I mentioned yesterday that I think all the deals with Author Solutions are going to backfire badly, and while I'm in Cassandra mode, I wanted to toss out another possibility: I think it's likely that a company that consistently screws its clients is not going to be shy about screwing the companies that buy or do business with it.
Look at what's happening over at Hewlett-Packard: They are taking an $8.8 billion writedown (wow) over their acquisition of Autonomy, which is basically an admission that they paid $10.3 billion for a company that was really worth only $1.5 billion.
That kind of thing isn't really that uncommon, although the size of that particular writedown is certainly impressive. The accounting practices at public companies are much more tightly regulated than the accounting practices at private companies, and as the Autonomy case demonstrates, an awful lot of money can be created or hidden via seemingly arcane practices like when and how to recognize revenue.
And while there were longstanding questions about Autonomy's accounting practices, there don't appear to have been allegations that the company was ripping off clients, which is more than can be said about Author Solutions. Author Solutions claims a mere 4% profit margin, and I do wonder how much of that margin comes from "accidentally" withholding half of the royalties its writers are due.
But publishers always treat writers like crap! Surely Author Solutions will treat large publishing houses with honestly and respect!
You know, like they did Simon & Schuster! The New York Times writes:
One odd twist of the deal is that Author Solutions was purchased by the British publishing giant Pearson in July. Pearson has made Author Solutions part of Penguin, a Simon & Schuster competitor. But since Simon & Schuster was already far along in the planning with Author Solutions for the new brand, it decided to go forward anyway....
Wow. When the Times is skeptical of a New York publishing deal, you know it must smell to high heaven.