Nature abhors a vacuum, and so, thank God, do bookshops.

“In July,” writes New York Times‘s Susan Stellin,  Borders “made plans to liquidate after 40 years in operation and will close nearly 400 remaining stores by this fall. Yet in a few choice locations those spaces have been replaced by other booksellers, including Books-a-Million, the Hudson Group and a university bookstore. In other communities, the loss of a Borders may open up the retail landscape for independent or niche booksellers.”

Books-a-Million has grabbed a dozen Border stores and Hudson, which does a brisk trade in airport bookstores, has taken up some leases too. A few big university bookstores have moved into vacated Borders. But independents are reluctant to rush into a typically sized Borders footprint – 25,000 square feet – when the the comfortable dimensions for ye olde bookshoppe are more like 2700, says Stellin.

But small bookshops don’t have to move into a Borders space to take advantage of Borders’ bankruptcy.  The disappearance of big-box Borders is driving book lovers to rival shops in the same neighborhoods. All they have to do is open their doors in order to realize an increase in traffic, a cogent example of addition by subtraction.

Details in Filling the Void Left by Borders

Richard Curtis

Jon Stewart’s guest John Hodgman won’t miss the “condescending nerds” who staffed Borders’ bookstores.

The darker it gets for Borders, the more mordant its employees’ humor. As evidenced by this display.

RC

(Photo: ludachrist, seen on Tumblr)

A closing Borders Bookstore in Chicago hung this sign in their window.

RC

If there’s anything left of Borders when it comes out from under the bankruptcy umbrella, its management will still face the same problems that pulled the company over the precipice in the first place: expensive real estate, slow sales velocity, the unending nightmare of returnability, and two behemoth rivals that dominate both the print and e-book space. Is there anything Borders can do the second time around that will give it a genuinely competitive position in a book world rapidly shifting from tangible to virtual?

Well, if I were in charge of Borders’ reorganization I’d urge the installation of e-book and print on demand kiosks. E-books could be viewed and sampled on the kiosk screen, purchased and downloaded directly into the customer’s Nook, Kindle or smart phone. Printed books?  Like the tiny Harvard Book Store about which we recently wrote, which offers a selection of 4 million titles on its Google-powered virtual bookshelf (every one of them turned face out), Borders could have Espresso Print on Demand presses on the premises that manufacture any book to order in the time it takes customers to have a snack in the coffee shop.  (See NYC Pharmacy Chain Installs DVD Kiosks and I’ll Have Four Sesames, Four Poppy Seeds, and One Copy of War and Peace.)

Richard Curtis

How bad is Borders’ collapse?

We’d love to say it’s not as bad as we feared. Actually it may be worse.

We’d been told the total losses were $230 million but it turns out that that was money owed only to major publishers, the so-called Big Six plus another handful of significant houses.  But Publishers Weekly reports the total for the thirty largest creditors is more like $314 million.  Drill down the list of creditors beyond the 3o largest and you find small presses that simply will not be able to survive the hit. This is doubly sad because independent publishers were beginning to make a significant comeback as authors and agents sought alternatives to the daunting big-money/high-platform conditions imposed by a blockbuster mentality industry.

Though Borders represented about 8% of retail sales, PW’s Jim Milliot points out that the percentage was higher for certain categories, mainly high visibility adult and children’s trade books.  In Borders Bankruptcy to Ripple Through Industry Milliot cites secondary damage to printers, authors, agents and especially independent presses. Also clipped are distributors of those presses. Specifically cited were Perseus (owed $7.8 million) and NBN ($2 million), which distribute for numerous indies.

One significant event overshadowed by last week’s Borders bankruptcy was the bankruptcy of Canada’s largest book distributor, H. B. Fenn, just a few weeks before. The loss of Canadian distribution on top of  the loss of American retail outlets was a double-barreled blast for many publishers.  Macmillan for instance lost $10 million in the Fenn collapse, compounded by another $11.4 million from Borders.

The outlook: smaller print runs trickling down to even more selective acquisitions trickling down to lower advances. Superagent Robert Gottlieb says Borders’ best chance to pull out of its nosedive is to go digital, an area where Borders has been Johnny-come-lately.

About that we will have something to say tomorrow.

Richard Curtis

Are you a patron of a Borders bookstore? Then the list of closings will bring home to you what a blow to our culture the bankruptcy of the chain is.

Look upon this list of hundreds of shuttered shops and millions of square feet of store space and despair.

Richard Curtis

A trade publishing industry staggered by the paradigm shift from tangible to virtual suffered a major body blow today as America’s second largest bookstore chain sought protection under Federal bankruptcy laws.

According to Publishers Weekly, on the strength of a $505 million pledge by a corporate refinancer the chain elected reorganization (Chapter 11) rather than liquidation (Chapter 7), hoping to shed highly devalued real estate holdings and other liabilities including underperforming stores among the 674 currently on its roster. But Chapter 11 isn’t a slam dunk: As Publishers Weekly explained, “It is believed an agreement by publishers to resume shipping books to Borders will be necessary to obtain debtor-in possession financing that will allow it to reorganize under Chapter 11.”  Hopefully Borders achieved this goal.

But the $230 million it owes publishers for the stock of books it recently acquired, and the fate of the books themselves, will not be sorted out at a pace that will do publishers or authors any good. Federal bankruptcy laws favor secured creditors like bank lenders, while unsecured publishers have little leverage even though books are what bookstores are all about. Authors of course are at the end of the line. After all, all they did was write the books.

Despite job cuts, store closings and budget slashes the chain has been sliding to oblivion for years and has been the subject of bankruptcy speculation. Even during the 2010 Christmas holiday, it suffered a 15% drop in sales over the prior year’s revenues. The gathering storm clouds of bankruptcy only added to Borders’ woes as publishers withheld vitally needed shipments of new releases. Unlike its principal rival Barnes & Noble, which has the Nook to help B&N’s transition to an e-book business model, Borders’ alliance with Kobo was too little too late to bootstrap itself out of woe.

The handful of major publishers that have survived the upheavals of the last decade probably have adequate resources to get through this latest one too, but marginal presses that have barely hung on may be sucked under for good. Big or small, no one will escape unharmed. Publishers Lunch‘s Michael Cader lists the publisher creditors in a veritable bloodbath of debt:

Penguin $41.1 million
Hachette Book Group $36.9 million
Simon & Schuster $33.75 million
Random House $33.5 million
HarperCollins $25.8 million
Macmillan $11.4 million
Wiley $11.2 million
Perseus $7.8 million
F+W Media $4.6 million
Houghton Mifflin Harcourt $4.4 million
Workman $4 million
McGraw-Hill $3.1 million
Pearson Education $2.8 million
NBN $2 million
Norton $2 million
Zondervan $1.9 million
Hay House $1.7 million
Elsevier Science $1.6 million
Publications Intl. $1.1 million

It’s going to be bad.

Richard Curtis

Earlier this year, when the Borders bookstore chain seemed to have entered the death-rattle stage of its troubled life, we posted an article suggesting that the perfect rescuer would be a book publisher.

Today, as Barnes & Noble faces the prospect of being put up for sale, it seems appropriate to propose the same solution.

We’ve reproduced pertinent passages of the Borders article below, with Barnes & Noble bracketed to make our point.  We think it would be smart business for Borders, we think it would be smart business for Barnes & Noble, and we think it would be smart business for a publisher. Or is “smart publisher” an oxymoron?

Richard Curtis

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When Galley Cat invited me to make some predictions for the coming decade, I conjectured that sometime in the near future we would see the merger of a major retailer and a major publisher. Here was my reasoning: “A combined publisher/retailer solves many problems for both.The retailer owns the content and doesn’t have to pay a premium for it. The publisher does not have to pay a premium to distribute its books. There would be huge efficiencies of manufacturing and distribution.”

I’ve had about a month to think about what I said, and I want to revise it. The efficiencies of a retailer/publisher combine would not merely be huge. They would be decisive. If you don’t believe it, ask Amazon.

Amazon started as a retailer but has become a publisher too. It started with its Encore program aimed at identifying overlooked books and authors. That was followed by the creation of a service called CreateSpace aimed at self-published authors. And now Amazon has begun publishing mainstream authors.

Though Amazon has no qualms about becoming a  publisher, publishers are terrified of becoming retailers for fear of provoking the wrath of their key accounts – B&N and Amazon. When publishers do dip a timid toe in the water and try to sell their books direct to the consumer, they offer them at full list price, which cannot possibly compete with the deeply discounted prices charged by B&N and Amazon. Yet, if they wanted to, publishers could sell their books directly to the public at 40% discount or higher and thus level the playing field.

The solution? To survive, to remain competitive, publishers may have no choice: they must either become retailers or end up being acquired by them.

At this moment Borders [Barnes & Noble], one of the best and most popular bookstore chains in the business, is in a life and death struggle to remain viable. If a publisher were smart it would rescue Borders [Barnes & Noble] and go into the retail business.

Retailers, I said a while ago (see Direct Sales: Publishing’s Last Stand), are intermediaries in a world that is rapidly disintermediating. As big as they are, retailers are vulnerable to market forces bent on eliminating middlemen, and that’s precisely why they have begun publishing books. The digital revolution demands a direct relationship between content provider and consumer. Merging a publisher and a bookstore chain like Borders [Barnes & Noble] would bring both struggling enterprises a little closer to that direct relationship, to profitability and to competitiveness.

Do I hear any bids?

Richard Curtis

“We will not only undersell Amazon, but we make this guarantee: if you find a book cheaper on Amazon, we’ll refund the difference plus 10 percent.”

That’s the offer that Borders Australia made to its customers as reported by Neerav Bhatt in ITnews.com.au. The feisty antipodal book chain “announced plans to launch online bookstores powered by e-books download service Kobo and sell its own e-book reader devices,” writes Bhatt.  Kobo expects to launch on May 19th with over 1 million e-books, newspapers and magazines.

Casually mentioned in the story is the projected list price of Kobo’s reading device: AUS $200. That’s $180 in Yankee dollars, about US $80.00 less than the Kindle.

Has anyone noticed that e-book prices are coming down, and royalties going up?

While you ponder, read Borders Australia Lays Down Challenge to Amazon.com

Richard Curtis