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Demise of H.B. Fenn latest blow to Canadian publishing Add to ...

It was sadly fitting that entrepreneur Harold Fenn announced the failure of his once-thriving family business, Canada's largest independently owned book distributor, on the same day Bay Street cheered news that the bankruptcy rate in Canada had hit an all-time low. Whatever other opportunities might arise in a suddenly buoyant new economy, it seems clear that the business of making and selling paper books in Canada will not be among them.

The bankruptcy of H.B. Fenn, based in Bolton, Ont., is the latest example of what has become ceaseless turmoil in Canada's most vulnerable cultural industry, following closely on the company's decision last month to shutter its major publishing arm, Key Porter, and the similar bankruptcy in December of distributor DB Media. With the Stephen Harper government set to announce new policies this month regarding economic protection for Canadian publishers, some question how many will be left to save.

One thing is clear: The demise of H.B. Fenn, which put upward of 125 employees out of work, marks the end of a business model in which Canadian publishers were able to support domestic programs with revenue derived from the distribution of foreign titles.

The beginning of the end for the company came two years ago, when it lost almost half its business, laid off 50 workers and closed a major warehouse after the multinational Hachette Book Group, owners of Little, Brown and Grand Central Publishing, decided to serve Canadian customers directly from New York and ship books north from a warehouse in Indianapolis.

"This has made our ability to support our publishing program marginal," Fenn wrote in a brief to the Heritage ministry on its latest policy review last summer, shortly before the first round of layoffs at Key Porter. "Further erosion of our distribution base would make it impossible."

That warning proved prophetic this week - in part (as Fenn acknowledged in a statement marking his company's bankruptcy) due to the e-book revolution's further assault on the viability of independent Canadian distributors.

For the domestic subsidiaries of the multinational companies that currently dominate Canadian publishing, however, the distribution of head-office bestsellers by the likes of John Grisham and Dan Brown remains a lucrative business.

The result is that multinationals now out-compete independents on their own turf, ECW Press founder Jack David complained in his brief to the ministry: "These sales, and subsequent profits, lower the overall costs of selling and distributing books in Canada, and the lower expenses combine with great market clout to allow the branch plants to offer higher advances than Canadian-owned companies."

If nothing else, the fate of H.B. Fenn makes a fitting backdrop to the Harper government's current review of foreign investment in Canadian publishing. "Harold Fenn spent his entire life building up a very fine and very well-run company," publisher Kim McArthur of McArthur & Company Publishing said, "and I am frankly appalled that the Canadian government has not lifted a finger to come to the aid of anyone in the Canadian publishing industry, particularly H.B. Fenn."

Like Fenn, McArthur & Company lost a huge share of business and laid off staff when Hachette consolidated North American sales and distribution in the United States. "Where in all of this is the government?" McArthur asked. "Why are they screaming about some Australians wanting to buy a potash company when there's not a peep about the thing they're meant to be protecting - Canadian publishers and Canadian authors?"

The job of maintaining the current jury-rig of policies and programs that support Canadian publishing will not be simple. The review was announced in response to Amazon.com's establishment of a Canadian distribution centre west of Toronto, in apparent violation of existing rules, suggesting that economic pressures will overrule policy in any potential outcome. Rules prohibiting Canadian retailers from "buying around" authorized distributors - going directly to the international marketplace in search of cheaper prices - are likewise strained.

Not so slowly but surely, the separate market for Canadian books is disappearing in a wave of continental consolidation. The Pearson Group, owner of Penguin Canada, led the way last year when it put the company under direct control of its New York office. And with a considerable portion of all mass-market book sales expected to come in electronic form, territorial distribution rights become meaningless.

"Publishing operates on the thinnest of margins at the best of times," McArthur said, "and these are not the best of times by any stretch of the imagination."

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