Cross-subsidization by booksellers and publishers

Cross-subsidization in the book trade refers to the phenomenon that losses are made on some book titles, whereas profits are made on others. Since no single formula completely covers all aspects of cross-subsidization, the quantitative analyses in this report are based on several indicators that are related to (the degree of) cross-subsidization. These indicators were estimated at the level of individual physical bookshops and individual publishers. In each case the hypothesis for these indicators is that there are titles with characteristics of a relatively large contribution to the profitability and titles that have characteristics of no or a negative contribution to profitability. This is consistent with the occurrence of cross-subsidization. The more indicators confirm this hypothesis and the more publishers and bookshops within the sample they apply to, the stronger the evidence that cross-subsidization is taking place.

All indicators of cross-subsidization that were calculated for a sample of publishers and bookshops are consistent with the hypothesis that some of the book titles are responsible for a relatively large part of the profitability. Where there is a relatively small proportion of profitable titles, there is a significant proportion of loss-making titles (in terms of net profits at the book title level). Loss-making and highly profitable titles are not concentrated in a single genre or a few specific genres.

Although the results based on the quantitative analyses of the samples of publishers and bookshops cannot simply be generalized to all publishers and bookshops in the Netherlands, they do provide strong evidence for the existence of cross-subsidization between book titles by publishers and bookshops.

Minister Bussemaker of Education, Culture and Science has sent the report to the House of Representatives of the Netherlands on 30 January 2017.