As the Advanced Marketing Services Chapter 11 Filing takes more twists and turns (many of them appear in a post below) it’s helpful to turn the clock back a few years and go through the accounting scandals, fraudulent claims, federal investigations, criminal charges, civil actions, guilty pleas and resignations that have dogged AMS for years – and are almost certainly the strongest mitigating factors leading to their bankruptcy filing. What emerges is a story of a company that preferred self-aggrandizement to truth, bold claims instead of realistic expectations and a ship that started sinking years ago until the wreckage became so decimated that the only real recourse, especially for suddenly-struggling independent publishers, is to splinter and start over.
Posts Tagged ‘Advanced Marketing Services’
As Advanced Marketing Services‘s Chapter 11 adventures continue (with the top 20 creditors slated to meet on January 12 to discuss what to do next) attention still rightfully swirls around the future of once-profitable Publishers Group West and the 150-odd independent publishers who are its clients. Last Friday, more than 70 publishers discussed their options in a conference call and expressed support for taking collective action to promote PGW publishers’ interests. As a result, there’s a movement afoot to create an Ad Hoc Committee of PGW Publishers which will petition the bankruptcy court to appoint a separate creditors committee composed of PGW publishers to represent their interests.
The must do so because, as Shelf Awareness reports, some of their worst fears were confirmed on Friday after legal consultations: Their books in PGW’s possession are considered on consignment and are the property of PGW. Reclamation rights are limited. In the same vein, it will be very difficult for publishers to get out of the contracts with PGW, which means that the last three months of earnings will remain in limbo for an indefinite period of time, with limited (if any) access to the funds.
No wonder a rogue blog called Radio PGW has popped up to provide some dark humor in dark times, signing off today’s flurry of posts with “from the killing fields of America’s publishing industry–good day and good luck.”
The New York Times finally picks up the Advanced Marketing Services bankruptcy story (what took so long?) and provides an overview of why this is big news in the publishing industry. “This is a huge disruption in this business,” said a publishing executive to Julie Bosman, who declined to be further identified because he was not authorized to speak for his company. “The publishers are going to end up taking a big loss.”
But Shelf Awareness reports some good news on the PGW front. Yesterday the distributor indicated that key accounts, including Amazon, Ingram, Barnes & Noble, Baker & Taylor , Bookazine, Books-A-Million, Borders, Costco and “myriad indies,” have expressed their support and will “treat their ordering and return patterns as business as usual.” In addition, PGW president Rich Freese wrote to publishers saying that the AMS bankruptcy court had approved payments to publishers for books that shipped or will ship on or after December 29. Checks for gross sales for the first week after December 29 should go out next Monday. PGW will send checks on a weekly basis for the time being.
The biggest irony of the AMS bankruptcy? PGW had a great 2006 as ynit sales rose 3% to 11.2 million, gross sales grew 2.2% to $187.3 million, net sales were up 5.5% to $138.6 million, and returns dropped 6.1% to slightly under 26%. “Last Thursday, PGW was having its best year ever. Now it’s teetering on the edge,” said one disbelieving publisher.
As Advanced Marketing Services‘ bankruptcy woes continue to send the publishing industry into a tizzy, interim measures are now in place, the San Diego Union-Tribune reports, thanks to approval by Bankruptcy Court Judge Christopher Sontchi for up to $75 million in loans the company said it needs to operate while in bankruptcy. Good news also came by way of Costco, one of AMS’s largest distribution customers, who told publishers that supply books to AMS should continue to do so. A Costco spokesperson told PW Daily‘s Jim Milliot that until further notice, publishers should operate “on a business as usual basis.” Costco, the spokesperson added, is monitoring events “on a day-to-day basis.” Most of the larger publishers that supply AMS indicated they will continue to do so, but on a COD basis.
Though AMS’s Chapter 11 filing is only for its US holdings, the Bookseller reports that UK publishers are eyeing the bankruptcy filing nervously, despite assurances that AMS’s UK operations will remain unaffected. “There are no changes in our operations, we are free to conduct business as normal and our suppliers are unaffected,” said Gareth Powell, managing director of UK distribution company Advanced Marketing, an AMS subsidiary. But one publisher added: “My understanding is that the UK is affected and we will lose money on UK sales-we are waiting to hear.”
Declaring bankruptcy isn’t exactly the best way to begin the new year, but that’s exactly what has happened as Advanced Marketing Services filed Chapter 11 papers on December 29. The full text filing is available via PW Daily, and looking through the list of its top creditors – scrolling past the instantly eye-popping numbers of $43 million owed to Random House and $26 million to Simon & Schuster, the real story begins: the plight of the independent publishers.
That’s because many of them – over 150, in fact – use Publishers Group West as their distributor. PGW, over 30 years old now, had been an independent distribution entity until AMS bought them in 2002. And even though PGW had been considered an autonomous unit within AMS, that only goes so far, especially when money owing is concerned. Because even though the volumes at play do not compare to what’s owed to the top corporate publishing companies, it’s all about the percentage of revenues – so companies like Avalon ($2.3 million), Cooks Illustrated ($1.5 million), Good Books ($970,000), McSweeney’s, North Atlantic Books, Milkweed and Soft Skull, to name a select few of PGW’s clients, are about to take a severe hit, what with expected revenues for the last three months – key months for all publishers, small or otherwise – suddenly disappearing.
Advanced Marketing Services, a leading provider of customized merchandising, wholesaling, distribution and publishing services for the book industry, announced in a statement today that it will file voluntarily for Chapter 11 bankruptcy. The Chapter 11 proceeding does not include the Company’s international subsidiaries in the United Kingdom, Mexico and Australia, and their operations will not be affected. The Company also announced that, in conjunction with the filing, it has entered into a loan agreement for $75 million in Debtor-in-Possession (DIP) financing from Wells Fargo. “This move will permit AMS, with its investment banker, to continue to pursue strategic alternatives,” said Gary M. Rautenstrauch, President and Chief Executive Officer. “Additionally, Chapter 11 protection will enable the Company to continue to conduct business in the normal course, make payments to vendors going forward and continue delivering quality service and products to customers.”