PGW Publisher-Clients Look Forward to Returning Focus to Books

Although last Friday's Delaware bankruptcy court decision approving the Perseus Books Group offer for Publishers Group West (PGW) answered the immediate concerns of many of the distributor's publisher-clients, it certainly is not the end of the story. Several small press publishers now under contract to Perseus recently spoke to BTW about the challenges of returning their focus to the task of publishing books while faced with a future that still holds some uncertainty. In the meantime, Perseus is seeking to close on the PGW deal as soon as possible, and National Book Network (NBN) is left disappointed by the bankruptcy court's ruling against its competing bid.

David Steinberger, president and CEO of Perseus Books Group, told BTW, "It was really gratifying to get this outcome. We worked really hard on this -- in the face of a pretty tough competitor who was offering more money, it was a great outcome. Many publishers told us that they cared about having the right partner -- that this was more important than the extra money."

As of Wednesday, February 21, Steinberger said, Perseus had signed 120 PGW publisher-clients to contracts. Publishers can continue to sign up until the deal closes.

Jed Lyons, NBN president, told BTW that the judge's ruling surprised and disappointed him. He added, however, "The one silver lining is that many publishers have indicated their desire to come to NBN."

Speaking for McSweeney's, a PGW client that will be moving over to Perseus, Eli Horowitz, managing editor and publisher, said, "I'm happy it is over mostly so we can get back to thinking about books."

Sasquatch Books also signed on with Perseus, said Publisher Gary Luke. "We are glad to be with Perseus," he said. "We all liked PGW and what they were doing. With the Perseus arrangement, with their purchase of Avalon and Grove/Atlantic, this looks to be the best possible recreation of what was PGW."

Although the Perseus deal pays publishers 70 cents on the dollar, the loss of the remaining 30 cents creates a financial void that these small publishers must now somehow fill.

To overcome that deficit, Luke said Sasquatch would just have to sell more books in 2007. "We had an incredibly strong season," he added. "That has been a positive factor for us."

"We're just going to be poor," McSweeney's Horowitz said. "All things considered this was a pretty good outcome. We plan to sell some books."

One key issue for publishers is the impact of transitioning from PGW's accounting system, where publishers are debited and paid monthly for returns and sales based on 90-day terms, to Perseus' more common accounting system, where publishers are debited for returns from the previous month, but paid monthly for sales that occurred 90 days ago.

Publishers who spoke to BTW stressed that they were well aware of the differences between PGW's and Perseus' accounting systems. Horowitz noted that Perseus reps were very "upfront about the issue," but he believes it could lead to a cash flow crunch for some publishers at about four months from the closing date of the PGW/Perseus deal.

Sasquatch's Luke said that that first payment would be a factor, but one that could not be avoided. "There is going to be a gap, but the fact is, if a PGW publisher had gone shopping for another distributor [other than Perseus], they'd still have to account for that gap" since it is common accounting practice. "It is what it is."

Perseus' Steinberger stressed that he is well aware of the accounting differences and the impact the transition might have on some publishers. He said his company did the best it could to strike a deal that was best for all parties. "We are concerned about it," he said. "That's why we tried to get as much money as we could, with the 70 percent payment upfront."

Going forward, Perseus will try to close the deal "as quickly as we can," Steinberger said, and stressed it would occur no later than March 15, when the deal expires. He explained that the plan is for PGW to continue to operate for five months as the transition takes place. "During the transitional period, the PGW organization, including staff and processes will remain essentially" in tact.

How many PGW staff will be brought over to Perseus on a permanent basis once the transition is complete is unclear. "Obviously, we will have to add a significant number of staff permanently for the additional work," Steinberger said. "We are enormously impressed with PGW employees, and we've said we expect we are going to offer positions to the majority of selling, marketing, and client service staff. We are working as fast as possible to get specifics."

For McSweeney's, one of the most positive aspects of the deal is that Perseus has agreed to donate $79,000 to the Valentino Achak Deng foundation for Sudanese aid. The figure represents "the full amount that the foundation lost in the PGW bankruptcy," Horowitz said, though he stressed that McSweeney's loss has not changed.

"This is a very important cause," Steinberger said. "And we're very pleased to help." --David Grogan