Houghton Mifflin Harcourt Calls It Quits On New Acquisitions

December 1, 2008 at 10:22 pm | Posted in Uncategorized | Leave a comment

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Posted by David Hancock on December 1, 2008 at 3:11pm

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It’s been clear for months that it will be a not-so-merry holiday season for many publishers, but at least one house has gone so far as to stop acquisitions. Morgan James has learned that Houghton Mifflin Harcourt (Mark Twain’s publisher and the original publisher of Guerrilla Marketing) has asked its editors to stop buying books.

Publishers Weekly reported that Josef Blumenfeld, Vice President of communications for Houghton Mifflin Harcourt, confirmed that the publisher has “temporarily stopped acquiring manuscripts” across its trade and reference divisions. The directive was given verbally to a handful of executives and, according to Blumenfeld, is “not a permanent change.” Blumenfeld, who hedged on when the ban might be lifted, said that the right project could still go to the editorial review board. He also maintained that the the decision is less about taking drastic measures than conducting good business.

“In this case, it’s a symbol of doing things smarter; it’s not an indicator of the end of literature,” he said. “We have turned off the spigot, but we have a very robust pipeline.” The action by the highly leveraged Houghton Mifflin Harcourt may also be as much about the company’s need to cut costs in a tight credit market as about the current economic slowdown.

While Blumenfeld dismissed the severity of the policy, a number of agents said they have never heard of a publisher going so far as to instruct its editors to stop acquiring.

An agent who had also heard about the no-acquisitions policy at Houghton Mifflin Harcourt called the move “very scary” and said it’s indicative of an industry climate worse than any he’s ever seen.

Thus far one agent has confirmed that at least one of his manuscripts has been declined at Houghton Mifflin Harcourt per the policy. But perhaps an editor at the house put it best; in an e-mail, the editor mentioned the policy and added, “Who knows what’s next.”

With general bafflement over Houghton Mifflin Harcourt’s willingness to admit out loud that they have a freeze on buying new books, the New York Times speaks to Jeremy Dickens, president of Education Media and Publishing Group, the private equity company that owns the trade publisher. “He denied that the company was for sale, but said, ‘If there’s a transaction that makes sense for all of our stakeholders, we’ll consider it.'” And “he said that the company had received inquiries from other trade publishers interested in acquiring Houghton.”

On the freeze, Dickens said they wanted to be “extremely prudent about the way that we allocate our capital and where we make our investment decisions.” He added, “We have plenty of titles in the pipeline that will be coming out next year and we will continue to evaluate opportunities if and when we decide to lift the freeze.” That “if” will cause some additional concern…

The buyers took on massive debt to swallow Houghton Mifflin and then Harcourt, back when credit was at least cheap and freely available, and they now have “about $7 billion in debt” with annual debt service of “about $500 million.” DIckens says they have no problem covering the payments, but are not “allocating as much capital” to trade publishing, which is a small part of the company.

Is it time for an overhaul of the traditional publishing model? I think the answer is clear. According to McGraw Hill’s former Publisher, Morgan James is “taking the BS out of publishing”. If BS means 200 year old tradition that just doesn’t work anymore, I’m inclined to agree!

Meanwhile, Morgan James title acquisitions are up 32% and overall book sales are up 52%. I’m further inclined to share a quote from one of Houghton Mifflin Harcourt most successful authors, Jay Conrad Levinson (Guerrilla Marketing): “I’ve seen the future of publishing, and it’s name is Morgan James”.

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