Joshua has written one of the clearest and most insightful articles about the slide of Borders Bookstore that I could ever imagine. I learned a few things and got a little more perspective on the coming problem with Borders. Worth the read folks.
http://brilligblogger.blogspot.com/2010/12/borders-post-mortem.html
Bestselling author Dean Wesley Smith published traditionally more than one hundred popular novels and well over two hundred short stories. His novels include the science fiction novel Laying the Music to Rest and the thriller The Hunted as D.W. Smith. With Kristine Kathryn Rusch, he co-wrote The Tenth Planet trilogy and The 10th Kingdom. He writes under many pen names and ghosts for a number of top bestselling writers.
Dean wrote books and comics for all three major comic book companies, Marvel, DC, and Dark Horse, and wrote scripts for Hollywood. One movie actually saw film.
Dean also worked as an editor and publisher, first at Pulphouse Publishing, then for VB Tech Journal, then for Pocket Books. He now plays a role as an executive editor for Fiction River.
WMG Publishing Inc. is now my major publisher of all my coming novels, collections, and short stories.
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as long as you call ‘em Borders, Dean ! LOL
Happy royalty-full 2011.
Sigh…. fixed that. Teach me to put something up on New Year’s Eve. (grin) Thanks, Chuck.
Whoops! Guess I sorta replied to this in the last thread, already.
So what does this mean? If Borders starts doing mass returns to pay debts and stave off bankruptcy, it could mean losses in the hundreds of millions for major publishers (collectively).
And that could start happening like, oh, next week. Potentially.
Now, I know from reading your wife’s blog, Dean, that the publishers are working very hard to get ready for a shift in business model. But (paraphrasing Konrath here) if Borders does mass returns, it equates to loss to the publishers, who may in turn then buy less books and/or print less of the books they buy, which in turn means less income from them… And the gaping hole in the bookseller infrastructure left by a failing Borders could further accelerate ebook growth.
It seems to me like some publishers could find that the shift to a new publishing model is coming down the pipe faster than they were ready for.
Kevin, I think you might be right that things are happening even faster than many thought, and a Borders collapse could speed things up even more, but they won’t actually shut down. Just as GM and many other companies didn’t shut down. They will just run in under bankruptcy protection and the publishers will get paid and books will keep flowing. Not much chance of a complete and sudden shutdown.
And I think Mike S. is flat wrong about the collapse he kept predicting. I have ZERO doubt that traditional publishers are in for a very, very bumpy transition and some will fail, but only a few and the others will figure out a way to get through. Even if electronic publishing jumps to 20% this new year, that still means that 80% of all books will be through mostly traditional publishers and that’s a very, very large business, many, many billions of dollars. So nothing is vanishing, but there will be massive shake-ups and as Joshua said, this Borders shake-up wasn’t just brought on by electronic, but by bad business decisions for a couple decades now. Electronic is just speeding up the mess.
Man, that’s a train wreck…
…and yet another reason to love the small bookshop. A loosely organized “confederation” of small bookshops, perhaps, but still.
I suppose hiring a competent CTO would have helped, too. That seems important.
It’s always good to get these glimpses into What The Heck Is Going On(tm). Thanks!
There’s a Borders here, and it’s the ONLY bookstore in the area I never shop at. Didn’t realize why (and didn’t bother to analyze why); just knew I didn’t like it, and since there are 4 bookstores in the area I -do- like, I just don’t go to Borders. Joshua Bilmes analysis pretty well covers my reasons, and it’s interesting reading. Glad you posted that link.
Laura, whose feeting are KILLING her after co-hosting a big New Year’s party last night
Borders is the only new bookstore within 50 miles of here, and I don’t much like it either. I would much rather spend the extra hour of driving and go to Powells, but we don’t do that more than once a month or so, sadly.
Started the first challenge story tonight. “The Smoke That Wouldn’t Bark.” Sort of scary writing with this kind of public and immediate challenge, but I got going about 1:15 and am having a blast. I even got to a cover image and went “Perfect” as I typed it, so stopped and did the cover for the story. Seven pages and a cover between 1:15 and 4:00. Still a ways to go. This could be five to seven thousand words long the way it’s shaping up and I have no idea where it’s going. Great fun.
Here’s what I’m wondering….If Borders goes down in flames, why wouldn’t independent or Barnes and Noble move in for the market share in the towns which lost book stores? I’m just curious. I know the blog articles are more focused on what could happen in publishing if Borders tanks, but I have to wonder if it would be the catastrophe which is being predicted for the “readers.” Sure some towns will loose their “new” book store and won’t get a replacement, but I would think other towns would get either an independent or a B&N if the individual store was doing well despite the bad management at corporate.
Angelia, under normal conditions, what you suggested about having other stores move in and take the market share if Borders goes down is correct, but at the moment in publishing these are far from normal circumstances. I don’t see Borders shutting down completely, but I may be wrong. But think of it this way. Running a bookstore is tough during regular times, even with publishers guaranteeing all the merchandise with the returns system so that the bookstore owner has to take no responsibility for their own inventory. But now the returns system is starting to fade slightly, stores get better discounts on non-returnable, and the electronic books haven’t made it into stores yet in any way that will help the stores besides B&N. I’ve owned a bookstore and two comic stores over the years and I would never start a store into this uncertainty. Not until things settle a little and it’s clear how a profit could be made.
I worked at Waldenbooks back in the late 80s, and it makes me sad to see how far down Borders has gone. My local Borders was fantastic ten years ago, but now it’s a pit. All the non-book items they sell now makes the place look like KMart rather than a bookstore.
And just today they sent out a 50% off one item coupon for their club members. I feel a little guilty going in to buy something just for the coupon, but it really is a steal.
And Laura, I have a similar experience. The closest Barnes and Noble is 30-odd miles from me, whereas the Borders is maybe 10 miles, and I’ll go to the B&N before the Borders if I’m looking for something specific. I have more confidence the B&N will have it. (Also, the B&N is a much better looking store, and clean. I don’t like shopping in squalor.)
I am a Michigander, born and raised in a GM town. I gotta say that the phrase “GM is still there” does not fill me with optimism about Borders.
If it weren’t for the bailout, GM would most certainly not still be there. I just don’t see the gummint riding to the rescue of the bookselling industry, any more than they are helping the newspaper industry. Borders isn’t too big to fail.
It’s true that running under receivership is better than just being gone – some of the support businesses may get a chance to hang on, and the dependent communities too. But it is not a picnic. It’s ugly. In some cases, even though some of the support businesses didn’t fail, they were brought down anyway by the ones that did.
The fact that Borders is a Michigan company is particularly depressing. (Perhaps they got some management ideas from the auto industry …)
I agree, though, that the move to ebooks was not likely the cause of this – but this will probably accelerate the shift toward ebooks.
I knew there was some reason I hadn’t like Borders over the last 10 to 12 years, but I could never put my finger on exactly why. Now I can, thanks to Joshua Bilmes.
There’s a Borders about an hour from me, but I’ve never been in there. There’s also a B&N about an hour from me, and I’m in there about once a week. There’s only one indie book store near me, and I try to hit it up as often as possible, but I’m not crazy about their selection. The last place I lived I had five indie book stores, the main branch of the public library and two college book stores within walking distance of my house, and that was like a piece of heaven.
The whole Borders post from Bilmes reminded me a lot of my days as a newspaper editor … people in charge who saw no difference in their product than any other product on the market. They could be producing and selling anything … newspapers, books, cars, toasters, widgets … it was all the same to them. There’s a lot to be said for business sense, but there has long been a lack of recognition that different products draw different consumers or draw consumers for different reasons, thus the same business plans and thinking won’t work for each and every product all the time. Then when it all falls apart it’s the consumer’s fault for not caring, or it’s the employees’ fault for not working more and making less, or anybody else’s fault except the top dogs, who will still get their 6 or 7 figures plus bonuses for NOT going down with the ship. Do I sound bitter? Yeah, maybe a little; just saw way too many stupid decisions over the years. Another reason I’m glad to be doing my own thing now.
From a PW post:
Still reeling from record losses and a continuing drop in sales in the third quarter, the Borders Group announced that it is delaying payments to some publishers. PW has learned that at least one of the “big six” New York houses has suspended shipping books to Borders, a troubling sign for the company as it attempts to find lenders to refinance its debt and provide enough liquidity to get the national book retail chain through to early 2012.
If they’re not paying some of their publishers, and some of their publishers have stopped shipping books, it looks like they’re a couple of swirls farther down the death-spiral than I thought they were. :/
Angie
I think you’re right, Dean – Borders will survive, but not as a large chain. They’ve closed so many stores already in recent years – and this year I think we’ll see closures of many, many more as they consolidate their effort around stores that are still turning a profit, and dump the ones which are not.
Which in a way is probably worse for publishers than if Borders just into bankruptcy tomorrow. Because (according to PW) Borders is holding about $450 million (wholesale) in books right now. And if you were in debt to publishers, and wanted to clear that debt and close say half your stores at the same time, what would you do with those books…?
Returns. So they return $200 million in books – which are destroyed, not really “returned”, so they are a total loss to publishers. If the company went into bankruptcy or went under completely, publishers might have a chance to get some of that debt paid via those books. If Borders just rips up the books at every store they close, they can clear their debts to publishers without actually paying publishers a cent.
In the long run, Borders fighting the good fight is going to hurt the publishing industry (and via them, writers who rely on them) a great deal more than simply going under ever could.
Kevin said, “In the long run, Borders fighting the good fight is going to hurt the publishing industry (and via them, writers who rely on them) a great deal more than simply going under ever could.”
Oh, Kevin, I completely disagree. Trust me, half a pie is much better than no pie at all. And a sudden shutdown would also shut down distributors, some publishers, and so much more, where a bankruptcy path to a new, smaller, more profitable company where the debts are mostly paid off is a thousand times better. A million. The WORST case is a sudden shut-down, which would take a few different events to happen all at once to cause that. And every Indie publisher/writer needs to be hoping they stay afloat as well because they are powering their web sites with Sony (I think, or maybe Kobo) and selling three different e-devices in their stores. So they are helping spread the devices and also powering a new web store. Granted, I know, they are small online and many of you only think Kindle is the only thing, but trust me, the more stores we have, the better off we are. And Kris and I are selling very well through both Sony and Kobo right now. In fact I’m selling better on both of them then I am on Kindle. Kindle for my little 30 short stories is 4th on my list in sales volume.
So hope Borders stays afloat, folks, in one fashion or another. We need them. We may not always like them in their current form, but we need them.
Borders sold $2.65 billion retail in 2009, and we know their sales were down Q1-2, and probably Q3-4 as well. So if we guess at $2.4 billion in 2010 (which might be high, hard to tell), then that’s about $1.2 billion in wholesale books this year. And probably less than that – maybe much less with more store closures – in 2011.
If Borders dumps even half their inventory to recover debts, that amounts to straight losses for publishers collectively equal to a fifth or so what they can expect to sell in 2011. If they continue dumping and enter a “death spiral” like some suggest, they could drop as much as $500-600 million in books cyclicly as they fall, ‘returning’ books at a faster and faster rate to get new content into their stores.
That’s a horrific situation for publishers, with each return equating to a loss for them.
On the flip side, if they die in place, the publishers get their books back to pay the debts, so they can recover at least some of the money involved by reselling them elsewhere (even dumped, they can at least recoup the cost). B&N and other bookstores or chain stores with book sections will pick up a lot of the slack, and online print bookstores will pick up a lot of the rest.
Or is there a flaw in that logic that I’m missing?
Kobo (who gives Borders their ebook store) is an independent company. I’m honestly not sure how much of their traffic relies on Borders, and how much Borders is simply an additional advertising stream for them. But I think they’ll continue to do OK with or without Borders.
I don’t think Borders living or dying impacts indies very much at all, either way. It’s basically just a matter of time (couple of years, tops) before the Big Box bookstore model loses viability in most areas anyway, and POD bookstores move in (already are, in places). Since instore POD means “indie/small press too”, just like ebook, (at least so far), the anticipated outcome is pretty much the same no matter how Borders does.
I see where your problem is, Kevin. You don’t understand the returns system. You said, “On the flip side, if they die in place, the publishers get their books back to pay the debts, so they can recover at least some of the money involved by reselling them elsewhere (even dumped, they can at least recoup the cost).”
Of course that wouldn’t happen, they would just return them for credit against the debt just as they would do if they only dropped in half. Or went into bankruptcy protection. No books are going back that wouldn’t go back anyway. Hardbacks are sometimes full copy returned, but how pays the shipping on that if it all floods back at once into warehouses? And paperbacks are stripped and covers returned for credit and magazines are returned without even that, just a statement of how many didn’t sell. A 100% sudden shutdown without a white knight coming in and taking over would give 100% sudden loss to the publishers and distributors instead of a slower decline and half loss.
More than likely, in a sudden shut-down in a bankruptcy, the bankruptcy judge wouldn’t even allow the credits to be returned or the books stripped, since those books would be assets of the bankruptcy. So more than likely the books would just be sold at bulk at auction. No, publishers would be 100% screwed on a sudden shutdown.
As soon as a publisher shuts off credit to Borders, they must pay that bill to get the credit back. Squeaky wheel gets the oil.
Folks, the returns system isn’t a “send the book back” type of thing. It’s a destroy the book and get credit for it system. I’m not sure what the “turn” or “churn” is in a bookstore these days, but it used to be 16 days at it’s worst, meaning every book in a store would either be destroyed or sold every 16 days, and returns often average 50% range, which means half are destroyed.
Some stores and publishers are working on a “discount in place” form of returns system for hardbacks and some trade paperbacks. That means that if it didn’t sell, the publisher will “officially” return the book, the publisher will “officially” sell them the same copy of the book at a higher discount, and the store can then send the book to a discount table. For those of you who haven’t been reading my blogs, 95% of all the books on discount tables were sold directly to the store for that discount table. Only recently have bookstores been allowed to discount a book without returning it and then ordering it again and having it shipped again to them.
For writers, this is called “high discounting” in your contracts and if you don’t limit the percent of your run, it might all be high discounted and you will end up with nothing but your advance, because authors don’t get much if anything for any book sold at high discount, again depending on the contract.
Nope, Kevin, we want Borders to survive and turn around, even at half its size. Critical in so many ways.
Dean wrote: “So hope Borders stays afloat, folks, in one fashion or another. We need them. We may not always like them in their current form, but we need them.”
Amen, brother. We need them in a way that many may not have considered, which is that the fewer big distributors there are, the greater the opportunities for de facto corporate censorship.
I write erotica. Steve Jobs wants to give us all “freedom from porn” so I can’t sell through Apple. Amazon just started yanking erotica books from Kindle that had subject matter they didn’t like. Will they start yanking other erotica? It’s hard to tell.
Now there’s nothing wrong with this, really. A company certainly has the right to sell or not sell whatever titles and subjects they want to sell. But if they’re the ‘only game in town’ it becomes de facto censorship.
In contrast, if there are lots of competitors, someone will decide that not limiting their offerings based on content is a better business decision. Economic competition increases competition in the marketplace of ideas.
As Dean said, we may not like them, but we need them. The more marketplaces to sell our stories, the better.
No, I understand the ‘returns’ system, Dean – which is why I used quotes around the word, since it’s not really ‘returning’ anything.
But if you owe a publisher money. Have to pay the publisher money to get more books from them. Are closing poorly-performing stores anyway (by the dozens soon, I’ll bet). And have this fast, easy way to get credit with the publishers (tear covers off and mail them back for credit)….
Doesn’t it make sense to do that? Close the stores, return their inventory to pay your debt, and get more books to keep the other stores open. Then start cycling returns through at a fast pace, to keep the fresh new books (bestsellers and such) in the store.
Whereas with bankruptcy, I completely concur that the court would seize all assets (books), sell them, and then the publishers would get at least some recoupment of the debt Borders owes them.
Maybe not, though. I think the math is a little fuzzy.
Anyway, I think Borders will survive… It just won’t be a powerhouse anymore, not for a long while at least. They’re too far behind in the online print and ebook sales departments. Lot of catch up to do, there.
Kevin, in a complete bankruptcy, publishers would get ZERO. Publishers as creditors are far, far down the list. And it won’t work the way you suggest I’m afraid. But won’t matter at this point, since the chain will more than likely drop into reorganization bankruptcy and then publishers will be paid smoothly once set up. That’s the best solution of an ugly situation. Worst is complete and sudden shutdown inside a bankruptcy. That would send publishers out of business quickly, especially the middle-sized publishers and a few middle-sized distributors as well. Ugly beyond words.
By the way, folks, not sure who remembers a few weeks ago, but Borders made a pitch to buy B&N, and they have the backing to do so. Combining the two stores might end up being another solution. Either way Borders goes away, but maybe not since there still are a hundred or so Waldenbooks in old malls.
I am one ex-customer of Borders in Australia.
I found it is easier to order online through Book Depository (or Amazon) for any back listed book I find for a list of authors I love to read and collect. Also for a much cheaper price than in any book store in Australia (in some cases cheaper than secondhand books) and with free post to Australia from England taking only 3 working days from packing to delivery (unless the airports are closed due to snow).
Why would I want to travel to Borders (or other local book stores) only to find they don’t stock what I am looking for, then order it, and wait a week to a month before I travel back to the store to collect the order.
Note that Book Depository allows USA authors into Australia inside the 12 to 18 months wait for most books through physical stores.
Also Borders has collapsed SF/F to only one row of shelves, not the two or more rows it once was. When they decided to tell me what little choice I had from stocked books I walked out.
Now I discover new authors by reading their ebooks, and if I decide to collect any, I will purchase the print books through the internet.
Also, any business retracts and expands in changing economy, but they don’t forget their customers. I firmly believe once a business reaches it’s level of incompentence (not understand the clients in each district) it must retract until compentence is again reached.
I can only wish them well because I love books, but I will not be limited in my choice of purchases by their bad management.
Gotcha. Makes sense, I guess.
But:
“By the way, folks, not sure who remembers a few weeks ago, but Borders made a pitch to buy B&N, and they have the backing to do so. Combining the two stores might end up being another solution.”
Eek. I saw that, too. I was rather glad that the idea seems to have gone away… The only way Borders buying B&N is a solution is if the B&N management ends up in charge. Which would make sense…but which I am not certain would happen. Borders management has been screwing up by the numbers for quite a while now (detailed in even more depth than I knew in that article you linked!). They are in the “TSTL” category right now. Bringing B&N, who is doing a credible job of dealing with massive changes in the industry, under Borders (mis)management will only exacerbate the problems, I fear.
It hasn’t gone away, Kevin. It is still a very active idea and they have the backing to do so. More will be known as the price of the stock gets through this next week. If it drops too low, nothing will work but bankruptcy and reorganization.
Yeah, it would be like when Disney “bought” Pixar. They basically put Pixar in charge of the animation unit.
It’s crossed my mind that, in a perfect dream world, Powell’s would by Borders. Perhaps sentiment on my part — Powell’s is one of the things I really miss about the Portland area.
Ah, well…