Borders in Bankruptcy
- February 17, 2011
The bankruptcy filing of Borders book stores means two hundred fewer "superstores," lost jobs, and . . . what else?
by Gene Taft
If you’ve ever been in a fight, you understand that even if you know a punch is coming, it still hurts when it lands. Well, these days the world of books—publishers, authors and booksellers—is in one heck of a fight just to stay alive and relevant as a viable business. So, with Borders declaring bankruptcy, the business of books just took a punch. Although we all saw it coming, that shot dropped the industry to the proverbial canvas. The question is, can the industry get up and continue the fight?
A quote in the Washington Post from Albert Greco, senior researcher for the Institute for Publishing Research, summed up the news concisely. “This is the biggest bankruptcy in the history of the book business. This is really a depressing day.”
The general consensus on the failure of Borders among analysts and publishing insiders seems to lie in its late entry into two key facets of the new, 21st Century bookselling reality—a move to online sales of print books and the significant uptick in sales of both eBooks and eReaders. Borders, unlike its rival Barnes & Noble, initially ran its online sales operation, somewhat shockingly, through Amazon.com. Years later, Borders took over its own online commerce site, but it was never able to catch up to industry leaders—Amazon.com and Barnes & Noble.
Amazon.com and then Barnes & Noble, also beat Borders to the punch when it came to producing and selling eReaders, perhaps the most profitable aspect of a booming eBooks market. While both Amazon and B&N produced their own eReaders, the Kindle and Nook respectively, and made hefty profits on selling the hardware, Borders simply partnered with a Canadian company to offer the Kobo eReader, which continues to lag far behind the other readers, including the Apple iPad, in terms of adoption by consumers. Although there was a merry-go-round of upper management changes over the past few years, Borders apparently never recovered its financial footing from those two big stumbles.
The numbers behind the Borders bankruptcy filing are pretty staggering. Net sales dropped from a high of $4 billion five years ago to just $2.3 billion last year. In its bankruptcy filing, Borders reported a total debt of $1.29 billion and assets of $1.275 billion. Tough to get a loan with those numbers.
Borders currently has over six hundred stores, but will be closing two hundred in the next several weeks, including eight stores in the Washington, DC area and three stores in Manhattan/New York City. Publishers Weekly posted a link to a complete list of store closings.
Borders owes between $230 million and $303 million dollars to vendors, including: Penguin – $41.1 million, Hachette Book Group - $36.9, million, Simon & Schuster – $33.75 million, Random House – $33.5 million, and HarperCollins – $25.8 million. Borders is already past due on $178.8 million to vendors and about $18.6 million to landlords for their stores.
And hard times are ahead for employees. Book industry newsletter ShelfAwareness reports that “Borders has about 6,100 full-time employees, 11,400 part timers and 600 ‘contingent employees,’ who work at least one shift a month, usually at special events.” Layoffs are definitely coming.
Independent bookseller reaction to the Borders bankruptcy was summed up by Barbara Meade, co-owner of Politics and Prose, in the Washington Post. “It’s all just extraordinary. I feel sad for all the good independent bookstores that were put out of business in the process of their expansion and the way they slashed prices. But I also feel bad for the people who are losing their jobs, too. That’s very, very sad.”
So the fight goes on. Is it a war of attrition or survival of the fittest? Only time will tell which is the last store standing.
Gene Taft runs GTPR, a small book and author public relations company, and is Outreach and Marketing Manager for The Independent, where he will also occasionally contribute industry news stories.