LAUNCHING A PUBLISHING

BUSINESS IN NORTH AMERICA

Publishing Workshop, Beijing, September 4, 2007

Dr. Ashis Gupta, Publisher, Bayeux Arts, Inc., Calgary, Canada

Professor Emeritus, Haskayne School of Business, University of Calgary
 Some TRENDS to Consider
 The NA Publishing industry at a crossroads
 Aggressive ‘supply chain’ management; smaller
reprints. POD, an important NA trend.
 US print market losing $100 million/year to global
competition (Coffee table books – China)
 Consolidation in print industry; new alliances.
 Open access Electronic books (MIT, Athabasca)
 Globalization of publishing operations
 THINK Before Entering the
US/Canadian Market
 Tariff Barriers: Duties, quotas, etc.
 Non Tariff Barriers: Local Content requirements, Hiring of local
staff, Transfers of Chinese staff etc.
 Intellectual Property and Competition Law: Complex.
(More information at the close of this session)
 Anti Competitive Practices: Laws against dumping, cartels,
price fixing, pressure from monopolies and other competitors.
 Product and Service Standards: How Standards are
managed – health/safety, materials, environmental conditions, etc.
 Dispute Resolution: How predictable and Fair
 Appropriate Entry Strategy
ENTRY MODE ADVANTAGES DISADVANTAGES

Exporting Location and Transport costs, Trade and

Experience Curve local market barriers
economies
Licensing Low development Limited global strategy, some
costs and risks economies lost
Joint Local partner’s Limited global strategy, some
knowledge, shared economies lost
Ventures costs/risks
Wholly owned Better global High costs and risks
strategy, location
subsidiaries and experience
 Corporate Sustainability in a
Globalized World
 Strategy: Integrate long-term economic, environmental, social
concerns while maintaining global competitiveness
 Financial: Meet shareholder demands for sound financial returns,
long-term growth, open communication, transparent financials.
 Customer & Product: Invest in customer relationship,
product and service innovation, and technologies over long-term using
financial, natural, and social resources effectively and economically.
 Governance & Stakeholder: High standards of corporate
governance and stakeholder engagement, codes of conduct.
 Human: Manage Employee satisfaction through organizational
learning and optimal remuneration and benefits programs
 Is your Corporate Profile ready for
North American Market?
 Analyze your product line/technology
 Your Company’s Business Model
 Present Scope of Company’s geographical region
and territory
 Your Company’s current Mandate and strategic
plans
 Company performance over past THREE years,
including reference to key competitors
 Company’s Code of Ethical Practices
 Can You Develop a
“Global Publishing Mindset”?
Global Mindset
 Focus on big picture and
changes in company’s global
environment
 Strong confidence in Vision and
organizational process
 High value of multi-cultural
teams
 Diversity recognized as a
source of opportunities
 Always open to change
Parochial Mindset
 Focus on national markets and
local trends
 Emphasis on tight headquarter
control and hierarchical
structures
 Limited cross-national
cooperation
 Diversity viewed as threat to
rigid strategies
 Difficulty in coping with change
 Starting a Business in the U.S.

When beginning a business, you must decide what form of business entity
to establish. Your form of business determines which income tax return
form you have to file. The most common forms of business are :

 Sole Proprietorships
 Partnerships
 Corporations
 S Corporations
 Limited Liability Company (LLC)

Legal and tax considerations enter into selecting a business structure.

 Corporations
 In forming a corporation, prospective shareholders
exchange money, property, or both, for the
corporation's capital stock. A corporation generally
takes the same deductions as a sole
proprietorship to figure its taxable income. A
corporation can also take special deductions.
 The profit of a corporation is taxed to the
corporation when earned, and then is taxed to the
shareholders when distributed as dividends.
However, shareholders cannot deduct any loss of
the corporation.
 Limited Liability Company (LLC)
 LLCs are popular because, similar to a corporation, owners have
limited personal liability for the debts and actions of the LLC. Other
features of LLCs are more like a partnership, providing management
flexibility and the benefit of pass-through taxation.

 Owners of an LLC are called members. Since most states do not

restrict ownership, members may include individuals, corporations,
other LLCs and foreign entities. There is no maximum number of
members. Most states also permit “single member” LLCs, those having
only one owner.

 A few types of businesses generally cannot be LLCs, such as banks,

insurance companies and nonprofit organizations. Check your state’s
requirements and the federal tax regulations for further information.

 There are special rules for foreign LLCs.

 Employee Identification # (EIN)
Certain business conditions require an Employer Identification Number
(EIN). The EIN is also known as a Federal Tax Identification Number,
and is used to identify a business entity. Generally, businesses need
an EIN. You may apply for an EIN in various ways, and now you may
apply online. This is a free service offered by the Internal Revenue
Service. You must check with your state to make sure you need a state
number or charter.

Some of the most important business conditions requiring an EIN are:

 You withhold taxes on income, other than wages, paid to a non-

resident alien
 You operate your business as a corporation or a partnership
 You have employees
 BUSINESS TAXES
 The form of business you operate
determines what taxes you must pay and
how you pay them. The following are the
four general types of business taxes.
 Income Tax
 Self-Employment Tax
 Employment Taxes
 Excise Tax
 Income Tax
 All businesses except partnerships must file an annual income tax
return. Partnerships file an information return. The form you use
depends on how your business is organized. Refer to
Business Structures to find out which returns you must file based on
the business entity established.

 The federal income tax is a pay-as-you-go tax. You must pay the tax
as you earn or receive income during the year. An employee usually
has income tax withheld from his or her pay. If you do not pay your tax
through withholding, or do not pay enough tax that way, you might
have to pay estimated tax. If you are not required to make estimated
tax payments, you may pay any tax due when you file your return. For
additional information refer to Publication 583, ‘Starting a Business and
Keeping Records.’
 EMPLOYMENT TAXES
 When you have employees, you as the
employer have certain employment tax
responsibilities that you must pay and forms
you must file. Employment taxes include
the following:
 Social security and Medicare taxes
 Federal income tax withholding
 Federal unemployment (FUTA) tax
 Immigration Issues
 If you are not a citizen or a lawful permanent resident, you may need to
apply for an Employment Authorization Document (EAD) in order to
work in the United States.
 You must determine whether you are eligible for an EAD through an
immigration attorney or through a United States Citizenship and
Immigration Services office or government website.
 If you are authorized to work for a specific employer, such as a foreign
government, you do not need an Employment Authorization Document.
 Once you get your EAD, you will then also need to get a business
permit from your local city or county where you set up shop. If you will
have employees, you will need to get workers’ compensation
insurance, and will need an understanding of tax withholding laws.

 For information you may contact a law firm like Fragomen.

 N.A. Market Size
U.S.A. CANADA
Publishing Companies 15,000 490
New Titles / year 195,000 11,500
Book Sellers 5,238 2,000
Public Libraries 6,000 900
Broadband Subscribers 58 million 8 million
Internet Users 211 million 22 million
Government Subsidies $ 50 million
 Number of U.S. Publishers
 6 large publishers (in New York)
3-400 medium-sized publishers
86,000 small/self-publishers

The six U.S. conglomerate publishers are

 Random House, Inc.

 Penguin Putnam Inc.
 HarperCollins
 Holtzbrinck Publishing Holdings
 Time Warner
 Simon & Schuster, Inc.

 Four are foreign owned

 U.S. Trade Book Production
(All Hardback and Paperback)
Category 1995 2003 2004 2005
Agriculture 93 42 42 33
Arts 365 237 247 309
Biography 601 775 812 811
Business 602 897 1,116 1,000
Education 232 455 429 415
Fiction 4,307 4,952 5,125 5,479
Genl. Works 140 114 142 97
History 481 718 666 623
Home Econmcs. 618 486 487 533
Juveniles 4,507 5,294 6,660 5,267
Language 276 693 500 340
Law 209 95 125 87

Literature 579 664 488 450

 U.S. Trade Book Production(2)
(All Hardback and Paperback)
Category 1995 2003 2004 2005 (Prelim)
Medicine 488 568 593 700
Music 96 131 90 77
Philosophy, 713 838 910 842
Psychology
Poetry, Drama 276 256 225 232
Religion 686 956 839 825
Science 686 1,144 1,047 1,141
Sociology, Econ 1,254 1,533 1,600 1,505
Sports, 444 571 524 641
Recreation
Technology. 1,274 1,041 965 1,029
Travel 472 465 528 501
TOTAL 19,734 22,914 24,159 23,017
Est. Book Publishing Net Sales
2002-2005 (Thousands of Dollars)
2003 2004 2005 Compound Growth

Trade (Total) 6,534,828 6,267,199 7,828,050 9.1%

Adult Hardbound 2,060,949 2,190,788 2,221,700 1.7%
Adult 1,013,895 1,042,284 1,140,989 3.8%
Paperbound
Juvenile H/bound 2,718,721 2,264,695 3,614,748 19.6%

Juvenile P/bound 741,264 769,432 850,613 2.8%

Bk Clubs, Mail Ord 1,771,443 1,613,784 1,505,661 -8.2%

Mass Mkt P/back 1,187,100 1,081,448 1,083,611 -3.5%

Audiobooks 161,049 159,922 206,299 12.9%

Religious 883,406 932,877 875,971 14.2%

E-Books 80,793 123,695 179,110 81.5%

Professional 3,268,778 3,334,153 3,300,812 1.5%

EI-HI (K-12 Eductn) 5,939,920 5,945,860 6,570,175 4.3%

Higher Education 3,133,920 3,190,340 3,359,428 3.6%

All Other 153,932 161,629 158,558 5.1%

TOTAL 23,115,180 22,810,907 25,067,676 4.4%

 Copyright Law in U.S.A.

Purpose
 The first Copyright Act of 1790 was passed pursuant to the
United States’ Constitutional provision that grants
Congress the power “to promote the progress of Science
and useful Arts, by securing for limited Times to Authors
and Inventors the exclusive Right to their respective
Writings and Discoveries.” (United States Constitution,
Article I, Section 8, cl. 8 – known as the “Intellectual
Property Clause”). Thus, the Constitutional aim of copyright
protection has always been “to promote the progress of
Science and useful Arts.”
 Copyright Law in U.S.A.
Subject Matter

 In keeping with its purpose and its power to give authors control over their
works for a specific period of time, copyright law has evolved to accommodate
two centuries of technological and cultural change. After the enactment of the
Copyright Act 1790 which lent protection to books and maps, intellectual
property protection was steadily expanded to include engravings and prints
(1856); photographs (1865), paintings, drawings, and designs (1870);
photographs, newspapers, and all writings by authors (1909); motion pictures
(1912); and sound recordings (1971).
 Contemporary copyright law protects “original works of authorship fixed in any
tangible medium of expression,” and is embodied in the statutory regulation 17
United States Code Section 102 (17 USC § 102).Therefore, the question of
what can be the subject of a copyright is a critical, threshold issue. By
extending protection to the “tangible expression” of “original works of
authorship,” copyright law does not “extend to any idea, procedure, process,
system, method of operation, concept, principle, or discovery, regardless of the
form in which it is described.” (17 USC § 102 (b)).
 Copyright Law in U.S.A.
Scope of Protection

 The scope of protection grants exclusive rights in an author’s artistic

creations, including the right to “reproduce the copyrighted work in
copies,…prepare derivative works based upon the copyrighted work…
distribute copies…of the copyrighted work to the public” (17 USC §
106(1)-(3), (5)). To enforce the protection of an author’s copyrighted
expression, copyright law allows for a claim of infringement against any
person who is thought to violate the author’s rights in his work. To
prove a claim for infringement of an owner’s copyright, the copyright
holder must show valid ownership of the copyright (see Registration
below) and “copying of constituent elements of the work that are
original.” (Supreme Court precedent from Feist Publications, Inc. v.
Rural telephone Service Co. 499 U.S. 340 (1991)).
 Copyright Law in U.S.A.
Registration
 Under American law, the Copyright Act does not require registration as a
prerequisite for protection, and does not require notice of copyright either. Nevertheless,
registration in the U.S. is necessary for works originating in the U.S. in order to file a
claim of infringement against unauthorized use. One can register a work with the
Copyright Office in the Library of Congress. Names and titles alone are not protected by
copyright (but may be registered as trademarks).

Action for Infringement

A defendant’s copying for the purpose of an infringement claim must be unauthorized and is
considered “improper or unlawful appropriation” of copyrighted material. In this context,
courts require that a substantial similarity exists between the defendant’s work and the
protectible elements of plaintiff’s. Thus the allegedly infringing work must be derived from
the plaintiff’s copyright protected work and must be an unauthorized appropriation. An
important defense to copyright infringement is codified in 17 USC § 107 known as the
“fair use” doctrine. Fair use is a defense that establishes permissible use limiting the
exclusivity of owners’ rights. The fair use limitation on copyright is applied on a case-by-
case basis. Section 107 provides a non-exclusive list of purposes that establish fair use
of a protected work.
 Copyright Law in U.S.A.
Duration
 As mentioned above, copyright protection derives its power from Article I of the
Constitution and is a right that may be secured for “limited times.” U.S. Const.,
Art. I, § 8, cl. 8. Thus, the duration of a copyright determines when a work has
protection, when protection is renewed, and when a work loses protection and
enters the public domain. Duration is determined by the formalities of date of
publication, governing copyright, notice, and renewal.

 An analysis of copyright duration requires inquiry into the date of publication.

“Publication” refers to a combination of factors involving use, control over a
work, and restrictions or lack thereof on public access to the work. Although
publication is not a requirement for protection under the Copyright Act of 1976,
it is important for the establishment of valid copyright in works published prior
to January 1, 1978 (when the 1976 Act went into effect). Thus, only works
protected by valid copyright on or after January 1, 1978, are protected under
the 1976 Copyright Act and have a term of protection that consists of the
duration of life of the author + 70 years (17 U.S.C.A. § 302). Under the Act,
works of corporate authorship are protected up to 120 years after creation or
95 years after publication, whichever is earlier.
 International Law
and Copyright Protection
 The Berne Convention for the Protection of Literary and Artistic Works (“Berne Convention”), is an
international agreement about copyright, which was first adopted in Berne, Switzerland in 1886.
China is a signatory to the Berne Convention. The Berne Convention requires that signatories
recognize the copyright of works of authors from other signatory countries, just as it recognizes the
copyright of its own nationals, which means that, for instance, Chinese copyright law applies to
anything published in China, regardless of where it was originally created. A work created in one of
the countries that are signatories of the Berne Convention is protected in all of the member nations
and does not require individual protection in each nation.

 Copyright under the Berne Convention is automatic which means that there is no requirement of
formal registration for a work to be protected. Under the Berne Convention, an individual may
proceed with a claim of infringment on unregistered works. Although U.S. law requires registration for
such actions, it provides an exception for “actions for infringement of copyright in Berne Convention
works whose country of origin is not the United States” (17 USC § 411 (a)).

 The Berne Convention provides that all works except photographic and cinematographic shall be
copyrighted for at least 50 years after the author’s death, but parties are free to provide longer terms.
Although the Berne Convention states that the copyright law of the country where copyright is
claimed shall be applied, article 7.8 states that “unless the legislation of that country otherwise
provides, the term shall not exceed the term fixed in the country of origin of the work,” i.e. an author is
normally not entitled a longer copyright abroad than at home, even if the laws abroad give a longer
term. Some countries have not accepted this rule.
 U.S. Vendors Carrying
China-related Books
 Amazon.com (www.amazon.com)
 Abebooks.com (www.abebooks.com) used
books
 Asian Rare Books (http://users.erols.com)
used and rare books
 Association of American Academic Publishers
Online Catalog (http://aaup.uchicago.edu) lists
over 75,000 book titles from over 60 presses
 Blackwell North America (blackwell.com) Can
set up vendor profile for East Asian Studies.
 Cheng & Tsui Company (
www.cheng&tsui.com) language learning
materials; books and movies on/from China.
 China Books & Periodicals (San Francisco) (
www.chinabooks.com)
 China Sprout (www.chinasprout.com) Chinese
cultural and educational products.
 The Chinese University Press (HK) (
www.chineseupress.com)
• East Wind Books (www.eastwindbooks.com)
 Hanshan Books (UK)
(www.hanshan.com)Carry mostly rare and
second hand books in art history, architecture,
archaeology.
 Homa & Sekey Books (www.homabooks.com)
 Lexington Books (www.lexingtonbooks.com)
 M.E. Sharpe (www.mesharpe.com)
 Paragon Books (www.paragonbook.com)
 Penguin Group USA
(http://us.penguingroup.com)
 Rowman & Littlefield Publishers
(www.rowmanlittlefield.com)
 Shambhala Publications (
www.shambhala.com) Asian religions
 Tuttle (www.tuttlepublishing.com) Popular
titles on China.
 Westview Press (www.westviewpress.com)
Popular titles on China.
 World Wide Art Books (
www.worldwide-artbooks.com) art books and
exhibition catalogues