Jack Stoddart doesn't have many friends in the publishing industry these days. Once the chief executive of the largest publishing and distribution conglomerate in the country, he is now out of work, out of credit and, seemingly, out of luck.
The fallout from his company's demise has swept through the vulnerable publishing industry like a tornado through a shanty town. As devastated publishers, authors and booksellers scramble to salvage what they can from the wreckage, their bitterness and rage toward Stoddart is like a virus growing ever more virulent.
"He made a lot of enemies out there with the way he treated wholesalers and a lot of his customers," says a 30-year veteran of the business. "When you are down and you need friends and all you have made is enemies, then you aren't going to get any help."
Last week, General Publishing Co. Ltd. and its book distribution arm, General Distribution Services Ltd. (GDS), gave up the fight and filed for bankruptcy in an Ontario court.
The problem for the hundreds of writers caught up in the GDS mess is not so much unpaid royalties, but lost opportunities in terms of projects postponed or cancelled and books not available for sale in the marketplace. Poets Christian Bök ( Eunoia) and Karen Solie ( Short Haul Engine), for example, were both shortlisted for the Canadian portion of the $40,000 Griffin Poetry Prize this year. Suddenly, they were hot properties, but their publishers (Coach House Press and Brick Books) couldn't meet the public demand for their poetry because the books were stuck in the GDS warehouse. That is a loss that can't be counted in sales figures or royalty statements. But it is a loss nonetheless.
Jack Stoddart's dream of building a successful Canadian-owned and operated publishing company in his own image, outside of the shadow of his powerful father, also came crashing down.
The fall of the house of Stoddart is more than the end of a company that could count David Suzuki, M.T. Kelly, the late Carole Corbeil and Senator Keith Davey among its stable of authors. It is the public humiliation of a man who is a member of the Order of Canada, a three-term president of the Association of Canadian Publishers (ACP), and the head of a company that was voted publisher of the year in 1994 and 1996 and distributor of the year in 1998 by Canadian booksellers.
The last couple of years have been hard on Stoddart, who turned 58 last Sunday, as first his marriage and then his company fell apart. After suggesting and then cancelling an interview in his offices, Stoddart agreed to meet earlier this month for a mid-afternoon conversation at Le Select Bistro on Queen Street West in Toronto. He arrived late, dressed in a beige shirt and trousers and wearing his customary oversize black sunglasses. This is not a guy who talks in sound bites, but his distress and his earnestness, although wearing, seem sincere.
After ordering a vodka and tonic he sat across from me for more than two hours and explained in numbing detail why the publishing industry is so marginal in this country and complained that the government had not given him the kinds of tax and foreign ownership breaks it had offered the publishing house McClelland & Stewart, under its owners Jack McClelland and then Avie Bennett.
To hear Stoddart tell it, things would have been very different had he not been prevented by foreign ownership restrictions from forming a partnership with Ingram Book Group, whereby the mammoth U.S. book wholesaler would have had a 50.1 per cent share of General's distribution business.
And even after his company went sour, Stoddart says he could have salvaged something, if only the government had allowed him to sell Stoddart, his publishing imprint, to an American buyer; or, rescued GDS and turned it into a co-op in which Canadian publishers would have had 49-per-cent ownership with the rest going to an outside investor.
Jack Stoddart was never known as an innovative publisher, but he was a dedicated nationalist who fervently believed that an indigenous publishing industry could be built north of the 49th parallel. Writer Stevie Cameron says admiringly: "What I liked about Jack Stoddart was that he and his wonderful team of people supported Canadian books on subjects that were often ignored or avoided by other publishers. The books that were controversial or might create waves and lawsuits, he would go at with gusto."
His big contribution, which even he admits distracted him from the day-to-day running of his business, was lobbying Ottawa, as president of the ACP, for more innovative and generous support programs for Canadian publishers after the drastic federal budget cuts in the mid 1990s.
The book industry is ingrained in the Stoddart family. The late Jack Stoddart Sr., began as a sales rep for Macmillan Inc. for $12 a week during the Depression and worked his way up to sales manager before buying General in 1957, Musson a decade later and founding the Paperjacks and Bonanza imprints.
"He was very committed and careful and systematic," says Nelson Doucet, who joined General as a sales rep in 1967, adding that "it was also a time of growth and stability in the marketplace."
The elder Stoddart was a whiz at marketing American and British books, so much so that he could boast to a journalist in 1972: "Our Canadian publishing program generates more volume than all the basement publishers [such as Anansi and Coach House]put together." Some observers say that his son exhibits "the same sort of arrogance, the same strutting around" as his father.
Jack Stoddart Jr. and his sister Susan both worked for the company, but Jack, in particular, had larger dreams. To him, representing and distributing books from offshore publishers was just a way to make money. But he had bigger dreams: He wanted to be a publisher.
By the late seventies, Jack Jr. was running the company. In the early eighties, he bought a major part of the operation from his father, who was past retirement age and had suffered a serious heart attack. About the same time, Susan acquired Paperjacks, the mass-market part of the company, and now is head of Distican, which represents a number of major foreign publishers.
Jack Stoddart says the company he acquired was always undercapitalized. "They [his father and sister]kept the company that made 10 to 15 per cent every year before taxes and I took over a company that hadn't made money in three years," he told me.
Even so, Stoddart had the lucrative Simon & Schuster agency work in Canada -- until he lost the account to his sister in 1994.
With his minority partners, Doucet and Brian O'Donnell, Stoddart built a diversified trade and educational publishing and distribution company that at its height included five subsidiary publishers, minority ownership in Key Porter, Douglas & McIntrye and Cormorant Books, the Musson agency work, and General Distribution Services, which distributed books for more than 200 publishers, including 31 members of the Literary Press Group in Canada.
The company never went public and Stoddart owned 85 per cent of the shares. By all accounts, he lived the good life, including a cottage in Muskoka, a snazzy sports car and lavish corporate offices in Toronto.
Although, his authors never earned the literary kudos that enhanced the cultural capital of Jack McClelland, the other Jack was beloved of independent booksellers for his ability, through GDS, to ship a variety of titles from the extensive range of small publishers he distributed, on a single invoice. All that efficiency went awry, however, when Chapters, the mega bookseller that had overexpanded in the mid 1990s, faced a cash crunch and started shipping books back for credit faster than GDS could process them. Imagine a traffic jam caused by books rather than cars and you can get a glimpse of the havoc that occurred in the book industry beginning in 1999. To make matters worse, the single shipment and invoice that made life simpler for booksellers, was a Gordian knot of complexity when the system was reversed and GDS had to ship books back to individual publishers.
That drastic constriction of the bookselling market coincided roughly with GDS's move to a huge, 300,000-square-foot warehouse on the outskirts of Toronto, sweetheart deals to entice medium-sized publishers, such as Key Porter and Douglas and McIntyre, to climb aboard the distribution train and a prolonged systems failure as the company tried and failed to gear up its computers for Y2K. Desperately short of cash, Stoddart signed up with an Arizona-based finance company named Finova. The cash flowed until Finova ran into trouble and not only called in the loan but, according to Stoddart, dipped into General's cash accounts.
"I ran a company that happened to be a pretty good publisher," Stoddart says, swirling the melting ice in his drink. "I've always felt that, as long as you do things the best you can and as honestly as you can, chips fall as they may. And they didn't fall very well right now."
If you ask him what went wrong, he will blame it on three things:
The Competition Bureau allowed Chapters to become such a dominant player in book retailing that it became the outlet for 70 per cent of the books that Stoddart's companies either published or distributed.
Returns from Chapters, GDS's biggest customer and the anorexic margins that Canadian publishers have to work on to compete against huge U.S. firms. "In the American economic model, you can take up to a 50-per-cent return factor and still make money," he says, "but in the Canadian model, if you go over 25-per-cent return factor, you're losing money." The return rate from Chapters was up to 60 per cent, according to Stoddart.
Cash flow: GDS was being squeezed by Chapters, but instead of slashing his distribution contracts and pulling the plug on his marginal publishing companies, Stoddart kept them all afloat, hoping the marketplace would stabilize so that everybody, including him, would survive. His pockets weren't deep enough to keep the cash flowing, especially after Finova filed for bankruptcy protection.
Others tell a more complicated tale of hubris and mismanagement in which Chapters and Finova are the tipping point for a company that was already stretched too thin.
"If you have a cold, then you are susceptible to an infection." says Jack David of ECW Press and the president of the Literary Press Group, the publishing association that represents the 31 independent presses caught up in the collapse of GDS. "The company was sick and it took one more push to get it over the edge."
Allan MacDougall, president of Raincoast Books in Vancouver, says the financing problems with Finova demonstrated that General was too highly leveraged. He pointed out that many other distributors, such as H.B. Fenn, withstood the flood of returns from Chapters.
General was too complex, he says. The conglomerate had three different businesses -- agency, distribution and publishing -- but more than that, all the companies within those businesses were separate entities and so each had to be managed separately. "That is a huge task," MacDougall says. "Couple that with all the publishers he was distributing and two warehouses -- one in the west and one in the east -- and there's another level of complexity."
Besides, MacDougall says, the fees GDS was charging its biggest customers were unrealistic. "We couldn't make money using that fee structure," says MacDougall, whose own publishing company is based on a foundation as a wholesaler and distributor.
"He wanted to build a Canadian publishing company, but I don't think building a bigger warehouse and getting more and more of other people's lines is the way to do it," says Anna Porter, president of Key Porter Books. "If you want to build a publishing business, you should publish," says Porter, who admits she was "badly burned" from her company's involvement with General and GDS. "Distribution is another business."
The management style at General, says Marc Coté of Cormorant Books, enabled people to make decisions without being held accountable for them, and fostered an atmosphere in which time was wasted on internal petty office politics rather than publishing. "I like Jack a lot and I have a lot of respect for him," Coté says, "but I have to say he didn't have a handle on the people running the company. He allowed them to screw up."
Later, in a telephone conversation, Stoddart says: "I wasn't the kind of manager who went out every day and patted everybody on the back and all that kind of stuff. I had four presidents who ran the four companies and I was very deliberately hands off."
Unlike most of the publishers caught up in the collapse of GDS, Coté had worked briefly in the publishing arm of General.
He left his job as executive director of the Literary Press Group in 1995 to become General Publishing's marketing manager because he believed in Stoddart's nationalist vision.
"Jack wanted to publish significant non-fiction, but his real desire was to do the important political biographies, the books that made really serious contributions to the country," says Coté. Less than six months later, Coté had quit because "it was a madhouse."
We tend to think of publishing as a glamorous profession based on flashes of inspiration from celebrity authors, but it is a business like any other. Decisions about print runs, paper stock, shelf space and shipping costs are the mundane details that ensure that authors and readers connect.
On that score, the biggest loser has to be Stoddart himself. He has lost his dream, his company, his reputation and most of his assets. In two lengthy conversations with Stoddart, I was surprised by how defensive he was about his own skills as a manager and how he shifted much of the responsibility to others. What Stoddart does claim responsibility for, is inventing the publishing-board model. "It was a management tool that had between eight and 12 people involved in a decision-making process in the publishing program," he said, adding that he doesn't think "anybody has done a better job of training people in publishing than we have in this company."
But many in the industry suggest that publishing by committee meant that the Stoddart publishing list had no direction or cohesion. One executive, who has been in the business for more than 30 years, says: "He had no editorial director. He had an editorial board and they were all amateurs, so there was never any shape to the list. It was all over the map."
The publishing board was "dysfunctional," says Coté of Cormorant Books, describing a scenario in which people who had seen their projects shot down by fellow board members the week before, were inclined to return the favour in spades the next week.
Jack David of ECW press says his company got "lots of books via publishing-board rejections," mentioning three authors by name: Dr. Frank Gifford-Jones, sex therapist Sue Johanson and Frank Davey's book How Linda Died. "To us, they were no-brainers. All three of them had commercial or literary quality."
When a conglomerate as diversified and as large as General Publishing goes under, it threatens allied companies and weakens confidence in the entire industry. In any business collapse there are winners and losers and the unlucky bystanders that are caught in the crossfire. The most vulnerable of all are the writers, for they are at the beginning and the end of the publishing chain. They write the books that the publishers produce, the booksellers sell and the consumers buy and read.
As for Stoddart, he began our last conversation aggressively -- "I hear you are doing a hatchet job on me" -- and ended it with a plea to "be kind." Fair, as even he acknowledged, is the best I can do.
How the chips fell
The Winners "That company was in mothballs," Jack Stoddart says about his salvaging of House of Anansi Press in 1989. Two years later, he acquired the publishing arm of CBC and the iconic little press added the CBC/Massey Lectures to its traditional mix of fiction and poetry titles.
Anansi's editorial vision, prestige and access to grants made it a very saleable property. It has a small but prestigious list, an excellent publisher in Martha Sharpe and lucrative backlist titles, such as Michael Ondaatje's The Collected Works of Billy the Kid and John Ralston Saul's The Unconscious Civilization.
Scott Griffin, the venture capitalist and founder and benefactor of the Griffin poetry awards, was the first to put in an offer. He paid $400,000 in cash and topped that up with operating capital and money to pay off royalties to authors and other outstanding debts. Although Anansi is back in startup mode more than 30 years after its founding, Sharpe, editor Adrienne Leahey and sales director Matt Williams, all of whom now have an ownership stake in the resurrected company, were giddily setting up shop in new office space in downtown Toronto this summer.
"I'm pumped. I feel like the winner on Survivor," chortles John Dennison, publisher of Boston Mills,the niche publisher of illustrated local histories that Lionel Koffler of Firefly Books has just scooped out of the ashes of Jack Stoddart's publishing empire.
Firefly paid $500,000 for Boston Mills, assumed several hundred-thousand dollars in outstanding bills and is committed to injecting operating capital into the company to complete books that are in the production pipeline.
"Boston Mills will remain independent," says Koffler, a distributor and publisher of natural history, astronomy and environmental books who began in the book business as a commissioned sales rep 30 years ago and now does about $30-million in sales annually.
Dennison, who now has a 25-per-cent minority interest in the press, will continue to operate out of Erin Mills, Ont.
The Walking Wounded Most of General's authors will find other publishers. The publishers he owned or invested in will make strategic alliances with other firms. And the literary presses that GDS distributed will likely stay afloat thanks to low overheads, tenacity and contingency grants from the federal and Ontario governments. But the price is high for all of these people in money, stress and time.
Daniel Stoffman, co-author of the bestselling Boom Bust and Echo,hasn't received any royalties from Stoddart since April, 2001. Instead of feeling angry, he's relieved about the timing of General's bankruptcy. "In all probability this is the biggest success I will ever have," he says. "What if this had happened when Boom first came out and sold 250,000 in hardback and another 60,000 in paperback?" he asks.
Tim Inkster, head of The Porcupine's Quill,is another "lucky" victim. He cancelled his distribution agreement with GDS shortly before the company filed for bankruptcy protection at the end of April. He got his books out of the mammoth Toronto warehouse and he now has a distribution agreement with the University of Toronto Press. His new books will be on shelves this fall. After 25 years in business, Inkster and his wife Elke have to take a writedown of between $50,000 and $60,000. "We aren't going to be paid for three years," he says. "It isn't terminal, but it is extremely unpleasant because Elke and I are on the wrong side of 50 and that is a significant piece of our retirement nest egg."
"Cormorant is going to survive," insists publisher Marc Coté, but he admits there are dark days ahead. General first invested in Cormorant in 1996 and raised its interest to 40-per-cent ownership a year later.
Cormorant hasn't received any money from GDS since last October and Coté hasn't drawn a salary since April. They have met their obligations to authors and suppliers, and have five books ready to be sent to the printers, but Coté admits he can't go on much longer without some money coming in.
The Losers Very few, if any, of the 200 plus people who worked in various parts of the General conglomerate had jobs to go to in other parts of the industry when the company filed for bankruptcy protection at the end of April. A few have found jobs since, but most of the staff were terminated without severance or pensions.
Unsecured creditors, too, are expected to come away empty-handed.
The big losers are General Distribution Services and Stoddart,his publishing imprint. There are still no buyers for either. As for Jack Stoddart, he sees the loss of the family imprint as such an unfathomable calamity, he has filed an affidavit in court claiming that bankruptcy trustee Deloitte & Touche did not try hard enough to complete a sale, even though the imprint was shopped to nearly 50 prospective owners on both sides of the border.
-- Sandra Martin The fall of the House of Stoddart
General Publishing, the largest publishing and distribution conglomerate in the country, filed for bankruptcy protection late in April, citing debts of $47.5-million. Cash-flow problems began about two years ago when its warehouse became inundated with books being shipped back for credit from Chapters' floundering chain of superstores. The collapse of such a diversified company has rocked the vulnerable Canadian publishing industry.
General Distribution Services Ltd.
This part of the company distributed books in Canada and the U.S. for more than 200 publishers including its own companies and 31 members of The Literary Press Group.
General publishing group
This part of the company can be divided into three publishing houses: Musson 49% An agency that imported books from American and British publishers. Stoddart 30% Trade Irwin 21% Education The publishing group also included Boston Mills and House of Anansi and minority stakes in Key Porter Books (10%), Douglas & McIntyre (9.5%), and Cormorant (40%).
Sandra Martin