April 17th, 2015 | Current Affairs | 50 Comments
I’ve had a number of people write to ask about the bankruptcy of Family Christian Stores, and specifically if it will affect writers who publish in CBA. A bit of background: FCS has 266 stores, did $230M in business last year, and were the largest purveyor of religious books, bibles, t-shirts, and inspirational ephemera in the country. They were originally part of Zondervan, but were bought out by Richard Jackson (remember that name — it will come up often) and his partners a few years ago. Jackson and his buddies said they were going to use the stores to sell products, make money, and use the profits to fund other ministries around the world. Certainly a noble idea. The only problem? They didn’t know what they were doing.
Sales dropped. Bookselling turned into a tough business. Profits were slim. So a few weeks ago, the chain filed for Chapter 11, a reorganization bankruptcy. They have huge debts — close to $127M. They owe $7M to HarperCollins alone, largely for bibles, which is an expensive (and lucrative) business. They owe another $2M to Tyndale, and a half million each to Baker, B&H, Harvest House, Crossway, Barbour, Presbyterian & Reformed, etc. Their debts to publishers total roughly $14M. They owe greeting card and gift companies about another $13M.
In the world of Wall Street finance, that may not look like much. (Borders had nearly a thousand stores, and owed publishers much more.) But in the world of Christian publishing, this is huge. Imagine you’re Harvest House — a very well run, medium-sized publishing house that is privately owned, and trying to compete with the Random Houses and Simon & Schusters of the world. If a giant corporation is suddenly told they won’t be paid a half million dollars, you can bet they won’t be happy, but they’ll weather the storm because they have the financial resources to get through the rough patches. But Harvest House? A half million dollar hit is awfully painful. It can mean mean people lose their jobs (and no, I don’t have any insider information on Harvest House — I’m simply using them as an example). At a small house like P&R, a half million dollar loss can spell disaster.
What does that mean for authors? It certainly means fewer places to sell your books, and possibly fewer companies to approach with your manuscript. In the immediate, it means that all those books your publisher sent to the various Family Christian Stores won’t be making you any money, since FCS won’t be paying your publisher for them, and they’ll likely have to write them off. (The total debt for “unsecured receivables,” which means books and stuff they took in but haven’t paid for, is about $40M — the rest of the debts are in leases and equipment, presumably. So they have $40M in product that likely won’t be paid for.)
Worse, FCS began offering consignment sales a couple years ago. It worked this way: If you have, say, a jewelry company that you run out of your garage, they’ll take a bunch of your jewelry and put it on display in their stores, but will only pay you if the jewelry actually sells. So it’s on consignment, and you’re trusting FCS to display and sell your products, then track and pay you the money. But if they suddenly shut down, you get nothing — and you don’t get your product back, either. FCS got into consignments in a big way, since they were a means of making money with nothing down. I’ve seen reports that they had nearly $20M in consignment products (and, as usual with a Chapter 11 bankruptcy, the numbers can sometimes be convoluted)… which means little mom-and-pop operations who sent them products are just out of luck. THAT will shut down small businesses, since you can bet when it’s time to divvy up the proceeds, the big banks will get paid first and there won’t be anything left over by the time it gets to the small creditors.
One of the real concerns here is that Family Christian Stores apparently was still ordering more books and taking in new consignments, even when they had to have known they were not going to be able to pay for them. That’s the point where people stop wondering if they were done in by a difficult retail environment, and start wondering if they were simply unethical, or even possibly corrupt.
So Richard Jackson, the guy who bought the company a few years ago? He’s put together another company, and wants to buy FCS. (You read that right — the guy who owns it wants to sell it to himself.) But, of course, he only wants to pay a fraction of what is owed — $28M in cash, and he’ll assume the leases. And who is in line to get paid? Um… one of the creditors is Richard Jackson. Yes. The guy who owns the company, and who wants to buy the company from himself, also wants to be a creditor, so he gets paid before others. What a guy. I’m sure he’ll use the money to fund other great ministries!
Family Christian Stores has come out with a statement that says all their stores will re-open and all their employees will be retained. This is what public relations experts refer to as “spin,” and what the rest of us call a total, stinking pile of bull-pucky. I don’t know what Richard and his friends are smoking, but there’s no way on God’s green earth they keep all the stores open, and even their employees have laughed off the claim that everyone will keep their jobs. And what do you think the folks at Harvest House are going to say when Richard and Buddies call them to order more books?
So, yeah… this is a disaster. For readers, for publishers, and for authors working in CBA.
UPDATE: So Richard Jackson and his friends have indeed dropped their plan to buy out their own company and therefore cheat publishers out of millions of dollars. They faced a lot of criticism as word got out about their plans, and this week a hearing was held that had the current owners, publishers, and lawyers representing the various businesses negotiating for a settlement. A judge set a May 21 auction date for Family Christian Stores, the winning bid will be announced the next day, and the sale must close by early June. What does this mean? It means that either some companies will get together, buy FCS out, and keep some of the stores open, or everything will go into the hands of a wholesaler that will slash prices and sell all the stock, displays, and fixtures in order to close them out. Either way, there’s going to be far fewer selling opportunities for CBA authors.