Phoenix Rising: Indie Publishing in the Aftermath of PGW’s Bankruptcy
You might be surprised to hear that several independent publishers are feeling optimistic these days. It’s a startling discovery, given that the last six months have been a veritable roller coaster ride for independent publishing -- one of those roller coasters that flip you upside down, around, forwards and backwards.
It began with the surprise announcement by distributor Publisher’s Group West (PGW) on December 29, 2006 that they were filing for bankruptcy, an announcement that thrust their more than 130 clients into a state of uncertainty. None of the publishers knew what would happen to their stock in the PGW warehouses, to their fourth-quarter earnings -- the most fruitful season of the bookselling year, or to their own futures as imprints. Richard Nash, Publisher of Soft Skull Press, describes his initial reaction as “shock and awe.”
The reason for PGW’s bankruptcy was due to financial mismanagement by their parent company, Advanced Marketing Services (AMS). The FBI and the Securities and Exchanges Commission had been investigating AMS for deliberately inflating their earnings during the 2001 -- 2003 fiscal year. In early December, three AMS executives were indicted and pleaded guilty, and two of them are currently serving jail time. But this was cold comfort to the independent publishers affected at the time.
“We had sold 60,000 copies of What Is the What,” explains Eli Horowitz, publisher of McSweeney’s. Because of the PGW pay system, publishers received payments for sold books every 90 days. When the bankruptcy was announced, no one knew what was to become of the hundreds of thousands of dollars worth of sales for the previous quarter. “There were a couple months of confusion. Everyone was wondering what would happen,” Horowitz remembers. Publishers were faced with the prospect of a total loss of revenue for all fourth-quarter sales, a deathblow for many.
Then, in what was to be one of the biggest deals in the history of independent publishing, Perseus swooped down and offered to buy PGW, paying 70 cents to the dollar of entitled revenue for fall sales of any publisher who signed a four-year contract with them.
Morgan Entrekin, president and publisher of Grove/Atlantic, recalls, “January and February were intense, because we were right at the center of the thing.” According to Entrekin, Perseus called him in early winter and offered him the deal, saying that if Grove signed on, Perseus would extend the offer to all other PGW clients. Entrekin signed in early January, and when Perseus offered the same conditions to the rest of the PGW clients, most jumped at the chance. Getting 70% of what was owed to them was far better -- it meant possible survival -- than nothing at all.
But what about the 30% loss on fall sales? That’s the dark cloud currently looming over indie publishers. It’s the loss that spawned McSweeney’s recent auction and book sale. It’s the loss that for Milkweed Editions, a non-profit publisher based in Minnesota, has meant taking their 2006 fourth-quarter check to squeak out payment for their spring books. It’s the loss that for Soft Skull Press would have meant filing for bankruptcy had it not been for Charlie Winton’s offer to buy the press and retain it as an imprint of Winton, Shoemaker, & Co.’s newly acquired Counterpoint.
In short, right now indie publishers’ belts are so tightened that they can hardly breathe. And what’s worse, the complicated transition from PGW’s accounting to Perseus’s, means that many imprints won’t likely see any money until August. “In our case,” says Soft Skull’s Richard Nash, “the 30% loss was really less significant than this returns accounting adjustment. That's why the story hits now: almost no one is getting a July check. Everyone's March sales were eaten by the deduction of March-June returns.”
For Nash, Winton, Shoemaker & Co.’s acquisition of Soft Skull loosens the belt significantly. Nash has been named Executive Editor for Counterpoint and will also retain the title of Editorial director of Soft Skull, acquiring titles for both imprints. How does he feel about the buyout?
Soft Skull’s financial situation prior to the PGW bankruptcy was precarious. Nash doesn’t mince words when he describes the reason that Soft Skull would’ve had to file for Chapter 7 bankruptcy if it hadn’t been for Charlie Winton: “It is true that there is an inherent fragility if you don’t have access to capital -- any literary independent that does not have outside funding is only ever two big fuck-ups from bankruptcy. But we were more fragile than most. There have been bankruptcies in indie publishing without distributors going under -- Context Books in 2003, iBooks in 2006. And if it were Consortium who went bankrupt, rather than PGW, there would have been a lot more presses going under.”
Despite the chaos and the acquisitions, the money down the tubes, and the inordinate amount of time, energy, and tears spent on this publishing bankruptcy disaster, a phoenix does seem to be emerging from the fire. Publishers both large and small, non-profit and for-profit, express excitement, hope, and relief about the future with Perseus. Morgan Entrekin of Grove/Atlantic fairly gushes over the new alliance: “We’ve now created the greatest option for independent publishing – and I’ve been in the independent publishing business for twenty-four years. We really have a better situation than I ever could have hoped for last fall. We keep all the PGW people and relationships, and the business is stable.”
Rhonda Hughes of Hawthorne books also expresses optimism about the deal: “We subscribe to the silver cloud theory because we are fortunate enough to still be working with our PGW team and the amazing PGW sales staff (only a few reps relocated).”
Emily Cook, marketing and publicity manager of Milkweed Editions, acknowledges her concern for some small presses; she worries that some will have to close their doors. But she says confidently, “We’re going to be OK… I personally feel that we came out with the best-case scenario.”
“We’re definitely not disappearing,” McSweeney’s Horowitz affirms. “We’re full steam ahead on current projects.” In a June 22 newsletter on the state of the McSweeney’s auction and book sale, the vibe was overwhelmingly positive. “Thank you, thank you, a thousand thank yous and more,” it begins. “You've made a very real difference: because of your incredible response, McSweeney's isn't going anywhere… All the support has been inspiring.”
Don’t get them wrong -- it’s been hell. David Wick of Silver Light Publications said the road “was rough and put us on an anxious edge”; Morgan Entrekin called the ordeal “stressful, disruptive, and upsetting”; and Richard Nash cites “80-hour work weeks, insomnia, nausea and vomiting (from anxiety mostly in the morning on the way into work, no lie).”
But from the ash of all that nastiness comes good news for many of these imprints. Several houses report record sales in the last fourth quarter and strong first-quarter sales this year, too. There’s McSweeney’s outstanding success from last fall, the 60,000 copies sold of Dave Eggers’s What Is the What. Rhonda Hughes details a recent feather in Hawthorne’s cap: “During the transition we had our best-seller ever deliver, a debut novel by Monica Drake called Clown Girl with an introduction by Chuck Palahniuk, and as of its pub date last February, we have sold in the neighborhood of 13,000 copies.” Grove/Atlantic had their best first quarter in years. “We had the cover of the New York Times Book Review two weeks in a row,” Entrekin marvels. “We can go a year without a cover.” When Nash describes the future of his imprints and of publishing in general, he sounds hopeful: “The radical changes that will be wrought by the majority of book revenues coming from electronic distribution, well, that'll change everything. And the dark years of the second half of the first decade of the first century of the millennium will be long forgot.”
So what can book lovers do to help? “Go buy books by these publishers,” says Entrekin. Easier said than done, as I discovered on a recent foray into a large New York City bookstore. When I asked an employee there how I might go about searching in their database for books by publisher, they were stumped. “We can’t even do that,” the employee told me, seemingly mystified by the request. When I mentioned this to Richard Nash, he replied, “Well, at the moment, it’s buying from the Web sites… but you’ve identified a bit of a flaw there that is worth rectifying.”
If you’d like to help any of these hard-hit imprints out, here is a link to PGW’s active client list, many of which have their Web sites posted next to their name. You can buy books off of most of the sites or simply gather a list of authors and titles featured on those sites, and then go ask for them by name at your local bookstore.If you don’t have time to peruse the sites, below is a list of recommendations from the PGW publishers that I cited in this article. Take your pick from a variety of fiction and nonfiction books and feel all warm and fuzzy that you’re helping out some hard-hit, quality imprints. As McSweeney’s Eli Horowitz says, “It’s a labor of love. We’re grateful to everyone who buys books.”