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The combined effects of the recession and a lack of trade credit insurance are having a severe effect on smaller publishers and packaging houses.
John Twiggs, c.e.o. of publisher Tick Tock, said its credit insurance company had downgraded “more and more” of its customers over the past year.
Twiggs said: “We can get insurance for a small company in South Africa, but not for a large book retailer in the US. Without insurance, banks won’t provide the funding we need to support our contracts with these customers.” Tick Tock has recently refinanced to cover the costs of a number of its ongoing projects.
At Tony Potter Publishing, m.d. Tony Potter said that credit insurance may be in place when a company takes an order but that the insurance can be removed at any time before the books are delivered. He said: “You can be half way through meeting an order and find yourself without insurance.”
Frequently the publisher or packager will end up taking on the risk while the global recession is increasing the level of risk. Potter said: “We have a huge US client that can’t pay us and refuses to give any sign of when they might be able to. I’ve also been holding stock for 18 months for a customer in Europe that can’t pay for the goods.”
On top of this, tougher trade terms are making it hard for publishers and packagers to maintain cashflow, said Potter.
“One major UK retailer’s terms are to pay suppliers 70% of the cost six months after they receive the product and the remaining 30% when and if the product sells.”
David Bennett, m.d. of Boxer Books, believes that the established business model no longer works for smaller companies involved in children’s publishing.
He said: “Larger publishing houses are better able to withstand a decline in sales but when you only publish about 20 titles a year, it is harder to withstand those falls.” His company is now seeking a larger business partner.