What Borders’s Impending Bankruptcy Means for Australia, and Paper Books

Borders books store

Here we go. The first very large book chain is about to file their chapter 11 – bankruptcy to you and I – in the US. Borders was very late in the game to get onboard the ebook bandwagon, a long way behind Barnes & Noble, and their Nook (who aredoing quite nicely, thank you).

Anyone else get the same feeling that you go 8-10 years ago when music monoliths were shrinking and merging uder a similar digital paradigm shift?

The Wall Street Journal reports today that those in the know expect the bankruptcy filing from Borders any day.

The report states:

A bankruptcy filing by Borders Group Inc., which could come within days, will mean fewer places for consumers to buy books, which in turn is expected to speed the pace of online and e-book sales.

Borders has been putting the finishing touches on a store-closure program that could eliminate more than one-third of its 674 stores as part of a Chapter 11 restructuring, according to people familiar with the matter.

“Once physical shelf space is gone, it’s gone forever,” says Mark Coker, chief executive of Smashwords Inc., an e-book publishing and distribution platform based in Los Gatos, Calif. “If you remove books from our towns and villages and malls, there will be less opportunity for the serendipitous discovery of books. And that will make it tougher to sell books.”

The story goes on to speculate that the news can only accelerate ebook uptake, which is certainly true. It’s a no-brainer and it will happen for several reasons, the main one being “confidence”.

What a broke Borders means for physical books globally

As global financial markets have seen recently, confidence takes a long time to build, and can come crashing down in an instant. When bankruptcy rumours start swirling, let alone the filing of papers, confidence evaporates from consumers (will I get books that I buy from these guys?) suppliers (will I get paid?), and advertisers (Am I wasting my money with these guys?)

This is why it’s very hard to come back from this position. Let’s be clear: Borders aren’t dead yet, but they’ll reportedly a step closer, and If they were teetering, this news will push them over.

Worse than confidence about Borders itself, this news will erode confidence around the world about paper books in general, and paper as a delivery system for stories, I’m not saying that the book market will collapse overnight, or even in a decade, but it’s only going to go south from here in the long-term. And The more stories like this that we see, the faster it will slump.

Investors backing p-book chains, investors improving distribution systems for physical books, paper suppliers and sellers,

And the worse news for the physical book industry – news like this gets picked up and repeated around the world, outside the techie, geek world. It was on breakfast TV news in Australia this morning – on Sunrise for those in Oz. This starts to get people who don’t know what an ebook is, or haven’t even considered buying a Kindle, to start to understand that there is an alternative to paper books. Danger, danger, Will Robinson.

Again, no-one’s saying that paper books are dead, but they’ve officially caught a cold.

What a broke Borders (US) means in Australia

Borders.com.au will be hating this. A lot. They aren’t tied to the US chain in anything more than name, but a little bit of mud has to stick. In these days of branding, using someone else’s brand is a double-edged sword.

Not that  Borders AU hasn’t had it’s share of financial strife. It’s owner, REDGroup Retail, was under financial pressure with creditors as recently as late last year, and when they announced a $43m loss, making a filing to the NZ stock exchange that made lots of people nervous. Then there was a round of redundancies in November. More nerves.

There’s that concept again – confidence.

Via Jason Davis’ Book Bee blog

10 Comments on What Borders’s Impending Bankruptcy Means for Australia, and Paper Books

  1. These sorts of ill-considered doomsday prophecies are good for no one: all they do is spread uncertainty, which is already rife.

    What’s your interest in slamming the physical trade? Because this article smacks of propaganda to me. You can’t read one article in the Wall Street Journal and then start shooting your mouth off.

    The pBook trade is alive and well, despite your isolated misgivings.

    If it’s rumours that cause the death of the pBook trade (which is no more likely than the death of the novel itself, or the cassette, or radio, or any other medium that’s come under pressure from an emerging technology), you’ll be among the willfully ignorant apostates who hurried it along by telling lies. Well done.

  2. Hi Jason,

    Interesting article, but I’m confused as to what exactly you’re suggesting. It appears as though you’re saying a lack of confidence in pBook sales and high street sellers will undermine the industry in the same breath as condemning Borders Australia to a similar fate even though you admit they aren’t tied to the US chain in any more than name. I agree branding is an important binder, but businesses have been known to close in other countries (Woolworths in the UK for example) without the same happening in Australia.

    I’d say there’s a massive difference between the US and AU markets at the moment, not least because the US has reported the highest increase in eBook sales from 2009-2010 in the world, whereas Australia is just starting out selling digital. So what does the bankruptcy mean to Borders AU? Probably a sadface emoticon at the bottom of a condolence email to the US, and a warning to try harder in the future themselves, which ALL bookshops in Australia should be thinking about.

  3. Paul Holzworth // February 17, 2011 at 1:18 am //

    Consider the other side of your confidence argument. If I buy a physical book, I maintain possession of the book after the closing of the store that sold it to me. If I buy an ebook, do I still have the ability to access it once the seller declares bankruptcy? Perhaps the effect will be to cause doubt and fear about buying ebooks when the sellers may disappear.

  4. Update: Borders in Australia has also gone into adminstration, along with Angus and Robertson and the NZ newsagency chain Whitcoull’s.

    http://www.smh.com.au/business/borders-angus–robertson-go-bust-20110217-1axt9.html

    “Ill-considered doomsday prophecies”, anyone?

  5. Ryan Paine – you make a lot of strong accusations but I don’t see any responses from you on what think are the lies or untruths in the article ? without those it is impossible not to dismiss your post.

  6. Going into Chapter 11 in the US is a good thing for Borders. It receives a lot of legal protection from creditors and allows it to slim down and restructure in a way it could not do under normal trading laws.
    Clearly the trend to eDevices is starting it’s influence on the bookshop business model. But I don’t believe that it is at the stage yet where it is putting the model at risk quite yet. Book shops have another couple of years of viable trading before that happens.

    I believe that Border’s troubles are self inflicted, like most businesses that go out of business. Lazy inertia in management. Lack of leadership. Lack of direction. Poor marketing choices. Failure to respond to the changing market. These are all probably at the core of Border’s problems and I have no doubt that if they take the right decisions they can survive.

    But the business model is in decline, there is no doubt.

  7. Howard, Jason moderated my second response out of the debate, over at his other site, so I’m taking this to my own blog, in my own time. I hope you’ll come over to read my case there.

    Jon, Borders going into administration here does not make Jason’s ill-considered doomsday prophecy any less spurious. Thanks for the link though – it’s good to know you’re going to the objective sources.

    Fingers crossed that Jason lets this one through.

  8. Ooh, no moderator. Maybe free speech will flourish here.

  9. Actually, we have moderation here. So discuss. But be civil.

  10. there hardly a book store left in Hull now not in my village of cottingham
    Edgar Wallace

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