The Loss of Access Copyright Royalties and the Effect on Publishers: Sifting Fact from Fiction (Part 2)

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”, which advances the thesis and leads the reader to the supposedly inescapable conclusion 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 second of a series of posts in which why these thesis and conclusions do not hold up to scrutiny.

Part 1 examined the main smoking gun in the Q&Q article, the claimed devastation of Oxford University Press. This part examines the alleged plight of Broadview Press.

The Broadview Anthology of Poetry: The other non-smoking gun

The second smoking gun in the Q&Q article, purportedly proving how the decision of many educational institutions to operate without a license from Access Copyright, is the decline in sales of The Broadview Anthology of Poetry, from Broadview Press.

I quote:

“The loss of income is not limited to the loss of the Access Copyright fees,” says Broadview Press president Leslie Dema. “There are now many professors turning to coursepacks instead of anthologies for the first time – simply because the coursepacks are so much cheaper when there is no charge for copyright.”

Dema says she has been tracking sales on titles “identified as being especially sensitive in this regard, and there has been a significant downturn in unit sales on these titles in the past two years.” Sales of the second edition of The Broadview Anthology of Poetry, for example, declined by 70 per cent between 2011 and 2013.”

Broadview’s founder, former President and CEO made an essentially similar argument in a witness statement that Access Copyright filed with the Copyright Board last September,¹ and I will assume that the sales of the Anthology have indeed declined 70% between 2011 and 2013.

Roanie Levy, the CEO of Access Copyright, repeated the claim during last week’s public debate with Howard Knopf at Brock University, directly attributing the reported decline is sales to universities’ decision not to obtain licenses from Access Copyright. “So when you have these ‘fair dealing’ policies”, she said, “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.”

On its face, the argument seems straightforward enough: until 2012 or so, when students were required to purchase coursepacks prepared by their professors, the cost of producing those coursepacks included Access Copyright royalties. Therefore, when universities began opting out and stopped paying royalties for courspacks, the price of coursepacks relative to books has declined, and professors began turning to coursepacks and away from books (this argument oversimplifies how professors choose materials and I’ll turn to this later, but for now, let’s assume that reduction in the relative cost of coursepacks indeed translates directly to decline in sales of books such as the Anthology). And since the declines in the sales of the Anthology began around the same time universities began opting out, the purportedly inevitable conclusion is that those universities who opted out have caused the decline. This sounds plausible, except that it ignores another important development that occurred in 2012.

The decline in sales is correlated with two Access Copyright developments, not one

Two important developments occurred in the 2012, the year Broadview Press claims sales began to falter: in January 2012 UofT and Western signed new license agreements with Access Copyright and in the following months more than half of Canadian universities signed similar agreements, while others began opting out entirely. However, the universities who opted into signing new license agreements did not simply renew their previous licenses. Rather, they signed new Access Copyright licenses that were different from those that had been in place for the previous two decades in two material respects: first, the included permission to make digital copies, not only photocopies; and second, the new licenses required university to pay a flat fixed $26 fee per student, unlike the previous licenses that included a small fixed fee ($3.38 per student) and an additional $0.10 per-page royalty for copies included in coursepacks. The choice to move from a per-page royalty to a flat “all-you-can-eat” fee was Access Copyright’s own decision. In fact, it insisted on it.

Thus, since 2012, there were essentially two types of universities: those who paid a flat “all-you-can-eat” royalties to Access Copyright (AC-licensed universities) and those stopped paying any blanket royalties to Access Copyright and chose an “à la carter” approach instead (opt-out universities).

However, the change in the royalty structure meant that since 2012, the per-page royalty component in the cost of a coursepack in AC-licensed universities is exactly the same as the per-page royalty component in the cost of a coursepack in opt-out universities. In both cases the royalty component is zero. If this makes coursepacks relatively cheaper compared to books, and if professors turn to courspacks and away from books and the sales of books drop, this would happen regardless of whether the professor teaches in an AC-licensed university or in an opt-out university. In other words, the claimed decline in sales would result from Access Copyright’s decision to move to a flat-fee royalty at least as it would stem from universities’ decision to opt out. But things become even more interesting than that.

Which development is more likely to have contributed to the decline in sales?

In fact, if such substitution is the cause of the decline in sales of the Anthology and collections like it, this effect might even be felt more strongly in AC-licensed universities. The reason is that in AC-licensed universities the cost of producing each individual coursepack has unquestionably declined by $0.10 per page, and to the extent that professors factor the price of course materials, they would have good reasons to economize on this opportunity for cost-savings by switching away from books and towards coursepacks. They might even feel compelled to do that, rationalizing that if the university or the students have already paid a flat fee to Access Copyright anyway, professors might as well take advantage of the license and not ask students to buy additional books and incur the extra cost. If you ever overloaded your plate with food in an “all-you-can-eat” buffet you might recognize the feeling (and you might also appreciate that “all-you-can-eat” buffets do not encourage healthy choices).

In contrast, opt-out universities do not face the same motivation to economize on the flat “all-you-can-eat” Access Copyright fee. Rather, knowing that they are no longer covered by a blanket license from Access Copyright, many professors have become more diligent about how to use copyrighted materials than they had been before–they have opted for the healthier choices. Some universities, being more concerned with potential liability, however remote, have continued (or began) outsourcing the printing of coursepacks to third-party copy shops that operate under a license from Access Copyright (and therefore ensured that students continue to pay the higher per-page price for coursepacks even though their university had opted out). In some other cases, universities began seeking transactional licenses, or encouraged professors to use digital (and separately licensed) materials, or implemented other risk-minimizing strategies even when under their own policies including those materials in coursepacks would be considered fair dealing. Therefore, if a decline in the relative price of coursepacks compared to books had indeed precipitated a switch away from books and towards coursepacks, it could reasonably expected to have occurred more in AC-licensed universities than in opt-out universities. This would be a wound that Access Copyright has itself inflicted on its own affiliates.

Has Access Copyright intentionally encouraged universities to copy more and buy less?

If the conclusion that Access Copyright’s new licensing model might have been responsible for a decline in sales of book sounds a bit counter-intuitive to you, let me tell you about a conversation that I had with Roanie Levy in December 2012, at a conference in Toronto. Ms. Levy presented dire predictions about how the recent Supreme Court rulings, the Copyright Modernization Act, and the various fair dealing policies that many institutions began promulgating would cause teachers, students, and their institutions to stop buying materials and harm publishers. While I was skeptical about her arguments, I approached her after her presentation and asked her why, if Access Copyright had been so concerned about decline in book sales, would it insist on the new flat-fee licensing model that might actually encourage educators and students to copy more and buy less.

I expected that she would disagree that this might be the effect of Access Copyright’s new licensing model, but Ms. Levy’s answer astounded me. She quickly explained to me that Access Copyright decided to move to a flat-fee royalty model precisely to encourage more copying. When I expressed my surprise to hearing this unexpected answer, she expounded that this had been a strategic decision, targeting the next round of Copyright Board tariff hearings. Here is the rationale: if, as she hoped, universities operating under the new model would indeed copy more and buy less, this could prove beneficial to Access Copyright for two reasons: one, Access Copyright would be able to show that the amount of copying increased, which, she hoped would then justify a higher fee set by the Board (under the theory that more copies justify higher fees), and second, if they would be able to show decrease in sales, this would justify a further increase, to compensate publishers for the lost sales.

Why would Access Copyright choose a strategy intended to encourage its licensees to copy more books and buy less of them? This is a good question (and a better one is whether this strategy benefits authors). I can think of several answers, but I will leave that to another post.

How sensitive are professors to the cost of course materials?

So far we assumed that when the cost of producing coursepacks decreases relative to the cost of purchasing books, professors respond by substituting coursepacks to books. Broadview Press reports that the sales of its Anthology declined 70%, and claims that this has been the result of such substitution. This may sound plausible enough, except that it gives professors credit that many of them do not fully deserve.

Unlike the K-12 sectors, where decisions about which books to use are often done centrally by the school, the school board or the province (who typically also pay for those books), typically in universities professors individually decide which materials to assign. But “Just as doctors prescribe prescription drugs they’ll never have to pay for, college professors often assign titles with little consideration of cost.” This, unfortunately, is considered to be the main cause for the absurdly high prices of textbooks. To Broadview’s credit, the Anthology is not an example of a ridiculously priced book. It’s currently priced at $29.95, (down from $49.95). Maybe professors who teach English poetry are a special breed and do consider the costs that their students would have to bear, but even if that were the case, it would be a mistake to draw general conclusions from this isolated example.

Moreover, even highly conscientious professors would hesitate spending time and energy on compiling their own materials when a ready-made and moderately-priced book, serving the same pedagogical function, is available for sale. I would be very surprised if professors would substitute their own coursepack for a $29.95 book in order to save their students a few dollars. When professors decide to compile their own materials instead of using a ready-made book (if one is available), there are usually very good pedagogical reasons for that.

Are coursepacks cheaper than books?

And it’s not even clear that a coursepack would cost less, even if no royalties were paid. Consider the Anthology, which is 1144 pages long. At a typical photocopying/printing cost of $0.10 per page, plus the cost of binding, an equivalent coursepack would cost more than $115, even without a royalty. At this price, Broadview’s Anthology is a bargain. I mean that. I just bought one.²

Now, all of that does not preclude the possibility that professors have indeed began turning into coursepacks and away from the Anthology, or that they would not respond in the future to lower relative coursepacks prices by substituting their own materials to ready-made collections, but if such substitution is indeed or will be happening something more complex must be going on.

Changes in professors’ and students’ preferences

Professors may not be fully sensitive to the price that their students pay for materials, but they cannot, and many would not, fully ignore the hardship that the increasing cost of education may cause to their students. While many professors expect students to purchase the required materials, and rightly consider it as part of the cost of education, the increasing cost of such materials have forced professors to pay more attention to the materials that they assign. In particular, they are expected to ensure that they do not require students to purchase materials that are hardly used, or that only a small fraction of which is used, or that might be available more cheaply. The Anthology may be a victim of such trends. It contains hundreds of poems, and if only a small selection of them is taught, students may have grown reluctant to buy books that contain materials that they don’t use, and professor might be responding to that by compiling their own customized materials.³

There are likely additional changes in preferences. Maybe students prefer materials in digital form, available through the school’s content management systems, and professor began responding to such change in demand. The Anthology is not offered digitally.

Anthologies as ‘premium’ course packs

Moreover, roughly half of the poems in the Anthology are poems written by authors who died before 1963. Those poems are in the public domain in Canada, and each of them can be freely copied from any source. Just as Broadview is entitled to publish a compilation of such poems and sell them, any professor is free to prepare her own compilation and distribute them to their students. And as far as in-copyright poems are concerned, many of them could be licensed already by universities, and in any event including them in a coursepack that a teacher has carefully curated for educational purposes is likely to be fair dealing.

Access Copyright may disagree with this interpretation, and Broadview may resent the fact that as a publisher who sells book for profit it probably cannot publish a compilation that includes in-copyright poems without a license the owners of the copyright in such poems, whereas teachers enjoy greater latitude.⁴

But Parliament has decided specifically to add “education” to s. 29 of the Copyright Act in order to allow educators to make greater uses of copyrighted materials without permission, and the Supreme Court has effectively held that educators have had the right to do that all along, and the greater latitude to not-for-profit activities in determining the fairness of dealings has been recognized for a long time. Publishers may not like it, but educators cannot be faulted for doing exactly what they are permitted to do. It’s unfortunate that Access Copyright denies these developments. It’s a pity that it falsely leads its creator members to believe that it has a viable model that could guarantee them an ability to make a living off their writing. But it’s downright scandalous that it spreads misinformation and resorts to scare tactics so that universities give away their rights under the law in order to achieve some measure of peace or an improvident and impossible bright line formula that requires payment for what is and should be free.

Moreover, there is something presumptuous in the claim that there is something unfair when professors substitute their own-made compilations for those published by Broadview, and that Broadview is entitled to be compensated for this substitution. Granted, Broadview’s Anthology and other anthologies may be printed in nice type, bound in fine binding, and they may be more convenient to carry around, or include some other features that may or may not exist in ordinary coursepacks. But the truth is that content-wise, these anthologies are coursepacks. They may be “premium” coursepacks, but for copyright purposes the skill and judgment that the authors of those anthologies (which are often university professors themselves) have exercised is not dissimilar to the skill and judgment that any professor exercises when she carefully selects, arranges, and customizes materials for her students. Broadview’s complaint, and Access Copyright’s demand, boil down to an arrogant claim that professors should buy one compilation (such as the Anthology), and not create their own, because Broadview and Access Copyright benefit from the one but not the other.

Importantly, the claimed decline in the sale of anthologies is the only concrete example of harm that Access Copyright filed in its statement of case, to support the claim that universities’ fair dealing policies harm the market for anthologies. But even if this evidence were meaningful–rather than merely anecdotical–it would be of little consequence for the public policy goals of copyright law. Unauthorized copying may be considered less fair when it threatens to harm the market for a work, when the copy substitutes for sales in a way that might undermine the incentive to create the copied work in the first place. Copyright law is not concerned with harm resulting from the creation of other but equally good, or better, or more cost-effective works.

Simply put, harm to the sale of one compilation resulting from the creation of a different compilation–the only concrete example of harm that Access Copyright has presented–is irrelevant for copyright purposes.

Other factors

There could be other factors explaining the decline in sales that have nothing to do with such substitution. For example, in the case of publishers the size of Broadview’s, typically a print run of a few hundred books is considered a big success, and one could surmise that even before the reported decline in sales, Broadview’s sales of the Anthology were in that range. With numbers that small, events such as a retirement of only one professor who used to assign a particular book could cause a serious decline in sales, especially if that book was used in a big enrolment undergraduate course. In the example of the Anthology, not only does the sample consist of one book and one small publisher, we are asked to draw broad and general conclusions from what has happened in a very short period, between 2011 and 2013.

The Quill & Quire, Broadview Press, and Access Copyright are entitled to believe that the decline in the sale of Broadview’s Anthology has resulted from the decision of some universities to operate without Access Copyright license. They are also entitled to ignore the possibility that Access Copyright’s own new licensing model has been an at least an equally effective cause, if not more. They are entitled to believe not only that they have established causation between universities’ new approach to copyright and some of Broadview’s difficulties, but also that this is evidence that demonstrates a general devastation that has been inflicted on publishers.

They are, of course, entitled to believe all of that. But nobody could possibly be required to believe them.

By all means, subscribe to Quill & Quire; buy Broadview’s good books; but don’t buy their faulty arguments.

Continue to Part 3.