A New Home For Independent Publishers

Many independent U.S. book publishers breathed a sigh of relief after a Delaware bankruptcy court ruled in favor of the Perseus Books Group taking control of the distribution contracts for more than 120 clients of the now-defunct Publishers Group West (PGW).

The New York-based Perseus Books offered to pay
70 cents for every dollar of pre-bankruptcy claims owed to publishers who were distributed under PGW, a Berkeley, Calif.-based division of Advanced Marketing Services (AMS). The bid to help bail out AMS from a pile of debt claims was approved by Judge Christopher Sontchi Feb. 19.

Perseus President David Steinberger says the company began shipping books for the former PGW clients on March 1. The companies started to receive payments on the same day.

“Our mission as an organization is to enable independent publishers to succeed,” he says. “Whether those publishers are publishers that we own, like Basic Books, or whether they’re joint-venture partners, like Public Affairs, or independent clients, like Harvard Business School Press. … So when PGW clients ended up caught in this AMS bankruptcy, it wasn’t in the original plan of ours to look at an acquisition in this area, but we began to think, ‘Is there some opportunity here for us to step in and maybe provide a solution. ...’”

PGW’s parent company, the San Diego-based AMS, declared bankruptcy on Dec. 29, 2006, leaving its publishers without fourth-quarter payments or a means of distributing titles. Steinberger says the company started working on a deal almost immediately after AMS’s bankruptcy announcement came.

“We started having conversations the day it happened, internally,” he says. “We began to talk … about whether there was some way we could work together to come up with a solution here. ...”

In early January, Perseus began discussions with AMS.

“We came up with a pretty unorthodox design, not to buy PGW, but to pay debts that PGW owed to PGW clients that had been cut off by the bankruptcy,” he says. “We would pay a portion of those debts, and in exchange we asked PGW clients to agree to have their agreements assigned to us. It relieved a huge claim from the bankrupted company.”