Friday, February 18, 2011

The Borders Bankruptcy

Posted by Victoria Strauss for Writer Beware

The publishing news of the week--maybe of the year--is the collapse of Borders, the USA's second largest bookstore chain. On Wednesday, Borders filed for Chapter 11 bankruptcy protection in the Southern District of New York. (Chapter 11 allows a company to re-structure its business, with the aim of re-launching it.)

Word of Borders' financial difficulties has been circulating for months, and there's been widespread speculation that the chain would fail. The end came over the past few weeks, as Borders began delaying payments to creditors (it reportedly owes publishers and vendors more than $260 million, with the Big Five publishers topping the list at $25 to $41 million each), and its attempts to round up new financing crumbled.

Borders has established a Case Administration website to follow the proceedings, on which it states that "Borders' business operations continue as normal." Well, not quite. Some publishers have stopped shipping to Borders, in response to its suspension of payments. Also, as part of the re-organization plan, Borders will shutter 200 of its more than 600 Borders and Waldenbooks stores--approximately 30% of its business (a list of the closings can be accessed here). Liquidation sales begin tomorrow. Down the line, it's possible that there could be even more closings. (That's on top of over 200 store closings in 2009, and 45 in 2010.)

If you bought ebooks from Borders, you'll still be able to access them, at least for now (Borders contracted with a separate company, Kobo, to power its ebook business). According to Borders' reorganization FAQ, your Borders gift cards are also safe. (You might want to hurry up and use them, though.) What if you self-published an ebook through Borders' Get Published program? Get Published is outsourced to a service called BookBrewer, which has posted a news item on its website assuring authors that their royalties will be paid. (Borders' POD publishing service, Borders Personal Publishing, was transferred to Lulu.com some time ago.)

I've seen a lot of speculation that Borders is one more casualty of the ebook explosion, another canary in the coal mine of the shift to digital. Undoubtedly, that's part of the story, as it is for the difficulties that booksellers of all kinds are experiencing right now. But Borders' troubles apparently go much deeper. Overexpansion, poor Internet and digital strategies (they outsourced their commerce website to Amazon until 2008, and were slow to expand into ebooks), management shakeups (of Borders' current senior management, the one with the longest tenure has been with the company only since August 2009), and a succession of top executives whose experience was in the supermarket or department store business, rather than with books or publishing, all played a part. (At one point, Borders was being run by a CEO from the grocery world, who re-organized Borders stores according to supermarket "category" marketing models.)

Will Borders survive? It needs the industry to support its reorganization efforts, but publishers are reportedly skeptical of its turnaround plan. According to the Wall Street Journal,
Whether it can restructure and emerge as a stand-alone company is unclear. Many Wall Street bankers and lawyers who have studied the chain believe it may not be able to avoid liquidation. It is expected to report more than $1 billion in liabilities in its bankruptcy petition, said a person familiar with the matter.
The bad news doesn't end there. Australia's REDGroup Retail, which owns Borders Australia, the Angus & Robertson book chain, and Whitcoulls, New Zealand's major book chain, also failed this week, amid charges of financial ineptitude and lack of bookselling expertise. Debts are reported to be in the $150-$170 million range. REDGroup's collapse is unrelated to the Borders US failure--the Australian Borders stores were spun off and sold some time ago--but it's still an ominous sign. It has sent shockwaves through the publishing world down under, and has infuriated consumers, whose gift vouchers are only being honored if the consumer matches them dollar for dollar.

In Canada, the nation's largest book distributor, H.B. Fenn, has also begun bankruptcy proceedings--a move that was apparently a surprise to publishers on both sides of the border. Again, debts are said to be in the millions.

What does it all mean--for writers, for customers, for books, for publishing? There's plenty of speculation--John Scalzi has some thoughts on the impact of the Borders closing on authors, and BackSpace founder Karen Dionne and Teleread's Jason Davis examine some of the possible implications for book publishing, especially print.

However, as always with major events of this sort, no one can really say for sure. All that can be known right now is that it's a sad day for the book business, and especially for the many people whose jobs will disappear along with those closing stores.

21 comments:

Jenny said...

Borders main selling point used to be its huge stock of specialty and small press books. That made it a destination worth driving to. They sold many thousands of my small press's books and I shopped there a lot.

Then in 1999 the non-book management threw out all the small presses and moved to a Top 40 model. Now they had fewer books than B&N, so I no longer made the drive there to hunt for all those interesting specialty books.

Obviously the non-book industry execs had no clue why people went to Borders. That, not the lack of e-books is what did them in. Why go to a store that only has the books you see everywhere else?

Francis Hamit said...

I posted a longer message on LinkIn's Book Publishing Professionals group about this. Basically it's about Real Estate.

catdownunder said...

Borders in Australia/NZ has also gone under along with the Angus & Robertson/Whitcoullis chain. They are demanding that people spend an equivalent amount again in order to use their gift-cards.
Here the problems have been exacerbated by "parallel import restrictions" and a tax on books. The PIR were supposed to protect Australian publishing but did not.
Poor business practices and government protectionism has killed them off - and in Australia there is very little else available.

Robin Bayne said...

It is sad, and I agree about the small press boooks--mine haven't been stocked there for years.

Shawn James said...

I shop in Borders here in New York and it's just terrible. Books are often sold at full retail price with no discounts, backlist titles often aren't in stock, and stuff like DVDs and CDs are so overpriced I go to Best Buy or Amazon after I leave the store to buy them.

Many of the titles at Borders are top 40 and NYT Bestsellers, which are sold at FULL LIST PRICE. Why buy a new title at Borders when that same title is sold at Barnes & Noble and Amazon for 25% off?

On top of that, it's Hard to find a graphic novel, a comic Trade Paperback, or a book by a small-press or self-published author. You can't even order a POD or self-published book in their system? People can find my self-published books at Amazon, B&N or anyplace in the world, but not at Borders a train ride away. Crazy.

Borders could have carved a nice niche market for itself if it continued to focuse on specialty and small press books. These niche titles can keep a store afloat for years, because those types of books are hard-to find and have a dedicated audience that follows titles for years to come.

Ebooks didn't do Borders in. I publish e-books and the market isn't so red-hot that it's taking away from print copies. E-books on average cost what? $2.99-$3.99? and not everybody wants to sit and read at a screen.

Plain and simple It was poor management and poor business planning that got Borders in trouble. Shopping there feels like a distant, disconnected experience; it's hard to relax there and get acclimated with the titles there or feel comfortable searching for books.

Barnes & Noble stores have a warm home-like feeling that connects the customer to the books and makes them feel comfortable. At B&N, you want to spend a few hours there, at Borders, you just want to get in and get out.

B&N has the shopping experience. Amazon has the big selection. Borders needs to find something distinct that makes it stand out when they restructure. Maybe catering to small presses, and self-publishers will get them some market share. But selling top 40 and NYT bestsellers at list is not an effective strategy in the competitive world of publishing.

James C. Wallace II said...

This may sound bitter, but as far as I'm concerned, good riddance to bad rubbish!
I approached them a year ago about carrying my self-published trilogy of books and was soundly rebuked.
Now, my books sell well on the .com market and Borders is going away.
Serves them right!!!
If they are unwilling to embrace the new ebook business model, then they deserve their fate.

I have no sympathy for losers who cling to the past!!!

Jhon Baker said...

It is a sad day for borders employees indeed but a great day for the small bookseller and the soon to be more small time bookseller. People still want books - they still want to buy them from bookstores - many people are tired of big box and in part because of borders jerking readers around for so long. long live mom and pop - find an independent or open one today! The revenue needed to sustain a small business is much less than to sustain a too big to fail - think about it - even if your store as as large as a borders it would still cost less to operate over all. the corporate center takes a lot of money to run itself let alone the store.

Anonymous said...

With all due respect, I don't think that any bookstore is hurting because they don't carry self-published books.

There's been, what?, hundreds of thousands of self-published print-on-demand books released over the past decade?

Most only sold a few copies to friends and relatives.

behlerblog.com said...

Vic, you asked whether Borders will survive and conjectured that it would take the publishers' support in order to make an effective comeback. Our distributor guaranteed all sales to Border up to December - meaning that even though they probably won't get paid, we will. That ended at the beginning of the year. Furthermore, they have ceases all deliveries to Borders. Given their past business practices, it's likely that trust has been destroyed forever. Borders will have to put bonds up - or escrow accounts so distributors will feel certain of getting paid.

Dane Grannon said...

My hometown is losing its biggest bookstore. There are a few smaller ones in town, but they don't have the selection.

jphbr said...

"... a succession of top executives whose experience was in the supermarket or department store business."

That's why Borders always made me feel like going to CVS !

My motto: Books without Borders.

James C. Wallace II said...

According to a posting by Anonymous below, "With all due respect, I don't think that any bookstore is hurting because they don't carry self-published books."

Apparently, Borders Books is hurting because they have refused to carry any self-published books. Now look at them!

As for my books, they are doing fairly well. I don't get rich but I've paid a bill or two with royalties from all 3 of my Oz books.

I stand by my statement and I use my name too!!!

Marla Miller said...

I've worked with many Border execs and now it makes sense--so many had NO book experience---- never could figure out how their regional managers, and higher, lacked book knowledge---I figured at a certain level, you didn't need it? After all, they were making major decisions about the biz and everyone seemed to regard their position in the industry-now i realize, like so many other businesses that have failed, they did a lot using the 'smoke and mirror' approach...too bad, in their heyday, they ran so many Indies out of the bookselling biz---

Anonymous said...

Just one more proof that SFWA, Crispin and Strauss and their minions have accomplished the self-defeating behavior of knocking out other businesses in the industry, not realizing because of their gross stupidity and ignorance, that when you start knocking your competition, it eventually gets around to yourselves. That is comforting to know, that the books of the SFWA authors have fewer retail outlets now. When you knock out small businesses in the supply chain in your industry, Victoria And Ann and "MISS SNARK" so that they can't pay their bills, and their suppliers go under, then eventually the loss of customers gets around to yourselves. That is the one silver lining in this cloud of industry woes.. That the public will have less access to the books of the SFWA authors, and to the books of Ann Crispin ,Victoria Strauss and all the other losers in their group. Go ahead with your self-defeating behavior, and eventually you'll take a long walk off a short pier. It will be inevitable, and welcome as long as you continue to spew your own poison. You can take credit for destroying an industry systematically. Good job!

Anonymous said...

I'm the first Anonymous, not the second.

>> As for my books, they are doing fairly well. I don't get rich but I've paid a bill or two with royalties <<

I don't know what that means. A bill or two? Could mean that you've earned $2,000 or $20.

I'm both self-published and commercially published. My most successful self-published POD book sold over 500 copies, so I've paid "a bill or two" as well.

Even so, I'm not going to delude myself into thinking that Borders failed because it doesn't carry self-published books.

Sorry, but there's not that much reader demand for self-published books.

Discounted books from online stores (which pay no rent, and collect no sales tax) is what's hurting bricks & mortar stores.

Anonymous said...

Actually, I should qualify my statement.

Although I've sold over 500 copies, the money I spent publishing, promoting, and advertising my book exceeds what I earned. So despite selling over 500 copies, I'm still in the red.

You don't mention whether you're in the red or not?

Either way, in all the publishing news stories I've read, no publishing expert has ever suggested that bookstores were hurting because they don't carry self-published titles.

Frances Grimble said...

Actually, the industry term "small press" covers a great deal of ground, including many specialty publishers of things like craft books, how-to books, and computer books, as well as many university presses. The last publisher I worked for in-house was a computer book publisher with over 80 titles a year--and they were considered a small press.

Self-publishers and micropublishers of only a few books are usually referred to by those terms.

And yes, carrying specialty titles matters. I still regret the demise of the great local bookstore Cody's, which carried lots of interesting academic and literary books. Unfortunately, that was not enough to keep them in business.

Aya Knight said...

That's truly a shame about Borders! I hope they are able to re-evaluate their situation and overcome their financial struggles. It seems as though bookstores are dropping off of the charts one by one. Borders had some great discounts on books.

Thanks for the post!

Sincerely,
Aya Knight

Author of the young adult fantasy- The Chronicles of Kale: A Dragon's Awakening

Victoria Strauss said...

A couple of interesting links:

- A former Borders exec takes issue with some of the theorizing on why the company failed.

- PW speculates about the bankruptcy's impact on publishers, booksellers, authors, and the industry in general.

Elisa Michelle said...

Wow. I had no clue that so many places went bankrupt. It's scary, and I hope for the best for the employees who are now searching for work elsewhere. In the US at least, I know that can't be good. Heck, I doubt it's good anywhere, really.

It's sad though, about Border's lack of management and understanding. Our local Borders seemed to really be almost along the lines of a local bookstore in atmosphere. The employees know what they're talking about and people gather there all the time to talk books or draw or paint. The fact that Borders failed to repeat this on a national (or even global) level means they missed what people love about bookstores the most: community and the enjoying atmosphere.

At least that's what I think. Great blog post. Will definitely pass it around.

Holly said...

I am still saddened by this no matter what. I worked for a store in TN that is the ONLY one of that state closing for 3 yrs. I still have many co-workers who will lose work in less than a month. I also have worked for B&N honestly I think both companies are great. I think its sad the way bookstores are dying. I dont like electric bks and will probably never be one to use them. Yet they are one of the bigger reasons the companys are struggling including B&N :(