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Perils of the book biz

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No one epitomized the successes and sheer will to beat the odds of the Canadian publishing business more than Jack McClelland. I thought about Jack last week when I was notified by email of the serious financial problems of my current publisher, Douglas & McIntyre. The company is more than $6 million in debt and has had to seek creditor protection under Canada's Bankruptcy and Insolvency Act.

D&M was the brainchild of James Douglas and Scott McIntyre; both had worked for Jack McClelland. This year, it celebrated its 40th anniversary. Based in Vancouver, the company started out in the early 1970s as a small operation and gradually grew into a successful medium-sized publisher. It has been noted for its award-winning non-fiction titles like Charlotte Gill's Eating Dirt, an unlikely bestseller and multi-book prize winner about tree-planting in B.C.

From my own personal experience, the company treats its authors exceptionally well, knows how to produce and promote books and is first-rate in every respect.

Since 2007, the company has been owned by Mark Scott, formerly with Scotia Capital, and his partners, Rod Senft and David Rowntree, who established Tri Pacific Capital. Until this past February, McIntyre was CEO of the company, while Douglas gave up his interests some years ago.

The book business is challenging in Canada, as McClelland well knew. In 1946, at the age of 24, he began working for McClelland & Stewart, the publishing house founded in 1919 by his father, John, and his partner George Stewart. In those days, the firm, like its handful of competitors, primarily functioned as a distributor of books published in the United States and Britain.

To Jack, this business model was unacceptable. Once he assumed control of the company in the early 1950s, he discovered and nurtured a stable of talented Canadian writers -- the long list eventually included Pierre Berton, Farley Mowat, Margaret Laurence, Peter C. Newman and Margaret Atwood -- and was arguably the most significant figure in the establishment of the Canadian book-publishing industry.

Yet for all his love and devotion to writers and books, McClelland's life story, ably recounted in James King's 1999 biography of him, is equally the chronicle of one financial crisis after another.

Quite simply, despite a steady stream of bestsellers, M&S still published too many books, some of which should never have been released, and was constantly in debt.

The company faced severe competition from foreign-owned publishing conglomerates with much deeper pockets and competed in a dwindling number of book stores for shelf space in a market flooded with American and British books. (Jack would hardly be surprised that for the week ending Oct. 14, 2012, according to Booknet Canada, the top five fiction and non-fiction books are all, with the exception of Neil Young's memoirs, the works of U.S. or U.K. authors -- including the remarkably successful but terribly written soft-porn Fifty Shades of Grey series.)

"Economically speaking," writes Roy MacSkimming in his aptly titled 2003 book on the Canadian publishing industry, The Perilous Trade, "publishing books in Canada doesn't make a lot of sense. It's a high-risk, low-margin business conducted on the fringes of empire."

Or, as author Morley Callaghan observed, Canada is "a country that is no publisher's paradise."

In the '70s, M&S was rescued by the Ontario Development Corporation (an agency of the Ontario government), but eventually McClelland was forced to sell the company to businessman Avie Bennett.

In turn, Bennett, who faced the same dire economic challenges as McClelland, donated 75 per cent of the company to the University of Toronto and sold the balance to Random House, itself owned by the mammoth German media company Bertelsmann.

This past year, M&S became wholly owned by Random House and now operates as one of its many divisions.

After he sold his company in 1986, Jack McClelland, who died in 2004, spent a few years working as a literary agent. I was fortunate enough to be one of his clients.

When I first met with him at his Avenue Road office in Toronto, he was just as I expected. He was tall with long white flowing hair. He wore a sharp blazer, complemented by a silk cravat. A raconteur, he was charming, friendly and funny.

He assured me he would sell the book I was writing at the time about politics and the media for lots of money. That did not quite come to pass. Truth was that Jack hated being an agent, as King points out in his biography. When he shut his office down, he kindly recommended me to another agency, which still represents me. And while he could not deliver on his various promises, on every occasion that we'd meet or go to lunch, I remember feeling that I was in the presence of greatness.

The precise details that caused D&M's current problems are not public. Yet it is no doubt connected to the same reasons -- trying to compete on an even footing with the big three, Random House, HarperCollins and Penguin, all foreign-owned by huge media corporations -- that did in an independent M&S and Doubleday Canada, and killed Key Porter, Stoddart (my first personal experience in dealing with a bankrupt publisher), Lester & Orpen Dennys and before that, Ryerson Press and Clarke, Irwin.

News that the big three are about to become the big two with the announced merger of Random House and Penguin will further hamper and restrict the writing and publishing of books in Canada.

The demise of Stoddart and its subsidiary General Distribution Services was particularly telling. The head of the company, Jack Stoddart, had debts of $45 million by the time of his bankruptcy in 2002.

Stoddart and the industry's real problems, however, started in 1994 with the establishment of Chapters by Larry Stevenson and his drive to monopolize the book-selling business. Chapters soon bought out most of its competitors or drove others out of business with its predatory pricing and large box stores, complete with Starbucks and comfy chairs.

Through its wholesale distribution arm, Pegasus, Stephenson demanded discounted terms from publishers, placed larger orders, took forever to pay or returned thousands of books.

"Publishers realized," explains MacSkimming, "Stephenson hadn't been buying their books so much as borrowing them, fully returnable, to wallpaper his edifice complex."

Besides Amazon, which pioneered the online book business, Chapters' one real competitor was Indigo, founded in 1996 by Heather Reisman and her husband, Gerry Schwartz of the Onex Corporation. In 2000, Indigo took over Chapters, thereby establishing what amounts to a near monopoly in the Canadian book business.

McNally Robinson's survival and success, albeit with financial problems of its own, is one of the few exceptions to challenging Indigo's control of the retail market.

It is not all doom and gloom, of course. Despite D&M's difficulties, there are still more than 100 successful independent Canadian publishers such as Winnipeg's Turnstone Press and the House of Anansi Press in Toronto, as well as academic publishers, which are thriving and producing fine books each season.

"The death of everything is greatly exaggerated, but this is a different time," prophetically commented D&M's McIntyre this past March on the CBC Radio show Sunday Edition, discussing the future of Canadian publishing. "But it's still about the writers and their books, and we can't forget that." Waiting to learn the fate of my current book project -- and there are always options -- I will go with that sentiment.

Now & Then is a column in which historian Allan Levine puts the events of today in historical context. His most recent book, King: William Lyon Mackenzie King: A Life Guided by the Hand of Destiny, is now available in paperback.

Republished from the Winnipeg Free Press print edition November 3, 2012 J1

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