Initiative for Equitable Library Access

Audiobook and eBook Publishing in Canada (2008)

Part III: Digitization and the Production of Digital Editions

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5.0 The Canadian Context for Audiobook and eBook Production

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A March 2008 Market Partners study observed that "far less than half" of the total title offerings of major multinational publishers are available as eBooks. As we noted earlier, approximately 3% of the total title output available in the Canadian market is published in audiobook form, with the vast majority of those titles released by specialized audiobook publishers or large multinational firms.

We have also described a Canadian market where imported titles—particularly those from the US, UK, and France—have a majority market share. Estimates of market share vary, but it would be safe to say that imported books account for at least 65% of the Canadian market. In the case of audiobooks, we believe this market share is closer to 95%, and, for eBooks, roughly 90%.

These observations point to a key characteristic of the Canadian marketplace: with only a few exceptions, the largest firms are foreign-owned while Canadian-owned firms are on average noticeably smaller. In its 2004 Survey of Book Publishers, Statistics Canada data identified a core group of 330 publishers operating in Canada. Of these, 311 were Canadian-owned and 19 were foreign-owned. Despite their smaller numbers, foreign-owned firms account for a majority of domestic book sales.

In fact, BookNet Canada reports that only five firms—Pearson Canada (Penguin), Simon & Schuster Canada, Random House Canada, HarperCollins Canada, and H.B. Fenn²⁵ — accounted for roughly 37% of tracked retail book sales in Canada in 2006 (through their original and distributed titles).

This concentration of market share has a number of implications for title output in the audiobook and eBook categories, but it also highlights the particular dynamics of production in book publishing.

5.0.1 Curious Economics of Cultural Production

Our understanding of the economics of cultural industries owes much to the work of Richard Cave, author of Creative Industries, and Peter Grant in his co-authored book, Blockbusters and Trade Wars. These works identify a number of distinguishing characteristics of cultural products, and Grant offers three critical observations that reflect what The Economist has termed the "curious economics" of the cultural marketplace.

"Most products fail to achieve commercial success, and it is virtually impossible to predict ahead of time which products those will be. This makes the cultural business exceptionally risky. That risk is further heightened by the brief opportunity that cultural products have to prove themselves....The second observation, however, is the converse of the first. If they are successful, cultural products can produce a much higher reward than any ordinary commodities can. Once the cost of the first or master copy has been recovered, the marginal costs of selling additional copies are tiny...the revenue from sales of additional copies in additional markets is profit."

"A third observation is also worth noting at this point: cultural products that are attractive to consumers in a large geographical market have a lower risk and a much greater potential reward than do those that are produced for a smaller market. The reason is that with the larger market, there are a greater number of potential customers over which to amortize the fixed costs of the master copy, after which the product can go into profit.²⁶"

As Grant's observations illustrate, cultural industries are characterized by sharply increasing returns to scale. These economies of scale are more readily available to—and represent a formidable source of competitive advantage for—larger firms in the cultural marketplace. Such competitors are better placed to produce a higher volume of product (thereby spreading the risk of unpredictable demand across a larger number of titles), to command a significant presence in channels to market with high-profile talent and substantial marketing budgets, and to exploit intellectual property under contract across the widest possible range of markets and formats.

These factors create a self-reinforcing cycle where the result is that the characteristics of cultural markets reward larger players throughout the supply chain. The further implications of this is that companies will expand to as many viable markets as possible to extend economies of scale to the greatest extent.

Put another way, the cultural marketplace has a number of defining structural characteristics that both favour larger competitors and encourage market concentration. In a globalized economy where supply chains are increasingly integrated, and technological change is rapid and far-reaching, these market characteristics have an observable effect on the selection of products available to consumers.

5.0.2 Implications for Digital Book Production

This broad discussion of cultural economics applies to our more specific context of audiobook and eBook publishing in the following ways:

• The largest firms in the market are in the best position to acquire and publish the most commercially viable titles, and to exploit these titles in as many markets, and in as many formats, as possible. This largely explains the pattern that we see in Canada, where large multinational firms account for the vast majority of audiobook and eBook titles (and sales).
• Many foreign-owned subsidiary firms operating in Canada also have well-established original publishing programs that produce top-selling Canadian-authored titles. They also have the resources to produce audiobook and/or eBook editions of bestselling titles originated in Canada. 
• In contrast, the smaller Canadian-owned firms have more limited market reach through which they can exploit audio and/or eBook editions. They also have more limited staff and budget resources to invest in digitization and digital distribution. As a result, Canadian-owned publishing houses have, to date, been slower to bring digital editions to market.  

5.1 Commercial Book Publishers

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We can divide the field of publishers producing audiobooks and eBooks for the Canadian market into three broad categories: (1) foreign and multinational publishers, (2) Canadian-owned publishers, and (3) non-commercial producers. We'll address the first two of these categories below, and review non-commercial producers separately in section 5.2.

5.1.1 Foreign and Multinational Publishers

The world's largest publishers have a large footprint, including wholly owned subsidiary companies, in the Canadian market. These include Random House, Penguin, HarperCollins, Simon & Schuster, and Hachette Livre.

The Canadian subsidiaries of these multinational publishers import a considerable number of titles from the various divisions, imprints, and international subsidiaries of their international parent companies. Most of the Canadian subsidiaries—notably Random House Canada, HarperCollins Canada, and Penguin Canada—operate original Canadian publishing programs as well.

Each of these multinational publishers has made major investments in digitization and digital distribution, and each publishes large catalogues of eBook and audiobook titles. In October 2008, for example, Penguin Group announced that it would use Ingram Digital—a prominent digital services firm—for the hosting, management, and distribution of Penguin's eBook and downloadable audiobook titles in the US, UK, and Canada. Penguin will initially distribute "approximately 11,000 titles" through Ingram Digital with "many more" scheduled to be added in 2009.

Random House Canada

Random House Canada was established in 1944 as the Canadian distributor of Random House Books²⁷, and the company subsequently established a Canadian publishing program in 1986. Random's worldwide revenues exceeded US$2.6 billion in 2007.

Random House, Inc. has invested significantly in digitization, and it has established its own digital services division: Random House Insight. Random digitizes and distributes its own digital content through Insight and also sells its services to other publishers.

The number of digitized Random House titles in the Insight system is changing quickly. The platform launched in February 2007 with 5,000 titles, but Random announced in fall 2008 that its collection had grown to more than 14,000 titles by that time.

In March 2007, Random House announced that the Insight program would be extended to audiobooks. In that month, 2,200 audiobook titles were immediately available on the system, and the total audio content is now reported to exceed 10,000 titles.

In an internal memo dated August 2008, Random House CEO Markus Dohle commented, "Our significant investments in the digital future are beginning to see results. Thanks to the successful introduction of the Amazon Kindle and continuing support for the Sony Reader, our e-book revenue in the United States for the first six months of 2008 is double our e-book revenue for all of 2007. It is still a tiny source of revenue for us, but it will grow quickly as we continue to make more of our titles available for downloading and more people adopt the new reading devices. Our e-book publishing program is well underway in Germany and Canada and will debut in the United Kingdom next month, timed to the launch there of the Sony Reader."

Harpercollins Canada

In 1989, the News Corporation acquired publishers William Collins and Harper & Row and combined the two companies to form HarperCollins. HarperCollins Canada was established as a subsidiary company that same year to act as a Canadian distributor for HarperCollins titles and also to establish a Canadian publishing program under the HarperCollins Canada imprint. HarperCollins had worldwide revenues of US$1 billion in 2007.

The company launched an ambitious digitization effort in January 2007 by taking an equity position in the LibreDigital division of Newsstand, Inc²⁸. Through this investment, HarperCollins announced its intention to work with LibreDigital to "create, market and operate digital services for the publishing industry....in discrete, modular segments including digital typesetting, production, digital warehousing, Internet distribution, and online marketing."

The effect of this transaction was to create a similar structure as at Random House, in that HarperCollins has joint ownership of a subsidiary company that will drive its digitization programs and is also selling digital services to other publishers. LibreDigital is now a leader within an emerging group of Digital Asset Distributors in the publishing business.

In February 2007, the New York Times reported that HarperCollins had digitized 10,000 titles, with plans to add 15,000 more in the coming months. HarperCollins Canada has been active in digitization of its titles as well, and has converted "several hundred" of its original Canadian titles for digital delivery in the first half of 2008.

Hachette Livre

With 2007 revenues of US$2.67 billion, Hachette Livre is the largest publisher in France and part of Lagardère Media, the media division of Groupe Lagardère. The company is organized around three operating divisions: Hachette Livre (book publishing), Hachette Filipacchi Médias (magazine publishing), and Hachette Distribution Services (distribution and retail).

A major publisher of French-language titles, the Hachette Livre division also incorporates Hachette Book Group USA—a prominent English-language trade publisher²⁹ that has recently announced plans to establish a Canadian subsidiary.

Similar to HarperCollins, Hachette's investment in digitization was punctuated by the company's acquisition of a major online platform and digital services provider, Numilog, in May 2008. Numilog is an online retailer of eBooks and audiobooks that also offers a wide range of digital services to Hachette and other client publishers (including digitization, digital asset management, and digital distribution services), and provides collections of eBooks and audiobooks to libraries. Numilog's inventory of digital books currently exceeds 50,000 titles.

Managing Rights between Subsidiaries and Parents

As we noted earlier, many Canadian subsidiaries of multinational firms maintain substantial Canadian publishing programs. As these companies ramp up their digitization efforts, it is possible that more Canadian content from these subsidiary firms will find its way into major retail platforms for digital books, or into other digital collections. However, there are a couple of issues that may limit how quickly or easily any such titles could be incorporated within the global systems for digital content of which these subsidiary firms are a part:

1. The subsidiary company may not have the digital rights to exploit. If the rights to the title were acquired from the parent, the parent company may well have retained the digital rights.

2. Digital licensing and distribution arrangements for multinational publishing firms are generally negotiated on a global basis from head offices in New York, London, or Paris. Many of these firms have also invested heavily in systems for managing digital content produced both by the international parent firm and its subsidiaries.

   These large international systems figure in the availability of digital Canadian books in a couple of ways. First, if the subsidiary company holds only Canadian rights to the title, those titles will generally have a lower priority within international frameworks for digital content. (That is, they will be incorporated more slowly if at all.) Second, even if digital rights are available for a title originally published by a Canadian subsidiary, the rights will often be effectively claimed by the parent company as Canadian-originated titles are rolled up into the firm's global systems for managing and distributing digital content.

5.1.2 Foreign Audiobook Publishers

Only one Canadian subsidiary, HarperCollins Canada, publishes original audiobook editions based on its Canadian book publishing program. The company launched its audiobook program in October 2007 through a partnership with Audio Joe, a Toronto-based recording company. HarperCollins Canada plans to produce 20+ audiobook titles per year³⁰, in both CD and downloadable formats.

Audiobook titles published within the HarperCollins Canada program are released simultaneously with the corresponding first print edition. All of the titles are unabridged, and, along with its originated titles, HarperCollins is also exploring options to acquire Canadian audio rights for foreign-originated titles and also producing localized Canadian editions of previously published audiobooks.

Beyond this singular example, there is a fairly well-established field of foreign publishers that regularly sell audiobooks into the Canadian market. A representative sample of these firms appears in the following table.

Category	Publishers
Independent (French):	Les Éditions Gallimard, Editions Thélème, Colombini-Frémeaux, Livraphone
Multinational (French):	Hachette Livre
Independent (English):	Blackstone Audio, Brilliance Audio, Chivers Audio, Isis Soundings, Magna Story Sound, Oakhill Publishing, Recorded Books, Tantor Media, BBC Audiobook, Hyperion, Zondervan
Multinational (English):	Simon & Schuster, HarperCollins, Random House, Penguin Group

5.1.3 Canadian-Owned Publishers

The Department of Canadian Heritage reports that for the 2007–2008 fiscal year, only 28 publishers out of the 230 Canadian publishers participating in the Book Publishing Industry Development Program (BPIDP) reported any sales of non-print editions. The combined value of these non-print sales (encompassing eBooks, audiobooks, and licensed digital content) was roughly $3 million (about 1% of the total sales reported by BPIDP publishers that year), most of which was concentrated among only a few firms.

This reflects the observation we made earlier: the pace of digitization has generally been slower, and the circulation of digital books more limited, within the Canadian-owned segment of the publishing industry. There are exceptions to this of course, and in fact, a closer look reveals some impressive first steps by Canadian firms.

Several have launched substantial digitization initiatives and have already released or are about to release expanded inventories of eBook titles. Further, the Canadian market saw its first major sale of a domestic digital book collection last year through the Canadian Research Knowledge Network (CRKN)—an event that has fired the interest of domestic publishers in expanded digitization initiatives.

Early Case Studies

Harlequin was one of the first Canadian-owned publishers to move strongly to eBook publishing. The company has published some of its titles as eBooks since 2005, initially releasing nine new titles per month. More recently, Harlequin has expanded its digital book program.

Consumers can now buy Harlequin eBooks directly from the company's dedicated retail site³¹ in Adobe, Microsoft Reader, and Mobipocket editions. Harlequin also circulates its titles to other retailers and in additional formats such as eReader (Palm) and Sony Reader (BBeB).

In addition, Harlequin announced in September 2007 that all of its new releases (which amount to roughly 120 new titles per month, or 1,440 per year) would be simultaneously published as eBooks. This statistic alone would make Harlequin the most prolific eBook publisher in the Canadian-owned sector.

Through targeted funding initiatives from the Canada Council for the Arts and the Ontario Media Development Corporation (OMDC), several additional publishers have embarked on substantial digitization projects over the past year as well. Twenty-five publishers have received targeted funding from the Supply Chain component of BPIDP to support business planning for additional digitization efforts.

In February 2007, the OMDC provided $152,000 to a consortium of four Canadian publishers—Insomniac Press, ECW Press, Dundurn Press, and McClelland & Stewart—to support digitization and digital distribution initiatives at each company. The grant allowed for the digitization of 150–200 backlist titles from each publishing house, and provided in the process an opportunity for each of the four firms to work through all of the issues—legal, production, technology, and others—associated with publishing digital books.

Similarly, the Canada Council, through its Supplementary Operating Fund Initiative, provided significant digitization funding to five Canadian publishing houses in July 2007: McClelland & Stewart ($200,000), Douglas & McIntyre ($185,000), Annick Press ($151,000), Kids Can Press ($77,000), and Goose Land Editions ($52,000). McClelland & Stewart used its funding to digitize selected titles from its New Canadian Library series. Douglas & McIntyre applied its funding to the development of a new system for managing and distributing digital assets. Annick's funding was commited to an online marketing and eBook project called the Annick Livebrary. Both Kids Can and Goose Lane applied their SOFI funds to online marketing as well (with expanded digital content and digital distribution components in both cases).

The Canadian Research Knowledge Network Sale

September 2008 saw the first major sale of a Canadian eBook collection when Montreal-based Gibson Publishing Connections brokered the sale of a 7,000-title collection to the Canadian Research Knowledge Network (CRKN). CRKN is a consortium of 67 academic libraries at universities throughout the country, and the Gibson sale places the entire collection (the "Canadian Publishers Collection" as aggregated from 47 Canadian publishers between 2005 and 2008) in each library for a period of three years. The transaction was valued at just over $11 million.

There are a few significant aspects to the CRKN sale. First, it demonstrated to Canadian publishers that there is a market in the library sector for their digital content³². Second, it provided a basis for assembling the largest known collection of Canadian eBooks. Third, it triggered a national discussion within the Canadian publishing industry about expanded digitization efforts.

The Canadian Publishers Collection currently consists of 8,000 eBooks from more than 50 Canadian publishers. The collection was digitized and the source files managed by codeMantra, a digital asset distributor with offices in the US and India. The entire collection exists as "Universal PDF" files. Universal PDF³³ is a file specification developed by codeMantra to harmonize file requirements among 16 major aggregators, including Google Book Search and Amazon's Search Inside program.

In September 2008, the Association of Canadian Publishers—the national industry association in English Canada—convened a strategic planning symposium in Ottawa to tackle the question of digitization. The session gathered together industry representatives from across the country, including a large delegation from the Association nationale des éditeurs de livres (ANEL), the industry association for French Canada.

The symposium laid the foundation for expanded cooperation between the ACP and ANEL toward a national strategy for expanded digitization and digital distribution among Canadian publishers. It also provided a few key points with respect to the readiness of the industry to expand its output of digital editions:

1. In the summer of 2008, the ACP estimated that the quarter of its membership that is most interested in digital publishing will soon be in a position to bring 800 frontlist titles per year to market as eBooks. These same publishers maintain a backlist of about 11,000 titles. Ten percent of these titles are available as Universal PDF eBooks; the remainder are available for digital conversion as resources permit.
2. The ACP has received $200,000 in targeted digitization funding from the OMDC and will be distributing these funds to its members in the coming year. The funds will be released on a 50:50 cost-share basis so that the combined value of digitization spending (presuming the fund is fully employed) will be $400,000—roughly enough to convert 2,000 additional print editions to digital books.
3. ANEL is currently engaged in the development of a digital repository of eBooks from Quebec-based publishers. Development of the repository has begun, with the idea that this would be a digital warehouse to securely store publishers' digital source files—which would then be distributed at the publisher's discretion. From a survey of its member publishers, ANEL estimates that there are currently 2,000 titles ready to go to market in French Canada³⁴.

In short, the total field of Canadian-authored books that could be available as eBooks in the near future likely numbers 15,000–20,000.

5.1.4 Canadian-Owned Audiobook Publishers

As we have observed, the economics of audiobook production are very different from those of eBooks. As a result, audiobook output among Canadian-owned publishers is modest. Along with the Canadian audiobook program of HarperCollins Canada, there are two additional audiobook programs in English Canada, at Goose Lane Editions and Rattling Books, and several more in French Canada.

Goose Lane Editions has a long-standing partnership with the CBC to publish audiobook editions of CBC's "Between the Covers" series. The titles are all abridged from the original print works for broadcast purposes, and Goose Lane does not publish any other audio titles beyond the CBC series. In fact, the future of the audio program at Goose Lane is uncertain at the moment as the CBC is changing its broadcast strategy for "Between the Covers" to rely more on podcast delivery. This may preclude the commercial release of audiobooks based on the series.

Newfoundland-based Rattling Books began publishing audiobooks in 2003. It has since published more than 40 unabridged titles and short stories. Rattling focuses on Canadian literary fiction and poetry as well as outdoor adventure-based non-fiction. The company emphasizes digital delivery of its books to consumers and libraries with direct sales available on the company website³⁵.

The field of audiobook publishers in Quebec is somewhat larger and more diffused. There are currently 660 Quebec-produced audiobook titles available for sale. The leading publisher in this area, Éditions Alexandre Stanké, established in 1995, has 342 titles on its list, 175 of them in the Coffragants series and 19 in the Pocketaudio series. The house produces approximately 30 new titles each year. In terms of country of origin for audiobooks produced by Éditions Alexandre Stanké, roughly 30% of audio rights are acquired from publishers in the province and 70% from those in France or the US.

The Coffragants series features popular and young people's literature in French, and Pocketaudio features books for young readers in English. Some of these works are unabridged, but the majority are released as abridged versions.

Other audiobook programs in Quebec include: Les Éditions AdA (self-help, 80 titles), Les Éditions Un monde different (self-help, 80 titles), Les Éditions Planète rebelle (literary titles and spoken word, 60 titles with CD-ROMs accompanying the printed version). Québec Amérique (reference and young adult, 15 titles), Québec Loisirs (commercial fiction, 15 titles), Les Éditions L'Oeil qui écoute (young adult, 12 titles), and Les Éditions ATMA international (51 spoken-word recordings). Finally, the library services provider iTheque has released five audiobooks on its 15e Avenue and PUN (Presses universitaires numériques) labels.

Other French-language publishers will very occasionally produce talking books on CD-ROM to accompany traditional printed books. We have not counted these here, although we note that this format is used by two French-Canadian houses in particular, Prise de Parole and GREF, both based in Ontario.

5.2 Non-Commercial Producers

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Outside of the educational and scholarly publishing sectors, there are three major non-commercial producers of audiobooks and eBooks in Canada³⁶. The CNIB Library is the largest Canadian producer of audiobooks and maintains a catalogue of non-print resources, with both English and French-language titles, for visually impaired readers. British Columbia's Public Library InterLINK is a cooperative of 18 public library systems that manages an inter-library loan program and produces audiobooks for print-disabled readers. La Magnétothèque, a non-profit society in Quebec, produces audiobooks for visually impaired readers under commissions from the Service québécois du livre adapté (SQLA).

In this section, we'll explore the context in which these non-commercial producers operate, look at each one more closely, and explore their relationships with the book publishing industry.

5.2.1 Context for Non-Commercial Production

Non-commercial production of adaptive books occurs in a particular context: under a copyright exemption and to specific standards for accessibility. We should also note that one of the main reasons that non-commercial editions are produced is that the works in question are not commercially available in the first place.

Copyright Provisions for Non-Commercial Production

Section 32(1) of the Copyright Act explicitly provides for a copyright exemption in order to provide accessible materials to print-disabled readers.

"32.(1) It is not an infringement of copyright for a person, at the request of a person with a perceptual disability, or for a non-profit organization acting for his or her benefit, to (a) make a copy or sound recording of a literary, musical, artistic or dramatic work, other than a cinematographic work, in a format specially designed for persons with a perceptual disability³⁷;"

The provisions in Section 32(1) explicitly exclude the production of large-print books, and are void in cases "where the work...is commercially available in a format specially designed to meet the needs of any person [with a perceptual disability]."

On this last point, the CNIB practices and procedures manual notes that, "While a commercial alternative format version of a work may be available, it is not always in a format specially designed for persons with perceptual disabilities. In particular, commercial audiobooks and e-books, while technically accessible, do not offer the benefits of the international DAISY (Digital Accessible Information System) standard (ANSI/NISO Z39.86), which provides print-disabled readers with a comparable experience to their sighted peers."

Accessible File Formats: The XML Family Tree

If information, including books, is to move smoothly in a digital space, it needs supporting standards so that the various servers, computers, and playback devices among which it is being passed can receive it, process it, and render it properly at every step of the journey. This is the theory behind metadata, sometimes called "tagging" or "markup." In a publishing context, this "information about information" contains instructions or descriptions about the book itself, but it is not normally intended to be printed or displayed with the actual book.

XML (Extensible Markup Language) is a powerful metadata specification that is highly customizable. An XML file has two basic components: the "tagged" content itself and a DTD (Document Type Definition). The DTD defines all of the tags in the content file, and acts as a master key that interprets the data for other software applications or devices. 

Because of the flexibility and wide acceptance of XML, it has emerged as a powerful foundation for standards development both in the print-disabled community and in the broader publishing industry.

The DTBook standard is one such example that emerged from the NISO Digital Talking Books Committee³⁸. The NISO committee essentially defined an initial XML element set to represent the content and structure of books and other publications presented in digital talking book format.

The Digital Accessible Information System (DAISY) Consortium was formed in 1996 with the goal of further developing accessibility standards for people who are print disabled. The DTBook standard in turn became the foundation for DAISY/NISO³⁹, the accessibility standard for book content.

From the DAISY website:

As this description illustrates, there are important distinctions to be drawn between commercial audiobooks or eBooks, and a DAISY-standard edition. The DAISY standard offers print-disabled readers a highly navigable and complete digital representation of the original work to a degree that is not possible in available commercial formats.

5.2.2 CNIB Library

Founded in 1918, the Canadian National Institute for the Blind is a not-for-profit organization that offers a range of direct services to individuals who have suffered either total or partial loss of vision. It has a presence in all Canadian provinces and territories, including Quebec. It also offers alternate format products and has created a major library for individuals who cannot read printed materials.

CNIB produces talking books in English and French and braille books in English. Each year, it produces 200–225 DAISY titles in French and 400–525 in English. The library circulates a catalogue of 74,137 English titles and 6,464 French editions to readers across the country. In 2007, the library circulated 2.2 million items and responded to 62,000 inquiries from print-disabled Canadians. The average CNIB library patron borrows 60 books per year.

FORMAT	FRENCH	ENGLISH
Analog and digital audio (DAISY CD-ROM)	2,573	8,214
Analog and digital audio for young readers (DAISY CD-ROM)	479	1,380
Digital audio online	2,817	10,552
Abridged in braille	0	14,905
Unabridged in braille	0	1,180
Braille on-line	141	3,353
Dual media for young readers (printed and braille)	0	2,913
Electronic text	454	11,687
Braille music partitions	0	19,953
Total	6,464	74,137

Over the past four years, the CNIB Library has undertaken a complete digital transformation of its infrastructure and is moving toward a fully integrated digital library service that will allow users to access downloadable titles online. For the moment, the library has moved from audiobooks on cassette to DAISY files on CD to online audio, and as with the mainstream audiobook market, is clearly on a track for expanded digital delivery from its online platform.

5.2.3 La Magnétothèque

La Magnétothèque is a non-profit society established in 1976 to produce audiobooks for print-disabled readers. The organization receives base budget funding from Quebec's ministère de la Culture, des Communications et de la Condition féminine (MCCCQ), and the balance of its funding from production commissions from the Quebec government and others.

La Magnétothèque's production has increased in recent years, climbing from 400 titles in 2005 to 769 in 2006–2007—all in the form of unabridged audiobooks. In order to respond to a growing demand, La Magnétothèque has set itself the goal of reaching an output of 850 titles in 2010.

In 2005, La Magnétothèque transferred a collection of 5,000 titles to the Service québécois du livre adapté (SQLA), which at that point became the sole repository and distributor for all works intended for individuals with impaired vision in the province. Also in 2005, the SQLA was incorporated into the Bibliothèque et Archives nationales du Québec (BAnQ), and since then it has managed the development of collections for the visually impaired.

In 2007–2008, the SQLA's holdings included 25,343 items for 7,555 visually disabled subscribers, of whom 4,175 borrowed at least one title during the year. The total number of library loans reached 98,985 during 2007–2008—for a 147% increase over the previous year and an average of approximately 24 books per subscriber. The SQLA's holding are summarized in the table below.

Format	Holdings
Analog audio	10,760
Digital audio (DAISY CD-ROM)	2,558
Abridged in braille	6,975
Unabridged in braille	2,175
Dual media for young readers (printed and braille)	375
Braille music partitions	2,500
Total	25,343

5.2.4 Public Library Interlink

Established in 1994, Public Library InterLINK is a cooperative federation of 18 autonomous public libraries in British Columbia. The cooperative provides a platform for resource sharing and management of inter-library loans and other collaborative programs.

The cooperative also produces audiobooks on cassette for circulation to print-disabled readers. In the past, InterLINK had produced an average of 250 audiobooks per year. Due to recent budget cuts, audiobook output has slowed to 25–60 titles per year.

InterLINK maintains a collection of 15,000 audiobook titles for distribution among member libraries. The collection consists of titles produced by the InterLINK cooperative as well as unabridged titles acquired from commercial producers in Canada, the US, and the UK.

5.2.5 The Relationship between Publishers and Non-Commercial Producers

There really is very little interaction between traditional publishing houses and non-commercial producers of audiobooks or eBooks. The two groups share many common concerns, and each is affected by the same broad patterns in the Canadian market, such as limited economies of scale, the large market share for imported titles, and the increasing shift to digital production and delivery of book content. Nevertheless, aside from a few informal linkages, commercial and non-commercial producers appear to operate in very different spheres.

In recent years, there have been some efforts to bridge the gap, notably a 2005 pilot of an electronic clearinghouse. The clearinghouse model aims to formalize arrangements for securing source files for conversion/adaptation for print-disabled readers⁴¹.

Meanwhile, the Canadian publishing industry is moving toward expanded digitization and digital distribution. The country's non-commercial producers are clearly interested in expanding their title output to better keep up with the demand from print-disabled library patrons. There is an opportunity to build linkages between non-commercial producers and Canadian book publishers and we believe that the two groups could collaborate productively in a number of areas. The key to any such exchange—as is the case in all partnerships—is that each party has to benefit in a meaningful way. 

For example, publishers and non-commercial producers could collaborate on audiobook production so that titles could be released for both print-disabled readers (by the non-commercial producer) and a mainstream audience (by the publisher). Similarly, they could share best practices and tools for digitization, and/or collaborate around common standards. More broadly, a targeted digitization fund for Canadian publishers could be implemented with the proviso that participating publishers deposit digital source files with a trusted national repository. Those files could then be made available on a restricted basis for the production of adapted editions for print-disabled readers.

5.3 Additional Factors That Encourage Digital Production

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Digital Production

We have explored a number of issues throughout this paper that influence publisher, trade, and consumer adoption of digital book content. With the launch of the Kindle and Sony Reader platforms, we are seeing real consumer adoption of eBooks for the first time, and the CRKN sale illustrates the potential of the library market in Canada. These are developments that certainly trigger expanded digitization efforts by themselves.

In this section, we'll explicitly set out a couple of additional levers — the presence of which encourages digitization (and the absence of which is an impediment).

5.3.1 Standards

"Traditionally, libraries serving persons who are blind or print disabled have had to create accessible, specially formatted materials and distribute these products to their patrons. As new technologies evolve, there is the vision of a time when materials published for the mainstream can be made accessible to persons with disabilities at the same time and at no greater cost than the versions targeted for the mainstream consumer."

— George Kerscher, Secretary General, DAISY Consortium

We earlier discussed the importance of the XML specification and of formal XML-based standards such as DAISY/NISO in supporting more accessible adapted editions for print-disabled readers.

Standards naturally have an important role to play in the mainstream publishing industry as well, and, interestingly, a recently established eBook standard shares the same digital heritage as the DAISY standard.

The International Digital Publishing Forum (IDPF) released the EPUB standard in September 2007. EPUB is an XML-based file format designed to reflow text according to screen size. EPUB is composed of three open standards, the Open Publication Structure (OPS), Open Packaging Format (OPF), and Open Container Format (OCF) produced by the IDPF.

EPUB is based on the DTBook standard from NISO—the same underlying standard on which the DAISY format was built. Using the DTBook standard, publishers can create EPUB files to bundle with other required files for NIMAS compliance. A number of our study respondents commented on the idea of the "holy grail" file—the single source file that can be converted easily into various accessible formats. Most agreed that a well-structured XML file is the closest currently available approximation of that ideal format. It appears that EPUB could be that file.

In mainstream book markets, the combined EPUB standard allows publishers to produce and send a single digital publication file through distribution for a variety of platforms. EPUB is a publisher-to-consumer format in that there are more and more software applications and devices that support the format (i.e., they can read EPUB files without any additional processing or conversion). But the standard is also a business-to-business format in that it can be reliably converted for use on a range of additional platforms, including Microsoft Reader, Palm, MobiPocket, and the Amazon Kindle.

This means that book publishers can reduce the costs of conversion and managing multiple file formats across the range of digital platforms and channels to market.

The EPUB standard has already been widely adopted throughout the publishing industry, particularly among large publishers, publishers' associations, software developers, and aggregators of digital books. In practice, this means that it is getting progressively easier to create⁴² and circulate EPUB files.

While EPUB is an example of a formal standard, the market is also shaped by de facto standards—tools or platforms that are so commonly used that they effectively operate as market standards. Major consumer platforms such as the Kindle or Sony Reader have the potential to establish themselves as de facto standards. In fact, major retailers and other aggregators naturally aim to establish their platforms or products as standards in the marketplace—essentially, to lock the market to their platform.

This kind of competitive strategy can also help shape a marketplace, to the extent that a clear standard emerges from among the competing platforms. In any case, while there are now real contenders for broadly accepted standards in both audiobook and eBook markets, the digital marketplace is still young enough that no dominant standard has yet emerged.

5.3.2 Scale

As noted earlier, the economics of the cultural marketplace reward size in that larger firms have a competitive advantage through economies of scale and market reach. This idea is relevant to the digital marketplace as well, with the further considerations of the required investment in digital platforms and consumer demand for wide title selection as additional drivers to scale.

Trading partners through the digital supply chain—retailers, library service providers, distributors—are working to assemble the largest possible collections of digital books. Larger collections push costs down, attract consumers, and help lock publishers and other trading partners into a given digital platform.

Amazon had 185,000 titles on its Kindle platform in October 2008. A Quill & Quire feature published that month comparing the Kindle and Sony e-readers nevertheless noted that, "For now, there's room for improvement in both models. But the biggest problem the format faces is the shortness of the tail.⁴³" Perhaps this only makes the point that it doesn't matter if the platform features 185,000 books or twice that many. If the book you want isn't there, the inventory is still too small.

This emphasis on scale has some implications for marketing digital books. Most importantly, a bias toward building the largest possible collection naturally disadvantages smaller firms as the aggregator will naturally prefer to do business with larger publishers that can bring more titles to the collection. This suggests that Canadian firms—with their relatively small title catalogues—may have difficulty in fully or easily participating in key sales channels, and this may further constrain the availability of Canadian eBooks.

Some of our study respondents, for example, described additional delays or costs associated with getting their books listed for various retail platforms. When these firms approached the same retailers as a collective of publishers (as opposed to an individual publishing house), they found the doors opening much more readily.

This suggests that smaller publishers can achieve greater scale in various ways. They can work through their distributors, organize themselves in consortia, and/or join in digital collections, such as the Canadian Publishers Collection we described earlier. It may be that as the tools and sale channels to support expanded digitization programs are increasingly in place, the need to create economies of scale will be the next big challenge for Canadian publishers.

5.3.3 Publishers' Access to Digital Services

The investment required to trade digital assets can be significant. The publisher's archive has to be catalogued and organized, and then it—or some portion of it—must be digitized, structured, and stored for delivery in various formats and to various platforms and vendors. At a basic level, each publisher that intends to produce digital editions has to make a decision about how much of that work it is going to do in-house, and what tasks or services, if any, it can efficiently contract for with an outside firm.

As noted earlier, the largest publishers, notably Random House and HarperCollins, have invested millions in building their own digital content systems. For most other publishers, however, the more cost-effective option will be to contract with an outside firm for digital services.

US publishing consultant Mike Shatzkin has described the emergence of several new digital distribution firms in America and Europe, and he has provided a glossary of terms that illustrate the roles played by major participants in the digital supply chain. In Shatzkin's lexicon, the market is composed of Digital Asset Producers (DAPs—i.e., publishers), Digital Asset Distributors (DADs), and Digital Asset Recipients (DARs—e.g., retailers, library service providers, printers, and others).

In effect, what Shatzkin is describing is a new supply chain for digital content. The Digital Asset Distributor, or DAD, is a specialist firm that provides a comprehensive service, including storing DAPs' digital assets; converting them into various formats; serving them to DARs of all types (who then deliver them to the end user/consumer); and providing digital rights management and transactional services.

The digital marketplace is fluid, but the current North American entrants in the DAD category include: (1) Accenture, a global consulting and technology services firm, (2) codeMantra, a US-based DAD with a production facility in Chennai, India, (3) LibreDigital, a division of Newsstand Inc that is partially owned by HarperCollins Publishers, (4) Random House Inc, one of the world's leading trade publishers, (5) RR Donnelly, and (6) Ingram Digital Ventures, a wholly owned subsidiary of the leading US book wholesaler⁴⁴. All these firms are US-based.

There are a few cost components that are typical of digital conversion and management services. These include (1) ingestion or set-up fees for the publisher's account, (2) per-title fees to convert the publisher's books to a common source file standard, (3) and annual costs to store and manage the publisher's digital inventory of source files.

Cost structures vary but an analysis of costs provided by selected DADs indicates that average costs range between $150 and $200 per title for the first year after initial conversion, and then average $30–$40 per year per title thereafter.

For a mid-sized Canadian publisher with a backlist of 400 titles and annual title output of 25 books per year, these averages would translate into total costs of between $100,000 and $140,000 (depending on the DADs) over three years for digital conversion and management services. The bulk of these costs—roughly 75% of the total—would be incurred in year one as the publishing house absorbs both the initial set-up costs as well as the costs of digitizing its backlist.

As is the case in print distribution, these digital distributors will be most attracted to publisher-clients with large sales volumes and large numbers of titles—that is, they are attracted to economies of scale. Smaller clients will have more difficulty accessing these services or will at least have a challenging position from which to negotiate terms of business.

Perhaps because of this, new digital distributors have come into the marketplace within the past year with a special focus on serving smaller firms. In particular, some of the larger book distributors of independent presses in the US have expanded their services to the digital marketplace.

With more than 300 client-publishers, Perseus is one of the largest distributors of independent presses in the US. The company announced a new service, Constellation, in September 2008 that will distribute client eBooks to a wide range of vendors and aggregators, including Amazon's Kindle platform, Sony Reader, library service providers (e.g., OverDrive and ebrary), print-on-demand services such as Amazon BookSurge and Ingram Lightning Source, and search-inside programs at Google, Amazon, and Barnes & Noble.

Constellation does not provide a digitization service as such, but instead requires publishers to provide PDF files for onward distribution to these different vendors and platforms. The program is limited to eBooks for the time being, but Perseus expects to incorporate downloadable audiobook files by mid-2009.

Constellation is an attempt to improve the competitiveness of independent publishing houses in digital sales channels. In a way, Perseus is aiming for the same type of efficiency through greater scale and coordination that the ACP and ANEL have been pursuing for Canadian-owned publishers. The challenge is that smaller firms generally do not have the resources—either staff or budgets—to absorb the initial investments required to digitize and distribute a catalogue of eBooks.

As we noted earlier, the Canadian publishing industry has taken some important steps toward expanded production and distribution of digital books. It seems clear, however, that some combination of targeted supports and partnering arrangements will be necessary to strengthen the competitiveness of Canadian firms in the digital marketplace, in terms of their ability to access training, improve production workflows, pursue digitization of their backlists, and manage digital assets. If the industry is not able to access digitization and other digital services in a cost-effective way, Canadian publishers will lag behind in digital markets, and readers in and outside of Canada will continue to have only limited access to digital editions of Canadian books.

5.3.4 An Appropriate Balance of Rights

"Obscurity is a far greater threat to authors and creative artists than piracy."

—Tim O'Reilly, Publisher, O'Reilly Media

"The internet is a copy machine. At its most foundational level, it copies every action, every character, every thought we make while we ride upon it...The digital economy is thus run on a river of copies. Unlike the mass-produced reproductions of the machine age, these copies are not just cheap, they are free."

—Kevin Kelly, The Technium, January 31, 2008

Copyright is a complex area of legal, business, and social practice, perhaps especially so in the digital world. Intellectual property law—copyright in particular—provides a basis for the exploitation of creative work and other "products of the mind," and, as such, is a cornerstone of the publishing business (and all other cultural industries). But more than that, copyright is also a balancing act between the interests of creators in the ownership and integrity of their work, and the interests of society in an open and free exchange of information and ideas.

As with most other aspects of the digital marketplace, ideas and emerging practices around copyright are in flux right now. But this much is clear: to the extent that there is a clear and equitable environment for managing rights for digital content, publishers will be more likely to release digital books and consumers will be more likely to buy them.

There are basically two contending schools of thought around digital rights. On one hand, there is the perspective that any copyright protections that restrict the discoverability and use of digital content is bad for consumers, bad for creators, and bad for business. On the other, many rightsholders⁴⁵ are concerned about what happens to their intellectual property once it has been set loose on the world's biggest copy machine, and they are reasonably interested in limiting illegal distribution.

The way in which these arguments accommodate themselves to one another to find a balance between the interests of creators and consumers will play a pivotal role in how the market for digital content evolves.

The environment for copyright is shaped by industry practice, legal precedent arising from court challenges, and legislation. Canadian copyright law is widely acknowledged to be overdue for reform with respect to digital content. However, legislative reform tends to lag behind industry and social practice (as well as court findings), and recent attempts to introduce new copyright legislation in Canada⁴⁶ have been controversial to say the least.

Much of the current debate around both legislative reform and industry convention centres on two related copyright issues: (1) digital rights management and (2) fair use provisions.

The term "digital rights management," or DRM, generally refers to any technologies used by manufacturers, publishers, or other rightsholders to limit usage of digital media or media devices. In practice, DRM measures⁴⁷ are not absolute protections against illegal use. Rather, their function is to make unauthorized use as technically difficult as possible.

DRM provisions also reinforce the linkage between content, consumer, and a given retail or media platform. We have seen a number of examples of this throughout this paper, notably the iTunes–iPod platform and also Audible's exclusive relationship with Apple to distribute audiobooks through iTunes.

As we have also noted earlier, some producers who might otherwise be inclined to release content with strong DRM measures in place have also demonstrated a willingness to forego DRM protections in order to both pursue greater sales and to circumvent any cases of iTunes-like "platform lock in". Within the last year alone, major audiobook publishers such as Random House have released DRM-free audiobooks with these goals in mind.

Even so, DRM remains a common feature of commercially released digital content as well as a persistent source of controversy in digital publishing. DRM opponents argue that any such measures often manifest themselves as unreasonable restrictions on fair and appropriate consumer use of digital content. Much of the tension around what constitutes fair use centres around the consumer's ability to copy the content for his/her own use, to use the content for educational purposes, or even to access rights-protected content with assistive technologies such as text-to-speech reading software.

Cory Doctorow is an author and a high-profile advocate for DRM-free publishing. In a recent presentation to Microsoft executives, he provided an illustrative example of how DRM can interfere with consumer use.

"Here's a true story about a user I know who was stopped by DRM. She's smart, college educated, and knows nothing about electronics. She has three kids. She has a DVD in the living room and an old VHS deck in the kids' playroom. One day, she brought home the Toy Story DVD for the kids. That's a substantial investment, and given the generally jam-smeared character of everything the kids get their paws on, she decided to tape the DVD off to VHS and give that to the kids—that way she could make a fresh VHS copy when the first one went south...Except she fails. There's a DRM system called Macrovision embedded—by law—in every VHS that messes with the vertical blanking interval in the signal and causes any tape made in this fashion to fail."

The scenario Doctorow describes has its parallel in consumers who buy music for one platform that cannot be moved to updated operating systems or devices, or eBook customers who invest in books for one reader device who are similarly locked in against updated software or platforms that may become available in the future.

As these experiences accumulate, they contribute to a growing consumer backlash against DRM protections. Whatever the legal arguments for and against, consumers have amply demonstrated in the past that if they cannot use the products they buy in the way they wish, or if they cannot be reasonably assured that investment in content for one platform will be portable to new file formats or devices in the future, they simply won't buy.

So how to reconcile the consumer's need for flexible use and "futureproofing" with the rightsholder's need to protect commercial and creative interests? The solution—in terms of an appropriate balance of interests—may rest in making a sharper distinction between copying and distribution. There is a growing body of opinion supporting this approach, under which DRM restrictions that prevent copying of digital content by consumers would be relaxed (particularly for personal or educational use) but legal prohibitions and/or remedies against unlawful distribution would be strengthened.

The persistent question of what constitutes fair use will be central to how copyright practice develops in the years to come. Our understanding of this question is constantly being tested and interpreted, and there is no better recent example of this than the October 2008 out-of-court settlement between Google and the Association of American Publishers (AAP) and the US-based Authors Guild.

The AAP and Authors Guild brought separate class-action lawsuits against Google to claim that Google Book Search (a massive digitization and indexing project that to date has digitized more than seven million books) was a violation of copyright. Google's position was that its use of digitized copies of rights-protected books was covered under the fair use provisions of US copyright law. The AAP and Authors Guild, to say the least, disagreed.

Through the out-of-court settlement, however, all parties have established a new basis for using and distributing digitized book content through Google Book Search. The terms under which Google can include copyrighted works in the Book Search program are specified, US-based libraries receive expanded access to digitized content, and Google and participating rightsholders share in expanded sales programs within the Book Search program.

Sara Lloyd, writing on The Digitalist⁴⁸ blog on October 28, 2008, summarized the terms as follows.

"The agreement, after all, acknowledges that Google needs to recognise the differences between out of copyright and in-copyright works; it gives rights holders of in-copyright works the power to opt in to ‘preview' and ‘purchase' functions as opposed to the previously held invidious assumption that the onus should be on publishers to opt out; the settlement money will partially be used to fund an independent, not-for-profit Book Rights registry which will work towards ensuring authors and publishers receive the money they are owed under the agreement, and the revenue split between the rights holder and Google is set at 63-37 respectively, which is surely the right way round."

The Google settlement effectively establishes Google Book Search as a major platform for distributing digital books, both public domain and those under copyright, and provides an important reference point for balancing rightsholder-consumer interests in the online distribution of books. Having done so, it is better placed to encourage both consumer use of and publisher participation in the Book Search program.

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²⁵ H.B. Fenn is a Canadian-owned publisher-distributor. In 2007, 71 of Fenn's 74 distributed lines were imported books, including Hachette.

²⁶ Grant and Wood, Blockbusters and Trade Wars: Popular Culture in a Globalized World, Douglas & McIntyre.

²⁷ Today, Random House is owned by the German media powerhouse Bertelsmann AG.

²⁸ Newsstand has since formally changed its name to LibreDigital.

²⁹ The Hachette Book Group includes a large number of distinct imprints, notably the Time Warner Book Group and Little, Brown and Company.

³⁰ The company published 22 original audio titles in 2007.

³¹ http://ebooks.eharlequin.com

³² Two cautions here. (1) The CRKN sale was made possible through a one-time grant of $47 million from the Canadian Foundation for Innovation. As such, it is not necessarily indicative of ongoing sales potential in Canadian academic libraries. (2) Acquisitions budgets in academic libraries have shifted sharply to electronic resources, and as much as half of academic library collections budgets are now spent on digital content. The shift is less acute in public libraries, where spending on electronic collections accounts for only about 10% of total acquisitions.

³³ PDF may or may not be the optimal format for the collection going forward. Interestingly, however, codeMantra's digitization process first converts the books to an XML standard (pubXML) before onward conversion to PDF. In effect, this means that the Canadian Publishers Collection can also be made available as XML-based source files.

³⁴ ANEL notes that the response to the survey was limited and this number is therefore not truly indicative of market readiness. The association believes there are many more digital books in French Canada that could be brought to market.

³⁵ www.rattlingbooks.com

³⁶ We should note as well that other non-commercial ventures play an important role in circulating book content online, particularly public domain titles for which copyright protections have lapsed. Notable examples include Project Gutenberg for eBooks (www.gutenberg.org) and LibriVox for audiobooks (http://librivox.org). Project Gutenberg offers a catalogue of more than 25,000 free eBooks, and LibriVox's volunteer readers have produced nearly 2,000 free audio titles to date.

³⁷ "Perceptual disability" is essentially synonymous with the term "print-disabled" as we have applied it throughout this paper.

³⁸ NISO, the National Information Standards Organization, a non-profit association accredited by the American National Standards Institute (ANSI), identifies, develops, maintains, and publishes technical standards to manage information in our changing and ever-more digital environment.

³⁹ The official name for the DAISY standard is the ANSI/NISO Z39.86, Specifications for the Digital Talking Book, known as DAISY 3.

⁴⁰ We note as well the contribution of the Institut Nazareth et Louis-Braille (INLB) as a partner to the SQLA. Established in 1861, INLB is a specialized rehabilitation centre and partner in the Réseau québécois des services de santé et des services sociaux (a Quebec network of health and social service centres). The institute's mission is to promote the self-sufficiency and social integration of the visually impaired and in this capacity it is an important producer of non-commercial editions in both Braille and DAISY-text formats.

⁴¹ The Initiative for Equitable Library Access at Library and Archives continues to work with the clearinghouse concept as part of a national strategy for more accessible library services for print-disabled Canadians. Please see www.collectionscanada.gc.ca/iela/005002-5000-e.html for further details.

⁴² The latest release of Adobe InDesign (CS4) exports directly to the EPUB format. Quark Express does the same with a third-party plug-in.

⁴³ "The Future of Books," Quill & Quire, November 2008.

⁴⁴ Educational publishers have a further option through Bibliovault, a digital repository, conversion, and asset delivery service operated by the University of Chicago Press.

⁴⁵ We use the term "rightsholders" as a general reference to creators and any publishers, other producers, or distributors that have been assigned rights by authors or artists.

⁴⁶ The most recent draft legislation, Bill C-61, died on the parliamentary order papers when parliament was dissolved in fall 2008 for a federal election. The legislation is expected to be reintroduced in an upcoming legislative session, but it is unclear if it will be revised from its previous draft.

⁴⁷ Also sometimes referred to as "Technical Protection Measures" or TPMs.

⁴⁸ The Digitalist blog is published by the digital publishing team at book publisher Pan Macmillan: http://thedigitalist.net

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