Publishers Group, Inc.

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Publishers Group, Inc.

1700 Fourth Street
Berkeley, California 94710
U.S.A.
Telephone: (510) 528-1444
Toll Free: (800) 788-3123
Fax: (510) 528-3444
Web site: http://www.pgw.com

Private Company
Incorporated: 1976 as Publishers Group West
Sales: $120 million (1999 est.)
Employees: 250
NAIC: 42292 Book, Periodical and Newspaper Wholesalers

Publishers Group, Inc. (PGI) is the largest distributor of books from independent publishers in the United States. The company’s two divisions include Publishers Group West (PGW) and Avalon Publishers Group. PGW, originally the company’s only business, handles distribution and accounts for three-fourths of revenues. The 150 publishers it represents include Grove/Atlantic, Kelley Blue Book, Feral House, New World Library, and the National Geographic Society. Its sister company, Avalon, was formed in 1994 to invest in companies that PGW distributes. These include Carroll & Graf, Thunder’s Mouth Press, and John Muir Publications, which are now wholly owned, as well as a number of others. The privately held company is still run by some of its early investors including president, chairman and CEO Charlie Winton, his brother, COO Michael Winton, and CFO Randall Fleming.

1970s Origins

The origins of PGI date to 1976 when math textbook publisher Page Ficklin Publications, of Palo Alto California, formed a subsidiary called Publishers Group West. PGW’s purpose was to distribute books from so-called “small press” publishers. One of the new operation’s sales representatives was Charlie Winton, a graduate of Stanford University’s film school who had first been hired by owner Jerry Ficklin to unload trucks. Winton did well in his new job, and was made sales manager for PGW within six months. After a period of modest growth, PGW was purchased by Winton, Ficklin and two others from Page Ficklin in 1978. One of the company’s key strategies was to develop sales through chain bookstores, which were not then well-stocked with small press titles.

In 1979 PGW moved its headquarters to Emeryville, California. Winton’s brother Michael and former Stanford classmate Randall Fleming joined the small company’s board of directors, also helping with the move, which required only a single U-Haul truck. The company expanded dramatically later in the year when PGW’s presentation at the American Booksellers Association meeting in Anaheim, California, brought a number of new publishing clients into the fold. Titles distributed by PGW jumped from 70 to nearly 300. One of these, Bernard Kamoroff’s Small Time Operation: How to Start Your Own Small Business, Keep Your Books, Pay Your Taxes, and Stay Out of Trouble, proved to be a hit, selling 440,000 copies over the next decade. In 1981 company founder Jerry Ficklin left, selling his stake to the other investors.

The company’s sales were continuing to grow rapidly, with revenues for 1982 hitting $2.5 million. At this time PGW’s income was drawn equally from chains, such as B. Dalton and Waldenbooks, and independent booksellers. A major new distribution deal was inked in 1983, when Carroll & Graf Publishers came on board. The East Coast-based company, which specialized in mysteries, history, biography and fiction, broadened PGW’s profile from that of an exclusively West Coast operation to one of national reach.

Setbacks, Triumphs in 1985

In 1985, PGW experienced a difficult year. Its employees, heretofore generally comprised of laid-back college students, were unionized by the Teamsters, dramatically altering the atmosphere of the workplace. On the sales front, PGW’s revenues took a hit when the company was forced to take back abnormally high returns of stock from B. Dalton, which was undergoing its own travails. A saving grace for the year was PGW’s first New York Times bestseller, Diets Don’t Work by Bob Schwartz, published by Breakthru Books. Sales of this title accounted for 15 percent of the company’s $7 million in revenues for the year.

With this high-profile success, the company was able to gain access to more bookstores than ever before, but the book’s heavy sales highlighted the need for a more formalized billing procedure. Previously, contracts for distribution were not formulated in a consistent manner, and from this time forward PGW began to charge a percentage of the net billing of each title it distributed. With the new arrangement the company would receive 24 percent of the net, with shipping to PGW’s warehouse paid by the publisher, who would also pay for any promotional materials that were used.

The company maintained a sales staff which visited independent bookstores and chain buyers to promote new titles, typically with slide shows and catalogues for each category of books. PGW’s publishers produced a wide range of titles, which included fiction, nonfiction, juvenile, travel, computer books and calendars. New Age books were particularly strong sellers. Sales of audiotapes, which PGW began handling in 1980, took off in the latter part of the decade, with Shakti Gawain’s Creative Visualization selling more than 150,000 units. Other audiotapes distributed by PGW included those of Minnesota Public Radio, Vital Body, and Source Cassette Learning Systems.

PGW was also becoming more than just a distributor at this time. The company worked with its clients to suggest editorial changes and marketing angles, occasionally coming up with a concept that led to a new publication, such as Gawain ’s Reflections in the Light: Daily Thoughts and Meditations. PGW represented 200 publishers by the end of the 1980s, with ten percent or more of these changing in a typical year as companies were dropped and added. Some went out of business, while others were discontinued if PGW felt their products were not up to the distributor’s overall standards.

In 1989, sales hit $25 million, the company having grown almost fourfold in less than ten years. This caused problems in the areas of shipping and order processing, however, and complaints were received from the Northern California Booksellers Association. The company responded by consolidating operations that had previously been in three locations into a single 65,000 square foot facility in the San Francisco Bay Area. New releases were also shipped to the east from Lebanon, Pennsylvania.

Further Growth in the 1990s

PGW’s success continued in the early 1990s. Strong sellers included the hit 50 Simple Things You Can Do to Save the Earth, as well as several books on the John F. Kennedy assassination. Despite the faltering U.S. economy, the company’s sales continued to grow, reaching $42 million in 1992. Nonetheless, PGW was trimming its list of clients, moving to a total of 180 by late that same year. The company was marketing a total of some 720 new books and 50 audiotapes annually at this time, in addition to handling a “backlist” of several thousand. Revenues were split evenly between new releases and older titles. The company was also working on building its sales in Canada.

At the same time, PGW was moving toward more direct involvement with its clients. In the summer of 1992, the company purchased a minority interest in Moon Publications, whose books it had been distributing for some time. Within a year, PGW took over majority ownership, and this led to the formation of a new corporate structure for the company. In April 1994, a sister business to PGW was formed, Avalon Publishing Group, with ownership of both now held by a new entity, Publishers Group, Inc. Avalon’s purpose was to invest in publishing companies, and those it became associated with were required to use PGW for distribution. This would ideally bring in a double revenue stream, both through the return on Avalon’s investment and from PGW’s distribution fees. The company’s ownership remained private, with the Winton brothers and Randall Fleming still in charge of the company. A major step forward came in 1993 with the signing of a distribution deal with Grove Press and Atlantic Monthly Press, who would bring more general trade books to the company’s lineup.

Over the next several years, Avalon began purchasing stakes in a number of other publishers, including Marlowe and Company, Thunder’s Mouth Press, and Four Walls Eight Windows. In 1996, the unit purchased 20 percent of Carroll & Graf, which allowed that publisher to more aggressively seek out big new titles. The same year also saw PGW lose two major computer book publishing clients when Peachpit and The Waite Group were acquired by companies with different distribution arrangements.

In 1996 PGI experienced a drop in revenues, the first in its history, but it bounced back in 1997 following layoffs of 15 from its staff of 220 and a reduction in clients to 145. Net sales for the year topped $100 million, up 25 percent. Some of that higher total was due to the wild success of Charles Frazier’s Cold Mountain, published by Grove/Atlantic, which sold more than 1.5 million copies in hardcover. Also during the year, acquisition funds were bolstered by an investment from outside firm Sycamore Hill.

Key Dates:

1976:: Publishers Group West formed as a subsidiary of Page Ficklin Publishers.
1977:: PGW purchased by Charlie Winton, Jerry Ficklin, and several others.
1983:: PGW signs distribution contract with Carroll & Graf.
1985:: Company’s first New York Times bestseller, Diets Don’t Work.
1993:: Grove Press/Atlantic Monthly Press distribution deal signed.
1994:: Publishers Group Inc. assumes ownership of PGW, forms Avalon Publishing Group.
1996:: Avalon purchases stake in Carroll & Graf, later acquiring entire company.
1997:: PGW distributes bestseller Cold Mountain from Grove/Atlantic.
2000:: Avalon launches Nation imprint through its Thunder’s Mouth Press division.

Early in 1998, Avalon purchased the remaining portion of Carroll & Graf. The division’s original description as an investment unit was no longer accurate, as it had become a full-fledged publisher. A new division of Avalon, Avalon Travel Publishing, was established and began issuing titles under the Moon Travel Handbooks and Foghorn Outdoors names, both formerly independent companies that had been acquired. The pending acquisition of John Muir, a Santa Fe-based travel publisher with such popular lines as the Rick Steves and Travel Smart series, was expected to further expand Avalon Travel’s reach. Avalon also purchased the assets of Grove founder Barney Rosset’s bankrupt Blue Moon Books. The company pledged to continue publishing the imprint, with Rosset remaining involved as a consultant. Blue Moon’s focus was described as “Victorian erotica.”

At this same time, PGW was moving distribution operations yet again, from the Bay area to Reno, Nevada, where a 272,000 square foot facility was established. East Coast distribution continued to be handled out of Lebanon, Pennsylvania. Sales to book chains now accounted for more than two-thirds of PGW’s business, up substantially from the 50 percent figure of a decade earlier.

In the spring of 2000, another new publishing venture was announced at Avalon. An imprint, Nation Books, was to be launched by Avalon unit Thunder’s Mouth Press, in conjunction with the Nation Institute, publisher of the Nation magazine. Projected subject areas were politics, culture and history. Titles were expected to be a mix of reprints and new books, with the first ones due to appear in the fall of 2000.

As it neared the end of its first quarter-century in business, PGI appeared to be in excellent health. The successful move into publishing in the 1990s had broadened the focus of the company and boosted its revenues, which peaked at $120 million for 1999. One-fourth of sales now came from the Avalon Publishing Group division, and its success enhanced that of distribution arm Publishers Group West, which shipped all Avalon product. Ongoing bookselling trends such as the growth of “superstore” chains and online sales sites appeared likely to ensure the company’s success for some time to come.