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Price policy

May 29, 2010

The German book price fixing scheme has been in place for more than 120 years. But the publishing world faces new challenges now that e-books and electronic reading devices have been thrown into the mix.

The e-Book
The popularity of e-books in Germany is growingImage: DW/picture-alliance/dpa/AP

Germany likes to think of itself as 'the land of poets and thinkers.' Considering the nation has around 20,000 publishers, about 5,000 book-sellers and more than 90,000 new books hitting the market each year it may seem hard to disagree with that assessment.

However, the country's publishing industry has had a little extra help: Germany operates a fixed book price system that allows publishers to set the cost of new releases. The time-honored pricing scheme has been is even protected under European Union regulations.

Ruth Klinkenberg of Marga Schoeller bookstore in Berlin believes that fixed prices keep her business alive.

"For book stores like ours, it's imperative. Fixed prices take away the pressure of having to compete on price,” she said, adding: “I think if the fixed book price system went away, our bookstore and others like it, that, thank God still exist in Berlin, they would all very quickly disappear."

The Marga Schoeller bookstore in Berlin's western neighborhood of Savignyplatz is something of an institution in the German capital. For over three-quarters of a century, the book shop has been hosting authors and revolutionarie. It's also home to Ida, the cute shop dog.

Ida, the shop dog seen amidst the book shelves at the Marga Schoeller Buecherstube in Berlin
Ida the shop dog adds to the cosy atmosphere at Marga Schoeller bookstoreImage: DW/Susan Stone

Booksellers' dilemma

The bookshop is known for its large selection of English language books. While that is great for customers, Klinkenberg points out that it presents problems for the booksellers.

"Because in Germany there's no fixed price for these books, we set our own. So in this area, we're seeing just how hard it is to survive a price war," Klinkenberg said.

"Sellers like Amazon have other possibilities to offer certain titles at discounts as promotional items, and to attract customers. That's something we just can't do, it's beyond us. So unfortunately, over the last few years, we have noticed a sales slump for English-language literature," she explained.

American online bookseller Amazon has a popular German web shop, but it too must abide by the fixed price ruling. Still, it does draw customers away from stores like Marga Schoeller by offering lower-priced English books and cheap second-hand books. But that's just the beginning of the huge challenge looming on the horizon.

Gatekeepers to literature?

Traditional German booksellers are set to face unprecedented competition as the digitization of books becomes more commonplace.

E-book devices like the Sony Reader and Amazon Kindle worry German publishers and booksellers, because they have the potential to eliminate, or at least weaken, the bookstore, just as Mp3 players hurt the record business.

Ruth Klinkenberg, manager of Marga Schoeller alongside a book shelf at the store
Ruth Klinkenberg says fixed prices keep stores like hers in businessImage: DW/Susan Stone

Ronald Schild, an expert on the book market, says they threaten more than just commerce.

"We fear that if there are single gatekeepers to the e-content market - if the e-book market is dominated by Amazon or Google or Apple - that will not benefit cultural diversity, the number of books published," he said.

"It is somewhat foreign to our understanding of freedom of speech and freedom of culture if there's a gatekeeper to literature."

Online platform

Schild is managing director of Libreka, the German book trade's secret weapon in the digital duel. Overseen by the German Publishers and Book Sellers Association, Libreka is an online platform that keeps brick and mortar stores in the e-book loop.

It allows shops to download latest releases to a SD card or mini-drive, and sell it to a customer. In the future, the files could simply be moved electronically from a virtual shelf to a Wi-Fi-capable e-reader with the push of a bookseller's button.

Schild says this system ensures German booksellers get a fair share of e-book revenues, and will help keep traditional bookstores in business.

Books in a disorderly heap
Book shop owners hope traditional hard-copy books will survive the digital onslaughtImage: picture alliance/dpa

Software or book?

Still, the same fixed-price laws that protect booksellers have a glitch when it comes to the virtual world. Legally, e-books are seen as a replacement for printed books, and as a result, must have set prices. But when it comes to taxation, e-books are considered software or electronics - not books.

"We have a reduced VAT sales tax on printed books of 7 percent but for e-books its 19 percent. It's very difficult to understand that. It's more a question for the tax authorities to distinguish between e-books and software and other electronic. For the consumer it doesn't make any sense," Schild said.

The higher tax and fixed prices mean that e-books are much more expensive in Germany than in markets like the US, where the dominance of Amazon and Apple has led to price wars. The electronic format is also tempting to digital pirates. Schild points out that the latest Harry Potter novel went online as an illegal scan the same day it hit bookstores in hardback even though none of JK Rowling's books have been officially released for digital publication.

Stepping into digital waters

Apple CEO Steve Jobs shows off the iPad during an Apple event in San Francisco in January 2010
Apple's iPad promises to be the next big thing in e-readingImage: AP

E-books sales are yet to pick up pace in Germany, and conventional bookstores are hoping that most customers will continue to opt for traditional books with paper and covers, and traditional stores like Marga Schoeller, with its shop dog, fresh flowers, and good advice.

Still, bookstores like Marga Schoeller are dipping their toes in the digital waters by joining Libreka, or selling digital e-book devices.

No one wants to lag too far behind in the digitization race - after all, the next big thing in e-reading, Apple's iPad, is set to hit Germany at the end of May.

Author: Susan Stone (rb)
Editor: Sam Edmonds