Another publisher bankruptcy. I saw this last Friday in this post on the Passive Voice blog: Houghton Mifflin Harcourt Enters Bankruptcy Process.
The article blames the bankruptcy on debt from leveraged buyouts in 2006 and 2007. It seems they were in trouble almost right away, having temporarily stopped acquiring new books in 2008. No mention of e-books or self-publishing playing a role.
This also seems a bit unusual in that a Chapter 11 deal was pre-negotiated with over 70% of senior lenders and bondholders (those with first dibs on assets in a liquidation) to convert their $3.1B debt to equity. I suspect the “negotiation” was along the lines of “your only alternative is to take five cents on the dollar in a liquidation” (they have $135M cash on hand, 4.4% of their debt; not sure of other assets but the lawyers and accountants would chew up a large chunk).
No word on what their current shareholders think of this massive dilution in their investment. But again, it’s likely a case of “you can take a haircut or a beheading.”
They assured their employees that there will be no layoffs, and day-to-day business will continue as usual. But the impact on authors under contract to them is not mentioned (see my previous post on this). Will they continue to get paid? Will their outstanding amounts be converted to equity as part of the debt deal? Or will they have to negotiate their own deal as a class of creditors?
One surprising bit of innovation for a traditional publisher is a deal to license books from Amazon’s new publishing unit. They sold their soul to the devil? Desperate times…
This deal could provide an interesting new avenue for successful self-published writers to get picked up by Amazon (who offer a very reasonable 50% royalties, and take over editing, covers, and promotion), and then have access to bookstores through Houghton Mifflin Harcourt (if Houghton doesn’t get blackballed for making this deal). Also, since Houghton is big in educational publishing, it potentially opens up a market for indie educational books.
I’ll be interested to see how this turns out. What do you think?
- B&N and Houghton Mifflin Harcourt to sell Nooks loaded with content to schools (teleread.com)
- In their words: James O’Neill, Senior VP, marketing strategy, Houghton Mifflin Harcourt (chicagoreader.com)
- Progress Academy’s Web-Based Curriculum Now Features Houghton Mifflin Harcourt Interactive Textbooks (prweb.com)
- How Truthy Is David Sedaris?; Defending the NYPL’s Renovations (theatlanticwire.com)
- MBS Direct Teams with Leading K-12 Publisher to Expand E-Book Catalog (teleread.com)
- Houghton Mifflin Earobics: Brain Training Product Review Survey (sharpbrains.com)