5 Main Partners of the Diffuser/Distributor

• 5.1 Relationships with the publisher
• 5.2 Relationships with the retailer
• 5.3 Revenue sharing between partners

The concept of book trade implies a chain of successive transactions conducted by a network of professionals in sometimes-complex interrelationships between suppliers and customers that permit the movement of a book from author to reader. The book trade operates under a set of rules governed both by legislation and by practices that have become established with the passage of time.

Diffusion/distribution is an essential segment of the book trade and an important link in the supply chain, since it is the interface between production and retail sales, between the publisher and the diversity of retail outlets, including bookstores. The diffuser/distributor ensures that the product reaches its market.

This section will attempt to outline how diffuser and distributor serve as an interface between publisher and retailer. We will concentrate on the bookstores and mass-market channels.

5.1 Relationships with the publisher

According to economist Marc Ménard, [translation] "It is the publisher that plays the central role in the book trade; it links the various functions making up this path, functions that are, as is always the case for an industry subject to an editorial logic, relatively disjointed."¹ Like Ménard, we must recognize that it is the publisher that chooses what titles to publish, "chooses" to a certain extent how to market the titles and therefore decides to work with a diffuser and a distributor, or with a diffuser/distributor, even though it is the latter that is able to dictate most of the terms of their contractual agreement. We often see publishers changing distributor, but we more rarely see the inverse.

With the exception of academic publishers, few publishers decide to take care of the diffusion and distribution of their books themselves. To do so effectively and efficiently, they must work with diffusers and distributors that have the necessary resources to effectively circulate the books, and the critical mass needed to ensure that the investments required for the diffusion and distribution of books are cost effective.

Diffusers and distributors therefore put together catalogues of publishers that they attempt to market as widely as possible, while minimizing the risks associated with this activity. The largest diffusers (or diffuser/distributors) may have a stable of some 150 publishers (sometimes more than 250). A publisher seeking a diffuser/distributor therefore tries to join with a partner whose critical mass gives it the resources needed to effectively support its titles. On the other hand, certain publishers will want to be a given diffuser's only, or at least largest, publisher in their niche, so that the team of representatives will give their titles clear priority. It is well known that certain diffusers present all their publisher's release programs to booksellers, while others make partial presentations or highlight their top titles. No publisher wants to be a small fish in a big pond.

5.1.1    Diffusion and distribution contracts

There are several models of contracts between publishers, diffusers and distributors, and one can imagine that several variants are possible in the clauses of a given type of contract.

As we have seen, in Quebec and French Canada, diffusion/distribution contracts are by far the most common; they make it possible to concentrate all book-marketing efforts in a single partner and avoid fragmenting the related efforts and responsibilities. Many, if not most, distributors will refuse any agreement with a publisher that wishes to separate the diffusion and distribution functions, or even limit the exclusive rights of the diffuser/distributor to certain markets.

However, diffusion contracts (not including distribution) are becoming less marginal and are sought by a growing number of Quebec and French-Canadian publishers. Many French publishers are diffused in Canada by the three major French diffusers (Hachette, Flammarion and Gallimard), which have established distribution agreements with Socadis. This type of diffusion agreement involves only presenting titles to retailers and sometimes promoting them to the public, but the diffuser does not carry inventories of books for sale.

Among Canadian distributors (excluding foreign-owned diffusers and distributors), it was Prologue that first showed some flexibility with respect to distribution agreements with publishers, which would themselves do their own diffusion or assign it to a separate diffuser. In the early 1990s, Prologue in particular signed a distribution agreement with Leméac, which did its own diffusion with that of the French publisher Acte Sud, with which it began a new partnership. At about the same time, Prologue also signed a distribution agreement with French-language publishers outside Quebec, under the aegis of RÉCF (Regroupement des éditeurs canadiens-français) [French-Canadian publishers group], which at the same time decided to hire its own commercial representative for Quebec. With this strategy, the French-Canadian publishers hoped to stand out amidst the sea of other Quebec titles and avoid becoming "a small fish in a big pond." This door opened by Prologue, and these innovative formulas developed by Leméac and the RÉCF, generated a great deal of interest among other Quebec publishers that wanted to separate their diffusion from distribution. Over the following years, certain publishers left their diffuser/distributors to join a distributor open to allowing them to do their own diffusion or delegate it to a separate diffuser. Thus, the French-language book trade in Canada was able to gradually turn to a model more like the preferred practice in the book trade in English Canada and even in France, which consists of treating book diffusion and distribution separately.

The concept of exclusive rights is an essential part of the agreement between a publisher and a diffuser/distributor; this is precisely what clearly distinguishes an exclusive diffuser from a wholesaler. The exclusive diffuser is therefore the only one allowed to serve retailers on behalf of the publisher. The exclusive character of the agreement usually covers the publisher's entire catalogue, but it may be limited to certain genres (general publishing versus textbooks, for example).

The exclusive rights in the diffuser's mandate are also defined in terms of a territory. Usually a French or even a Quebec publisher grants a diffuser exclusive rights for all of Canada, whereas other Quebec publishers — more specifically those that might have other diffusion agreements in Canada — will limit a Quebec diffuser's exclusive territory to Quebec and the Ottawa region. This will also be true for French-language publishers in other provinces, which are often in a better position to serve their own region than are their Quebec diffusers and distributors.

Exclusive rights may also be granted according to a defined sales network. Of course, most diffusion/distribution agreements cover both bookstores and the mass-market channels. However, the more suitable the publisher's catalogue is for mass-market sales, the more it will be tempted to limit its diffuser's exclusive rights to niches that it will find difficult to serve for itself. A number of publishers, for example, include in their diffusion/distribution contract a clause reserving sales through Costco to themselves, since this requires less marketing effort, as they concern only a few carefully selected titles and can take on considerable importance. Certain contracts will include an appendix with a long list of markets and customers reserved for the publisher. A number of diffuser/distributors reject this kind of exception out of hand, at the risk of losing some of their publishers. In their desire to serve certain mass-market channel customers themselves, publishers set themselves up as competing with their main diffusion/distribution partners and sometimes do not hesitate to negotiate higher retailer discounts, figuring that they are "saving" by bypassing the middleman. However, these practices jeopardize the relative stability of discounts granted to mass-market channels and may lead to the excessive discounts that characterize those demanded elsewhere by the big-box stores.

Lastly, certain diffuser/ distributors allow publishers to make final sales themselves (by mail, clubs, shows, etc.), provided they do not encroach on the networks for which they have exclusive rights, and the selling prices are not lower than the retail cost as indicated to the diffuser for resale. Other diffusers consider that any promotion for the purpose of making a direct sale will have a positive impact on both the publisher and the retail trade networks, and so they do not discourage direct sales by publishers. These clauses regarding direct sales are becoming increasingly relevant and important as online book sales grow.

The contract between the publisher and the diffuser/ distributor obviously sets out the responsibilities of the diffuser/distributor towards its publisher partner. It usually describes the diffusion activities to be carried out by the diffuser both in bookstores (number and frequency of representative visits, presentation of new titles, distribution of the publisher's promotional material, restocking of new titles, information on the publisher's promotion activities, etc.) and, if appropriate, in the mass-market channel (regular visits to retail outlets, stocking, restocking, shelving and returns of titles on consignment, distribution of the publisher's diffusion material, selection of titles to be displayed, etc.). The contract will also specify the partner's responsibilities with respect to book distribution: receiving books, warehousing, managing orders, shipping books (système d'office, shelving and restocking), invoicing, managing returns, collections (the distributor is responsible for bad debts), inventory management, etc.

A clause then specifies what discounts will be granted to the diffuser/distributor, in other words the share of the sales revenue that will be granted to the publisher.² In general, the discount granted to the diffuser/ distributor will be 54% to 60%, a percentage of which (40% for bookstores and 30% for the mass-market channels) represents the retailer's share. This percentage remains relatively firm for the bookstore, but varies in mass-market channels, depending on the negotiating power of each party. However, the discount granted to the diffuser/distributor will generally be the same, whether the sale is made in bookstores or mass-market channels. Of the percentage that comes to the diffuser/distributor, about 10% is associated with diffusion and 5% to 10% with distribution. The diffuser is usually remunerated according to the net sales of the books.

Yet, the remuneration provided in a distribution-only contract relates to flows, in that it is calculated based on the movement of each copy. Thus, the distributor receives 7% (or thereabouts, depending on the agreement) of the value of retail sales invoiced during the month; depending on the agreement, the distributor may add up to 7% of returns, valued at the retail price. In this case, a copy that is shipped under the système d'office, returned and then sent back as restocking yields a cumulative discount of 21% (three times 7%) for the distributor. This practice is explained by the fact that the distributor does not participate in the système d'office strategy, which is rather the diffuser's role. Since its revenue depends on choices made by another business, it is normal for it not to have to share the risks associated with the système d'office, but instead be remunerated based on its copy movement management activities. A percentage for returns can be negotiated based on the publisher's sales volume.

Contrary to the practice usually seen in English Canada, the discount is not calculated on net sales revenue, but on the retail price instead.

The contract usually sets out the arrangements for payment by the diffuser/distributor to the publisher. The distributor generally allows 90 days following the production of a sales report to pay the publisher, but this may sometimes be as long as 120 days. Returns recorded during the same period will be deducted from the total amount entered on the sales report. Moreover, since the distributor pays the publisher for books in the système d'office that may be returned during the months following the sales report, the distributor reserves the right to apply a holdback on a portion of the payments due to the publisher. This is not a general practice, but is used mainly when a publisher experiences a decrease in production, which could make it difficult to deduct returns from the next sales reports, which might end up being negative.

Lastly, since mass-market channel shipments may have a consignment status, there may be separate payment arrangements, depending on the sales networks. We learned of an agreement where bookstore sales were paid three months after the sales report, whereas mass-market sales were paid 30 days following payment to the distributor by the retailer.

The following clause of the agreement between the publisher and the distributor concerns the management of unsold copies and book warehousing. First, it is important to recall that the distributor never owns the inventory. "The publisher is the sole owner of inventory delivered to the distributor on consignment." Therefore, the distributor is usually free of any responsibility for publications sent to the distributor "for any damage, loss, disappearance, total or partial destruction, pursuant to a theft, fire or any other cause even if these damages, losses, disappearances or destructions were due to a partial carelessness or error on the part of an employee or administrator of the distributor…." Once a year, the distributor will take inventory of copies in stock. A differential margin of 1% of the value of net sales for the year will be tolerated between the theoretical number of copies and the number listed.

The term of the distribution contracts may vary from two to ten years. Agreements are often renewable for an equal term by tacit renewal unless terminated at least three months before expiration.

An agreement between a publisher and a distributor may include a list of services that may or may not be formally included in the contract. These complementary services might include:

• Warehousing of all or part of the publisher's inventory in return for payment of warehousing expenses;
• Representation of the publisher and presentation of its titles at book fairs and other trade shows, with sharing of costs;
• Sharing of costs of bookstore placements (displays, tables, windows, cubes, etc.);
• Shared-cost publicity, participation in admail campaigns;
• Press service, mainly for foreign publishers, on a fee-for-service basis; etc.

Lastly, where the distributor is also a publisher or is affiliated with a publishing house, the publisher could demand that a non-competition clause (covering the publisher's niche, certain collections or certain titles) be included in the agreement.

5.1.2    The diffuser/distributor's dealings with the publisher

When delegating the diffusion and distribution of its titles to an outside partner, a publisher must ensure that it has all the tools needed to properly support them in the retail trade networks. It must also anticipate opportunities to analyse the strategies to be used in their marketing, measure results and coordinate its promotion efforts with the diffusion efforts of its partners. The diffuser must ensure that it has all the information needed to present the publisher's titles to its customers in bookstore channels and, when appropriate, measure their suitability for the mass-market channel, essentially to properly measure the real potential of the titles for the various categories of retailers and propose marketing appropriate for the titles.

The publisher has no direct contact with the bookseller; therefore, it must rely on its diffuser's team of commercial representatives to represent it in the retail trade. Regular meetings are planned, generally two or four times a year, between the team of representatives and the publisher, so it can present its upcoming titles and discuss each one's significance and special features, identify target readers, suggest sales pitches, etc. The publisher will also prepare marketing material for representatives to use in preparing for meetings with booksellers.

These meetings provide a rare opportunity for representatives to ask the publisher questions, pass on comments, discuss the appropriateness and aesthetics of the cover, and influence the selling price. It is very much in the publisher's interest to listen to them about these issues. Representatives are the only ones who receive comments from booksellers, which in turn receive them from the public, and their contributions can prove very rewarding for a publisher able to listen to them and benefit from their views of the market. The future of the système d'office strategy depends on honest and transparent reporting from each partner involved.

The next section discusses how the diffuser/distributor works with the bookstores and mass-market channels. For the publisher, the sales cycle is managed by the diffuser/distributor. The two partners will stay in constant contact to ensure that the book is delivered in time to be included in the système d'office shipment on the planned date; they must ensure that there are sufficient copies available in stock to restock retailers if necessary; the publisher will continue to inform the diffuser of its promotion efforts, awards received by the author for the book, author's tours, etc., so that the bookseller is in a position to respond to any potential increase in demand.

The professional relationship between diffuser and publisher must not be limited to planning of title placements under the système d'office or in the form of a mise en place.³ It is essential that they work together to regularly analyse results and the appropriateness of their placement strategies in order to learn from the early experience gained from the marketing of each title.

As a first stage in this analysis, the diffuser/distributor provides the publisher with a detailed monthly report of all title movements. These reports show all activity recorded for each of the publisher's titles, both new and backlist: quantities received, shipments under the système d'office or mise en place, returns, restocking, review copies and other services, beginning and ending inventories, number of copies sold in bookstores, in mass-market channels, remaining balance, etc. This report will provide the total accounts receivable for the month.

Beyond the monthly monitoring of title movements, it is important to regularly conduct a more thorough analysis, at least once or twice a year, in order to consider the changes to recommend to booksellers in the système d'office order form, prepare progress reports on the results of diffusion investments, and better guide each one's efforts in marketing the titles. To do this, the diffuser/distributor could provide the publisher with a package of increasingly sophisticated reports itemizing, for example, sales by the 20 best customers, or by a specific customer, sales in a targeted region, in shopping mall bookstores, concentrating on a specific title or a collection, etc., in order to be in a position to make informed decisions about upcoming titles, or even to put a title that still appears to have market potential back into the système d'office.

It is crucial that the diffuser process all available information on the behaviour of a title and carry out a detailed analysis of sales and returns. Over time, the diffuser must build up its knowledge of related experiences. In this respect, it must deal with a certain contradiction: while the value of a book depends on its unique character that distinguishes it from all the others, the diffuser must try to predict its market appeal by comparing it with similar products. The diffuser can control risk by analysing the results for similar products and thus determine the diffusion approach.

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5.2 Relationships with the retailer

The retail book trade has changed tremendously over the past decade. In the 1990s, sales networks were usually limited to bookstores, a few major chains, certain pharmacies, tobacco shops and other specialized businesses. With the arrival and expansion of various categories of big-box establishments, the variety of retail outlets has increased considerably, to the point that there are now questions about the role of bookstores, particularly independent bookstores, in the selling of books.

Even though it appears that the market share of the mass-market channels has stabilized over the past few years, the fact remains that mass-market channels are now part of the retail book trade sector, and the diffuser/distributor has to maintain relationships with an increasingly complex and varied network of retailers.

5.2.1    An overview of the bookstore channel

The bookstore channel has grown over the past few decades, particularly under Bill 51 in Quebec. There are French-language bookstores in provinces that have a Francophone population large enough to support local bookstores or book kiosks, and education systems that encourage the purchase of French-language books. According to the Annuaire de l'édition au Québec et au Canada français 2007-2008, there are 26 French-language bookstores or retail outlets outside Quebec: two in Alberta, one in Saskatchewan, two in Manitoba, six in New Brunswick and 15 in Ontario. We also know that two new French-language bookstores have just opened in Ontario, and one in New Brunswick. Considering Canada's size, the delivery of services to these bookstores poses a real challenge to diffusers and distributors, which are all located in Quebec.

The Annuaire shows that Quebec has 292 bookstores, which are divided into independent bookstores, bookstore chains (or multiple-location bookstores) and school co‑operatives (mainly serving colleges and universities). Of these 292 bookstores, 208 are accredited by the Government of Quebec. As defined in the Observatoire de la culture et des communications du Québec, a bookstore chain comprises four or more locations under the same ownership. The two main chains are Librairies Renaud Bray, which now has 24 locations, and Librairies Archambault, with 15 locations. Then there is the chain made up of Chapters, Indigo and Coles, which has 10 locations in Quebec. School co‑operatives belong to an association of more than 60 co‑operatives operating more than 100 retail outlets.

5.2.2    The diffuser's dealings with the bookseller

Diffusers on average serve a network of between 400 and 500 bookstores and retail outlets dedicated mainly to the sale of books in Quebec and French Canada; some have nearly 1,000. Obviously, not all these bookstores have système d'office order forms, which indicates that the diffuser has to make a serious effort to serve these retailers.

For bookstores that do have one, each diffuser works with the retailer to draw up a système d'office order form of new titles by subject. A système d'office order form includes several hundred categories, depending on the genre and sales potential of each title, with a predetermined number of copies to be delivered. Great care must be taken in preparing the order forms, since poor planning can result in missed sales for the retailer and the publisher, or alternatively an excessive number of unsold copies and thus a high return rate. A système d'office order form may be completed for each publisher distributed, in accordance with its collections and the reputation of its authors.

A diffuser's representatives are usually divided into work teams by genre and the region to be covered. Representatives each have a portfolio that they present to customers in their territories. In major centres, a large diffuser may have teams composed of three to five representatives covering a similar number of areas of publication: adult titles, youth titles, scientific and technical titles, etc. Thus, a bookseller may be visited by five representatives of the same diffuser, depending on the types of titles carried by the store. In the regions — or with smaller diffusers — one representative may be responsible for more than one portfolio, or even all titles distributed.

Depending on the size of the bookstores, the number of titles to appear and the territory to be covered, representatives may visit each of their customers four to twelve times a year, sometimes even up to once a week, depending on the catalogue and customers' needs. When meeting with booksellers, the representative presents each upcoming title using the marketing material developed with the publisher. In theory, every upcoming title should be discussed, but in practice, the focus may be on the most promising titles, allowing others to be entered automatically in the système d'office order form. For each title, the representative and the bookseller will consider the number of copies entered in the système d'office order form and decide whether this number should be increased through a prenotification or reduced. Recall that a prenotification is a [translation] "one-time modification of a système d'office form in which the quantities delivered are different from those set out in the boxes of a système d'office order form. [Thus,] a prenotification modifies the quantities delivered but does not alter the quantities set out in the boxes of the système d'office order form."⁴

The representative will also use the visit to the bookstore to verify the inventory of titles already in the bookstore, both new and background titles. The bookseller might be encouraged to restock a title when its stock is too low; this new order from the bookseller then takes the form of a restocking, usually without a right of return. This restocking will also take the form of a mise en place or promotion, this time with a right of return. The representative will also take the opportunity to present the promotion material provided by the publisher and inform the bookseller of any events that may influence a title's sales.

Lastly, the representative's mandate may also include certain institutions not subject to Bill 51, particularly university libraries or research centres.

5.2.3    The distributor's dealings with the bookseller

As we have seen, distribution includes the logistical tasks involving the physical movement of books and the management of related financial flows. The distributor first receives books from the publisher as well as orders (système d'office, prenotifications and restocking) received by representatives during their meetings with booksellers.

Throughout the book supply management chain, the distributor must put in place an extremely sophisticated computer processing system that permits constant tracking of each copy of every title. This system is activated when a new title is received from the publisher. Title data is entered into the distributor's computer system, the number of copies delivered is recorded, and the book will even be weighed in order to better to plan for delivery.

The distributor then prepares the title for placement in the système d'office. Considering the growing number of new titles, a few years ago distributors changed from one système d'office form every two weeks to one système d'office form a week. The weekly système d'office form includes new titles from all publishers distributed. A shipment is prepared for each of the 300 to 500 bookstores affected by the système d'office. Not all bookstores necessarily receive all titles on the système d'office, depending on their clientele, and certainly not the same number of copies of each title. This therefore requires very special attention, even though it is now supported by specialized technology. Invoices are prepared, and carriers are informed of the weights of packages to be sent and are given the task of delivering the packages quickly to their recipients.

In addition to the système d'office shipments, the distributor must fill orders submitted in the form of restocking. The logistical organization will be different from the système d'office, since with restocking, any titles in stock may be involved. Each distributor has developed its own system to compile the copies ordered by individual retailers. Each package is usually routed from one section of the distributor's warehouse to another, and specialized staff assigned to each section puts in the titles appearing on the invoice. The system informs staff when all of the section's titles have been placed in the package, which then continues on to the next section of the warehouse. When all the titles have been collected for a single customer, they are weighed to ensure that the weight of the package is equal to the total weight of the titles and the number of copies set out in the order, thereby validating the contents. The information is then forwarded, again by computer, to the carrier, which picks up the package. Obviously, not all distributors' management systems have the same level of sophistication, but their quality and level of accuracy provide an advantage to distributors facing strong competition.

Managing returns is another extremely demanding operation for the distributor, since titles received must be returned to all sections of the distributor's warehouse. Teams are therefore kept busy opening packages, ensuring that the package contents match the slip, checking the condition of the copies and planning how to arrange them in the appropriate warehouse section for each title.

One very important aspect of the distributor's work is managing the financial flows associated with the movement of the titles. An invoice for a système d'office shipment will contain titles from several publishers, and the same is true for the return slips. The distributor must divide each document among all the publishers, deduct returns from shipments to retailers (as credit notes), deduct the same returns from accounts payable to publishers, etc. These operations are obviously carried out using computerized management systems, but the fact remains that they are complex and highly specialized.

The importance of warehousing infrastructures and computer systems to the logistical and financial management of a book distribution firm is not difficult to understand. The dimensions of the barriers to entry are also easy to understand, considering the massive investments required, as is how the profitability of a distribution business depends on economies of scale and reaching a critical mass.

5.2.4    The distributor's dealings with mass-market channels

The marketing of books through mass-market channels is very different from the bookstore channel. Mass-market channels include retail outlets where books are not the main product sold. They are broken down into several categories of customers, including warehouse clubs or stores (such as Costco), mass-market retail stores (Wal-Mart), retail big-box stores (Home Depot, Bureau en Gros), as well as a broad range of specialized stores, pharmacies, stationery and tobacco shops, gift boutiques, etc. In sectors other than books, and sometimes in the book trade in English Canada, these markets are supplied by wholesalers. However, as we have seen, in the French-language book trade, this segment has been taken over by distributors, and often represents an important part of their activities.

Mass-market channels should perhaps sometimes be called the mass-market distribution network, since marketing often takes place there without the diffuser's involvement. A large number of mass-market retail outlets do not choose the titles to be displayed. Representatives have total responsibility for stocking, restocking, shelving and returns. They certainly engage in a certain "diffusion" of the titles, but they do not have marketing materials to prepare and no one to win over. If a certain amount of promotional materials come with the titles on display, the representatives themselves arrange and distribute the posters, brochures, inserts, etc. Titles are placed on consignment, and the consignee only has to record the sales on the representative's visit. On the other hand, in warehouse clubs or in mass-market retail stores, titles are selected by the customer with a great deal of attention, considering the very limited number of titles on display and the specialized nature of their clientele.

Mass-market channel representatives visit every retail outlet one to four times a month, depending on the customer's needs. They usually live in the region they serve and sometimes work part time. They visit their retail outlets regularly to ensure that titles are always available, that the display is in good order, and that a competitor has not moved their titles and decreased their visibility.

Considering the complexities of mass marketing and the network of more than 1,500 retail outlets to be served, there are very few distributors involved in mass-market channels. In fact, a number of diffusers and distributors prefer to subcontract mass-market sales to another distributor.

Similarly, few titles are chosen for diffusion in this network. Titles are selected very narrowly; they must be targeted at the mass market and have the potential to generate a level of sales sufficient to remain on display. Mass-market channels seek titles with sales guaranteed in advance. Average stocking is very limited (200 to 300 titles for Costco), and titles can be turned over very quickly.

Processing orders for the big-box store network is especially demanding for the distributor, which has to assume responsibility for a number of formalities regarding packing and labelling of the various books for each of the major mass-market channel customers (discount, mass market, big-box, etc.). This results in book processing costs much higher than for the bookstore channel. Similarly, since books are placed on consignment, they may be returned at any time; in addition, since title turnover is very high, mass-market channels have a return rate much higher than the bookstore channel.

For these reasons, the distributor will generally grant only a 30% discount to mass-market retailers. However, this discount rate is sometimes higher, although the French-language market is not facing the same trend to higher discounts as seen in the English-language market, due in part to the collegial culture promoted by Bill 51. Nevertheless, such stability is fragile. It does seem that publishers reserve certain mass-market customers for themselves and take advantage of the fact that they are able to sell their books without intermediaries to increase the discounts granted to retailers. This practice could destroy a tradition of moderate discounts instituted as a result of the persistence of certain distributors and at the cost of lengthy negotiations.

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5.3 Revenue sharing between partners

The following table proposes a model for calculating the revenue share for each partner. This model is obviously expected to fluctuate depending on a number of variables, such as the network in which the book is sold (bookstore or mass-market channel), the print run and production conditions.

We immediately see that royalties and printer's and publisher's revenue generally remain the same, regardless of which book sales network is used. However, as we have just seen, the publisher may look for different ways to recover the diffuser/distributor's share by dealing directly with certain retailers in the big-box store network, even if this increases the retailer's share of the revenue. Under these conditions, the publisher is to some extent competing with its own partner in the diffusion and distribution of its titles. It also may seek to recover the retailer's share by developing direct-sales strategies, either by postal promotion, exhibitions or online sales. However, in the Quebec and French-Canadian market, direct Internet sales by publishers remain relatively limited for the time being.

This table also reveals the publishers' precarious situation regarding a possible escalation of discounts both in bookstores (Bill 51 sets a minimal discount of 40% for bookstores, which does not place a cap on discounts) and in mass-market channels. With its 11% share of book sales revenue, it is difficult for a publisher to cover all expenses related to book publishing and managing the business.

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