A shakeup is happening in the Christian book industry. Family Christian stores the largest Christian store chain in the country (counting locations, not necessarily sales revenue) with 266 stores in 36 states has filed bankruptcy.
Initially, Family Christian filed for a sale of its assets and operations under Section 363 of Chapter 11 of the U.S. Bankruptcy code. This allows the company to reorganize. Family Christian Ministries, which owns the stores, had formed a new subsidiary to buy the stores for $73,773,000 and assume the property leases and other accrued operating liabilities. It was reported that the company expected to continue operations without closing stores or laying off employees.
Then last week, a group of 27 Christian publishers filed a joint lawsuit against Family Christian to keep the retailer from selling their products at a future auction. It appears that Family Christan recently made the decision to sell around $20 million worth of books, music and DVDs at an auction scheduled for later this year. However, the products that Family Christian plans to sell they did not purchase; rather these are consigned products. A few years ago Family Christian stores went to a consignment model to save money. In this model, publishers shipped merchandise to Family Christian and Family Christian did not have to pay the publishers for the merchandise until it sold.
Court documents show that Family Christian owes banks and vendors (publishers) about $97 million, not including the consigned inventory. Publishers are concerned that if Family Christian auctions off the inventory that they have consigned, they will not be able to recoup any money for these products. In the lawsuit, the publishers are demanding that Family Christian either return consigned inventory to each respective publisher or pay the publishers outright for the products.
All this appears to point to the fact that Family Christian is not doing as well as they originally indicated. That, in fact, if they need to auction inventory to raise money, they may have to look at closing stores and laying off employees. The company may not be able to continue “business as usual” even with a reorganization.
If this is true, it bodes ill for the Christian book market. While some reading this blog may say, “Since more books today are purchased online than in physical stores, the impact won’t be much.” I disagree. The more channels through which consumers can purchase books, the more books will sell—and selling books in bookstores actually earns an author more money.
Bookstores are important when it comes to selling books. A recent study showed that while only 54% of traditionally published books actually made it onto bookstore shelves, those that did earned their authors a median of $5,000 to $9,999 across all platforms. Traditionally published books that were not sold in bookstores only made their authors a median of $1 to $499. For self-published books, the study showed that those that were sold in bookstores (only 12%) earned a median of $500 to $999 compared to $1 to $499 for those self-published books that weren’t.
Every time a sales channel is lost, book selling takes a hit. If the largest Christian bookstore chain ends up closing its doors, publishers and authors will need to be creative to adapt and create sales opportunities elsewhere.
Update as of March 20, 2015:
Family Christian has filed a court notice withdrawing its motion of plans for bankruptcy. The company announced its plans this week through an official statement.