Monday, August 17, 2015

Europeans have had enough with high e-book prices


Electronic books have found massive success in Canada, US and the United Kingdom. The sales of e-books represent between a quarter and a third of the consumer book market and, by 2018, will edge out printed and audio books as the most lucrative segment. Things over in mainland Europe are quite a different story. Last year, digital books made up 8% of the consumer book market in France, less than 4% in Germany and Italy, and 1% in Sweden and Norway.

Why is Europe lagging behind in e-book adoption? There are two trains of thought on the subject, one is the cultural stigma that e-books will erode print book sales and the other is the high rate of VAT where  e-books are often taxed more than 20% compared to print.

Since the e-book revolution first begun in 2009, there as been a cultural resistance to protect the print industry. Germany and France prohibit the kind of deep discounts on digital books relative to print that have lifted e-book sales in English-language markets. But another, less publicized factor is taxation, which in the case of e-books is all over the map.

Selling e-books in Europe is challenging, since the rules keep changing. Amazon, Barnes and Noble, Kobo, Google and Apple  used to be based out of Luxembourg to sell their digital books, since they could get away with charging  3% VAT on e-books in every country in Europe. On January 1st 2015 the European Commission mandated that VAT will be payed based on where the buyer is located and not the seller. The United Kingdom, for example has a 20% VAT on e-books and the Irish Republic VAT is 23%. Germany charges 19% VAT, Luxembourg 3% VAT, Spain 21% VAT and Italy 4% VAT.

Some countries like Poland are trying to fight the existing VAT system to get an even playing field between print and digital. The government has been behind this idea for a number of years and last week a series of judges have petitioned the European Court of Justice to look into the matter.

Poland likely will not be able to change the European Court of Justice, but some countries are considering something even more radical, a single European market for e-books. The European Commission revealed that it would hold an an antitrust competition inquiry into the e-commerce sector in the European Union, as part of 16 initiatives on a digital single market to be delivered by the end of next year. As part of its inquiry, the EC will look at cross-border trade in digital content and the Book Sellers Association hopes it will study issues around accessibility and interoperability in e-books.

When it comes down to it e-book taxes are tremendously fragmented in the EU and I think they would be better served with a common VAT on e-books in order to foster growth and allow more players to enter the market.

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