By Yun Suh-young
The bankruptcy of Songin Books, the country's No. 2 book wholesaler, Tuesday is taking a toll on the already staggering publishing industry.
Concerns are growing that its insolvency will trigger chain collapses of many other companies in the industry. Songin failed to honor 37 billion won ($31 million) in matured debt owed to smaller publishing companies and other creditors.
Its collapse reflects poor management, and a reduced role of the wholesaler in the industry due to a decreased number of offline bookstores, and the increase in online purchases. The dwindling educational publication market amid the reduced student population was also another contributing factor.
Those hit hardest by Songin's bankruptcy were small- and medium-sized bookstores that are dependent on wholesalers for their supply.
Excluding large scale book stores, such as Kyobo Book Store, many smaller bookstores in the city and in provincial regions receive their books from wholesalers such as Songin. With the company's bankruptcy, around 2,000 clients who have done business with Songin will no longer be able to receive books.
Songin Books started as Songin Seorim in 1959 and had worked with over 2,000 publishers over the years. Yet with the decreasing number of offline book stores, and due to the recently implemented fixed book price regulation in 2014 that limited bookstores from selling books at prices lower than those set by the publishers, sales of books in the offline market have dropped. Moreover, Songin suffered from competition with other wholesalers.
"It's impossible for a wholesaler to survive under the current structure. Large publishers want their shares on time while book stores want lower distribution rates. The few wholesalers that compete are sandwiched in the middle suffering from low distribution prices and rates," said Han Ki-ho, director of the Korea Publishing Marketing Research Institute, lamenting the situation on his blog on the day the bankruptcy was announced.
"The situation got worse with the fixed book price regulation. Book stores wanted wholesalers to distribute at lower prices."
However, some industry insiders say Songin went under mainly due to its own poor management.
"The difficulty is similar for other wholesalers too. If the industry's structural problem is the issue, other wholesalers should go bankrupt too, but that's not the case. Songin's management was poor and didn't take proper measures to prevent this situation in advance," said an industry official who requested anonymity.
"From what I know, it tried to expand overseas a few years ago and they established a branch in the U.S., but it didn't go well and they bled financially from that."
Songin is unique in their financial transaction method as they are one of the few companies that transact business with promissory notes. The bankruptcy came from its failure to pay back 8 billion won that was held in promissory notes.
In reaction to the panic spreading among industry officials, the culture ministry said Wednesday that it will evaluate all possible measures including financial support to prevent small publishers from going bankrupt. It decided to meet with industry officials to further discuss ways to mitigate the situation.
Songin's leftover balance and stock was handed over to creditors.
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