The Loss of Access Copyright Royalties and the Effect on Publishers: Sifting Fact from Fiction (Part 1)

On May 29, 2014 the Quill & Quire published an article with the sensational title “Why the loss of Access Copyright royalties could be devastating for educational publishers”. Julie Baldassi, the Q&Q staff reporter who wrote the article, advances the thesis and leads the reader to the supposedly inescapable conclusion (despite occasionally inserting words such as “perhaps” or “could”) that the decision of many educational institutions to sever their ties with Access Copyright has already wreaked havoc with publishers and will continue to be. This is a first of a series of posts in which I examine that thesis and conclusions to see if they hold up to scrutiny. Spoiler alert: they don’t.

The Fiction

To support her thesis, Baldassi provides several anecdotes and quotes from a carefully selected sample of educational publishers: two university presses (Oxford University Press and Wilfrid Laurier University Press; the one is large, old, and global, while the other is small, young, and local); one large, multinational, and publicly traded commercial publisher (McGraw-Hill Ryerson); and two small, independent and local publishers (Fernwood Publishing, Broadview Press). The message arising from this diverse group of publishers is supposedly the same: the loss of Access Copyright royalties has indeed been devastating for educational publishers.

Baldassi relies on two concrete examples to support her general assertions: one, the decision of Oxford University Press to eliminate three jobs and close its Canadian K-12 division, and, two, a claim made by Broadview Press that sales of the second edition of The Broadview Anthology of Poetry declined by 70% between 2011 and 2013. These incidents are supposed to be the smoking guns, the unequivocal evidence proving the direct impact of educators’ decision to discontinue their relationships with Access Copyright.

Access Copyright, expectedly, responded with an immediate series of tweets linking to the article, accompanied with even bolder alarmist assertions, such as “Decreased sales, lost jobs, harder to turn a profit – all impacts of educational fair dealing in Canada” or “The consequences of fair dealing policies adopted by educational institutions for Cdn publishers and creators”. And in a public debate with Howard Knopf at Brock University last Thursday, Roanie Levy, Access Copyright’s CEO, pounced on the Q&Q article and quoted from it to prove its case. After repeating the story about the closure of OUP Canada K-12 division she added,

“So the royalties that are collected and have been traditionally collected for over 25 years and redistributed to creators and publishers make a difference. And a little over a year after a decision was made by the ministries of education to stop paying (this happened in January 1, 2013) already we are seeing the creators and publishers in Canada feeling the negative repercussions of that.”

Levy then invoked the 70% decline in the sales of the Broadview Anthology and concluded

“So when you have these ‘fair dealing policies’ which allow the copying for free not only are you seeing the loss of the Access Copyright revenue you are also seeing the loss of sales of books themselves … these royalties have a significant impact on publishers’ ability to break even, pay their staff, and create new works. So this is what the so-called ‘fair’ dealing guidelines and policies that have been put in place by educational institutions across the country are having an impact.”

If this debate took place in a TV courtroom drama she would turn to the jury and declare “I rest my case”; if she were a rapper, a comedian, or the President of the United States, she would drop the mic. And if any of that were true, I would shut up.

The Facts

But none of this is true, so now it’s time to check the facts and see which facts are true and which are fiction, and whether any of then can even plausibly demonstrate causation between “the so-called ‘fair’ dealing guideline and policies” and the devastation that they are accused of spreading. That Access Copyright has seen a significant decline in its revenue is undisputed. But the article attempts to convince the reader that the alleged plight of publishers (which as we will see momentarily is more imaginary than real) is not only correlated with the decline in Access Copyright’s revenue, but is also causally connected.

Correlation ≠ Causation

Correlation between variables, of course, may suggest causal connection, but correlation does not imply causation, and if the Q&Q and the educational publishers who contributed to that article have forgotten this important point, Tyler Vigen, a JD student at Harvard Law School provides an excellent reminder.

Fair enough, you might say, even if correlation doesn’t imply causation, one could still expect that decline in the royalties that Access Copyright collects and distributes to publishers would hurt them, and if they are indeed devastated, then the former may as well be the cause for the latter. That sounds right and plausible, but at this stage all that we have is an hypothesis that might, if proven, establish a causal connection between the two variables. A plausible hypothesis begins the inquiry, but it doesn’t conclude it. So equipped with this hypothesis, let’s see whether the reported “devastation” has indeed occurred, and then also consider whether other factors might better explain it than the decline in Access Copyright royalties.

Oxford University Press Canada

Baldassi opens her article with her main evidence: Exhibit 1, the supposed plight of OUP Canada’s schools division. A clever choice. Oxford University Press is the largest and second-oldest university press, and one of the most prestigious academic publishers. When Oxford speaks everyone listens, and if Oxford has foundered, who will not fear? Here is how the Q&Q article begins:

“Earlier this year, Oxford University Press Canada ceased publishing in its schools division after yet another year of double-digit sales declines. As with other publishers active in the K–12 market, OUP Canada faced shrinking provincial budgets, changing curricula, and a weakened post-recession economy. But it was another factor – the loss of royalties distributed on behalf of schools by Access Copyright, Canada’s copyright licencing agency – that perhaps dealt the final blow. Those royalties, which typically amounted to around $10 million for the K–12 sector, were “a significant factor in making school publishing viable here, even in the wake of declining sales of the materials themselves,” OUP Canada president David Stover told Q&Q at the time. “The more we looked at [the disappearance of copyright royalties], the bleaker the view seemed to be.” As royalties continue to shrink, the situation is having a profound impact on the bottom line of publishers catering to both the K–12 and postsecondary sectors. OUP Canada eliminated three jobs as a result of the closure of its schools division.”

In short, the loss of Access Copyright royalties, which, according to the Q&Q, typically amounted to $10 million, has lead OUP Canada to close its K-12 program. Not only has a giant fallen, it collapsed with a thud, and in just a little more than a year after the Ministries of Education stopped paying Access Copyright. If only that were true.

Fact-checking

Let’s do some fact-checking. Baldassi reports that royalties that OUP Canada had received from Access Copyright until last year typically amounted to around $10 million for the K–12. This is an impressive number, but which cannot possibly be true, because $10 million constitute about a third of Access Copyright’s typical total annual revenue from all sources.¹

More specifically, in 2012 Access Copyright distributed to publishers $6.1 million under the “K-12 title specific” category, and additional $3.7 million under “publisher repertoire”.² In 2013 those amounts were $3.1 million and $2.8 million.³ Other than throwing the impossible $10 million figure, the article does not disclose how much Access Copyright royalties OUP had actually lost, but it couldn’t possibly be anywhere in the millions range. If the decline in Access Copyright royalties has dealt any blow to OUP Canada, it cannot be anywhere close to $10 million.

OK. The Q&Q may have exaggerated the magnitude of the blow that OUP Canada has suffered. But it surely had been dealt a serious blow, correct? After all, its former president was quoted as predicting a bleak future; it reportedly closed its Canadian schools division; and it has eliminated three jobs. This must be true, no?

Not quite. Let’s do some additional fact checking. The Q&Q is a reputable publication, and I have no reason to doubt that it accurately reported what the president of OUP Canada had told it a couple of months ago. But OUP’s latest Annual Report—an audited and handy document that any diligent journalist could easily consult—reveals an entirely different picture. In the Report’s general discussion of the K-12 sector, OUP mentions several challenges “from rapid digitization and changing purchasing patterns to increasing competitive intensity and educational reforms.”⁴  It specifically mentioned “dampened sales in Spain and other European markets and delays to a new curriculum hindered progress in Australia.”

But what about Canada? Surprise! Instead of the Q&Q’s “yet another year of double-digit sales declines” OUP reports that “Canada secured significant sales increases in a declining market, buoyed by a major high school geography adoption in Newfoundland and Labrador as well as increasing sales of the Oxford Next digital platform.”⁵ No K-12 doom; no-school boards gloom. In Canada, it’s been buoying sales and boom.

And that’s only for the K-12 sector. The Annul Report’s discussion of the higher education sector describes spectacular growth, resulting from a ”string of new titles helped to buoy sales, while digital revenue increased tenfold on the previous year.”⁶ Let’s repeat that: the Canadian higher education sector is responsible to buoying sales of new titles, and in 2012-13 it spent 1000% the amount that it spent during 2011-12.

And what about the closing of OUP Canada K-12 program? This seems to have nothing to do with declining royalties from Access Copyright, let alone any state of “devastation”. Rather, it has more to do with a series of organizational changes and restructuring of OUP global operations.⁷ Yes, OUP Canada has eliminated three jobs (actually four–its president David Stover who had talked about a bleak future has also been let go as part of this reorganization), but the Press’ audited reports tell an entirely different story. And by the way, not only is OUP Canada reporting “Business as Usual” despite its reorganization, but it is also currently hiring. It seeks to fill five open positions, stating that “with over a decade of continuous growth in the Canadian Higher Education market, OUP has situated itself as one of the fastest growing Higher Education publishers in Canada.”

And what about the overall health of the giant? Thanks for asking; you can relax. OUP, the Queen of university presses, finished its previous year with global revenue of £760 million (C$1.4 billion) and after-tax profit of £103.4 million (C$ 188 million). Not bad, Oxford. Well done.

In sum, as far as OUP is concerned, the decline of Access Copyright royalties and the timing of the closing of OUP Canada K-12 program may have coincided. Other than that, the decline of AC royalties has been correlated with buoying sales and revenue in both the K-12 and higher education sectors.

If I were to adopt the Q&Q methodology I would declare that the loss of Access Copyright royalties has been a blessing for Canadian publishers, but I appreciate the difference between correlation and causation, and I recognize the perils of drawing general conclusions from a single anecdotal observation, so I won’t.

In the next part I will discuss what can be learned from the reported decline in sales of the Broadview Anthology of Poetry.

 

Continue to Part 2