In Greek mythology, Perseus, the son of Zeus, killed Medusa, saved Andromeda and founded Mycenae, a great center of commerce and culture. In current American publishing, Perseus is no less dramatic a force, stepping into a situation made calamitous by a sudden bankruptcy—and hopes are high that next week, the first checks from Perseus will signal the end of a long siege of bad luck for some embattled publishers.

As of three months ago, the fates of more than 100 small houses, picked up by Perseus in the aftermath of the collapse of Advanced Marketing Services, have been in the hands of a company that now finds itself representing a good portion of noncorporate publishing in America. The lifeline for these houses is cash, and the disruptions of the past six months have taken a huge toll on their receivables, forcing a handful of houses into new ownership. The next quarter will be crucial, and many publishers are anxiously awaiting their first postsettlement checks, which Perseus CEO David Steinberger promises will be forthcoming on July 9.

A Long Dry Spell

When AMS filed for bankruptcy late last year, its PGW subsidiary, representing close to 200 presses, including such houses as Grove Atlantic, North Atlantic, Berrett-Koehler, McSweeney's and New World Library, were suddenly cash-starved. As the bankruptcy proceedings ground on, several suitors for the PGW distribution contracts emerged. First in line, with an offer of 70 cents to the dollar of monies owed the presses, was the Perseus Book Group.

A total of 124 of the PGW presses signed on with Perseus in late February, having endured a final quarter of '06 with no money and living on weekly checks from PGW for the first two months of '07. When Perseus was able to finalize agreements with the PGW imprints, it made a lump-sum payment, on March 1, of $13 million. The publishers, of course, took a hit (the 30% reduction in what would otherwise be due them), and they have not received any monies since then. On July 9, Perseus will make its first payment to the houses for March billings. For a few houses, the wait proved too long.

Just last week, longtime PGW member Hugh Lauter Levin was bought by Rizzoli. This followed upon Inner Ocean, which struggled mightily with cash-flow problems, being bought by New World Library, another PGW publisher. This week Perseus announced that Marlowe & Co. would be folded into an imprint of Da Capo (the autumn closings of Carroll & Graf and Thunder's Mouth were announced last month). And McSweeney's, which found itself short $130,000 due to accepting the 70 cents on the dollar deal, is deeply discounting its books on its Web site in an effort to make ends meet.

Perseus's Steinberger said that the July checks to all the former PGW clients will total somewhere between $5 million and $10 million. He said most publishers will be receiving checks, the only exceptions being those companies that are still running negative balances because of returns. He noted that many publishers were running negative when Perseus first took over distribution, but that most now are on the right side of the ledger. For publishers still running negative balances, Steinberger said Perseus will continue to carry them until they move onto the plus side. “We're doing everything we can to help,” Steinberger said about publishers' cash situation. Moving forward, publishers will be paid on a monthly basis. “As we go along, we're returning to more of a business-as-usual basis,” Steinberger said.

Looking Forward

Kim Wylie, who continues to oversee sales for the PGW stable of publishers, said that, although the bankruptcy period indeed produced “tons of heartbreak stories,” the combination of “smart, not conservative, cash control” and an “amazing amount of support from many accounts” helped lessen the blow. “I wouldn't say bookstore accounts were overbuying in the period between the bankruptcy and the Perseus offer, but they understood our plight and ordered aggressively on our good titles.” Wylie praised the professional acumen of many of the PGW publishers, saying, “These guys didn't just fall off a turnip truck.” As she looks at the winter lists ahead, she sees signs of prudence and caution, but is confident that the worst is over. “We are overbudget for this month,” she said, and the transition terms PGW offered at the BEA—in anticipation of the transition to warehousing in Jackson, Tenn., it offered discounts to beef up backlist orders to take retailers through the warehouse transition—produced strong ordering. Asked about the heartbreak stories, Wylie mentioned Ulysses Press. “They had their best quarter ever at the end of '06 and saw nothing of it till March; they had their first New York Times bestseller in's What Will Happen in Harry Potter 7. But that's why we paid people week-to-week during January and February. They've come through and will do fine, but it was tough on them, as on all of us. But it's all good now.”

A sampling of PGW houses now with Perseus shows a mix of anxiety and the characteristic indie-press optimism. Milkweed Editions managing editor Hilary Reeves confirmed that the bankruptcy period “definitely created a cash situation for us,” triggering spending cutbacks. Reeves had just returned from the BEA, where there was considerable excitement, she reports, for Matthew Eck's novel, The Farther Shore. With the return of Larry Watson's Montana 1948, first published by Milkweed to considerable acclaim 12 years ago and, for the past 10 years, a paperback on the S&S list, Reeves thinks they can weather the dry spell. “We have a good frontlist and, with Montana and Seth Kanter's Ordinary Wolves still going strong, we have a good source of strength.” Reeves was very bullish on the new combined PGW/Perseus sales force. “We are trying to be lean and aggressive. The bankruptcy was a one-time hit, and we don't want it to derail our forward momentum.”

Doug Seibold, president of Agate Press in Evanston, Ill., characterized the four months with no payments as a “cash drought,” but was optimistic. “We've tried to be abstemious regarding spending, but we are not in any real peril. Our sales have been strong. Once the revenue starts flowing again, we should be in great shape.” But Seibold is hoping “nothing else comes along to shake things up—then we're screwed.”

Richard Hunt at Clerisy Press, which recently merged with Menasha Ridge, said he is looking forward to the promised July 9 check. His printer, he said, has been “really good to us” during the period of reduced cash flow. With a royalty period ending June 30, he said he has been able to assure authors that royalties will be coming. As for staff, he said there have been no layoffs, and he hoped “there won't have to be.” He added, “No publisher is ever in a great position because of the cash-flow nature of the business, but we'll be able to breathe again in July.”

With reporting by Jim Milliot and Claire Kirch