Bankruptcy Jolts Indie Publishers

Book Distributor Goes on the Block

Within the world of independent books, publishers are normally preoccupied this time of year with getting their new titles to distributors so distributors can include them in the annual catalogue they market to booksellers.

This year, however, has been different for more than 150 U.S. publishers whose lifeline to the bookstores, libraries, universities and specialty stores that buy their books is a distribution company that is caught up in a massive bankruptcy case.

Publishers Group West, which was founded in Berkeley, Calif., 30 years ago and carved out a niche publishing works by Beat Generation writers and books on rock music, was put on the block by its parent company, Advanced Marketing Services. Advanced Marketing, which filed for Chapter 11 bankruptcy protection in December, distributes mass-market books to large outlets such as Costco, Wal-Mart, Target and Barnes & Noble.

Embroiled in its parent company's woes, PGW, which has become the nation's largest distributor of independent publishers' books, stopped payments owed to clients from the last four months of 2006. PGW President Richard Freese said bankruptcy code required the company to do so.

Among the publishers caught up in the situation is McSweeney's, which published Dave Eggers's latest novel, "What is the What," just as Advanced Marketing's bankruptcy protection took effect.

"Those books went out, but [McSweeney's isn't] getting paid for them," said Richard Nash, publisher of the independent Soft Skull Press and a client of PGW. "They're owed $600,000."

"We're trying to craft a solution whereby they can move to a new distribution operation and continue on," Freese said.

The publishers pooled their money, chipping in $500 each to hire lawyers, and filed a $25 million claim against PGW in bankruptcy court.

A federal bankruptcy judge in Delaware said he would decide tomorrow which of two PGW competitors will take over the company. The first to put in a bid, New York-based Perseus Books Group, is the nation's second-largest independent book publisher. The other, which jumped in only last week, is the distributor owned by Lanham-based Rowman & Littlefield Publishing Group. Its marketing and delivery subsidiary, National Book Network, is the third-largest independent book distributor in the country.

Publishers who have contracts with PGW have been scrambling to ensure that they have the capital to cover their short-term expenses. It's a business where margins can be slim, said Albert Greco, professor of marketing at Fordham University and a consultant to the Institute for Publishing Research. There's little money for advances, and books are often printed in batches, he said, so sales receipts can cover the price of printing more.

"It affects authors, agents, printers, trucking companies," Greco said. "It's a big business, but it is very fragile. Margins are tight; the per-person hours of reading are on the decline. And it's really a price-sensitive product that struggles against all the other [media] formats. It hasn't been easy."

National Book Network historically has focused on nonfiction and academic and business titles. Until recently, one of its biggest clients was Washington-based Regnery Publishing, which published "Unfit for Command," a critical look at Sen. John F. Kerry, during the 2004 presidential campaign. Regnery, however, recently left NBN and signed with Perseus.