact on the gross profit margin. In such situations the advantages of gaining sales revenue and opportunities for increasing market share must be assessed by the exporting publisher as to their gross margin implications.

Sales Commissions

Representatives and agents are usually paid a percentage commission by the publisher client on all sales made into the market where they are representing the publisher. Typically such commissions would be 10% of the invoiced sales value. This formula is based on the understanding that all the sales that are made in the market result from the activity of the representative, regardless of whether an order was actually sent in by the representative. Indeed, it is more usual for orders to be sent by electronic means directly from the local retail customer to the publisher. Prompt payment to the representative by the publisher of the commissions due is a basic requirement of all sales representation agreements.

The development of publishers’ sales of eBooks has in recent years provoked discussion as to whether eBook sales should attract a commission to local representatives. Practices vary among publishers.

Marketing Support Costs

Who should pay for catalogues and marketing materials used in an export market?

The contractual agreements between publishers and agents/distributors will usually make it clear how much marketing support is to be provided by the publisher to the agent or distributor. There is a cost to these activities and it is in the interests of both parties to understand in advance what level of marketing support is to be made available.

Typical examples of the support that the publisher would provide would be:

• Samples copies of some, or all new titles.
• Copies of promotional materials and catalogues. These might be samples only, or they might be bulk supplies to be used in local marketing, although this is less usual now.
• Digital files for brochures and catalogues which would then be locally versioned and printed by the Agent.
• Financial support with attending certain meetings, trade shows etc.
• Travel and accommodation of representatives attending the publisher’s Sales conferences

5.8 Risk Analysis in Export

Exporting carries many risks, some more significant than others. When developing an export plan into a market, it is essential to have a clear understanding of the risks, to have taken these into account in the planning, and to have identified appropriate steps to mitigate the impact of the risks. Some examples of the types of risk encountered are included in the news items included at the links in this section.

Analysing Risk

A simple and commonly recognised methodology for assessing the possible consequences of things going wrong is to identify the potential risks (e.g. financial, operational, external risks) and their impact, and then assess each of those possible risks against two measures: (1) How likely is the risk to occur? and (2) If it were to occur, how great would the impact be? As shown below in Figure 1, this can be visualised as a two-by-two matrix, placing each of the risks in one of the four boxes. The high-impact and high-likelihood risks in the red box are the most dangerous and are the ones that deserve the most attention. The other high-impact but less likely risks in the top left orange box would be the next most important to address, followed by the other orange box of more-likely, low-impact.

Examples of risks in exporting:

1. The risk of not getting paid by customers, risk of bad debts

This risk can be mitigated by obtaining a letter of credit guarantee via a government supported scheme such as that offered by the UK government. See: 

https://www.gov.uk/letter-of-credit-guarantee-scheme-overview-and-how-to-apply

2. Difficulties of controlling the behaviour of representatives and agents

Two real cases from the educational publishing industry

http://www.theguardian.com/global-development/2011/jul/25/macmillan-education-deal-south-sudan

http://www.theguardian.com/law/2012/jul/03/oxford-university-press-fined-bribery

3. Exchange rate risks

Most European and US companies will limit their exposure to foreign exchange risk by requiring payment in relatively stable currencies - US dollars, Euros or UK Sterling. However for publishers outside these zones fluctuations in currency can have a significant impact. By buying currency forward it is possible to manage the risk of foreign exchange fluctuations. The following video explains how this works

4. Risk that the books fail to arrive at the destination

To mitigate this risk, publishers choose to work with importers who have their own freight forwarders (this moves the risk onto the importer); use an established shipper, one with experience of working with books, such as Book Freight or DHL.

Exporters should always be sure to have the appropriate insurance for their exports.

5. Piracy of successful titles in certain markets can undermine legitimate trade and spoil a market

http://www.universityworldnews.com/article.php?story=20140325151724931

6. Political and Economic instability within the destination country.

Examples of this are numerous and present more frequently in some regions of the world than others.

Skills Builder 6 – Risk Analysis

You are a publisher of paperback self-help books, based in Australia and you are building an export network of third-party agents and distributors in South, South-East, and North East Asia. You have done market research and established that there is demand for your products,

Using the risk analysis matrix and referring to these and other examples of risk in exporting, identify those risks which the exporting publisher should be concerned about in terms of both impact and likelihood. Make your own notes.

See Sample Answer.

5.9 Chapter Summary

This chapter has explored exporting as a business development strategy. It has also looked at the reasons why publishers seek to sell their products into international markets and the practical, operational, and financial aspects of exporting. You should now be able to:

• Critically evaluate the opportunities and potential risks of exporting as an international development strategy
• Analyse the export market potential for a given product line into a specific geographical market

Further Reading

Clark, G and Philips, A. 2020. Inside Book Publishing 6th Edition. London: Routledge.
Wall, S. 2015. International Business, 4th Edition Harlow: Pearson

Skills Builder 1 – Sample Answer

Here’s a grid showing which markets we think would represent the greatest opportunity and would therefore be high priority, and those that would be low priority.

Skills Builder 2 – Sample Answer

Although publishers do not describe their contractual relationships with agents and distributors on their websites, it is possible to gain a picture of their approach to exporting. The table below is an interpretation of the four publishers’ approaches as described on their websites.

Kogan Page focuses on a small number of export markets with real potential (US and India). All others are operated on an open basis (whether passive or active).

Usborne has formed exclusive distribution arrangements with complementary publishers in the key English language markets, notably Harper Collins, leaving other markets open or with agent representatives (although this information is not evident on the website).

Edinburgh University Press similarly has formed exclusive distribution arrangements with complementary publishers in major English language academic markets with other markets left open or with agent representatives.

Jessica Kingsley Publishers (JKP) became part of the Hachette group in 2017 and it uses Hachette representatives and distribution companies in some territories. In other territories, JKP has relationships with specialist distributors

Skills Builder 3 – Sample Answer

1. For a small children’s illustrated book publisher

Spain – The potential will not be great for English language books. Therefore an agent/representative who operates in children’s book markets and who understands the market for English language children’s books in Spain would be suitable. Spain probably offers a much more significant translation rights and coedition market for his publisher.

South East Asia – You would probably choose an exclusive distributor who would hold some stock of the entire list and who would undertake to visit all key trade accounts, to actively market the books and who would work within agreed financial parameters. Financial due diligence would be needed to ensure that they were secure.

2. For a specialist medical publisher

Spain – You would probably choose an agent/representative arrangement, as physical distribution will be possible from the UK. The key considerations in Spain will be whether the agent visits the specialist trade accounts, is familiar with health science markets, will undertake an appropriate level of promotion and has a respected profile in the market. You might also want a partner who is able to market your electronic products.

South East Asia – You would probably choose an exclusive distributor who would hold some stock of important titles. You would expect the distributor to be familiar with health science markets (meaning they will probably already distribute on behalf of other medical publishers), they would undertake an appropriate level of promotion in the market, provide regular feedback and reports, and commit to a certain level of business. Financial due diligence would be needed to ensure that they were secure.

Skills Builder 4 – Sample Answer

Areas you will have identified are:

• Complete range of content/one stop shop
• Fewer conversations, negotiations and contracts
• Added services for resource discovery, collection management, usage monitoring
• Technical support
• Integration with library catalogues and management systems
• Purchase budget management
• Single payment
• In the case of the regional specialists

Skills Builder 5 – Sample Answer

1. The markets in India and South East Asia are lower priced markets with lots of low priced competition; in order to compete in these markets with higher education, school and trade books, importers need to price their imports competitively meaning that the Publisher must offer a much higher discount to the importer/distributor.
2. Reference and monograph titles are more individually distinctive/unique, demand will be limited because the titles are specialised and in export markets can be priced more closely to the domestic price. These titles are most likely aimed at an institutional library market which is less price sensitive.

Additionally, trade and higher education titles require more local marketing effort, meaning that the US distributor and customers in other markets will need a greater margin in order to fund their marketing efforts.

Skills Builder 6 – Sample Answer

Your lines of thought may have included these points:

1. RED The most significant risk areas – high impact and higher likelihood might be:

The risk of the agent or representative failing to perform. This is a risk area with high impact at least on the revenue objectives. Most companies find that they are obliged to deal with such situations from time to time.

Piracy – in some markets such as Pakistan or Bangladesh piracy is such as to make trading there sometimes quite impossible.

2. ORANGE The risks with the greater potential impact but low likelihood, might be:

Major political upheaval – although less likely in most South East and North East Asia markets, political upheaval is pervasive in others (parts of the Middle East) little to be done to manage the risk, but the impact can be controlled by avoiding trading in volatile markets, limiting credit periods and tracking macroeconomic and political events.

3. ORANGE Lower impact but more likely

Foreign exchange fluctuation – exporting publishers will always have exposure if they price in currencies other than their own or if they accept payment in currencies other than their own. Best managed by pricing in a stable currency (eg US$, Euro or Sterling) and limiting the currencies accepted for payment to these more stable ones

Bad Debt- this can be managed through credit limits, constant communication,

Delivery issues and customer claims.

4. GREEN Lower impact and lower likelihood

None identified.

6.1. Chapter Aims

This chapter explores the rationale for licensing translation and reprint rights, the optimum approach (a co-edition printed by the original publishers for their licensees, or a licence with independent printing by the licensee) and the procedures involved; establishing and building partnerships with licensees, promoting appropriate titles, negotiating licence terms, agreeing on appropriate contracts and monitoring each licence.

This chapter is designed to equal approximately 5 hours of independent study and as you work through the chapter you will find skills builder exercises that will help you to develop what you have learned in a practical sense.

6.2 Introduction – The Rationale for Licensing

This section examines whether granting licences is always beneficial to the overall interests of the author and the original publisher, and also what reasons publishers may have to acquire rights through licences.

Licensing translation and reprint rights is a core activity for staff in a publisher’s rights department and staff in literary agencies. Many licence arrangements are made on an “arm’s length” basis, with the licensees manufacturing their own editions. In some cases, however, the deals may be handled as co-editions, where the original publisher coordinates orders from a range of licensees and arranges to print their editions for them, delivering finished copies to them. This option is most used in the case of books heavily illustrated in colour, but co-editions could also be undertaken for same-language licences with a simple change of imprint and ISBN for the licensee. Co-editions increase the overall print run and reduce the manufacturing cost for all participating publishers.

Each licensing initiative needs to be carefully considered to assess whether it maximises opportunities for the title and the author in the market concerned. For example, a UK publisher might consider the following points: is licensing rights to a US publisher a better option than distributing the original edition in the US market, either through the original publisher’s subsidiary company or via an independent distributor? Will licensing translation rights in a particular territory enhance or damage sales of the original English edition in that territory? Rights staff may need to consult sales colleagues to determine the best strategy. An Indian publisher publishing in the English language might seek licensing partners to access markets such as the USA, or the UK and Commonwealth territories excluding the Indian home market. A French or Italian publisher wishing to sell translation rights may need to consider which foreign language markets are most important for them to target.

For publishers seeking to acquire rights through licence arrangements, there may be a number of motivating factors: to secure rights in the work of a particular author, to acquire specialist content which may not easily be available from local authors in their own market (e.g. medical or professional business titles), to acquire publications which would be too expensive to produce themselves (e.g. heavily illustrated titles, available via co-edition licences) and to build a list quickly.

So what might be some of the most important reasons why publishers and agents grant rights for literary works? Is the main reason to generate revenue for the author and the publisher/agent? What other reasons might justify licensing? The answers are likely to revolve around reaching a wider readership through licensed editions, enhancing author reputation and maintaining author loyalty; in some cases (if the title is appropriate and rights are within your control), licensing non-print rights such as film or merchandising rights.

Skills Builder 1 – To License or not to License?

Consider the following scenarios and then write notes in answer to the questions.

(a) You work in an English language publisher’s rights department and receive a request from a Dutch academic publisher to translate the new edition of one of your bestselling undergraduate textbooks. What information would you need to formulate your response and how would you respond to the application?

(b) You work in an Italian publisher’s rights department and have interest from a Swedish publisher in translating one of your children’s storybooks for young children, illustrated in full colour, with a proposed initial print run of 3000 copies. How would you respond to this application and what type of licence would be appropriate if you decide to go ahead?

(c) You work in a French publishing house and have interest in one of your adult novels from a publisher in Quebec. Would you want to grant them a licence for the francophone Canadian market?

See Sample Answer.

6.3 What are the Advantages and Disadvantages of Licensing Rights?

Not all licensing arrangements are necessarily beneficial to the overall interests of the author and the original publisher so rights sellers need to make an informed judgement on whether licensing is appropriate.

Same-language reprint rights

Advantages might include accessing a market where it is difficult to find distribution for your original edition and where the price of the original edition is prohibitively high for local buyers. Examples might be US or UK academic textbook publishers granting local low-price reprint licences to publishers in markets such as India or the Philippines, or a mainland Spanish publisher granting a licence to a publisher in Mexico.

Translation rights

Advantages would be where the main readership for the book would be in the local language. Examples might include books for young children who could not be expected to read the original language edition, or adult fiction or trade non-fiction which readers would prefer to read in their own language.

Disadvantages for both types of licence might include the impact on your own original edition in some markets; key concerns would be the identity of the potential licensee and their ability to comply with the terms of a licence.

6.4 What Skills are Needed to Sell Rights?

An effective rights seller – whether a specialist member of the original publisher’s staff or a literary agent – needs a combination of skills: a nimble mind to identify rights potential, excellent knowledge of their titles, potential market trends and appropriate partners, powers of persuasion, numeracy, contractual skills as well as administrative skills to keep track of many different deals which may be at different stages. An ability to speak foreign languages is also a plus.

6.5 Identifying Titles with Rights Potential

Not all titles are published with rights potential in mind – for example, a student textbook is usually commissioned to fulfil a curriculum need; any rights sales will be a bonus and will not affect the initial commissioning decision. By contrast, some trade titles (e.g. a new novel by an established writer or a controversial political autobiography where a large advance may be needed to secure the rights, or a non-fiction title heavily illustrated in colour, with high origination costs) may be very dependent on rights deals to make publication viable. The content of some books (e.g. an illustrated children’s book) may be designed to maximise international licensing potential.

Skills Builder 2 – Assessing Rights Potential

Which of the following titles do you think have good rights potential? Which do you think might contain elements which would assist or impede rights sales in some markets?

(a) UK examples

A new novel by Alan Hollinghurst, a prizewinning novelist

A new cookery book by Jamie Oliver, the TV chef

A new edition of a bestselling undergraduate textbook on business strategy

(b) International examples

An academic monograph in Italian on the history of the Italian City States

A French children’s picture book featuring three animal friends – a frog, a duck and a pig

See Sample Answer.

6.6 Identifying Possible Partners and Building Relationships

Rights sellers (publishing staff or literary agents) need to identify and build up relationships with publishers in key target markets whose interests match the titles they are representing. This may involve dealing with a range of licence partners for different types of publication, and even different editors within the same publishing house. This involves regular market research on the profiles of potential partners, gauging their suitability and taking steps to establish their reliability, and also monitoring publishing trends in each market.

Five methods of identifying suitable partners are listed below. List the pros and cons of each of these and then identify the most effective way of identifying suitable partners for licences.

Consulting publishing directories, book fair directories, or websites such as www.publishingglobal.com

• Researching publishers’ websites online
• Using online rights trading services such as PubMatch or IPR License
• Reading the trade press in relevant markets (e.g. Publishers Weekly, The Bookseller, Borsenblatt)
• Visiting the stands of potential partners at international book fairs

How can we best evaluate the suitability of potential partners?

• Directories such as Literary Marketplace and International Literary Marketplace and book fair catalogues with detailed subject categories (e.g. Frankfurt) provide good starting points but none are totally comprehensive.
• Looking at publishers’ own websites (even when in an unfamiliar language) can give an initial impression of whether their lists are compatible.
• Online rights services can be useful, but at a cost (usually an annual subscription enabling users to upload a limited number of titles). They are probably of more use to smaller publishing houses.
• Publisher’s Weekly and The Bookseller can provide a useful guide to the US and UK markets. Other trade press publications may be harder to access and in an unfamiliar language.
• A quick visit to a book fair stand to assess the type and style of publication can often identify compatible lists or eliminate publishers who would not be appropriate partners.
• A compatible list is a good starting point, but you also need to look at other titles they have acquired under licence, take up financial references from their other publishing partners, their capacity to produce high-quality editions and promote them well as well as your judgement of them as people. It is worth remembering that larger publishers may have more financial clout, but smaller publishers may devote more attention and energy to making a licensed edition a success.

6.7 Making the First Contact and Building Relationships

Making the first contact with a potential partner can be done in various ways – by mail or by email, enclosing or attaching a catalogue or information about specific individual projects. One could also seek an appointment with the appropriate acquisitions editor at an international book fair, although not all editors attend fairs and if they are present they may have very full appointment schedules and may not be able to fit in meetings “on the spot”.

6.8 Working Direct or Using Subagents?

Rights sellers – publishing rights staff or literary agents representing authors – may choose to work direct with editors in appropriate partner publishing houses, or may choose instead to work via a local subagent or subagents in a particular market, either on a title-by-title basis or allowing the agent to handle their whole list. Markets might include the USA, Poland, Russia, Japan, Korea, China, Taiwan, Thailand and Vietnam. Agents retain a commission on the deals they handle.

Two important questions arise:

1. Why do you think rights sellers might choose to use intermediary agents?
2. What benefits might a subagent offer, and what are the drawbacks?

Benefits might include on-the-spot knowledge of market trends and local publishers; disadvantages might include the agent working for many other publishers, and that payment via an agent will take longer. For example, for a deal done directly between a German and a Japanese publisher, terms may be suggested and agreed in less than a week, and a contract drawn up and signed and an advance transferred in a month. The same deal handled via a Japanese subagent is likely to take three months or more to reach the same stage.

6.9 What Type of Licence is best?

This section looks at two methods of licensing – as a co-edition, or as an arm’s length licence.

The optimum method may depend very much on the type of book in question.

Co-editions

These are licences where the originating publisher develops a project, approaches a range of potential partners (e.g. US and foreign language publishers) to generate interest in the project with the aim of securing orders for printed copies for each licensee, with a coordinated printing to be arranged by the original publisher. This results in a larger print run and lower unit costs for each participating publisher. The original publisher will invest in paper and printing on behalf of the partners; foreign language publishers will need to prepare the translated text for their editions. This type of deal works well for books heavily illustrated in colour, as the origination costs can be amortised over the combined printing. Co-editions can also be arranged for un-illustrated books requiring only a change of imprint and ISBN (e.g. for a US partner) but viability will depend on the exchange rate for the US dollar.

Licences

Reprint and translation licences can also be negotiated on the basis of “arm’s length” deals where each licensee manufactures their own edition, perhaps purchasing electronic files from the original publisher to assist in the production process. This type of licence can be used for heavily illustrated books (although there is no economy of scale in manufacturing as there would be for a co-edition) and is also appropriate for other types of books – it can also be useful if the licensee wishes to make some (permitted) adaptations for their edition. Examples of adaptations might include the Americanisation of spelling and terminology in a UK cookery book or a UK children’s picture book by a US licensee, or a publisher translating a book removing references specific to the country of origin (e.g. sources of information, stockists etc.) and replacing them with local references.

6.10 Supplying Material for Assessment

The material supplied to potential licensees may vary enormously according to the type of project and the status of both the rights seller and the author. For a new novel by a well-established author with an international track record, a brief description of the new project may be enough to stimulate interest. For a new novel by a first-time author, sample material if not the whole text will be essential. For any book heavily dependent on illustrations, sample material will be essential – it could be shown to potential licensees at a book fair on an iPad or even on a smartphone, but potential buyers will usually need something more tangible for assessment, and may need to consult with colleagues back at their offices. For an educational or academic title, a list of contents may be enough to spark interest – for a new edition, details of the changes made for the new edition. Material could be supplied as sample sections (blads), proofs, finished copies of the book, or increasingly in the form of electronic files. These would normally be supplied as PDFs, rather than the application files which might later be needed by the licensee for actual production of their edition.

Skills Builder 3 – Supplying electronic files

List what you consider to be the advantages for both licensor and licensee of supplying electronic files for assessment, rather than proofs or finished copies. Are there any potential problems with supplying materials in this way?
See Sample Answer.

6.11 On what Basis should Rights be offered – Exclusively or Non-exclusively?

Rights holders (publishers or agents) may choose to offer projects to potential licensees in a variety of ways. These include on the basis of an exclusive option to one publisher at a time in a particular market (often used for educational and academic works, where the potential licensee will need time – perhaps three months – to obtain specialist reports). By contrast, trade publishers may offer rights on the basis of a multiple submission (several competing publishers receive material at the same time with a deadline for making an offer) or a full-scale auction (publishers in the same market compete and there are specific rules on whether there is a minimum offer (the floor), whether the auction will have several rounds, and if a particular publisher (usually the publisher of the same author’s previous book) may have “topping rights”, whereby they have the right to make an offer an agreed percentage higher than the best offer made by a rival publisher. Publishers might choose to make a “pre-emptive bid”, whereby they make a high initial offer at the very beginning of the auction process, which the licensor might choose to accept.

6.12 Key Areas of Negotiation

Once a potential partner expresses interest in a project, the agreement will need to be reached on all relevant aspects of the licence deal. These will include a clear definition of the rights which are being granted and which are being withheld, the permitted sales territory and duration of the licence, the financial terms (e.g. a price per copy for a co-edition, royalties or a lump sum arrangement for a licence), the obligations placed on the licensee for the life of the licence arrangement; agreement on who will be responsible for clearing and paying for permission for the use of any third party copyright material contained in the book; provisions for cancellation or termination of the contract; provisions for arbitration and a statement of which law which will be applicable to the contract. Only when all these aspects have been agreed can a licence contract be finalised.

It is also vital to establish in advance of the contract whether the licensee wishes to make any changes for their licensed edition – these might include adding an introduction by a local specialist, omitting some material specific to the country of origin and substituting local examples, or (in some markets) might amount to political censorship which might be unacceptable to the original publisher and affect their decision on whether to grant a licence.

6.13 The Financial Terms of the Licence

When negotiating the financial terms for the licence, the first questions are to establish what rights are required for which market/s and then the expected size of the first print run, the local selling price – retail (less any VAT) or wholesale and the expected publication date; also whether electronic rights are required as well as print. With this data you can formulate terms; in the case of a co-edition licence, this will mean quoting a unit price per copy for the licensee’s edition, to include all production costs, insurance and shipping from the place of manufacture to an agreed destination, and a profit element. The royalty may also be included in the price, or specified separately. Terms for an arm’s length licence, with the licensee manufacturing, are often an escalating royalty percentage based on the retail price or on net receipts. The royalty rates are a matter for negotiation and may take local circumstances in the licensee’s market into account – initial rates based on the retail price of a translated edition might be as low as 6% for a small children’s book, or 7 ½ % for a novel or an academic book, and could rise to 12 ½ %. The number and level of escalation points will also be a matter for negotiation, but the principle is that if the book does well the licensee should be able to pay a higher rate. Royalty rates based on net receipts will be higher to allow for trade discounts, perhaps starting at 10% and rising to 15%. Royalty rates for same language reprint editions – where the licensee incurs no translation costs – may start at 10% based on the retail price and could rise as high as 20%.

Advance payments are also a matter for negotiation. Trade publishers negotiating terms for a new work by a well-established author may be able to set figures not directly related to sales expectations, but for more modest projects a good rule of thumb is to secure an advance payment equivalent to 50% or more of the royalties due on the licensee’s first print run. In some markets where royalty accounting may be intermittent, securing an advance equivalent to the total royalty on the first printing may be wise.

An alternative is to formulate a lump sum payment equivalent to a royalty for an agreed first printing, with payment for any further printings to be renegotiated; this could be payable either all on signature of the licence contract or half on signature and half on publication or an agreed calendar date. This model has the advantage of simplicity for both sides.

6.14 The Licence Contract

This is the document which must outline clearly and precisely the rights which are being granted and the responsibilities of both partners – any lack of clarity may very well lead to misunderstandings and disputes in the future. When dealing with a licence partner for the first time, it is always wise to send them a draft contract in case there are any particular requirements or specific wording which need to be more fully explained, or which may need to be adapted to local legal or banking regulations; also, whether any additional documentation is required, e.g. an invoice for the initial payment; a certificate of residence from the licensor (needed to enable the licensee to apply the correct rate of tax deductions if appropriate; an invoice for each ongoing royalty payment.

6.15 After the Contract

Once the contract is signed by both parties the licence arrangement is in place, although many contracts specify that the licence is not valid until the initial payment due to the original publisher on signature has been received; it may be necessary to provide an invoice for this. If the licensee has proposed changes which are broadly acceptable, they may need to provide more detail for approval after the contract is signed. The licensee’s publication deadline will need to be monitored, as will their provision of finished copies of their edition, checking that they have acknowledged the author and original publisher correctly and that they then provide regular sales statements and royalty payments throughout the life of the licence. If the licence is limited by time, the original publisher needs to monitor when it will expire and decide whether to terminate or extend the arrangement.

In the case of a co-edition there will be many more administrative procedures to be followed, including much more liaison with in-house publishing departments such as the production, shipping and finance departments – for this reason, literary agents are rarely involved in co-edition deals. The original publisher must supply the licensee with the full text and layout of the project – foreign language publishers then have to commission their translated text and supply it imposed to fit round the existing layout of the illustrations. A same-language partner may need to do no more than supply a change of imprint, copyright details and ISBN.

Proofs then need to be supplied and approved by each partner before the co-edition goes to press. Each partner needs to have supplied detailed shipping and documentation instructions well in advance. The staged payments from each partner for the co-edition copies need to be carefully monitored.

6.16 Problematic Licences

The majority of licence arrangements, once agreed and contracted, run smoothly for both parties; this section addresses what happens if a licence arrangement runs into difficulties. Scenarios with financial implications might include negotiating a deal and signing a contract, but the licensee then fails to pay the initial advance, fails to publish, or fails to provide regular sales statements and royalties. Other problems might include evidence that more copies have been printed and sold than are being accounted for, or that copies of the licensed edition are being sold in territories not included in the licence. Problems could also occur if changes are made in the licensed edition without prior permission, or the author is not clearly credited.

6.17 Keeping Track of Licences

Rights sellers are often dealing with many different types of licences in different markets and at different stages of negotiation and contractual status. Potential licensees need to be chased for decisions, and licensees may need to be chased to return signed contracts, pay advances, publish on time, supply finished copies of their editions and provide regular sales and royalty statements. They may also need to be chased for payment for any duplicate production material provided. Sellers need to keep track of each stage of each deal.

6.18 Chapter Summary

This chapter has explored the rationale for licensing translation and reprint rights, the optimum approach (a co-edition printed by the original publishers for their licensees, or a licence with independent printing by the licensee) and the procedures involved. You should now be able to:

• Demonstrate understanding of the rationale for these areas of licensing, including the positive and negative aspects of granting licences, and evaluate the nature of those deals which are best arranged on a co-edition and those on a licence basis
• Analyse commercial opportunities for making a rights deal and develop appropriate recommendations
• Demonstrate an understanding of the processes involved in achieving a rights deal, from promotion to appropriate licensing partners through to administering a rights deal from start to finish.

Further Reading

Clark, G and Philips, A. 2020 Inside Book Publishing 6th Edition. London: Routledge.

Owen, L. 2019. Selling Rights Edition 8th Edition. London: Routledge

Upshall, M. 2009. Content licensing Buying and Selling Digital Resources. Oxford: Elsevier

Skills Builder 1 – Sample Answer

1. You may wish to consider the implications of licensing versus direct sales of the English edition.
2. Your answer might include considering whether it would be preferable to grant a licence for the Swedish publisher to manufacture their own edition or whether it could be printed as part of an international co-edition organised by the original publishers.
3. Your answer might include considering whether you can distribute your own original edition to that market (receiving the export price less any discounts) or grant a local reprint licence (on an advance and royalty based on the price of the licensed edition).

Skills Builder 2 – Sample Answer

UK examples

1. Students would need to pick up on the sensitivity in some markets to Alan Hollinghurst’s homosexual themes

2. Here, success in licensing would depend on the availability of timing of Jamie’s shows on local television in the markets concerned

3. Much would depend on whether the content was appropriate for curricula in licensing markets, or whether substantial adaptation would be needed

International examples

1. A high-level book on a specialist topic such as this might not justify the translation

2. The pig character would be unacceptable in Muslim markets

Skills Builder 3 – Sample Answer

The obvious advantage to both parties is speed of supply, which may be in advance of availability of finished copies. The licensor is saved shipping costs and the worry that reading copies may be lost in the mail.

Disadvantages may be concern about security of the files, especially if they are sent simultaneously to several publishers in a market with a record of copyright infringement. Watermarking files may deter reproduction in the original language, but will not prevent unauthorised translation.

7.1. Chapter Aims

The aim of this chapter is to develop an understanding of the opportunities and risks involved in the licensing of content for exploitation through digital channels and platforms. This landscape changes rapidly with emerging technologies and evolving business models, and so the focus of the chapter is to establish a broad understanding of the strategic, commercial and IP principles and issues.

This chapter is designed to equal approximately 5 hours of independent study and as you work through the chapter you will find skills builder exercises that will help you to develop what you have learned in a practical sense.

7.2 Introduction to Licensing Electronic Rights

Licensing by publishers of the right to distribute content in digital form has become increasingly common, indeed it is very often a part of ‘business as usual’. However, just as with the decision to license rights to reprint or to translate in print form, the publisher, as rights holder and custodian of the author’s intellectual property, must take into account commercial, intellectual property and strategic aspects when deciding what to license, to whom and on what terms.

The licensing of journal content to the core academic library market is now an essential business activity of all academic publishers and is effectively an extension into a digital setting of the pre-existing journal subscription business model. These ‘site licences’ allow for libraries to offer their users access to the publisher’s content under controlled terms and conditions, thereby preserving the IP rights of the publisher. Although it is important to understand that this is a licensing activity, rarely would it be regarded as a market development opportunity and hence it is largely outside the scope of this chapter. Within the chapter when discussing licensing we focus on the licensing by the publisher to a third party of the right to distribute, resell or reuse the content in digital form. 

Typical situations would be the licensing of content for inclusion in a larger database comprising many different publishers’ works, the licensing of content for delivery through a different market channel or to a different market segment. The licensing of chemistry experiments for inclusion in school science resources or of dictionary content for inclusion in a crossword solver would be examples of licensing to reach a different segment. Many book publishers have seen opportunities to reach new markets and segments by licensing content to other parties.

Reasons to license for market or sales development reasons will vary from situation to situation, and will be shaped by the rights holder’s existing technological capabilities, its access to markets and channels, and its assessment of the upsides and downsides presented by the particular licensing opportunity. Retail book sales channels have diminished as a proportion of total revenues, leading many book publishers to seek alternative revenue streams including electronic licensing, as well as eBook sales.

With regard to books, it should be understood that the distinction between ebook sales via resellers, and the licensing of book content to aggregators, is frequently blurred. Members of the former group of resellers usually agree a licence with the publisher in order to distribute content electronically, and many of the latter group will sell individual titles while also compiling collections of content, all done under licence. Format differences will often denote the distinction, with eBook resellers distributing in epub or equivalent format for stand-alone purchase, download and consumption, whereas aggregators will ingest content in xml or pdf format for distribution and reader access via their own proprietary platforms. Partly as a consequence of this blending of the licensing to aggregators and the contracting with institutional ebook resellers, many publishing companies combine the management of electronic licensing with the Sales function rather than with the Rights function of their organisation. Our discussion here focuses on the licensing aspects rather than the reselling of downloadable eBooks.

Examples of the benefits to the publisher brought by electronic licensing might include:

• incremental income as a result of access to a market segment or geographic market not otherwise reached;
• the licensee may be proposing to integrate the content with other content within a database or may be able to add contextual value which the publisher is unable to add;
• licensing may deter piracy of content; or
• licensing might simply present the opportunity to generate revenue from a deep content archive.

Case Study – Boydell and Brewer 

Boydell and Brewer (B&B) is a small academic publisher in the humanities, based in the UK. From the following link we can see that the company has agreements with numerous ebook resellers and academic ebook aggregators to distribute its content.

https://boydellandbrewer.com/
https://boydellandbrewer.com/ordering-ebooks

1. For a publisher such as B&B, what might be the arguments for and against licensing content to the aggregators listed on their website?
2. Reviewing the B&B offerings made by the aggregators listed on the site, to what extent do you see an appropriate solution to any of these concerns? For example look at Cambridge University Press who host B&B titles:

https://www.cambridge.org/core/what-we-publish/publishing-partners/boydell-brewer#

Let’s now go through the answers.

1. Arguments in favour of licensing to the aggregators?

The positive arguments that Boydell and Brewer (B&B) may have considered in deciding to license their content would include:

• The demand from institutional libraries for electronic access to academic monographs and reference works is strong and is overtaking the demand for print. All academic publishers including B&B must be able to provide their content to libraries in digital form.
• Working through aggregators provides B&B with a rapid and low cost way of making its content available electronically
• Licensing may unlock a revenue stream from the deep backlist
• Lack of critical mass: meaning that even if it were to develop its own platform or collection B&B could not offer enough range to be an attractive ‘stand-alone’ proposition to libraries
• B&B lacks the scale and the resources to invest in developing its own technology platform
• Great marketing and geographical reach is provided by the large aggregating organisations such as Cambridge. They have existing collections which they have already sold into libraries, a strong customer base, and an extensive sales organisation. This geographical reach and market penetration would exceed what B&B would be able to achieve on its own.

Arguments against licensing might include the following concerns:

• Loss of control of the sales effort, potentially leading to a lack of focus on B&B titles through these channels
• Sharing of profit margin with a third party
• Risks of file sharing and infringement of copyright because of inadequate digital rights management
• Loss of company or product identity
• Long contractual terms possibly limiting future options.
• The ebook files offered are typically pdf, offering low functionality
• Customers and readers will have a relationship with the aggregator, not with B&B.
• The company loses out on a learning opportunity – it does not build up knowledge about the digital market

2. Reviewing the B&B offerings made by the aggregators listed on the site, to what extent do you see an appropriate solution to any of these concerns?

We do not know the commercial aspects of the agreement between B&B and its partners. But we can note the following:

• The licensing agreements appear to be non-exclusive, meaning that B&B is able to make agreements with several parties concurrently.
• JSTOR also offers a dedicated B&B page ( although not strongly branded)
•  http://www.jstor.org/action/showPublisher?publisherCode=boydellbrewer
• The Cambridge site offers links to purchase the titles thus providing a marketing vehicle for B&B

7.3 Examples of Electronic Licensing - Aggregators

Visit the websites of some aggregators who license publishers’ content (see links below). Note that these are all in the academic and professional space as this is the segment where aggregation of content most typically occurs.

Use the internet to access these and other services and to compare and contrast the products and services offered.

• Alexander Street Press
  http://alexanderstreet.com/page/about-us

• Books 24/7 Skillsoft (look at the resources tab)
  http://www.skillsoft.com/

• Ebrary/Proquest
  https://www.proquest.com/about/publishers-partners/
  http://site.ebrary.com/lib/businesstitles/home.action?force=1

• EBSCO - Visit the Publisher information pages on the EBSCO website http://www.ebscohost.com/ebooks/for-publishers and look also at the pages which describe the collections of book and journal content for academic libraries and corporate customers
  http://www.ebscohost.com/ebooks/academic/subscriptions/academic-ebook-subscriptions

• InteLex/Academic Rights Press
  http://www.academicrightspress.com/for-publishers

• Knovel (now part of Elsevier. Take a look at the video at this link)
  http://www.elsevier.com/online-tools/knovel

• AcademicPub and Xanedu 
  http://www.academicpub.com/

Now consider the following questions:

1. What do these aggregators offer that individual publishers are not able to achieve on their own?

2. What objections might publishers and other rights holders have to the inclusion of their content on platforms such as the following?

Let’s now think this through together…

Question 1. What do these aggregators/vendors offer that individual publishers are not able to achieve on their own?

• A fit to a targeted market segment – most of these services are designed with a particular customer group in mind. For example Alexander Street Press is aimed at researchers in the humanities, Knovel at researchers and professionals in Engineering, Skillsoft at trainers and HR professionals in industry. The sites are designed to appeal to the needs of the respective audiences.
• Range – all of the platforms offer a range of content from many publishers
• Bibliographic functionality and tools – eg internal searching, linking, integration with library catalogue
• Sophisticated technical functionality – eg the graphic and data manipulation capabilities of Knovel, the integration of content and training resources of Skillsoft, or custom textbook creation by AcademicPub
• Marketing reach into difficult to access segments or geographic markets

Question 2. What objections might publishers and other rights holders have to the inclusion of their content on these platforms?

• Potential risk of cannibalising other more profitable sales – print or digital
• Loss of identity for the product, the author or the publisher
• Low revenues (the royalty rates flowing back to the publishers from these aggregators will vary from 60% to as little as 25%). The level at which aggregators set their rates of compensation will be determined by the perceived uniqueness of the service, the value added by the platform over and above the content, and the perceived value of the content itself.
• No territorial control. This is a greater issue for publishers who do not have global rights to their content and who may fear that the global reach offered by the aggregator may lead to the infringement of territorial rights. This would rarely be a concern for academic and professional publishers.

7.4 Commercial issues and Business Models

It is of great importance that the licensor (the rights holder) fully understands the business model of the licensee and the likely implications of the business model in terms of future income. In referring to the business model we mean both the sales and the access model (or models) used to make the licensor’s content available to users of the licensee’s product or service, and also the model of compensation used to remit back from the licensee to the licensor.

The most common sales and access models include: subscription (single year or multi-year), outright purchase with perpetual access, short term rental or ‘pay as you go’.

Different compensation models for licensors would usually be characterised as either:

1. A proportion of a defined royalty pool which would be a percentage of total sales of the aggregated product. The proportion allocated to the rights holder would typically be based on the volume of the rights holder’s content relative to the total content offered in the licensee’s product (often expressed in terms of the number of pages), or by the actual usage of the rights holder’s content relative to that of the product over all. There might be a guaranteed minimum royalty payment.
2. An annual flat fee for the content regardless of either sales or usage. This is simpler to budget and simpler to manage. But licensees are less likely to agree to such a model.

7.5 Intellectual Property Issues

In licensing electronic rights to a third party the publisher must always be aware of the extent of the rights that it owns or has been licensed. Typically, the publisher will have been assigned or will have been licensed certain rights from its author(s), editor(s) and illustrator(s), and may have obtained permissions from other rights holders to reproduce their content in print and/or electronic form. The contracts governing all of these must be taken into account in determining what the publisher can and cannot license to an aggregator or other party. In agreeing a licence with a licensee, which are those areas that might be considered to be the ‘MUST HAVES’ for the publisher/rights holder, and which are the ‘NICE TO HAVES’? Consider both commercial and IP aspects.

‘Must Haves’

• Non-exclusive – in licensing content to another party (the licensee) the publisher (the licensor)should ensure that licence is non-exclusive, allowing the publisher to license the same IP rights elsewhere and avoiding being tied to a single partner
• Term (or length) of the agreement to be limited – to avoid being locked in – perhaps two years initially, with the term tied to the date of the contract not the launch of the product/platform by the licensee
• Copyright in the content to remain with the publisher (or its authors), although copyright in the format and the presentation may be with the licensee
• Clear definition of the market(s) into which the licensee will be permitted sell the licensed content
• Clear definition of the format to be used by the licensee and the rights of users to download, store or print
• Clarity on and limits to any promotional free access offered
• A fair share of the revenue – the shape of this is dependent on the licensee’s product/service and business model
• No sub-licensing by the licensee
• No right of republication
• Licensee to take appropriate action in the case of copyright infringement and to inform the publisher

‘Nice to Haves’

• A guaranteed stream of income with potential for upside
• Reporting of usage statistics
• Ability to withdraw individual titles

7.6 Practical Aspects of Licensing

In developing and managing the licensing of digital rights, there are practical aspects to take into account. Careful organisation of rights data and control of the process will ensure that mistakes are not made in licensing content and that the process works efficiently.

Key areas to manage systematically are:

• Clearing of embedded rights and permissions at the time that a book is developed – with accurate and retrievable records kept as to rights owned and permissions cleared
• Compliance with standards for formatting metadata and content
• The management of accurate metadata
• An editorial and production workflow which supports the licensing of content
• Systematic and consistent organisation and tagging of digital content assets
• Efficient distribution, possibly by a third party
• Accurate and current data on what has been licensed to whom, and for what timing/ term and on what business terms.

Many publishers lack the infrastructure to organise this activity themselves and seek a technology partner to do it efficiently on their behalf. Several third party service providers offer to undertake many of these services for publishers. Two established organisations are Code Mantra and Coresource (Ingram).

Skills Builder 1 – Outsourcing Asset Management and Distribution

Review the Coresource and CodeMantra websites

Code Mantra:
http://www.codemantra.com/

Ingram’s Coresource
http://www.ingramcontent.com/publishers/digital

List the potential benefits to a book publisher of using these or similar services?
See Sample Answer.

7.7 Chapter Summary

This chapter has explored the opportunities and risks involved in the licensing of content for exploitation through digital channels and platforms. You should now be able to:

• Demonstrate an understanding of the IP, practical and commercial issues involved in licensing content for electronic distribution or exploitation
• Analyse a licensing proposal to identify possible commercial risks and potential areas of negotiation
• Assess the potential strategic contribution of digital licensing in formulating the development strategy of a given publishing company or list

Further Reading

Clark, G and Philips, A. 2020. Inside Book Publishing 6th Edition. London: Routledge.

Hall, F. 2013. The Business of Digital Publishing. London: Routledge

Jones, H. and Benson, C. 2016. Publishing Law Fifth Edition. London: Routledge

Owen, L. 2019. Selling Rights Edition 8th Edition. London: Routledge

Skills Builder 1 – Sample Answer

Benefits would include:

• Client website interface for uploading content, managing metadata and file distribution
• Consistent formatting and reliable storage of content assets
• Management and dynamic distribution of product metadata
• Cost effective conversion into proprietary ebook formats with automated quality assurance and validation
• Efficient distribution of content files to ebook resellers and aggregators
• Global reach
• Reporting data on which ebook files have been made available through which intermediaries
• Integration with other services, e.g. book production workflow, print on demand.

8.1. Chapter Aims

This chapter aims to explore the relationship between the role of the publisher (as an investor, disseminator and protector) and the economic value of Intellectual Property (IP) – whether owned by the publisher or published under licence. The chapter will discuss how IP value is created and how the market values IP assets, and will explore threats to the value of IP and some of the practical aspects of defending IP against those threats, especially in an international setting.

This chapter is designed to equal approximately 5 hours of independent study and as you work through the chapter you will find skills builder exercises that will help you to develop what you have learned in a practical sense.

8.2 The Economic Value of Intellectual Property

How do we measure the value of the Intellectual Property of a publishing business?

In many businesses, Intellectual Property assets are among the most valuable assets that the company owns and are protected by patents. For example a pharmaceutical company that has invested in the development of a new drug would attribute great value to its IP for as long as it is able to exploit the drug. Software design or engineering research and development would be other examples where IP is an asset of great value to the business.

In a publishing setting the copyrights owned by the business or the rights licensed to it are at the heart of its value. Despite its importance, the value of IP assets, whether patents or copyrights, is rarely shown on the balance sheet as an asset because of the difficulty in arriving at a measurable value. In his influential book about the publishing industry, Merchants of Culture (Polity Press 2012), John Thompson uses the terms Economic Capital Intellectual Capital and Symbolic Capital to discuss the value of publishing companies. He states that ‘for most trade publishers the ‘value’ of a particular book or book project is understood in one of two ways: its sales or sales potential, that is its capacity to generate economic capital; and its quality, which can be understood in various ways but includes its potential for winning various forms of recognition such as prizes and glowing reviews, or in other words its capacity to generate symbolic capital. These are the only two criteria – there simply are no other’.

In those situations where IP assets are actually valued financially, such a valuation must always stand up to scrutiny and must comply with relevant accounting standards. Methodologies for valuing IP vary. But two standard methods are: (a) valuation at cost – i.e. the value of the IP is considered to be equivalent to the cost of developing a similar substitutable product, or (b) the valuation of future income from the IP – i.e. the value of the IP is the value of all the future cash that might be generated by the IP, with the application of an appropriate discount factor to arrive at a Net Present Value (NPV) for those future cash flows. (A discount factor enables the calculation of the present value of expected cash flows in future years).

One situation when an effort is made to determine the value of publishing assets is when the owner of those assets chooses to put them up for sale and a market value must be established. The sale and purchase of publishing companies and of publishers’ assets occur frequently in the US and UK markets, less so in continental Europe and in Asia where a higher proportion of businesses remain family owned and controlled.

Valuing Publishing Companies and Publishing Assets: The valuation of a publishing company or a publishing programme is often described in terms of a multiple of the annual sales of the company or list, sometimes referred to as a ‘revenue multiple’. This method is used as a simple alternative to the more complex discounted cash flow calculation briefly mentioned above. The above reading discusses the range of multiples that might typically occur in a publishing setting and shows that in different publishing sectors different revenue multiples apply.

Two actual sales illustrate the difference between publishing sectors. The links below will take you to articles in The Bookseller reporting on two transactions. In both cases the prices paid are in the public domain. Additionally, you could look at the Bloomsbury and Hachette websites for more background.

Hachette UK in March 2014 purchased Quercus Publishing
http://www.thebookseller.com/news/hodder-buys-quercus

In September 2013 Bloomsbury acquired the academic law publisher Hart Publishing
http://www.thebookseller.com/news/bloomsbury-acquires-hart-publishing-65m 

Skills Builder 1

1. Why do you think that Hart attracted a revenue multiple of 2.5 whereas the Quercus multiple on revenue was 0.6?
2. In what ways might the difference in the revenue multiple be attributable to the nature of the intellectual property rights owned or controlled by the publishers?
3. To what extent might international factors have played a part in the valuation?
See Sample Answer. 

Valuing IP Assets: The value of a publishing company is typically built through the acquisition and development of publishing rights. In simplistic terms it might be said that the value of the publishing company is the sum of the value of all the rights it controls. Put another way: the more rights the company has, the greater its value (although of course every individual right could be said to have its own value, and some IP assets are worth immeasurably more than others.

The value of an individual publishing asset, for example the copyright in a title or the licence to publish a title for a period of time, may theoretically be calculated by projecting the likely cash that the title will generate and discounting that cash to present day values using an appropriate discount factor, as discussed above. In practice this exercise is rarely done and when it is, the valuation is not publicly disclosed. As an illustration, it is reasonable to suppose that when Hachette acquired the global rights to all of Enid Blyton’s work in 2012 a calculation as to the value of future cash flows was done in arriving at a price to be paid for the rights. It should also be noted that having acquired and paid for rights such as these, Hachette will have included the value of the acquired rights on its balance sheet as an ‘intangible asset’. See the following for more information on the Enid Blyton rights deal:

https://www.publishersweekly.com/pw/by-topic/childrens/childrens-book-news/article/51222-hachette-uk-acquires-enid-blyton-estate.html

Other value Drivers: Having placed the essence of valuation upon the rights controlled by a publishing company, it must be noted that sellers and buyers of publishing companies and publishing lists will often also attach value to other attributes. Some examples of other value drivers in a publishing company might be the following attributes:

• Its customer relationships, and customer databases
• Its brand(s), reputation
• Its market share
• Its strategic partnerships
• Its technology and innovation
• Its staff with their particular competencies
• Its physical or ‘fixed’ assets, eg property
• Its contracts to supply goods or services
• Its other assets, including warehouse stock, work in progress, author advances (collectively known as current assets)

Take a moment to consider the following questions:

1. Which of the above attributes might you expect normally to see on the company’s balance sheet? And why only these?
2. Why might some acquirers consider that some of the other attributes listed above would justify a valuation above a conventional revenue multiple for the sector?

Let’s go through the answers.

1. Only fixed assets and current assets would normally be included on the publisher’s balance sheet. In certain cases future contracts might be included. In general, only assets with a measurable future value are suitable for listing on the company’s balance sheet.
2. An acquirer might be willing to pay a ‘strategic premium’ over and above the normal valuation of a company because of the strategic benefits its acquisition would bring them. To justify such a premium the acquirer would need to be able to show that the acquisition would advance its own strategic objectives. For example, a company with a strong market share in a target segment or with strong imprints or brands, or even with key relationships might be considered strategically attractive to an acquirer desirous of building its share in that particular market.

8.3 Roles and Responsibilities of the Publisher in Building IP Value

The acquisition, management and exploitation of Intellectual Property assets is at the heart of what the publisher does; and the company’s effectiveness in undertaking this function will shape both its trading performance and its long term value.

Like all organisations, commercial publishing companies must have clear strategic objectives. These may usually be characterised in the following broad terms:

• maximise revenues and profit
• increase the long-term value of the enterprise
• protect the integrity of the intellectual property rights that it owns or controls

Each of these would be expressed in terms relevant to the nature and scale of the company and appropriate to the sector in which it is operating. Referring back to John Thompson (Thompson 2011, Merchants of Culture, 2nd Edition) these objectives may be characterised as maximising both economic and symbolic capital.

Many ‘not-for-profit’ publishing organisations will also have the same broad objectives as these, although they are usually described using different vocabulary: for example, profit may be expressed as ‘surplus’. Not-for-profit publishing organisations will frequently also have objectives associated with the advancement of the parent organisation’s vision and goals, typically referring to the extension of knowledge or education within the appropriate field. Such not-for-profit publishing organisations would include University Presses, learned societies and professional institutions.

Refer to OUP’s statement of its mission: http://global.oup.com/about/introduction?cc=gb

And look at how the Royal Society of Chemistry’s substantial publishing operation supports the Institution’s goals: http://www.rsc.org/publishing/aboutrscpublishing.asp

In a publishing organisation, whether commercial or not-for-profit, the responsibility for acquiring new IP rights and managing existing ones usually rests with the publishing team, sometimes called commissioning editors, acquisitions editors or publishers. By acquiring rights and developing commercially successful products the publishing team will progress the objectives described above and will contribute to increasing the long-term value of the enterprise. However, it must be understood that this is not done alone – as in all organisations the publishing team must work closely with colleagues in all areas to achieve the objectives. When thinking about the successful management and exploitation of intellectual property rights it is probably especially relevant to think of the close partnership work between the publishing, rights, and sales and marketing teams.

Skills Builder 2

When comparing the work undertaken by the publishing team in these three different publishing organisations in building IP value for the organisation, how would you characterise the similarities and the differences in their work?

List your thoughts about how the publishing team builds value in each of.
1. A science journal publishing team (e.g. Elsevier)
2. A school textbook publishing team (e.g. Hodder Education)
3. A children’s trade book publishing team (e.g. Usborne)
See Sample Answer.

8.4 Threats to the value of Intellectual Property Rights

The value of publishers’ Intellectual Property assets is constantly under threat. Such threats come from many different directions and might be clustered under these three headings:

1. Actual infringement of intellectual property rights, in both print and digital form through copying
2. Challenges to the relevance of the traditional copyright model (See chapter 2 of this course), and
3. Erosion of the attractiveness of the publishers’ proposition to the market by the emergence of alternative business models and alternative media forms

8.5 Protective measures and remedies in response to the threats to IP value

A central contractual responsibility of the publisher, encapsulated in the contracts it has with its authors and other licensors is, as we have noted, the protection of IP on behalf of the author or other licensor.

Piracy: Publishing as an industry and individual players within the industry can respond to online piracy threats by protecting intellectual property using Digital Rights Management software and pay-walls, by issuing website ‘take down’ notices, and by filing law suits against infringers. The industry has over the years attempted to make a robust defence of copyright in these ways.

For a discussion of the reasons for protecting intellectual property against online piracy, refer to the UK Publishers Association website.

https://www.publishers.org.uk/influence/copyright-and-ip/

http://www.publishers.org.uk/services-and-statistics/copyright-infringement-portal/

There is a different perspective. Some commentators believe that publishers are attempting to hold back the tide, like Canute, and that they should bow to the inevitable and adapt their commercial propositions and their business models so as to continue to appeal to readers. Parallels with the recorded music industry are frequently offered in this context.

For a vigorous discussion of the reasons why publishers should embrace wider access and changing business models read and listen to Tim O’Reilly’s views. Tim O’Reilly is both a successful publisher of computer books and an opinion leader on the impact of the internet on the media and on society. The first article below, entitled ‘Piracy is progressive taxation’, although quite old, presents the case for file sharing.

https://www.oreilly.com/ideas/piracy-is-progressive-taxation-and-other-thoughts-on-the-evolution-of-online-distribution

There are three key questions to consider: 

1. Which publishing sectors are the most affected by print piracy and why?

Among the sectors most affected by print piracy are higher education textbooks (because of their high price points and indispensability for learners) and a small number of highly popular trade titles – best-selling authors such as J.K. Rowling or James Patterson for example.

2. What are the consequences of print piracy for rights holders and the creators of Intellectual Property?

The consequences for publishers include loss of income to cover their fixed costs, for the author it is the loss of royalties; the circulation of low quality pirated copies can adversely affect the perception of the publisher in the market place.

The re-export of the pirated editions into other markets can affect those publishers trading in other parts of the world, e.g. the re-export of cheap pirated editions from South Asia to East or West Africa means that the publisher is unable to sell its own original edition in those African markets.

3. In what ways are the international development strategies discussed in chapters 5 and 6 (Exporting and Licensing) of this course undermined by piracy and in what ways do these strategies themselves offer solutions to piracy?

Agreements with local importers and distributors can be undermined by piracy as can the value of a reprint licence taken by a legitimate licensee.

Publishers’ programmes to reprint legitimate editions at lower price points for specific local markets can serve to make piracy less attractive economically to the pirates as the legitimate original publisher’s edition of a work is made available at a low price, however publishers need to be aware of the risk that lower-priced editions may be imported into higher-price markets. Likewise the development of local editions and adaptations of textbooks at acceptable local prices is a strategy followed by many global publishers.

Further Reading

Clark, G and Philips, A. 2020. Inside Book Publishing 6th Edition. London: Routledge.

Jones, H. and Benson, C. 2011. Publishing Law Fourth Edition. London: Routledge

Owen, L. 2019. Selling Rights Edition 8th Edition. London: Routledge

Phillips, A. and Bjaskar, M. (Eds) 2019. The Oxford Handbook of Publishing. Oxford: Oxford University Press.

Skills Builder 1 – Sample Answer

1. Why do you think that Hart attracted a revenue multiple of 2.5, whereas the Quercus multiple was 0.6?

There is a lot we don’t know about these transactions from reading the public records. For example, we do not know the financial state of each business, the exact nature of the rights controlled by each, the quality of the forward publishing programme, or details of the staff involved. However, we do know that both are strong brands in their respective fields.

There are also important differences:

Hart = academic and professional, high price, high margin, with some subscription products offering a strong future ‘annuity’ value. A direct purchase model meaning that the company had relationships with known professional customers, and low discount sales.

Quercus = trade, low price and low margin; dependent on book trade and high retail discounts. Although Quercus controls some important rights (e.g. Stieg Larsson), these rights may have been under a relatively narrow licence, leaving few opportunities for wider exploitation.

2. In what ways might the differences in the revenue multiple be attributable to the nature of the intellectual property rights owned or controlled by the publishers?

Being a professional and academic publisher Hart will have had wider control of its IP assets, including ownership of the journals and other titles, and full ownership and control (rather than Licence) of much of the content. Literary agents would not be involved meaning that Hart would have control of subsidiary rights. The higher education textbooks and reference books will often pass from one edition to another, therefore they offer a sustainable revenue stream and long-lived brands.

Quercus as a typical trade publisher will have had rights licensed to it which may have had restrictions both geographic and by media-type. Many of the titles published by Quercus will have been managed by literary agents who would retain control of many of the subsidiary rights. There may also have been time limits to the licences. The key Stieg Larsson titles are published in translation with the head contract being with the Swedish licensor.

3. To what extent might the international factors have played a part in the valuation?

Again limitations on the geographical rights controlled by Quercus may have depressed the value. In particular in North America Stieg Larsson is published by Vintage Crime (Random House). 

Trade publishing is typically a local language business, whereas academic publishing travels globally in English, meaning that Hart’s law titles in their original English language editions can be exported throughout the world. By contrast the export potential for Quercus would be more limited.

Although practical law is generally country specific in its market, academic law, as published by Hart, has a strong international market presenting growth opportunities for Bloomsbury, as Bloomsbury has a wider international network than that reached by Hart.

Skills Builder 2 – Sample Answer

In all three situations the teams are focussed on both managing existing programmes and on building strong new programmes – by understanding customers’ needs and by attracting authors, illustrators and other partners. In every case the publishing team is seeking out and securing new publishing projects that are supported by Sales and Marketing Colleagues and that fit the agreed strategic framework for the business. Successful publishing (which we might define as developing sustainable and profitable revenues from publishing projects that fit the organisation’s strategic objectives, and contractually securing the publisher’s IP rights) will in time contribute to increasing the IP value of the enterprise (its economic and symbolic capital).

There are obvious differences in the detail of each of these situations, as described below, but essentially all may be characterised as above.

1. A journal publishing team

In this situation, the role of the publishing team is to manage an existing journal's portfolio, working closely with the external scientific editors and editorial boards to raise the quality of the content. Close coordination with sponsoring learned societies will be needed. The team will also be monitoring developments in the market and seeking opportunities to launch innovative new journals or to acquire contracts from societies to publish existing journals. Ensuring that the company has robust contracts in place with society partners, journal editors and contributors is a key part of the work. In general this work tends to be ‘slow burn’ in nature. The value of the IP is built over the long term by improving the quality of the journals, ensuring rights are properly secured, and by innovating in the portfolio.

2. A school textbook publishing team

The schools textbook publisher is constantly in dialogue with teachers to understand the needs of schools, and is closely monitoring education funding patterns, curriculum change and competitive activity in order to identify publishing opportunities. The team will also be commissioning work from authors and other development partners, and managing the writing, development and design of new commissioned resources. The team will always maintain a holistic view of the programme as a whole and will conduct its market research and product development within an agreed strategic framework. IP value is built by commissioning good content, securing as many rights as can reasonably be acquired or licensed, and by building a strong competitive position in the market.

3. A children’s trade book publishing team

The children’s trade book publisher is continuously keeping track of market developments, communicating with customers, authors, agents and advisors, watching competitors and testing new ideas. A key aspect of the work is in negotiating contractual agreements with authors, illustrators and agents over IP rights, ensuring that contracts, while acceptable to all parties, serve the long-term interests of the Company. The team is also managing a dynamic portfolio, developing series and brands and working closely with authors and illustrators to create new products. IP value is increased by acquiring rights that have value in the market and by creating excellent and popular new products whose value grows with their commercial success. Long term value is created by establishing sustainable and profitable revenues from a strong backlist. Value may also be built by developing brands and characters that offer sublicensing (TV, Film), and even merchandising (toys, clothing etc.) potential

9.1. Chapter Aims

This chapter aims to explore the reasons for and some of the processes involved in developing an international publishing business, and through case studies to look at the journey taken by several publishers to build an international organisation through inward investment in destination countries.

This chapter is designed to equal approximately 5 hours of independent study and as you work through the chapter you will find skills builder exercises that will help you to develop what you have learned in a practical sense.

9.2 Why Build an International Organisation?

The firm will often be driven by the objectives of building its revenues and profits and controlling its own destiny into forming overseas sales offices initially and then developing publishing entities in international markets.

Publishing companies typically follow this progression, although it should be emphasised that such international expansion is neither appropriate for, nor sought by all publishing companies. For many organisations (usually the smaller ones) it is often preferable and appropriate to remain within their geographical borders. It should also be noted that positioning along the chain is not a purely linear progression: companies are usually at different points on the chain in different markets. Additionally, exporting and licensing are normally pursued in parallel rather than sequentially. For example, many publishers will license a foreign language translation of a work into a market and continue to export the original English language version into the same market concurrently.

Case Study - Human Kinetics

This case study looks at the international activity of Human Kinetics (HK), a US-based publisher with a tight publishing focus and a strong market share within its chosen vertical segment of sport sciences for consumers, students and professionals.

Study the company’s website to gain an understanding of the profile of the business.
https://uk.humankinetics.com/?virtual=1
https://uk.humankinetics.com/pages/about-human-kinetics 

Take a look at the international sales network by following:
https://uk.humankinetics.com/pages/international-sales-rep

Develop your thoughts and make your own notes on the following questions:

• Why did HK expand beyond the US?
• Why did HK establish operations in the UK?
• Where is HK on the ‘establishment chain’ discussed above?
• What might be HK’s next international development strategies?

From its foundation in 1973 HK has grown into a $40m + publishing organisation. Some of this has been achieved through international expansion.

International expansion was initially undertaken to accelerate sales growth and to retain direct control of sales in Europe through a sales office in the UK, established in the mid-1980s. Offices were also opened in Canada and Australia for the same reasons (although the Australia office has now closed and a local distributor – Footprint Books - appointed). The UK, Canada and Australia were the most important English language export markets for the company. HK had a unique approach to publishing for its customers, and the company’s management believed that this could be most effectively maximised in core markets by controlling local marketing and distribution directly rather than relying on agents.

The offices in the UK and Canada remain essentially sales offices and distribution centres. However, there is some local product commissioning activity, but the content development, design and production work are all undertaken by the HK parent in the US.

‘Establishment chain” - HK may be considered to be at different points along the establishment chain, having invested in local offices in the UK and Canada it would be at the right-hand side. But note that at the same time in other markets, HK has an active programme of licensing translation rights. Its content is most effectively used when available in local languages, and much of it has universal applicability.

Next Steps – HK might now look at those markets which are the greatest consumers of its content, and consider establishing a local business in one of the most important geographic markets. For example, if HK is licensing many of its titles for translation into Spanish, a possibility might be to establish its own office in Spain, or to form a partnership or joint venture with a Spanish Language publisher in order to launch its own imprint in Spanish

9.3 Local Organic Development

We saw in the Human Kinetics example above how a publisher intent on entering a market may choose to establish a local sales operation, distributing its own imported products (Local Office, Phase 1), before developing a local publishing programme (Local Office, Phase 2).

This phased approach is an organic strategy (i.e. not involving the acquisition of a local company); it enables the publisher to establish an office, to gain local market experience, and to hire local people. Having established a business locally to sell imported titles, formed relationships with customers and market channels, the local office can then take the next step of publishing specifically for the local market.

Case Study - Hachette India – transition from sales office to publishing operation

Hachette India, launched in 2008, is a good example of a sales operation converted into a sales + local publishing company. The second link is an interview with the local CEO on the 10th anniversary of the establishment of Hachette India.

http://www.hachetteindia.com/About.aspx

https://scroll.in/article/868070/hachette-india-turns-10-its-journey-symbolises-the-past-10-years-of-english-language-publishing

Using this example and the Human Kinetics case above as starting points, develop thoughts on the advantages of transitioning from selling imports to publishing locally.

The following are some of the most important advantages which might motivate a local subsidiary towards developing its own local programme.

Advantages

• Less dependence on imports
• Financial advantages
• Accelerated growth
• More margin for the local business
• Responsiveness to local needs
• Opportunity to use well-known local authors, exploit other local opportunities eg links with local/national organisations
• Market pricing will be under local control
• Greater potential to increase market share with local products
• Competitors are active with their own local publishing programme, therefore to compete effectively one’s own local programme is needed

Costs

The additional costs of starting a programme are:

• The typical costs of new publishing, all of which costs are being incurred only for the local market: investment in author advances, project origination, design, composition, printing
• Marketing and selling costs – although some of these costs are marginal only as the company is already engaged in marketing, selling and distributing imported titles
• Staff costs – the costs of recruiting and employing skilled acquisitions/commissioning editor(s), editorial and production people.
• Warehousing, financial and admin costs associated with managing a publishing programme

Risks

The Risks of taking this approach might be:

• Slow to get going. It may take two or three years from recruitment to the publishing of the first titles.
• Costly
• Requires working capital for list development and stock holding.
• Cannot get critical mass to compete effectively
• Ensuring focus – in the case of Hachette India with a vast array of imprints and market segments to choose from this has been a particular challenge for the local management. Human Kinetics is highly focused and does not have a similar challenge.
• Cannot attract the staff, the authors of the right calibre

Significantly in the cases of both HK and Hachette India the development of local publishing programmes has been strategically and commercially successful.

9.4 Joint Venture/Partnership or Acquisition?

In some situations forming a partnership in a market or establishing a formal Joint Venture (JV) is a suitable route for entering a market. JVs in China have been particularly popular among western companies in many industry segments. A Joint Venture is a business agreement for two (or more) parties to work together to achieve a particular objective and to share the costs and the profits. Usually a JV would bring together parties each of whom brings a strength (e.g. market access, a particular competence, a recognised brand, technology, Intellectual Property) that the other party does not have. A Joint Venture is always encapsulated in a legal agreement.

In recent years many publishers have found that the only way to enter the Chinese market (other than simply exporting to China) is via a joint venture. This has been because of the legal restrictions in that country on the ownership by western publishing companies of cultural organisations in China. These restrictions have meant that joint ventures have been among the few available ways of entering the market, both to sell locally and to publish. 

Some examples of publishing joint ventures are described in the following links. Use these and other examples to develop your thoughts on the advantages, disadvantages and risks of joint ventures.

Publishers Weekly article on JVs in China

https://www.publishersweekly.com/pw/by-topic/international/international-book-news/article/76269-children-s-books-in-china-2018-joint-ventures-in-china-the-dos-and-don-ts.html

The establishment by Elsevier of a JV in China with Science Publishing:

http://www.elsevier.com/about/press-releases/research-and-journals/elsevier-and-science-press-launch-joint-translation-center-in-china

http://www.elsevier.com/connect/keai-aims-to-bring-chinas-scientific-research-to-a-global-audience?utm_content=sf3102203

Joint venture between Macmillan Children’s Publishing and 21st Century Publishing Company in China:

https://www.publishersweekly.com/pw/by-topic/childrens/childrens-industry-news/article/53667-new-joint-venture-to-publish-macmillan-trade-titles-in-china.html

Two other publishing examples, one in Brazil (Harper Collins), the second in the Netherlands (Chicken House)

https://www.publishersweekly.com/pw/by-topic/industry-news/publisher-news/article/67693-harpercollins-launches-brazilian-subsidiary.html

https://www.publishersweekly.com/pw/by-topic/industry-news/publisher-news/article/72417-harpercollins-takes-full-ownership-of-harpercollins-brasil.html

https://www.publishersweekly.com/pw/by-topic/childrens/childrens-industry-news/article/50258-chicken-house-goes-dutch.html

http://www.carlsen.de/chicken-house

Thinking specifically about Joint Ventures…

The Advantages of JVs would include:

• Access to markets not otherwise accessible
• Sharing of the costs
• Access to expertise, not otherwise accessible.

The Disadvantages of JVs would include:

• Long and complex to set up (particularly true in China), attracting heavy legal fees
• JVs mean a sharing of control and of profits
• Often unequal in the inputs required
• The JV partner may be using the JV to acquire knowledge in order to compete directly.
• The Risks of JVs (all of which can be actively managed to make a success of the JV) might include:
• Management of the JV can be difficult and can lead to disagreement and conflict between the parties – which may have repercussions in other areas
• JVs sometimes lack the commitment of one of the parties – unequal inputs
• JVs are a legal arrangement with a formal term (5 years or 10 years typically) to the agreement. Uncertainty about what happens at the end of the term can destabilise the JV. They can be problematic to unravel.

Many publishers see the disadvantages and the risks and do not look favourably on JVs.

9.6 Organisational and Human Resource Issues

In this section we look at some of the organisational and human resource aspects of building an international organisation. This is a very large subject so we focus on three important areas:

• organisational structure,
• approaches to human resource management, and the
• identification and acquisition of the appropriate skills.

Organisational Structure: There are generally considered to be five ‘types’ of International Structural Organisation:

• International division structure
• Geographic regional structure
• International Product Structure
• International Functional Structure
• Matrix or mixed structure

Now take a moment to reflect on the following questions:

• Consider situations in which each of the above methods of structuring an international publishing company might be appropriate.
• What factors may influence the choice of organisational structure?
• How might the approach vary according to the publishing sector, e.g. trade, education or STM?

There are no hard and fast rules as to how publishing companies should organise themselves internationally. There is certainly no ‘correct’ way of organising. Very often one may detect elements of more than one of the five ‘types’ of organisational structure in one organisational solution.

It can be seen that some companies organise themselves with a centrally based International Division to coordinate their sales, marketing and development efforts worldwide. Many of the large US based publishers manage their business outside the US through an International Division. See McGraw Hill Education for an example of this: http://www.mheducation.com/global-sites.html

Human Kinetics, discussed in Section 3 above, also takes this approach.

Trade publishers will often be much more geographically dispersed in their organisation. Hachette discussed in chapter 3 is a good example of this, with relatively autonomous units operating country by country. https://www.hachette.com/en/our-story/key-figures-2018/

Organisation by product structure is relatively rare in publishing as most publishers see efficiencies in using the resources of an international organisation across their entire portfolio. Some large publishing companies that are active in different sectors will typically organise their international presence by broad sector. 

International functional structure is relatively unusual in a publishing setting. The exceptions might be where the centre seeks economies of scale from efficiencies in service delivery and where local responsiveness is a lower priority than global efficiency and the provision of a standardised service. Some large STM publishing organisations such as Elsevier or Wiley, whose customers have relatively homogenous requirements, show elements of international functional organisation. http://www.elsevier.com/about/at-a-glance

The factors which would determine structure would include:

• The market segment
• Homogeneity of demand globally
• Need for centralised control
• Drive for scale economies
• Maturity of the business
• The need for local responsiveness
• Local cultural issues or characteristics

Human Resource Management: There are generally four different approaches to international human resource management – take a moment to look these terms up if you are unfamiliar with them:

• Ethnocentric
• Polycentric
• Geocentric
• Regiocentric

Develop this thinking about IHRM to explore why large global publishing organisations make strenuous efforts to recruit locally the managers of their operations in India or China, and why the Australian subsidiaries of several large British and American publishing operations are managed by expatriate British and American Senior Managers.

Let’s now think this through. The majority of publishing companies that operate subsidiaries in Asian markets prefer to have a local manager rather than an expatriate. Locals are more able to navigate local systems and bureaucracy, better networked into customer, industry and client constituencies, and are familiar with employment practice and laws and with cultural factors. Subsidiaries in these markets will usually be run with a high level of decentralisation. Therefore, the recruitment of local nationals in India, Japan, China and other Asian countries is a high priority for publishers seeking an experienced, respected and reliable manager for their business. The talent pool sometimes appears relatively small, with the same individuals rotating around the major companies in these markets.

This tendency in Asia contrasts with the common practice of relocating nationals from the UK or the US to run subsidiaries in Australia. Such a practice is the consequence of several factors. The cultural differences between the UK and Australia are relatively few, enabling alignment in HRM practice between head office and subsidiary, in what the reading refers to as an ‘ethnocentric’ approach to HRM. As a result, managers from the head office have been able to operate effectively in the Australian setting, adapting quickly to the local culture. Additionally, some corporations may have regarded the Australian subsidiary as a suitable and attractive destination and management training ground for potential senior managers.

It is important to acknowledge that the two situations above are used as illustrations only and are not universal.

Skills and Experience: 

As a publishing company transitions from selling its products into an international market (Phase 1) to developing and producing them there (Phase 2), the profile of skills needed by the company will change significantly. The following activity focuses on the organisational development needs of the company making that transition.

Phase 2 = selling existing products into an international market
Phase 2 = developing and producing products in the international market(s)

Take a moment to consider the following questions:

• What skills and experience are needed in Phase 1 to establish a local sales office
• What new tasks will the company need to be able to undertake in Phase 2?
• What additional skills and experience will be needed in Phase 2 to fulfil the tasks and develop a publishing operation?
• How might the parent company support this development process?

Let’s consider the answers:

The skills and experience one would require in Phase 1 would include:

• Entrepreneurial skills
• Commercial skills
• Knowledge of local market and of customers and channels
• Selling and negotiation skills
• Attuned to local culture
• Sales management skills
• Sales promotion skills
• People management
• Inventory management

New Tasks in Phase 2

• Longer term business planning
• Market research
• Commissioning
• Negotiating and contracting with authors and other content providers 
• Project management
• Content development
• Permissions clearance
• Editing and design 
• Production Management
• Marketing 
• Author management
• Financial management

The additional skills needed in Phase 2 would include:

• Creativity and product innovation, Market research skills, Author recruitment and networking skills, Editorial skills, Project management, Marketing skills (ie beyond promotion and sales), Administrative skills to manage royalties and rights, Financial skills to manage more working capital for stock and work in progress
• Although these skills might be found in the same person or team as the Phase 1 skills, it is very likely that it would be necessary to add more people with a different skill set in order to get the programme up and running quickly.

How might the parent company support this development process?

This is a commonly occurring situation and a number of different solutions are found:

• Secondment. The parent company might second an individual from the centre/head office to the subsidiary to support the transition to Phase 2. This might be someone with editorial management or commissioning experience to help accelerate the local programme or to recruit people locally to continue development.
• Training. The parent company may offer concentrated training at the head office. This would have the benefits of accelerating learning and exposing the employee/editor from the subsidiary to the way things are done at the centreProcess Integration. Instead of the subsidiary undertaking all the functions associated with starting up the new programme, the parent may undertake many of these functions on behalf of the subsidiary. This would reduce the range of new skills that the subsidiary has to acquire. These functions might include the development of the content, editing, design, and manufacturing.

9.7 Building an International Business in a Digital world

It might be argued that in an industry which is increasingly digital, the need for an international network, with sales offices in different countries, has diminished. There are shifts occurring throughout the industry which have been brought about by changes at all points along the traditional publishing value chain. These changes include international selling and distribution, and rights. The need to ship books and journals physically reduces as a result of digital distribution of content; and the logic of selling territorial rights is transformed by the boundaryless nature of the digital world. Global eBook and eJournal aggregators and resellers make remote markets more accessible than ever, but at the same time they reinforce the need for investment by the publisher or originator in publicity and discovery.

What does this mean for the publisher operating internationally? Different publishing sectors are at different points in the digital transformation.

However it may be argued that the digital transformation of publishing drives the industry towards greater globalisation, evidenced by the following trends:

1. A global approach to the ownership and management of intellectual property rights is more important for publishers than ever.
2. An integrated approach to rights information (including geographical rights held), workflow, metadata, and content is essential – to ensure that all the content assets of the organisation are organised systematically, are consistently tagged and can be automatically retrieved, regardless of where they originate in the organisation.
3. The (almost) universal use of internet search engines by customers and readers as the first point of reference when searching for information, leading to the paramount importance of the discovery by search engines of an article or book title. Publishers operating internationally must have a joined-up approach to their websites to avoid inefficiencies and data inaccuracies and inconsistencies
4. Change in the relationships between publisher and reseller or content aggregator. Global resellers have become more concentrated and more powerful, in particular Amazon for books and EBSCO and ProQuest in respect of journals and other database content. These intermediaries are now wielding unprecedented power in the value chain, meaning that publishers must take a global approach to managing their relationships with them.
5. The need for more competitive products and ever more sophisticated customer solutions has driven a global approach to investment in digital platforms and technology in some segments and has been the driver behind the growth of big STM publishers such as Elsevier, legal publishers such as Thomson Reuters or LexisNexis, and college publishers such as Pearson. Conversely smaller players have found it hard to compete in this space.

9.8 Chapter Summary

This chapter has explored the reasons for and some of the processes involved in developing an international publishing business, and through case studies to look at the journey taken by several publishers to build an international organisation through inward investment in destination countries. You should now be able to:

• Demonstrate an understanding of the practical, organisational and financial issues involved in building an international business
• Analyse the international development strategy of a global publishing company using a range of management tools
• Develop recommendations on formulating an international development strategy

Further Reading

Clark, G and Philips, A. 2020 Inside Book Publishing 6th Edition. London: Routledge.
Wall, S. 2015. International Business, 4th Edition Harlow: Pearson

Skills Builder 1 – Sample Answer

Bloomsbury acquired Berlin Verlag (BV) in order to establish a position in one of the largest European markets. The intention was to use the German subsidiary to maximise the exploitation of the company’s intellectual property assets, especially Harry Potter. Bloomsbury sold the BV business because after eight years it was still loss-making. 

Bloomsbury in 2003 paid €3.3Mn (about £2.8Mn) for Berlin Verlag. In 2012 they sold the business for £2.6Mn to Bonnier and incurred a loss on disposal of £1.0Mn, as well as operating losses in the year of £2.6Mn. Thus, financially the acquisition cannot be considered to have been a success. Strategically the acquisition may have been beneficial during the period of high volume Harry Potter sales. However, without access to the accounts of the subsidiary we cannot detect this.

The case shows that market entry by acquisition does not guarantee success and that it brings with it many risks. Note that, as part of the agreement with Bonnier, Bloomsbury will continue a strategic partnership for the exploitation of Bloomsbury assets in Germany. From this we deduce that Bloomsbury remains committed to the German market but sees the partnership as a more appropriate strategy.

10.1 Chapter Aims

This chapter brings together work from throughout the course, combining the strategic and tactical aspects of international publishing management with the analysis of the development and exploitation of intellectual property rights. Additionally, the unit explores the significance of several key trends in publishing upon international publishing and rights, and through case studies consolidates earlier work on international strategy.

10.2 Revisiting the Course so far…

In this course, we have investigated aspects of international strategy and the management of rights. We have explored how publishers are able to develop the value of their publishing business by reaching out beyond their domestic market(s). And we have also seen that the potential to do this can be limited by the rights over which the publisher has control. We have looked at the different approaches that publishers can take to international markets, beginning with a straightforward export model, leading through the licensing of subsidiary rights (translation, reprint or co-edition), to the start-up and building of local publishing operations in new markets. Along the way we have explored the practical aspects of exporting, licensing and building and we have discussed aspects of copyright and the protection of intellectual property in both print and digital environments.

This final chapter consolidates the understanding built so far and investigates some of the trends in international markets and their impact on publishers. These trends will include looking at changing business models, changing technology and changing structures in the publishing industry. The inter-relationships between these trends will also be discussed. Several case studies will provide the opportunity to consolidate the work done throughout the course.

10.3 Changing Ways of Doing Business

The changes in business models which are transforming publishing have an impact on the international operations of publishers and play a part in shaping their international strategy, although the timing of such impact will vary from one geographic situation to another and from one publishing sector to another. In this section, we examine some of these developments, although we do not enter into a complete discussion of all the possible business models.

The trends upon which we focus in this section are:

• Changing business models
• The shift from Products to Products + Services
• Ebooks in an international setting

Changing Business Models and their impact on International Publishing: The publishing industry is being transformed. In all sectors new business models have emerged and are continuing to challenge or replace the traditional ‘volume sales’ or ‘copy sales’ model of publishing and bookselling, and the subscription model of selling journals. Innovation in business models has become as important as innovation in product design or technology, and usually complements both of these.

The shift from Products to Products + Services: Many publishers have recognised that content alone is not enough and identified the need to add value over and above content, especially in academic, professional, educational and STM publishing.

This development is driven by several factors: the commoditisation of content on the internet, the emergence of new ‘non-traditional’ competitors, and the widening of customers’ expectations that the provision of content will be integrated with other essential services. In addition, the development has been facilitated by advances in available technology.

In response to these drivers publishers have worked hard and innovated to develop other solutions which go far beyond the provision of content. These tools and services use technology to add value to content and improve the working lives of the companies’ customers. Typically the services are sold on a subscription basis and the prices are relatively high, to match the value offered.

10.4 Changing shape of the publishing industry

In this section we look at broad structural changes occurring in the industry, including:

• Concentration and globalisation of publishers
• The growth of emerging markets and local publishing

Concentration and Globalisation of Publishers: Increasing consolidation among the players has been a feature of the publishing industry for thirty years or more. In part this has resulted from changing commercial pressures, in part from the increasing move to digital, and in part from the drive towards building global brands and the drive to maximise the exploitation of intellectual property assets. Notwithstanding these observations about concentration, the barriers to entry into publishing remain generally low, which has enabled a steady stream of new players to enter almost all market segments. But typically a very wide gulf in size exists between the global corporations and the independent start-ups.

As an illustration, in the 1980s and 1990s clinical medical publishing was a market segment populated by a large number of publishers worldwide, each operating in local settings while exporting into international markets. By 2019 the number of medical publishers had probably reduced by two thirds. Formerly separate companies such as Saunders, Mosby, Churchill Livingstone, Butterworths, Academic Press are now all within Elsevier. Williams & Wilkins and Lippincott have combined into Wolters Kluwer Health, and Wiley and Blackwell have merged. Other medical publishing companies such as Edward Arnold, Radcliffe have ceased to exist altogether. The remaining companies all now operate globally with publishing and sales operations in all the major markets.

In the education sector, Pearson has become a global powerhouse of higher education publishing, having acquired many smaller publishing companies. Other higher education publishers such as McGraw Hill and Cengage have similarly absorbed other smaller players in the quest for greater synergies and global capability.

In other examples from trade publishing, Hachette, Bertelsmann/Random House, Holtzbrinck and HarperCollins have absorbed many of the independent trade imprints to create huge global trade publishing enterprises. In the case of the first three, to gain a strong English language publishing base was of paramount importance.

Growth of emerging markets and local publishing: Browse the website of any of the major global publishers and you quickly see the emphasis on emerging markets. The following examples are illustrative of a more general picture.

Oxford University Press

This company’s website and the annual report of recent activities feature examples from India, China, Pakistan and Africa. A browse through OUP’s annual reports quickly demonstrates a clear focus on the development of local publishing operations in many of its international businesses

http://global.oup.com/about/annualreport/archive?cc=gb

1.What are the notable opportunities which OUP appears to be addressing in emerging markets?
Pearson Education
This link gives a flavour of Pearson’s activities in global and emerging markets
https://www.pearson.com/about-us.html

2.What are the key drivers behind Pearson’s investment in BRIC countries?

Let’s consider the answers.

Question 1– what are the notable opportunities which OUP appears to be addressing in emerging markets?

OUP’s development in emerging markets appears to be across the business but with particular emphasis on schools education and English Language Teaching

Question 2 – What are the key drivers behind Pearson’s investment in countries such as India, China and Brazil?

The principal drivers are likely to be:

• the demographics – the large number of learners in those countries and in other emerging markets
• the economics – India, China and Brazil are fast growing economies 
• Pearson’s strong competitive position – these markets present an opportunity for Pearson to leverage its scale and existing assets (content, technology, brands) and to gain leadership in market share. In Brazil the position has been built by acquisition, in China by partnership and in India organically.

Question 3 – What explanation would you offer to explain the scale of Springer’s investment in building its workforce in the Asia Pacific region?

Although a proportion of the Asia workforce will be engaged in local product development and in sales and marketing, it is likely that Springer’s investment in India has as much to do with the development of a skilled labour force to undertake editorial programming and other technical work.

10.5 Technology drivers and international publishing

It is generally acknowledged that the internet has changed the publishing industry forever. In this section we ask the question – how do changes in technology affect the international aspects of publishing?

Although the intention is not to explore here the many areas of changing technology that are having and will continue to have an impact on publishing generally, it is appropriate to focus on several continuing trends that have a direct impact on the international strategy and operations of publishers. 

Although these are not the only trends relevant to international markets and organisations, the trends that we highlight here are:

• the dominance of the global technology companies (especially Google, Amazon, Apple, Microsoft, Facebook)
• the importance of mobile access
• distributed print on demand

All of these trends are very well documented in the literature, and recent developments and their impact on the different industry segments can be followed in the trade press, blogs, newsletters and other media.

The Dominance of Global Technology Companies – some FAQs

1. In what ways might the technology giants affect the relationship between the publisher and their traditional distributor and reseller partners?

The global operations and reach of all the technology giants has the potential to, and often does, conflict with or erode territorial exclusivity or regional rights. Although this can be policed and managed, it is difficult to do so comprehensively. Buying around traditional borders is both possible and commonly encountered.

Pricing transparency. It is very easy to discover the price of a book in any market making traditional mark-ups by (for example by distributors (historically) in Japan) impossible to preserve.

Ebooks and electronic information delivered over the internet are essentially global products. If the activity of a local agent or distributor when promoting a print title in which he has territorial exclusivity, results in the sale by Amazon or Apple of an ebook version, the local agent will receive no commission on the sale. This is the source of considerable friction between publishers and their international agents.

2. What opportunities are presented to publishers in an international context by the technology giants?

The dominance of all of them in their respective sectors (with increasing overlap among them) has meant that they have each become the de facto standard in book retail, in search, and in mobile.

Publishers both large and small have been able to benefit from working with these three technology partners. In particular, reaching the large installed base of Apple users offers a powerful channel and platform for content providers.

For example, some large publishers have formed partnerships in particular areas – eg Apple’s work with education publishers.

https://www.apple.com/uk/education/ipad/ibooks-textbooks/

Smaller publishers have been able to benefit from the global reach offered by the giants as well as that of other technology partners.

Having established a relationship in the US with these giants many publishers have been able to roll out that relationship into new markets ‘riding on the coat tails’ of the technology partner into new markets.

Amazon has enabled publishers to sell more books globally simply by making them visible and available.

Search and search via Google has similarly facilitated the discovery and subsequent sale of many millions of books

The establishment of the IOS system and the prevalence of iPhones and iPads has led to the definition of a standard for the formatting and distribution of mobile content.

3. What threats are presented to publishers in an international context by the technology giants?

Your thinking on this question will probably have explored:

Their commercial muscle has squeezed publishers. In particular the global power of Amazon, operating in multiple markets around the world, has led to a power struggle in the ebook and audiobook channels and nervousness throughout the industry that it has become increasingly dependent on a monopolistic channel worldwide.

Google and Amazon may have had a damaging effect on publishers’ freedom to exploit rights by reducing the attractiveness and the viability of territorial rights.

The access to free information provided by Google has unquestionably affected publishers’ ability to sell some types of content – this is exemplified by the spread in the open access to scholarly research articles (although it is important to recognise that Google itself has not been directly involved in the Open Access movement)

Google’s large digitisation projects and the legal wrangles that have resulted illustrate the tensions experienced by rights holders over the protection of rights in the internet world.

An over-reliance on a single channel (eg IOS platform) may cut off other opportunities.

The importance of mobile access: The penetration of mobile technology especially smartphones has been a pervasive technology story of the last decade.

The impact of this upon publishing has been massive in all sectors, whether in the form of point-of-care information for doctors produced by health science publishers, the development of education apps, or the provision of consumer apps, integration with social network sites or other media.

Countries with limited landline networks have installed mobile phone networks with the result that now the use of mobile phones is common in markets where traditional landline phones have never been widely used and where broadband connectivity is non-existent.

Distributed Print on Demand: Although this is a vision that has yet to be fully realised, the potential and the technology exist to print a book in the country or the city where it is needed simply by sharing print files and manufacturing the printed book at the point of need.

Thus, a new book launched in the UK could be printed simultaneously in all the major markets, saving both the time and the cost of shipping physical copies across the oceans.

10.7 Chapter Summary

This chapter has brought together work from throughout the course, combining the strategic and tactical aspects of international publishing management with the analysis of the development and exploitation of intellectual property rights. You should now be able to:

• Demonstrate an understanding of the relationship between international publishing and relevant changes in technology, business models and industry structure.

• Analyse the international situation and international strategy of different publishers by applying the tools and models discussed earlier in the course.

10.8 Course Conclusion

This course has explored two key areas: International Publishing Management and Rights Management. Although, as we have seen, the nuances vary according to size, sector and location of different publishers, the relationship between these two areas has been an important one to understand. You should now be able to:

• Demonstrate an understanding of the principal concepts in intellectual property and be able to relate them to international publishing.
• Understand the strategic, commercial, financial and operational aspects of the publisher’s decision to license to, export to or build locally in international markets.
• Analyse the international strategy of a publishing company, whether academic, educational or trade, in terms of both its strategic framework and its practical rationale.
• Research and develop a market entry strategy into an international market for your chosen publishing business, using strategy and research tools

Further Reading

Clark, G and Philips, A. 2020. Inside Book Publishing 6th Edition. London: Routledge.
Hall, F. 2013. The Business of Digital Publishing. London: Routledge
Jones, H. and Benson, C. 2011. Publishing Law Fourth Edition. London: Routledge
Owen, L. 2019. Selling Rights Edition 8th Edition. London: Routledge
Upshall, M. 2009. Content licensing Buying and Selling Digital Resources. Oxford: Elsevier
Wall, S. 2015. International Business, 4th Edition Harlow: Pearson