AMS Spin Cycle

The Gray Lady finally gets on the case, with reporter Julie Bosman speaking to an unnamed publishing executive. “The publishers are going to end up taking a huge loss,” says this executive. Also quoted in the article is Grove/Atlantic publisher Morgan Entrekin, who simply says, “It’s a mess” and who is reported as now being in something of a mad scramble. Entrekin has nothing more to say beyond these three words.

Okay, so the publishers aren’t talking (or at least going on the record with journalists). But I must quibble with this publishing executive’s asinine suggestion that “authors and readers were unlikely to be affected by the bankruptcy filing.” With AMS currently incapable of paying off their creditors, with a pennies-on-the-dollar turnaround at best, and with current AMS stock now being extricated from warehouses, it’s very likely you won’t be seeing independent books in stores anytime soon, until the publishers left in the lurch work out alternative distribution methods or guaranteed ways to earn current revenue. So readers looking for something different from, say, Laurell K. Hamilton and Mitch Albom are going to start seeing a difference.

And let’s consider the publishers, who are now in the process of bearing the financial brunt in ways that may very well go unreported. With reduced revenue coming in, it is unlikely that the affected publishers are going to be paying out advances to authors as they struggle to meet their operating expenses. Authors who are writing quirky or experimental books that don’t sell as well as the blockbusters often must go to independent presses to get their work published. But if the independent presses are hurting, then advances and acquiring new titles may be the least of the indie publishers’ cost concerns as this mess gets sorted out.

This morning, Publishers Weekly reported grimmer news, noting that the bankruptcy court is now in the process of granting the publishers access to the inventory. At the moment, access is now at the discretion of Judge Sontchi. A creditors committee meeting is now set for January 12, but with the creditors committee being comprised of the 20 largest creditors (i.e., the big publishers), it remains to be seen whether the precarious financial condition of indie presses will be taken into account by the committee.

Heidi MacDonald observes this morning that it remains unknown what distribution percentage Dark Horse had with PGW.

Sarah’s also investigating this, discovering this article that suggests financial inconsistencies on PGW’s part.

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3 Comments

  1. I think this is a very important story. Here are a couple of questions I’d love to hear an answer to, if you happen to know:

    — is there a historical precedent for this? have publishers been through this type of crisis before?

    — what portion of AMS’s business did PGW represent? Was AMS’s failure related to financial problems at PGW, or is PGW (and its creditors) just getting screwed because of AMS’s problems?

    Just thought I’d ask, Ed, in case you have the answers …

  2. I’m no expert, but I can answer, in general terms, your questions:

    – “Is there a historical precedent for this? Have publishers been through this type of crisis before?”

    Sure. There have been other times when book distributors have gone bankrupt, causing all sorts of problems for their client publishers.

    Among the most prominent example (and one that’s often cited in some discussions about PGW) is the 2002 bankruptcy of the LPC Group which distributed many independent publishers.

    Also, a Canadian distributor General Publishing declared bankruptcy in 2002, which caused similar panic for its distributees.

    Indeed, I think it fair to say that many of the reactions to the AMS/PGW bankruptcy are colored by people’s recollection of the LPC bankruptcy.

    – “What portion of AMS’s business did PGW represent?”

    Keeping in mind that AMS has had to restate earnings and financial statements several times over the years (and has done so with varying degrees of timeliness) and that any figures the genera public may be able to dig up might be of dubious accuracy, but:

    According to a March 2006 release (here: http://tinyurl.com/ylvulc ), AMS estimated 2005’s net sales at somewhere between $915 and $920 million.

    According to the Shelf-Awareness article at http://tinyurl.com/wc2y5 , PGW had actually had a very good 2006, reporting that 2006 net sales were up 5.5% to $138.6 million. If I’m doing the math right, that implies PGW’s net sales in 2005 to be a bit over $131 million.

    And if all that’s right, that’d lead one to believe that PGW represented about 15% of AMS’s overall business in 2005.

    Obviously, those numbers may be flawed, and “net sales” doesn’t give a compete picture of a company’s overall financial status, but these numbers might give a general sense of the relative size of PGW in relation to its overall parent company.

  3. PGW was never more than a hobby to the AMS executives – a desperate attempt to diversify their way out of a shrinking business with already razor-thin margins.

    NOBODY in San Diego had a remote clue how to manage PGW. They NEVER integrated the two companies – corporate culture clash from day one.

    All you “indies” are just gravel in the bottom of the publishing fishtank. AMS couldn’t give a rat’s ass about some tiny publisher or author. They were deep in business with all the heavyweights. Quit all your whining – you wanna play with the big boys, you take your chances.

    — a former AMS associate.

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