The struggle for independentsThe bankruptcy of a book distributor sent shock waves through the indie publishing world, leaving small presses like McSweeney's struggling to survive. Can the Internet help keep them afloat?
By Priya Jain
Jun. 21, 2007 | McSweeney's is holding a garage sale of sorts. An e-mail sent out last week announced that, "for the next week or so," the publishing house founded by Dave Eggers would be selling its new books at 30 percent off and its backlist at 50 percent off. It is also, by way of eBay, auctioning off donations from its more well-known contributors: One could bid on an original Chris Ware comics page, a personal tour of "The Daily Show" guided by John Hodgman, or a "one-sentence apology to your boyfriend/girlfriend, written and signed by Miranda July."
But the excitement stirred by the McSweeney's e-mail had less to do with the booty on offer than with the alarming news that McSweeney's needed to raise money at all. For fans, and for those who follow book-trade news, the e-mail raised the possibility that the much-beloved publisher could become another casualty of a bankruptcy saga that has engulfed the independent-publishing world for six months.
The bankrupt company in question, Advanced Marketing Services, was the parent company of Publishers Group West, which distributed books for more than 130 independent book publishers. "For us the timing was particularly bad," says Eli Horowitz, the publisher of McSweeney's Books, which has lost about $130,000 in actual earnings as a result of the bankruptcy. "We had a new Nick Hornby book and [Dave Eggers'] 'What Is the What', which was our best seller of all time."
McSweeney's is far from the only publisher that's taken a hit: As a result of the bankruptcy, either directly or indirectly, small publishers Soft Skull, Hugh Lauter Levin and Inner Ocean have been acquired by larger publishers, and Carroll & Graf and Thunder's Mouth, two Avalon Publishing Group imprints, have folded. Tiny punk-rock publisher Re/Search puts out two titles a year, but this year it'll be lucky to release one; publisher V. Vale was planning to update and reissue a book on William S. Burroughs for its spring title, "but we didn't have the money even for the down payment on the printing cost," he says.
Not every publisher is hurting so deeply, but the bankruptcy has left the small-press world at least temporarily wounded, and has probably changed it for good. "This was the biggest bankruptcy that's ever happened in publishing history," says Munro Magruder, the associate publisher of the new-agey New World Library, which publishes Deepak Chopra's books. "And its implications are going to be felt for some time."
Horowitz says that part of the problem is the tenuous nature of the business. "For all of these publishers, it's a break-even business at best; you just try to stay afloat to do what you love to do. If we found ourselves making money we'd probably take on more ridiculous projects we'd want to do. It's not really a business that's equipped to absorb a big chunky loss."
The fact that AMS/PGW's financial troubles could affect publishers so dramatically also serves as a reminder that, despite indie publishing's do-it-yourself ethos, the one area in which it hasn't been able to escape the middleman is in distribution. You can't sell a book if no one knows where to find it, and in helping them overcome that problem, PGW had become indie publishers' most indispensable partner.
"The beauty of PGW was that it allowed the publishing and editorial people to focus on publishing and editorial and not worry about being a marketing and sales organization," says Charlie Winton, who started PGW 30 years ago and sold it to AMS in 2002. PGW also allowed bookstores to find independent book publishers easily and helped small presses put together large shipments they wouldn't have been able to handle on their own. And it helped turn books like the Earthworks Groups' "50 Simple Things You Can Do to Save the Earth" and Charles Frazier's "Cold Mountain" into bestsellers.
Ironically, PGW -- the largest American distributor of independent publishers -- was by all accounts having its best year ever, and the financial troubles of AMS, a corporate giant that mainly distributed to wholesalers like Costco and Sam's Club, brought it down. AMS filed for Chapter 11 on Dec. 29, a result of being unable to bounce back from SEC and FBI investigations into its advertising accounting practices -- which led to three executive indictments -- and a class-action suit on behalf of its shareholders. As Horowitz points out, "It wasn't the indie distributor; it was a big, old-fashioned corporation with accounting problems."
Or, as Soft Skull publisher Richard Nash puts it more bluntly, "The independents got fucked by the Enron of publishing." When AMS filed for bankruptcy, PGW's assets were frozen, which included book sales for the last quarter of 2006 that belonged to its clients. Instead of receiving that money on Jan. 1 as expected, publishers were left uncertain as to when -- or if -- they would get paid, an especially panicky situation considering that the sales in question covered the holiday season, the most profitable time of year for any publisher.
Then, at the end of February, the Perseus Book Group successfully took over the majority of PGW's accounts, rescuing PGW's employees and paying the publishers 70 percent of what they were owed. Although many publishers were quite happy that Perseus -- a group that, like PGW, is focused on independent publishing -- had taken over their accounts, they found themselves losing 30 percent of their sales for the fall of 2006.
Even for those publishers who could take the fourth-quarter hit, the new deal with Perseus meant shifting over to a different payment schedule, which will leave many publishers virtually penniless until August. "Over the very, very long run, it's no big deal," says Nash, "but in the short run it is, and the short run is how smaller independent publishers live."
Nash, who has been running Soft Skull since 1993, was one of the publishers who couldn't bank on the long run. "I remember seeing the new contract and thinking, This is going to be a pain, but not realizing the impact until putting numbers into a spreadsheet and [seeing that] I was going to be a quarter of a million in the hole by September and October," he says. "Around then I started talking to Charlie Winton." In May, Winton bought Soft Skull for his new publishing house, Winton, Shoemaker and Co., LLC. "For Soft Skull itself," says Nash, "we ended up in an incredibly lucky version of an incredibly unlucky situation in that no one knows how to operate an independent business profitably better than Charlie Winton."
Winton sold PGW to AMS in 2002 so that he could focus on his growing publishing house, Avalon Publishing Group. "People ask, 'Do you wish you had kept PGW?'," he says now. "At some point that question becomes personal, but the business had gotten so big that it was necessary for PGW to go to a new place." In a feat of serendipitous timing, Winton was in the process of selling Avalon to Perseus when AMS/PGW went bankrupt. "The PGW bankruptcy occurred just as we were going into final papers in the Avalon sale," he says, so "part of the opportunity was the fact that they were already in a deal mode with me." Winton, however, couldn't save Carroll & Graf and Thunder's Mouth, two Avalon imprints that Perseus axed after buying Avalon from Winton. "I've been on the record that I've been very disappointed with the outcome there," says Winton.
All of the publishers Salon spoke with were happy to be working with Perseus, which has kept the PGW sales and marketing team intact, thus making it easier for the publishers to transfer their businesses smoothly. The odd thing about this salve, however, is that it has forced independent publishing distribution to conglomerate like a big corporation. Perseus' distribution arm now owns both PGW and Consortium, another independent-press distributor, which means it distributes books for more than 300 publishers.
If the demise of one corporation, AMS, could hurt indie publishing so badly, what does it mean that the majority of the indie-publishing world now relies on Perseus? "Not necessarily by intention, but by outcome," says Nash, "in the Texas hold 'em of independent press distribution, American independent publishing had collectively placed its entire pot in Perseus. If Perseus goes under, who knows what will happen."
For those that survive, the AMS/PGW/Perseus story serves as a good reminder that independent publishers are best off when they're self-reliant. Felice Newman, the co-publisher of Cleis -- which specializes in sex and gender books from authors like Tristan Taormino and Violet Blue -- estimates that Cleis lost about $100,000 in the bankruptcy and takeover, and had to sell off discounted books on its Web site and "cut everything to the bone," she says. Thanks to the fact that Cleis also sells direct to sex-positive stores like Good Vibrations, and wholesale distributors, they were "able to go on without any distributor for a few months," says Newman. "Cleis has been able to bounce back completely -- which means if this hadn't happened, we would be flush now."
The best tool that indie publishers have is the Internet, of course. McSweeney's was inspired to hold its online sale by a similar, successful move that comics publisher Fantagraphics made a few years ago when its distributor filed for Chapter 11. Like McSweeney's, Cleis appealed directly to its readership and offered discounted books on its Web site. "We got this outpouring of love and support from our authors," says Newman. "We asked them to send people to buy direct from our Web site, and sales increased a lot." Munro Magruder says that New World Library, which acquired the smaller Inner Ocean as a result of the bankruptcy, was lucky in that "we're a larger publisher, we've been around for 30 years, we simply had the financial resources" to deal with the bankruptcy. But it too asked some of its authors to do an e-mail blast and urge readers to buy directly from the publisher.
In this, at least, independent publishing is retaining its intimate, DIY flavor. Horowitz, who says McSweeney's has received "thousands of orders in the last few days," quips, "I don't think Bertelsmann can send out an e-mail saying, 'Hey, guys, we need to sell off some books so we can put out some more.' In a way this feels like a whole town coming together, and to me, this is all of a piece with what we're about."