by Elaine Dewar
Medley asserted that Bertelsmann had reported a 25.2 percent increase in revenue (to about 3.3 billion Euros), in its worldwide Penguin Random House operations (employing about 12,000 people) between 2013 and 2014. But my own reading of the annual report itself showed that this increase was mainly due to the merger with Penguin. The addition of Penguin’s revenues to Random House’s had caused “portfolio effects,” according to the report. This meant that the combination of the revenues of the two companies made it appear that book publishing revenues were growing, when in fact they were not. That year, book publishing revenue had actually dropped from being the second largest to the third largest segment in Bertelsmann’s holdings.202
While Bertelsmann had bragged in its 2013 report about Alice Munro’s Nobel, claiming her, and her Nobel, as its own,203 Canada got one sentence in this 2014 report. It asserted that PRH Canada had a large number of Canadian bestsellers that year. But no Canadian revenue numbers appeared: they were either included in the US figures, or were in the “Other” section of a graph showing publishing revenues by geographic area.204 No Canadian was listed as a member of the senior management team pictured in the annual report either. Though Martin attested to Medley that the Canadian end of the company is profitable, he showed no evidence to support that claim. In other words, Penguin Random House Canada is so small in the Bertelsmann scheme of things that if it vanished entirely it would leave no significant gap at all in future Bertelsmann earnings.205
Martin was not content with offering Medley a tour. He also explained to Medley the way in which the merged businesses would be run. Reading Martin’s words, I found myself wondering if Martin was banking on the Harper government being re-elected in the November, 2015 election. The Harper government, which was fairly friendly to foreign investment, had shown little interest in enforcing net benefit promises, and only a marginal interest in reshaping national publishing policy. Or did Martin believe that if the Liberals won, they might scrap the publishing policy entirely? He must have considered his company to be in a no-lose position either way because he proceeded to grab the third rail of Canadian politics, give it a hard yank, and dare whoever formed the next government to come and get him.
Martin confessed to Medley what every agent had been whispering about for years. He made it very clear that he had done away with competition for projects by price between his imprints. Price competition had been replaced with something one of his editors called “vision”—otherwise known as the editor’s plans for a book. Martin also made it clear that the number of books published by Penguin Random House would be reduced in future, that “…I would rather publish two books instead of three, and give both of those books a chance to win, than publish all three of them because it’s a numbers game.”
While this honesty was harsh, it wasn’t what made the world of agents, authors, and other publishers gasp in astonishment. It was what Medley drew out of Martin about his main requirement for projects he would be pleased to consider. PRH Canada had only published 542 books in 2014 with its staff of 33 editors. (The entire worldwide Penguin Random House operation, with its 250 imprints, published 15,000 books that year.) Martin wanted it known that unless one of his editors could mount a major case—a big vision—in support of a project, “I’m not interested in a book that is going to generate less than $100,000 in revenues.”
I could almost hear a collective, ragged whaaaa? rise from the throats of book industry readers across the country when I got to that paragraph. It certainly rose from mine.
In order to earn $100,000 in revenues (he surely meant net revenues), the average Canadian hardcover book would have to sell more than 6,000 copies, thanks to the high discounts demanded by booksellers (about 50% at Indigo or Amazon, for example). The average paperback priced at $20 would need to sell 9,000 copies. A Canadian non-fiction hardcover needs to sell about 5,000 copies to get on bestseller lists, sometimes fewer. Most Canadian trade books do not make the bestseller lists. Sales of about 1500 are high for Canadian fiction. As one independent publisher would later tell me, only six percent of all the nearly 200 books he’s published so far have sold more than 6,000 copies, meaning, 94% of his books would not have met Martin’s criterion for publication by Penguin Random House Canada. An advance of, say, $85,000, would require sales of 35,000 to 40,000 books for the author to earn enough royalties to pay the advance out. In practice, if a book doesn’t sell well enough for the author’s royalties to do that, no further offers would be made from that company to that author, or, any new advance would be much, much lower.
As Martin explained to Medley, before getting a go-ahead to make an offer on a book project, a PRH Canada editor would have to show him and Cochrane that a proposed non-fiction book would sell at least one thousand more copies than the average bestseller. An editor afflicted by “vision” would have to show that though a project might not hit that target, it would build a big audience for the author’s next book. With jobs disappearing, how many editors would make that pitch? This meant that Penguin Random House intended to focus in future even more than it did already on well-known, foreign-originated works supported by the bigger publicity machines in the US and the UK. The corollary of this policy was that writers (like me) who had been previously published by PRH Canada, and made it to the bestseller lists, and sold foreign rights, and/or won major awards, would still likely get no offer on new projects, unless, as one agent put it to Medley, HarperCollins or Simon & Schuster Canada also made an offer. How else would a PRH Canada editor demonstrate that a book could pull in $100,000? And even if those counter-offers appeared, and PRH countered the counter-offers and won the bid, that PRH offer would be lower than before—because there would be only one coming from all its imprints. (Are you paying attention, Competition Bureau? Falling prices paid to suppliers by a dominant company is indicative of oligopsony.)
I drew the obvious conclusion. Writers like me would have to take their projects in future to the poorly financed Canadian independent publishers. But for writers like me, this is no future at all. Canadian independent publishers subsist on a thin gruel of government grants, tax credits, and, in Ontario, the power to direct a small grant to writers from what is called the Writers’ Reserve. They simply cannot afford to offer significant advances—for example, advances of over $30,000 for Canadian rights alone—even if they believe that a book will sell 10,000 copies. The risk is too big. That kind of advance may be sufficient for fiction writers, but complex works of non-fiction require a lot of money up front. Non-fiction usually involves extensive research and often extensive travel, not to mention a lot of time, and granting agencies award money to writing projects only after the writing has begun. They insist on samples. While academics might be able to publish interesting non-fiction with small independent publishers, because they are paid salaries while they do their research and can earn academic grants as well, people like me would be out of luck. Non-fiction Canadian works will therefore mainly be replaced by non-fiction works of non-Canadian origin. In fact, if you listen carefully to the few remaining radio and television shows that still interview non-fiction authors about their work, you will note that books originated in the US and the UK are featured much more often than they used to be. That’s because the production of Canadian non-fiction has already been reduced.
And there is another corollary. Smart Canadian agents will desperately try to make their first sale of a Canadian project to publishers in the US or the UK, in order to prove to PRH Canada that a project will bring in a nice pile of dollars. But US or UK publishers are even less likely than they were 40 years ago to buy books focused on Canada, Canadians, or the Canadian experience. For one thing, unless the Canadian writer also writes for newspapers, magazines or online journals in the US or the UK, they have no platforms from which to publicize their new works and to build an audience for them. And then there’s the xenophobia factor: Britons like to read about the British. Americans like to read about Ameri
ca and Americans. Canadian writers aiming at foreign markets will be encouraged to scrub Canadian themes and issues and geography from their stories, in the same way that movies made in Canada for foreign release pretend to look as if they were shot in New York, or LA, or London. The world, as Bono has said, may well need more Canada. But the purchasing editors of the world are not convinced that Canada sells.
So where will that leave the Canadian reflection business?
When Medley suggested to Martin that his company, thanks to the merger with Penguin in 2013 and its absorption of M&S in 2012, controls the Canadian publishing market, Martin did not like the suggestion and responded that his market share is only about 32%. Yet that is just below the 35% share that the Competition Bureau defines as dominance. At that point, investigation will begin to determine whether practices have become abusive.206 As if to add fuel to that fire, when Medley noted that Penguin Random House imprints in the US and Britain still compete against each other on price, Martin insisted that in Canada, PRH would play by other rules.
“In Canada… that’s just the way it’s going to be,” he told Medley. “Why would you bid against each other? Scale is supposed to mean something. This is a small market.”
And growing smaller. After all, when Avie Bennett and Doug Gibson ran McClelland & Stewart, it published more than 100 books a year.207 As just another imprint of PRH, M&S brings out about one tenth that number. Martin had made it clear there would be even fewer books from PRH imprints in future.
I put down the newspaper in despair. Canadian book publishing, in spite of forty years under protective laws and policies, was even worse off than I’d imagined. Thanks to governments’ failures to enforce their own rules, it was now dominated by two oligopsonies, both of which are fragile. PRH Canada’s future depends on it keeping its costs low and its sales revenues sufficiently high that its foreign owner will let it live another year. Indigo is utterly dependent on its owners’ deep pockets and their willingness to keep selling books even at substantial loss. If either one fails, much of the Canadian book business will go with it.
I wondered: would the Competition Bureau launch an investigation of PRH Canada given Martin’s public announcement of its determination to suppress competition, which seemed to fall within what the Bureau calls “reviewable practices”?
There was no point even calling to ask (though I did), if any such investigation had taken place.208 That information is secret by law.
7
Avie’s Version
My appointment with Avie Bennett was at ten in the morning on a midsummer day so cool it felt as if fall had arrived early. I parked near the University of Toronto’s main campus and walked south. The sun was bright but not warm, the wind brisk yet erratic. It blew my hair in wild circles while plastic bags and paper napkins and Tim Horton’s lids piled up against the curbs. All I could see of the homeless people sleeping rough on University Avenue’s ceremonial median were tufts of hair and stockinged toes jutting from their sleeping bags.
Names that kept cropping up in this story were emblazoned here and there along the way, reminding me that at the top, Canada is a small town in which our leaders’ lives cross-link like a Deep Learning neural net.209 There is a newish stone building on the campus, north of Simcoe Hall where the M&S press conference took place in 2000. It resembles a shrunken version of the Supreme Court building in Ottawa. It’s called the J. Robert S. Prichard Alumnae Building and is named for the most successful endowment builder in U of T’s history,210 some say in the history of Canadian universities. The Bennett Gates, named for Avie Bennett who has donated millions to University of Toronto (not just shares in M&S),211 open onto the pathway called Philosopher’s Walk. The Gates are just behind University of Toronto Law School where Robert Prichard once presided as Dean. The Law School would confer an honourary degree on Gerry Schwartz in 2016, his introduction made by Prichard. Schwartz served on the University’s Governing Council and its Executive Committee between 1986 and 1995, when Prichard was Law School Dean and then U of T President.212 (The current Dean, Ed Iacobucci who is also the James M. Tory Professor of Law and an expert on competition law, is the son of the Honourable Frank Iacobucci, a former Justice of the Supreme Court of Canada. Frank Iacobucci taught Prichard at the Law School, became an interim President of U of T when another President left early, became Chairman of the Torstar Board after John Evans stepped down, which made him Prichard’s boss. Now Iacobucci and Prichard both work at Torys, which makes them associates.)213
On the west side of University Avenue, a big sign on the side of Mount Sinai Hospital says Schwartz Reisman Emergency Centre. The size of the gift conferring these naming rights was $13 million.214 Schwartz and Reisman gave another $15 million to expand the centre and create an Institute of Emergency Medicine. Across from the mirrored Hydro building lies MaRS, the brainchild of John Evans, also a former President of U of T. MaRS is supposed to marry the University’s scientific bright lights to Bay Street’s investors so as to birth high tech start-ups. It is not nearly as successful as John Evans was. He co-founded McMaster Medical School. He ran for Parliament for the Liberal Party in Rosedale in 1978, and though he lost, he failed upwards, becoming the first non-American chairman of the Rockefeller Foundation. In 1993, Evans also became Chairman of Torstar Corporation, then the owner of the Toronto Star, the country’s largest circulation newspaper, as well as Harlequin Books, the world’s most successful publisher of bodice-ripper fiction. Robert Prichard was hired by Evans and the Torstar board as President and CEO two years after the University accepted Bennett’s M&S gift.215 Both Evans and Prichard served with Bennett as representatives of U of T on the M&S board.
And then there’s Peter Munk’s name on the cardiac care centre at Toronto General Hospital and the Munk Centre on the campus—but Munk is only tangentially involved in this story.
The pillars beside the main door of 481 University Avenue have brass plaques affixed. They say:
McClelland & Stewart House
Not anymore and not for many years, I thought, as I entered the lobby. Nothing seemed as it did when I first walked into this building, age 24, hoping to be hired at Maclean’s. Then, 481 University was Maclean-Hunter’s head office. Then, I was filled with anticipation, taking my first step toward so many joyful times practising a wonderful trade. Now, there was an old woman reflected in the elevator doors, an old woman masquerading as me, who actually was me, but still filled with anticipation because I thought my questions were about to be answered.
I took the main elevator to the third floor. The doors opened on the expansive reception for B+H Architects. Bennett’s office was around a corner and down a narrow hall. There were two small brass plaques beside his door. One said Avie Bennett. The one below said First Plazas Inc.
Stepping into the reception hall was like dropping through a wormhole to the 1980s, the era of Edper-Brascan/Olympia & York/ Unicorp. There were vertical blinds, pink walls, deco-style leather armchairs. Diana Massiah, Bennett’s tall and elegant assistant, led me into a small conference room and offered me food and drink. No thanks, I said, as I pulled out my notebooks and pens. I amused myself instead by gazing at Charles Pachter’s portrait of Margaret Laurence which covered one wall. Pachter had painted her as if she were a member of a panel discussing some important subject, except she was covering her mouth in disgust and turning her back on the person beside her. Pachter had painted over that person—him? her?—with a great blob of black paint.
I waited for Bennett to appear. And waited. Finally, the main door opened and he came in on his daughter’s arm. I went to the hall to greet him. His once dark hair was homing in on white, his face seemed too lean, a not-at-all-well sort of lean. His goatee had turned white too, so at first I thought he was clean-shaven. He wore a dark blazer, with an Order of Canada pin in his lapel, a striped shirt without a tie, dark pants. He was tall enough to loom over me as he leaned in close to sh
ake my hand with a roguish grin.
Don’t want to do this here, he said to Diana, spurning the conference room. We’ll do this in my office.
Diana, who was the reason we’d put off this meeting for a month, was not invited to sit in.
As I followed him down the hall I tried to figure out who he reminded me of. It came to me as I settled into a chair across the desk from him. He looks like the father of Frasier and Niles Crane of television fame—the retired cop who drives his over-educated sons crazy with his working-man’s tastes and ideas. Not that there is anything unsophisticated about Bennett: it was the limp as he walked, the way he tilted his head to one side to size me up, the way he emanated a friendly openness alongside the impatience of a smart man with a short fuse.
His office was large, with two sets of windows down one wall, but it was not grand. He sat behind an ordinary desk in a large, leather office chair. Behind me, two dark couches faced off across a coffee table. Bookshelves lined the walls, shelves filled with McClelland & Stewart editions. Above, there were many framed photos: Avie with a very young and happy Prime Minister Brian Mulroney standing in a line of men that included Eddy Shack; Avie with Prime Minister Pierre Trudeau; Avie with Prime Minister Jean Chrétien in the Prime Minister’s office—I recognized the panelling. On the coffee table, there was a picture he particularly wanted me to see right away. It was Avie in white tie and tails at a Nobel Prize ball, a pinnacle moment. There was nothing I spotted that spoke to his years as a developer, though First Plazas Inc. still seemed to be a going concern with employees at work down the hall.
Why am I thinking of him as Avie instead of Mr. Bennett? I asked myself as I settled in. Was it the way he made himself seem like an old friend, as if we’d known each other for years? I’d certainly known of him for years, ever since he bought McClelland & Stewart back in 1985. I’d never heard of him before that. Many of my journalist friends, who had never heard of him before either, had been curious about his motives for taking on M&S.
