The combined sales of 69 top publishing companies in South Korea's best-selling books rose 0.9 percent in 2018 from the previous year, but their overall operating profit fell 7.4 percent. Only book sales of the top three online bookstores such as Yes24, Aladdin, and Interpark increased 11.8 percent year-on-year, surpassing 1 trillion won for the first time. Fixed book price contributed greatly to the cause of this wide gap between sales and profits. A fixed book price is a government-mandated system that prohibits bookstores from selling books at a lower price than those set by publishers.
The system was implemented with the aim of allowing bookstores to sell books at prices set by publishers in order to prevent the inflated reduction of book prices. In other words, although it was designed to protect cultural products, it is not only reducing the reading of the Korean books, but also having a negative impact on the publishing and printing industries. Under the Publication and Printing Promotion Act (출판 및 인쇄 진흥법), which went into effect in February 2003, fixed book prices were implemented on February 27 of the same year. Also, it allowed only online bookstores to classify books within one year of publication as a newly published book section and give a 10 percent discount.
In addition, books that had been published for more than a year were allowed to be discounted at the discretion of bookstores. However, the Publication and Culture Industry Promotion Act replacing the existed Publication and Printing Promotion Act, which went into effect on October 20, 2007, set a new book that was published within 18 months of its publication. Also, it allowed 10% discount of new books to be offered in offline bookstores. Otherwise, it was revised in November 2014 to allow a discount of up to 10% of the fixed price. regardless of the type. The revised system, which went into effect on Nov. 21, limited indirect discounts to 10 percent price discounts and discounts of up to 15 percent. It was originally scheduled to be implemented temporarily for three years. However, it will be extended until November 2020 following an agreement by interested parties, including the publishing and bookstore industries.
Before the fixed price system, books 18 months old were sold at a discount of 30 to 80 percent. There were many cases that people who had not been able to buy new books because of high prices waited 18 months when stores were selling them at a big discount. For publishers, it was also profitable in that they could handle the inventory of old books quickly, though at a low price. However, it was mainly applied to online bookstores such as Aladdin and Yes 24. Most offline bookstores did not offer significant discounts, even if they were old books. Therefore, there were many neighborhood bookstores that disappeared because of price competition. In response, lawmakers created a law called the "Fixed book price", which allows discounts of up to 15 percent for both new books and sections, with the aim of saving local bookstores.
However, after the system was put into effect, things got worse. This is because it has led to a decrease in people's reading. As the new book price system was implemented, it led to a rise in book prices. The average book price, which stood at 15,600 won in 2014, rose to 16,000 won in 2017. Publishers' sales also fell to 3.96 trillion won in 2016 from 4.23 trillion won in 2014. As such, the new fixed book price system has reduced the number of people who read books, rather than saving local bookstores and publishers. In addition, the number of regional bookstores also declined from 1,625 in 2013 to 1,536 in 2017. According to the "2018 Annual Report on the Promotion of Reading", published by the Ministry of Sports and Tourism(문화체육관광부), the adult reading rates dropped from 86.8 percent to 59.9 percent in 2017, down from 50-36 reading projects in the past.
The second problem is that as book sales have declined, book prices have increased. Online bookstores saw their sales drop in 2015 when the new book price system was implemented. However, it has been recorded the best sales ever since. The reason is simple that online bookstore is cheaper, and has a variety of books and hold many events. Looking at the current trend, the number of mid- to large size bookstores with less than 100 pyeong increased from 230 in 2005 to 277 in 2017, but the number of small and medium-sized bookstores with less than 100 pyeong continues to decline. In particular, small bookstore in 2005 with less than 20 pyeong in size, 1170 563 reduced by one, from 2017. This new system played a big role to reduce the reading population. Because of high prices, many people hesitate to read books. In addition to this trend, the number of printed copies of first editions of average circulations has devreased significantly from 1979 in 2014 to 1,401 in 2017. As a result, only Internet bookstores benefited.
Also, the publishing industry failed to be revitalized due to the book price system. Wholesalers went bankrupt and many offline bookstores were closed. There was no revitalization of the neighborhood bookstore that the book price system targeted, and they had to rely on voluntary reform and support from local governments. Compared to 48.5% of people who responded to “increased use of online Bookstore” and 18.9% of” increased going to large offline bookstore” since the system was implemented, only 8.3% said “increased use of small offline bookshop.”
As a result, readers will see the biggest damage from the book price system. The tightened pricing system has increased the price burden on consumers. As a result, fewer people read books and fewer people go to bookstores to buy books themselves. Book prices rise further as the finances of bookstores deteriorate and publishers lose print. If the system continues, it will be difficult to break the vicious circle. Public opinion is growing that the government in the past has limited the amount of book discounts, making it difficult for ordinary people to buy books. Therefore, there is also a growing voice that the system itself should be fundamentally reviewed. Kim Soo-min, a member of the Culture, Sports and Tourism Committee, said, “It is questionable whether the book price system, which was introduced by the government in the past is really achieving the purpose of the system.” It is also pointed out that there is a lot of public opinion that this system instead makes the entry barrier higher for people to purchase books. In addition, this has had an adverse effect on the book-related industry as well.
With current book price regulations, local bookstores cannot survive. The publishing world faces a problem of sustainability. Since the current book pricing system is not an "absolute" book pricing system, which is the case in France, local bookstores are losing ground in price competitiveness compared to large online bookstores. Moreover, with the aggressive marketing of gifts by large online bookstores, some even say that the neighborhood bookstore has become a so-called "book showroom," where customers only looks at books in advance before ordering them online. There are many opinions that The Ministry of Culture, Sports and Tourism, along with a fundamental review of the book price system itself, should come up with measures to improve the book industry as a whole.