H.B. Fenn and the state of our industry

February 4, 2011 by · Leave a Comment 

The Canadian publishing industry was dealt another body blow yesterday, as the country’s largest book distributor, H.B. Fenn and Company, announced that it had filed a Notice of Intention to Make a Proposal under the provisions of Canada’s Bankruptcy and Insolvency Act. The filing allows the company 30 days’ breathing room to come up with a restructuring plan. If no viable plan is reached after this period, the company can apply for an extension with the courts. According to D.J. Miller, a lawyer quoted in The Globe and Mail, “The purpose of the proposal will be to compromise the existing debt and allow the company to move forward with less debt.” In theory, Miller said, this does not necessarily signal that the company will go bankrupt. In practice, according to Fenn publicist Lisa Winstanley, speaking to the National Post, “We’re ceasing operations effective immediately.”

Winstanley was laid off, along with the other 124 employees of the company, after a meeting at Fenn’s offices in Bolton, Ontario, yesterday morning. In a brief press release, founder and CEO Harold Fenn said that they “have worked extremely hard to build the Company and keep it going even under today’s adverse conditions.” The press release stated that Fenn “has encountered significant financial challenges due to the loss of distribution lines, shrinking margins and the significant shift to e-books, all of which have significantly reduced the Company’s revenues.”

Although many industry watchers reacted with shock to yesterday’s announcement, there were indications that all was not well with the company. Last September, Fenn shuttered the offices of Key Porter and laid off the bulk of its staff. Fenn became controlling shareholder in the Canadian-owned publishing firm when it bought out co-founder Anna Porter in 2004. At the time, Fenn claimed that despite the changes, it remained committed to Key Porter’s publishing program, which operated under the aegis of vice-president and publisher Jordan Fenn, Harold’s son. Just last month, Fenn announced that Key Porter would be suspending its publishing operations indefinitely.

The writing was on the wall, at least with the benefit of hindsight.

A number of people have compared Fenn’s downfall to that of General Distribution Services/Stoddart Publishing in 2002. While there are no doubt similarities, Fenn’s troubles do not signal a seismic shift for the domestic publishing industry. GDS represented a significant number of Canadian independent presses; by contrast, outside of its own publishing line, Fenn Publishing, and Key Porter, the only Canadian-owned publisher Fenn distributed is Whitecap Books. Bad news for Whitecap, but not a huge blow to the domestic industry as a whole.

At least, not in the short term. Looking into the future, things might appear murkier.

Fenn suffered financial pressure resulting in part from one the departure of one of its largest clients, the Hachette Book Group, which opened a domestic office in 2009 and took over all responsibility for publicizing and marketing their titles. They also moved fulfillment to their office in Indiana. In addition to depriving Fenn of one of its major revenue sources, commentators at the time suggested that Hachette’s move contravened Canadian foreign-ownership laws, but the Department of Canadian Heritage never investigated the matter. For those who insist that a certain amount of cultural protectionism is necessary to keep our indigenous book industry alive, allowing a major multinational to ship directly to Canadian bookstores was an ill omen, and it may get worse.

Fenn handled distribution for approximately 90 clients, by far the largest of which was the publishing behemoth Macmillan, which is now effectively without representation in Canada. Should Macmillan decide to follow Hachette’s route, it would mean yet another major multinational will have co-opted distribution and marketing responsibilities for its titles in Canada. This is dangerous, because it removes a significant revenue stream from Canadian distributors on the one hand, and on the other, cements the idea that multinational publishers should be allowed access to the Canadian market without providing a net benefit to Canada.

Quoted in Quill & Quire, publisher Kim McArthur questions the rationale for the government’s non-intervention:

“The Canadian publishing industry operates on razor thin margins at the best of times, and these are not the best of times,” McArthur said on Thursday. “Perhaps the Canadian government, the Minister of Heritage, and the Foreign Investment Review Agency will wake up to the fact that – by not saying a word as Hachette U.K. and U.S. quietly decamped and removed all of their sales and distribution to the U.S., and by not demanding that Hachette provide any net benefit to Canada at all – they have endangered the entire Canadian-owned industry.”

Carolyn Wood, president of the Association of Canadian Publishers, disagrees. Speaking about Fenn’s announcement yesterday, Wood told the Toronto Star, “This is an extreme example of what can happen with some of the challenges that the industry is facing right now, but I don’t think it’s the tip of the iceberg or the first domino or anything like that.” Wood takes the long view, which tends to see industry fluctuations as peaks and valleys over the course of decades, not months or even years. Indeed, we may be on the cusp of a renaissance in Canadian publishing: the accelerating encroachment of multinationals into the Canadian market could be the spur required for talented entrepreneurs to revivify domestic independent publishing.

Personally, I’d rather side with Wood than with McArthur. Yes, we are facing a time of narrow margins and scanty readership, but it was always thus. As Roy MacSkimming points out in his book on the domestic publishing industry, The Perilous Trade, in Canada “the margin of error is narrow.” However, he asserts, “A harsh environment breeds resourcefulness and cunning.” The difficulties faced by H.B. Fenn are not pleasant, but they need not signal the incipient downfall of the industry.