Today in AMS: S&S Bid Rejected, Economies of Scale

By Carmen Comment

Buried at the end of Julie Bosman‘s New York Times piece about Perseus‘s offer to acquire the distribution contracts of Publishers Group West clients is that the federal bankruptcy court in Delaware rejected a bid by Simon & Schuster to reclaim books in Advanced Marketing Services‘ inventory that could be valued at $5 million. “We made an aggressive move to reclaim the books that were in their possession during the 45-day period before they filed Chapter 11,” said Simon & Schuster VP of marketing Adam Rothberg.

And the San Diego Union-Tribune reports that a Jan. 31 hearing has been scheduled on AMS proposal to establish procedures to sell all or part of the company or to find an investor willing to put up new capital or refinance its debt.

In other news, PW’s Sara Nelson has finally woken up to the ramifications of the AMS bankruptcy, but only after she was pulled out of her “edit-centric” viewpoint to look at this distinctly “not sexy” aspect of the publishing industry. But when she tries to explain how distribution consolidation may still benefit independent publishers because of “economy of scale”, which Nelson says “may mean that distribution can become the well-oiled, profitable machine it ought to be,” she’s given a quick education in the comments section.

“Whether you and your lunch companions realize it, extracting efficiencies in the supply chain and and the competitive (and increasingly efficient) distribution landscape have been one of the major developments of the past five years, and one of the major drivers of margins for publishers,” points out one unnamed distributor. And Soft Skull‘s Richard Nash points out that until now, PGW’s “economy of scale” was just fine, to the tune of $150 million in annual net sales. And as with AMS and potentially now with Perseus, “here we have two instances of a company simply because of access to capital, acquiring two strong companies with suitable economies of scale and dismantling the carefully constructed infrastructure that permitted those economies of scale,” Nash states.