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.