The new owner of Chapters Inc. warns that Canada's publishing sector faces at least another year of turmoil because of financial and operating troubles at the country's biggest book chain.
"I found deeper problems than I expected," said Chapters chief executive Heather Reisman, who with husband Gerald Schwartz acquired control of the book seller in February after a bitter takeover battle. The pair are expected in the next few weeks to receive approval from the federal Competition Tribunal for their proposal to merge Chapters with their privately owned chain Indigo Books & Music Inc.
Once the merger is approved, Ms. Reisman said she intends to purge about $40-million of mostly book inventory and close or sell more than 20 stores to turn around the struggling chain.
The cutbacks are expected to trigger a new wave of price discounts and book returns for publishers who say they have already been pushed to the brink by the tough financial treatment of Chapters former managers. The federal government has advanced emergency money to rescue a number of publishers and Ms. Reisman says it will "take me 18 months to get this thing turned around" and help the book sector recover from what she describes as a "crisis situation."
Chapters' tough tactics have grabbed headlines for months, but it has only now become clear just how bad things were. According to dozens of publishing executives and some former company officials interviewed by The Globe and Mail, publishers, printers and authors have endured chaos and financial grief through a combination of mismanagement and strong-arm tactics at Chapters.
One best-selling author went six months without pay from Chapters, others cancelled tours when their books didn't make it to the chain's stores. Search teams had to be employed to find missing books.
Thousands of paperbacks were needlessly shredded because of erratic return orders.
Worst of all, most of the country's publishers have seen their cash flows substantially squeezed by the double whammy of record book returns and delayed payments.
"Chapters off-loaded its financial problems onto the publishers. . . . There is so much blood everywhere, this industry looks like an abattoir," said Allan MacDougall, president of Vancouver's Raincoast Books, distributor of the popular Harry Potter series.
Richard Segal, who resigned last June as president of Chapters' Internet book-selling subsidiary, described some of Chapters' tactics as "brutal" and "callous."
"There's no question Chapters pushed it to the outer limits of what I personally would deem reasonable," he said.
Industry players said it will take years to recover. In the meantime, cash-strapped publishers say they are reducing print runs and scaling back book lists. At a time when Canadian authors are gaining international acclaim with top literary awards, some publishers worry they won't have enough resources to nurture the next generation of authors.
"The opportunity to publish books specifically for the Canadian market will shrink. . . . It is a huge loss," said Susan Renouf, associate publisher of Key Porter Books.