Friday, February 18, 2011

Border Crossing

As I'm sure you're aware, there has been a bit of an upheaval in the book industry this week with the announcement of Borders filing for Chapter 11 and closing 200 stores around the country. Two San Diego county stores are closing - the downtown store and one out in El Cajon - and 33 others in California alone. None of this really comes as much of a surprise, as Borders has been in some serious financial trouble for several years, but what will this mean for the industry as a whole?

In 1997, Borders stock hit an all-time high of $44.88 and by 2003 they were operating 1,249 stores (including Waldenbooks stores) worldwide. However, the last time Borders turned a profit was in 2006 - not that most indies have much to brag about either, but we're talking billions of dollars here. Citing financial woes, they sold all of their UK stores 2007 for a mere £20 million, scaled back the number of their Waldenbooks stores by half, and turned around & opened 14 digital concept stores in the US in 2008.  Then, later in '08, they announced that they were attempting to sell the whole chain - rumors that they approached Barnes & Noble for a buyout began to spread. 2008 losses: $187 million. By November 2009, the number of their smaller, non-"superstores" had dwindled from 1100 to 170. In 2010, their CEO bailed and they posted a $46 million second quarter loss despite opening an online eBook store selling eReaders. The 3rd quarter was even worse, at a $76 million loss & the stock plummeted to less than a dollar a share.

This January, they appeared to receive a bailout from GE of all places, but that seemed to fall apart when it became apparent how much money they actually owed their creditors. Chapter 11 opened on February 16th and they announced the closure of the 200 stores.

So, what does this mean for the rest of us? For years, Borders and Barnes & Noble were the ultimate enemy - their shadowy presence across the country forced the closures of 100's of small independent bookstores. Up until the last couple of years - as Amazon cornered more and more of the online market - the gruesome twosome were the bane of our collective existence, hated more than anything else for forcing the demise of so many of our fellow booksellers. Yet, people were buying books from them in droves, keeping America literate, despite it all.

Okay, so indie booksellers might have reason to rejoice over the fall of the giant, but...

Borders has $1.293 billion in debt. Soak that figure in. Even with restructuring & loans or whatever, how will they be able to pay off all their creditors? Who cares, you ask? Those creditors are the publishing companies - who are already behind the the eight ball with the eBook thing. Penguin is owed $41.1 million, Hachette $36 million, and Random House, HarperCollins, and Simon & Schuster all north of $25 million. Hell, they owe Source Interlink $6 million for magazines. None of this factors in the small publishing houses who are so far down the payback pipeline that they'll fold up altogether before seeing any restructuring funds.

So despite the fact that I've strongly disliked Borders' brand of bookselling for much of my time as a bookseller (see previous rants, Borders Invents Handselling, May 7, 2009 and In Your Face Bookselling, March 22, 2008), I think their failure speaks volumes for the fate of the book industry. Whenever there are fewer physical places for people to buy books, we all suffer.

And I don't mean "suffer" financially, I mean suffer as a literate, intelligent society.

So where do we go from here? I would hope that we would regroup as a society & realize the benefit of having small, locally owned bookstores in our communities. Alas, I fear that more people will gravitate to Amazon, ebooks, and more reality TV. After losing so many indies over the years, what will it mean to have the behemoth who killed them fall themselves? Will we just march on past or will we return to our bookish roots?

San Diego booksellers have long been fortunate in regards to the chains - the city is so spread out (SD county is a roughly Connecticut-sized piece of real estate) that the big stores never really encroached on what indies there were already in place. Yeah, the malls have chain bookstores (or they did) but having big box bookstores amidst the big box sections of town never really affected stores like Warwick's. So the demise of the downtown Borders won't have any effect on most of us, despite our long standing wish that they fail. Or rather, our longstanding wish that their customers were ours. Which I'm afraid they won't be now, even with the present set of circumstances. Complicated, no?

So, I've added a little 2-part poll to the Catapult this week in the wake of all this - see the side bar. I'm curious to know where people buy their books and how they read them. As readers, are you affected at all by the Borders closures?