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How To Sell A Publishing Company

I did some research and found that I've written a half dozen posts about buying or selling a publishing company, so I figure it's time to do something about it. The first problem I encountered in looking for another small publisher to buy is that there is no central directory listing publishing companies for sale. So I've decided to try to start one:

Publishing Business For Sale Listings

All I need now is listings from people trying to figure out how to sell a their published backlist. But listing a publishing company or assets for sale is one thing, and packaging titles such that they will be worth a good price as either a turnkey publishing operation or as a valuable addition to the catalog of another small press is another. Reminds me of the commercial with the catch line something like, "Would you buy a used truck from this man?"

The most important asset any publisher has is the intellectual property rights to the works they publish. In the case of a self publisher, establishing who owns the intellectual property rights isn't too difficult. It's either the publisher or the publisher's estate, if the author who established the business has passed away. But you can't assume that any other small publisher has dotted all the i's and crossed all the t's in their author contracts. I've even come across small publishers who boast that they don't use contracts at all. They do business on a hand-shake, the old fashioned way. Well, that business isn't going to be worth much to a potential buyer unless all the authors the original publisher shook hands with are willing to put pen to paper for the same deal.

The most general measure used to value sole proprietorships and other small businesses is probably copies of their tax returns. It could be that I'm in with a bad crowd, but I've known people to present fake tax returns to a bank when applying for a mortgage (and there are plenty of banks that are happy to take their word for it) so a series of tax returns that a publisher allegedly filed with the IRS is hardly proof positive of business activity. I'd want both the statements and the contact info for all of the vendors and major customers the publishing company deals with, along with the legal authority to confirm the account activity with them.

When the executor of an estate needs to figure out how to sell a publishing company or how to to estimate the value of a publisher's assets, they have limited resources beyond looking at past performance and talking to the business relations of the publisher. The real problem, especially with a small press, is that the majority of the sales activity was likely due directly to the efforts of the publisher who has gone on to that great printing press in the sky. This is especially true with self publishers whose public appearances and promotional activities are what drove the sales. It doesn't mean that the assets of the business fall to zero value on the publisher's demise, but they become a risky bet at anything other than a steep discount.

I don't expect an immediate burst of activity to populate the directory page I just set up, but I expect, over time, there will be a few listings and a marketplace may begin to form. Both buyers and sellers benefit from a thriving marketplace where values can be established by market forces rather than guesswork. I'm not going to rush around setting up a new domain with a catchy name for the time being, or establish automated listings. Anybody with a publishing company to sell can contact me directly, and I'll manually add a listing to the directory. If there's enough interest, that's when I'll get serious and establish a real auction site. It's the internet entrepreneur's dream. Start out giving a service away for free, establish value, and then start charging:-)

2 comments:

Jon said...

I moderate a mailing list for fans of Golden Age detective stories, and I hope that we might one day be able to resurrect some of the better GAD books via a subscription model and electronic distribution. As with many books from the early (and late!) 20th century, copyright holders are very difficult to trace, so a sensible approach would be to buy out a defunct publisher instead. I will be watching the list with interest. Many thanks for the helpful blog.

Jon.

Morris Rosenthal said...

Jon,

One of my favorite books when I was a kid was The Golden Age Of Science Fiction, edited by Asimov I think. Some of those stories may even have come from before the 1923 drop-dead date.

You might be interested in this presentation by Lawrence Lessing on youtube. It talks about Google's problems with rights of out-of-print books for their scanning project.

I don't happen to agree with part of what I think I hear Lessing saying, which sounds to me like, "Since it's hard to find many copyright owners of out-of-print books it's not necessary to even make an effort." But he certainly does a good job presenting his and point of view. Personally, I think the scan and index function should fall under Fair Use, but that's a different argument.

I'm 100% in favor of getting out-of-print books for which there is a demand back into print, I just believe that the copyright holders should be compensated. One work-around I don't hear anybody talking about would be for the government to establish a standard royalty rate for out-of-print works for the copyright holders can't be found through the copyright database and a standardized search regime or rights holder's listing.

The royalties could go into a trust fund where they would be held for the copyright holders' heirs. If they never come forward and the work goes into the public domain in the future, the money could go to libraries (though I suspect the government would find other uses:-)

Morris