Administration to Bail Out Book Biz
As the latest part of its effort to stabilize key sectors of the faltering U.S. economy, the Treasury Department this week is bailing out the book industry. Treasury Secretary Tim Geithner announced a series of far-reaching measures in a surprise press conference late last night.
Among other measures, the government is making significant cash infusions into Borders Group, Baker & Taylor, a range of independent bookstores and selected publishers and taking ownership positions in the affected companies.
Another key element of the effort is "the toxic asset dispersal program," which has both bookselling and publishing components. On the bookselling level, the program aims to deal primarily with piles of unsold books, whose sales the government will guarantee in an effort to keep them from being returned to publishers--and thus causing "catastrophic" backward bottlenecks in the supply chain and collapse of publishers' and wholesalers' balance sheets.
At the same time, the government aims to defuse publishers' main toxic assets by covering all advances over $1 million on yet-to-be-published books. It is, however, planning to seek reimbursement of many recent "questionable" advances, among them, former President George W. Bush's $7 million, Audrey Niffenegger's $5 million and US Airways Captain Chesley "Sully" Sullenberger's estimated $2.5 million-$3 million. By demanding the voluntary return of most of those advances, the Obama Administration also hopes to fend off bills introduced in the House and Senate to tax such advances at a rate of 90%.
Geithner noted that it is not just book industry employees who might be affected were the book industry allowed to fail. The professional lives of loggers, printers, shippers, truckers, UPS and FedEx drivers, creative writing teachers, book bloggers and used booksellers are also imperiled. Many millions of ordinary Americans who list their titles on Amazon and other Internet services are at risk. Members of the publishing industry itself would lose the extra cash they earn at the Strand and by selling online.
Reaction has been varied.
William Ackman, head of the hedge fund that is Borders's largest shareholder, has offered to take a 10% discount from the $30 million retention bonus he has demanded for his firm. "I'm taking this gracious step in the spirit of cooperation, the spirit of everyone being in this together," he said. "My generous offer to lower the payment is a sign, too, that we value this industry as deeply as any of the others we target. Who else cares enough to make the tough choices about which costs to cut and which people to fire?"
Len Riggio, chairman of Barnes & Noble, noted that he had contributed millions of dollars to the Democratic Party over the years, and was seeking a contribution return bailout, considering that his major competitors are now receiving government assistance.
Representatives of Castle Harlan, which owns Baker & Taylor, had no public comment, but sources close to the private equity fund said that it is investigating whether in this era of contracts that are no longer ironclad, it might be able to reverse its 2006 purchase of the wholesaler from Willis Stein & Partners.
Among programs that will be put into effect by American Borders and Baker, Taylor & Geithner and the other federal-private enterprise book partnerships:
- An effort to encourage retailers to remainder in place, which is being branded "Books: RIP."
- A stimulus element called Barack Book Bucks, consisting of electronic cards and coupons redeemable only at bookstores that will be distributed on Facebook, Twitter and Amazon, at Starbucks outlets, Apple and AT&T stores, movie theaters, shopping centers and warehouse clubs. "We're going where the people are," a Treasury Department spokesperson said.
- A special 50% "buy local tax"--a federal levy--on all online book sales.
- Internet-free Wednesdays, during which the government will shut down the Internet in an attempt simultaneously to boost reading, sales at bricks-and-mortar stores, social interaction and productivity in the American workplace.
At a press conference this morning, Treasury Secretary Tim Geithner said that while the federal government has a reluctance about owning banks and auto manufacturers, book-related ventures are a different matter. "I love books," he said. "I can't wait to visit the facilities, find a couple good titles and curl up in the corner for a nice afternoon's read. Isn't that what booksellers do?"
Geithner's enthusiasm for the book business is shared by President Obama. A red-hot author, the "book dude-in-chief" is doing his part to help the industry bailout effort by writing several new books that will appear this fall. This reverses a decision he made earlier in the year not to write any more books until after his third or fourth "economic emergency" term.
In a similar vein, the State Department is working with the U.K. Home Secretary to persuade through magic or trickery J.K. Rowling to continue the Harry Potter series as soon as superhumanly possible.
Likewise, reacting to requests by German authorities, who are concerned about the longterm viability of Bertelsmann/Random House, U.S. officials are crafting a program with the code name Novus Opus Dei that aims to get Dan Brown to finish his next book, which has repeatedly been postponed. If the MS does not arrive by specified dates, an escalating series of "persuasions" will be used for the author of The Da Vinci Code, such as requiring him to wear a hairshirt, having an editor go over his book before publication and deportation to Vatican City.
Also President Obama, an avid reader, is launching a book club with Oprah Winfrey. Called the Double O Book Club, the joint venture will feature titles from "distressed" publishers and be tweeted from the White House.--John Mutter