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SECTION FOUR - THE
PUBLISHER MARKET
4.1 There are no officially
published or prescribed textbooks[7] in Hong Kong. The supply of
textbooks is derived solely from private or commercial publishers,
and the Curriculum Development Institute (CDI) provides guidelines
on different subject syllabuses, then evaluates privately prepared
textbooks for suitability against the CDI syllabuses. Publishing in
Hong Kong is quite localised, with most textbooks in Hong Kong
being written by local teachers, sometimes in collaboration with
tertiary-level academics, and produced by local publishers. A few
international educational publishers are also represented in
publishing locally used texts, including local adaptations of
foreign works.
4.2 Many of the textbook
publishers belong to either one of two publisher associations,
namely the Anglo-Chinese Textbook Publishers Organisation and the
Hong Kong Educational Publishers Association. From information
provided by ED, there are currently 99 publishers of primary and
secondary textbooks in the industry. Of these a number of
publishers have not produced any textbooks over the past few years,
and ED estimates the number of active publishers, i.e. those who
publish on a regular basis, is 40 to 50.
Market shares
4.3 Tables 1 and 2 indicate
publishers? shares in primary and secondary school categories,
based on the 2000/2001 textbook lists provided by 23 primary
schools and 49 secondary schools. For previous year statistics
seeAppendix 1.
Table 1
Primary Segment by Sales Turnover ? 2000/2001
Table 2
Secondary Segment by Sales Turnover ? 2000/2001
Note:
- Figures may not add up to 100% due to rounding off.
- % shares are calculated by multiplying book count and sales
price per book then dividing by total sales turnover.
- Market shares of publishers for primary textbooks are estimated
by taking the first term only and those for secondary textbooks are
estimated by taking the whole school year data.
Source:
Figures are based on booklists supplied by 23 primary schools and
49 secondary schools.
4.4 From
the results of the survey of schools, four publishers have by far
the major share in terms of primary school textbook sales turnover,
altogether accounting for 76.5% of the primary school segment in
school year 2000/2001. The fourth publisher achieved close to 13%
(it had less than 10% in 1999/2000). The top four publishers owned
a cumulative share of 76.5% of the primary school textbook segment
while most of the remaining publishers each had a share of less
than 3%. The market shares of the four publishers ranged from 12.6%
to 24.4%. The situations in 1999/2000 and 1998/1999 were almost the
same - with the top four positions remaining in the hands of the
same four publishers and the respective cumulative shares being
75.4% and 68.2%.
4.5 The
secondary school textbook segment, on the other hand, has more
publishers with none holding more than 15% share by turnover.
Similar findings are observed for both school years 1999/2000 and
1998/1999.
4.6
However, the scenario of market distribution when categorised by
subject shows a different picture. From the following tables, it is
observed that both the primary and secondary textbook segments are
highly concentrated within individual subject category, having a
small number of publishers holding substantial shares by subject.
For instance, publishers A and N respectively held the major share
(above 75%) in the primary English textbook segment and secondary
Mathematics textbook segment in both academic years 1999/2000 and
2000/2001. For a more detailed breakdown and previous year
statistics see Appendix
2. It is also noted that some publishers, generally the large
publishing houses, supplied a wide range of texts, producing both
science and humanities textbooks.
Table 3
Primary Segment by Subject - 2000/2001
|
Subject |
No. of major publishers* |
No. of publishers |
Publisher - Market Share (%) |
|
Chin. Language |
2 |
5 |
B
45.2
D 40.8
Others 14.0 |
|
Chin. Language TOC |
4 |
4 |
B
38.0
E 24.5
D 21.6
C 15.6 |
|
English |
2 |
3 |
A
81.9
E 13.8
Others 4.2 |
|
English TOC |
2 |
2 |
A
85.2
E 14.8 |
|
Maths |
2 |
4 |
D
76.8
C 13.8
Others 9.4 |
|
Maths TOC |
4 |
5 |
A
44.6
D 17.5
B 15.6
C 14.5
Others 7.8 |
|
General Studies |
2 |
4 |
B
51.3
C 40.5
Others 8.2 |
|
Putonghua |
4 |
8
|
C
35.5
Y 18.5
D 15.1
B 11.8
Others 19.1 |
|
Music |
4 |
8 |
F
43.2
G 20.7
B 11.7
A 11.6
Others 13.1 |
Table 4
Secondary Segment by Subject ? 2000/2001
|
Subject |
No. of major
publishers* |
No. of
publishers |
Publishers - Market Share (%) |
|
Chin. Language |
3 |
8 |
E
58.0
M 25.1
U 10.9
Others 6.0 |
|
English |
4 |
6 |
A
45.1
L 25.2
E 15.2
P 13.3
Others 1.2 |
|
Maths |
2 |
8 |
N
78.0
S 17.7
Others 4.3 |
|
Integrated Science |
4 |
7 |
L
34.4
Q 25.3
A 23.5
P 10.3
Others 6.5 |
|
Putonghua |
4 |
7 |
Z
34.1
Y 24.5
T 17.9
K 14.8
Others 8.7 |
|
Computing |
3 |
14 |
P
22.3
W 21.8
A 21.7
Others 34.2 |
|
Chin. History |
5 |
9 |
K
44.3
D 17.9
M 15.4
U 10.9
R 10.3
Others 1.2 |
|
History |
3 |
8 |
L
33.2
M 29.1
R 24.2
Others 13.5 |
|
Geography |
2 |
6 |
K
65.3
E 17.7
Others 17.0 |
|
E. P. A. |
3
|
7 |
R
49.0
K 25.1
Q 17.3
Others 8.6 |
|
Economics |
2 |
10 |
O
48.3
A 37.3
Others 14.4 |
|
Chin. Literature |
4 |
6 |
M
32.8
K 25.3
X 20.1
E 15.1
Others 6.7 |
|
Eng. Literature |
1 |
1 |
I
100.0 |
|
A. Maths |
3 |
6 |
K
54.6
S 24.4
N 10.6
Others 10.4 |
|
Physics |
2 |
10 |
E
40.0
P 26.1
Others 33.9 |
|
Chemistry |
3 |
5 |
Q
59.6
AA 23.7
P 14.1
Others 2.6 |
|
Biology |
2 |
7 |
E
52.1
L 37.5
Others 10.4 |
|
Commerce |
2 |
10 |
A
59.2
T 16.4
Others 24.4 |
|
Music |
3 |
5 |
BB
59.4
O 26.3
CC 12.1
Others 2.2 |
Note:
- * Major publishers are those with market shares
>10%.
- Figures may not add up to 100% due to rounding
off.
Source:
Figures are based on the 2000/2001 booklists supplied by 23 primary
schools and 49 secondary schools.
Competition concerns based on market
share
4.7 A high concentration of
suppliers in a market will raise a prima facie competition concern.
In jurisdictions with laws that prohibit anti-competitive mergers
or acquisitions, a benchmark test based on arbitrary market
concentration ratios is generally applied to determine whether an
acquisition or merger might be at risk of breaching the law. If a
proposed acquisition or merger satisfies the test, i.e. that it
would result in a concentration level at or above the arbitrary
level, the merger or acquisition would therefore be scrutinized to
see whether in fact the authority is of the opinion that the
concern is well founded.
4.8 Taking one jurisdiction as
an example[8] , if a proposed merger will
result in a post-merger combined market share of 75% or more, for
the four (or fewer) largest firms, and the merged firm will supply
at least 15% of the relevant market, the competition authority will
want to give further consideration to the proposal before being
satisfied that it will not result in a substantial lessening of
competition. In any event, if the merged firm will supply 40% or
more of the market, the competition authority will want to give the
merger further consideration. The twofold thresholds in the
competition authority's benchmark test reflect concerns with the
potential exercise of both coordinated market power[9] and
unilateral market power.
4.9 Applying the above
benchmark test (which is set at a more lenient level than
competition authorities in comparable advanced economies) to the
primary school textbook segment in Hong Kong, and to subject areas
in the secondary segment, would give a prima facie reason for
concern as to the state of competition. This would particularly be
the case should there be further concentration of publishers; for
example through merger or joint venture.
4.10 However, whether the
concern would be justified, depends on the facts that exist at the
time. For example, what is the relevant market to be assessed (i.e.
a separate primary textbook market) and how contestable is that
market[10]. There are a number of
factors that would need to be closely assessed, such as the degree
of supply side substitutability (imports and competing technology)
and barriers to entry. A brief summary of these follows.
Imports
4.11 The importation of
textbooks simply requires a customs declaration and no import
license. It is noted that some schools, mainly international
schools, use imported storybooks in their teaching, but the number
of books is small when compared with locally produced texts. It
seems clear that local publishers can easily satisfy market demand
whereas foreign works cannot match the local curriculum without
adaptation. There would seem to be little incentive to adapt
foreign works when local authorship is readily available and local
materials can be adjusted and amended swiftly in response to
curriculum requirements. Nevertheless, given that Mathematics,
English, and Science texts have universal application, extensive
adaptations in these subjects may not be necessary.
Supply side substitutability
4.12 While there is some
specialisation as to subjects, publishers in Hong Kong generally
supply a wide range of texts between different subjects, such as
science and humanities. Having regard to the number of publishers,
and the range of texts supplied, it can be assumed there is little
impediment to Hong Kong publishers moving between different types
of textbooks. Supply side substitutability between these
participants in the publisher market would therefore appear to be
high. For most subjects at most levels, there is a wide choice of
approved textbooks. With reference to the book counts in the
Recommended Textbook List 2000/2001, there is a choice of
approximately nine textbooks available for each core subject in
each level of primary schools, and even more in the case of
secondary schools. SeeAppendix 3 for a detailed breakdown.
4.13 However, as noted in
Tables 3 and 4 there are high concentration ratios for individual
subjects. The Council is unable to ascertain the reasons for this.
In a joint submission to the Council by the Anglo-Chinese Textbook
Publishers Organisation and the Hong Kong Educational Publishers
Association it was noted that one of the factors affecting the
incentive for entry into market segments was the presence of
'donations' or other incentives demanded by schools. The ability
for some publishers to meet requests such as these might therefore
account for their position[11]. The two associations also
noted that with regard to switching between subjects, publishers
need to employ separate writers and supporting staff to work on new
subjects which require extensive training and market research.
Another reason for high market share might also be the quality of
the texts themselves. For example, through publishers aligning
themselves with sought after authors or otherwise having a higher
quality, in terms of academic excellence.
Barriers to entry
4.14 Entry into the publisher
market is affected by a number of factors. On the one hand there
are those factors that contribute directly to the fixed and
variable costs of operation, such as printing, distributing and
marketing the textbooks. On the other hand there is the ability to
satisfy government that the publisher's textbook is adequate as a
means of instruction for curriculum requirements, and therefore to
be placed on the Recommended Textbook List; and to satisfy
individual schools that their recommended textbook is best for that
school[12].
4.15 On the first point,
obtaining access to printing, distribution and marketing services
are not considered problematic. Comments were made to the Council
that publishers can reduce printing costs for example, by utilizing
printing houses in Mainland China. On the second point, any
academic or commercial publisher is free to develop textbooks or
learning materials for any subject or any level in local schools by
utilising their own in house creative capacity, or by seeking those
services from academics and other education specialists. Satisfying
government criteria, and those of schools have their own separate
problems as far as entry into the market is concerned.
Satisfying government criteria
4.16 Under the existing
regime, the CDI provides guidelines on different subject
syllabuses, then evaluates privately prepared textbooks for
suitability against the CDI syllabuses. The evaluation criteria
include coverage, content, sequence, exercises, language,
illustration and format of textbooks. To facilitate schools in
choosing quality textbooks, CDI maintains a set of Recommended
Textbook List for schools' reference. Schools are encouraged to
choose suitable textbooks from the Recommended Textbook List
although there is no requirement to do so[13] .
ED stated to the Council that it is common practice for the panel
of subject teachers within schools to provide reasons for selecting
certain textbooks, on the basis of suitability for their students.
It was also noted that most schools still choose textbooks from the
Recommended Textbook List.
4.17 To assist publishers in
preparing new syllabus textbooks, ED has improved the transparency
of its curriculum development by putting new syllabuses on the
website of the CDI, where information is updated at regular
intervals. As a result, all interested parties can easily obtain
new syllabuses and prepare their textbooks accordingly. This
arrangement now provides equal access to information for potential
and existing publishers in the market.
4.18 In the course of the
study, publishers complained to the Council that some government
policies affect their ability to create textbooks in time for
selection by schools, well before the beginning of the school year.
For example, the production of textbooks for schools' selection can
be subject to the efficiency or otherwise of ED in issuing its
requirements as to textbook subject matter etc. If ED does not give
sufficient time in setting out its requirements for publishers to
create the textbooks, and they are therefore unable to meet
deadlines for submission of textbooks, and for the textbook to be
included in the Recommended Textbook List, they could suffer
significant investment losses as a result. SeeAppendix 4 for a breakdown of the
production schedule of textbooks for the new syllabuses.
4.19 Publishers also
complained that in submitting textbooks for review, ED requires the
whole series of textbooks for a subject curriculum to be submitted
at the same time. Publishers argued that having to develop and
submit a whole series of textbooks at the beginning of their entry
means that resulting cost increases would eventually be passed on
in the price paid by students and their parents for textbooks.
Nevertheless, ED sees this requirement as important so that
consistency and continuity of a series is maintained and the
textbook coverage of that curriculum can be properly appraised.
Satisfying schools' criteria
4.20 As noted above, market
participant's other concerns are to satisfy the criteria that
schools have in the textbook selection process. Apart from the need
to satisfy the demands of the school in terms of a textbook's
educational function, there is also the issue of incentives. A
study undertaken by the Council in 1999 indicated that it was
common practice for publishers to provide complimentary teaching
aids and sponsorships, and make donations to influence school's
decisions on which textbook publisher to select. Examples given
were supplementary learning materials such as teacher manuals,
progress charts, cassette tapes, and computer software. There were
also other gifts to schools, or sponsorship of some extracurricular
activities and events. Apart from these incentives, it was noted
that there had been cases of schools requesting substantial
additional numbers of copies of teachers' desk copies of textbooks
and teaching manuals.
4.21 The Council's view of the
practice at the time was that
˙ the efficient operation of the
market may be impaired; and
˙ students and their parents may be
paying higher prices for textbooks than would otherwise be the
case.
4.22 The Council noted in its
report that the practice of offering sponsorships or incentives
could be viewed as a legitimate cost of marketing school textbooks,
because of the benefit ultimately derived by schools in educating
their students. In addition, the value of certain teaching aids
cannot be arbitrarily dismissed. Some of the teaching aids might
not be critical to the use of a textbook and could be substantiated
by teaching materials developed by teachers or schools. Ultimately
it is a matter for the school to decide whether the offer supports
the primary responsibility of schools, which is to educate students
to the best possible standard.
4.23 The Council's study made
a number of recommendations to address the concerns. A copy of the
recommendations can be found at Appendix 5. In summary, the Council
recommended that increasing transparency in the provision of
teaching aids and donations, and that their provision should be
within acceptable limits, would assist competing publishers to be
aware of the possible costs of doing business. This transparency
was also necessary in order that other interested parties within
society in general are aware of the extent of payments to schools
that could raise issues of conflict of interest. In addition, the
Council recommended that teaching aids (i.e. those that are not an
integral part of the textbook) should be invoiced separately to the
schools for their purchase, rather than be given to schools without
cost. The concern in this respect was that the provision of free
teaching aids added to the cost of textbooks borne by
students/parents.
4.24 From discussions with
publishers, it appears that the industry is still characterised by
market participants having to counter the offers made by their
competitors on incentives and donations when attempting to convince
schools to choose their textbooks. However, from discussions with
school councils, it appears that many schools are of the view that
teachers do not need to take the contents or quality of teaching
aids and supplementary materials into consideration when making a
choice on textbooks. Moreover, it was said that schools are willing
to buy teaching aids and teaching materials from publishers on a
needs basis, instead of obtaining them by donation.
History of entry
and exit
4.25 Annual price surveys have
been carried out by the Council, on a regular basis, for the last
24 years. The Council's observation over that period of time is
that the industry has had a significant history of entry and exit.
In their joint submission to the Council the Anglo-Chinese Textbook
Publishers Organisation and the Hong Kong Educational Publishers
Association noted that in recent years, the number of publishers in
the industry had remained rather constant and newcomers were
relatively few. The observation was made that some 'inactive'
publishers prefer to adopt a wait and see attitude. This suggests
the market in general is contestable and that entry would be
easy.
4.26 The entry of new players
is generally associated with the introduction of new subjects;
whereas exit is usually linked to a change in curriculum and
consolidation of subjects. For example, the newly created computer
science subject has attracted many new players into the publisher
market, Digital Vision Educational Publishing Company being one
prominent example. On the other hand, there are publishers losing
significant market share and having a diminishing role in the
market. Faced with the Government's implementation of Target
Oriented Curriculum some years ago, and the consolidation of
subjects, such as combining social science and health studies into
general studies, it was observed that some publishers were no
longer developing new textbooks. Examples are Evergreen
Publications Ltd, Good Earth Publishing Company Ltd, Sheep's
Publication (HK) Ltd. These publishers at present only supply
reprinted textbooks to the market.
Information
technology
4.27 It should also be
recognized that the transfer of knowledge no longer takes place
simply in paper format. The use of information technology is also
playing an important part in the education system with the result
that the Internet, and similar applications of information
technology could become closer substitutes or supplements to
textbooks.
4.28 The Government has taken
many initiatives in information technology in education, including
the provision of hardware, equipment, IT coordinators and technical
support services to schools. To enhance the use of information
technology in teaching and learning, the Government set up an
Information Technology Education Resource Centre in September 1998,
to provide a collection of resource materials, including
educational software, computer assisted learning packages and
useful websites for teaching and learning by subjects and
levels.
4.29 Software developers are
commissioned by the Government to develop educational software on
some selected topics for the use of schools. As the application of
information technology gains momentum, it can be expected that
their substitutability for paper textbooks will be correspondingly
higher.
Centralized
textbook publishing
4.30 In June 1999, rumours
were circulating that ED planned to author some textbooks in
co-operation with tertiary institutes. According to ED, the idea
was raised with a view to better control and improve the quality of
textbooks. However, there was neither a concrete plan nor a
feasibility study on the issue. The rumours did provoke strong
response from the publishing industry and academics. It was feared
that should the idea become a reality, ED would be overwhelmingly
influential and cause a bias in the schools' textbook selection
process. The concern was that ED's influence would distort the
competitive rivalry that characterises the present market where
commercial publishers compete amongst themselves on the basis of
their own attributes for the custom of schools. It was also
suspected that ED could not take a neutral stand towards sensitive
topics taught in schools (17 June 1999,Mingpao).
