Jenny Rae Rappaport
We got into a discussion about the future of publishing, over on my online writer's group, Codex, and I ended up writing an entire essay about what I think. And since so many people keep asking my opinion of it all, I figure it's completely worthwhile to x-post it on the blog. So here it is, my professional speculation about Borders. It's long; enjoy. =)

"Ok, since Borders was brought into this, here is the long version of my professional speculation.

One, Borders and HarperCollins are not discontinuing returns together. Borders and HarperStudio, which is one specific, fairly small and experimental, imprint of HarperCollins is doing this. The rest of Harpercollins is still doing returns.

Two, Borders is now trading at 51 cents a share for stock, at the time of the writing of this post. It has been common knowledge in the publishing industry that Borders is going under. It's expected to be gone, as we know it, by February. The real question, however, is will Borders be gone right after Christmas? They are desperate; they are discounting massive amounts of books, CDS, DVDs, etc.

Three, what happens, once Borders is gone? There are a number of answers to this. Since I'm already using numbers for points, I'll start lettering.

A. Borders gets bought up by an investment group, and they do something with it.

B. Borders goes into immediate bankruptcy, everything gets liquidated, and poof, it's gone.

C. Borders gets bought up by Amazon, who decide to go into the brick and mortar business of selling books.

D. Something else happens, that no one knows yet.

We now have several scenarios that can happen.

If Scenario B happens, this has an immediate impact on NY publishers. Print runs go down, because we've knocked one of the major book buyers out of the marketplace. Remember that it's not consumers who buy books from publishers, really, it's booksellers. Because print runs go down, advances go down. Authors and agents lose money on this. Is this the route that publishing will have to go in the long run? I don't know.

If Scenario A happens, it's anyone's guess, and really, in this economic time, does an investment group want to play it safe or take a chance on a failing business?

If Scenario C happens, NY publishers may be in a slightly better position. They'll still be able to publish midlist titles, although print runs and advances may still go down. Will Amazon go into brick and mortar for books? Unknown. But then again, if an investment group is able to pick up the pieces of Borders for chump change, Amazon will be able to as well. And this is the most interesting scenario in my opinion, because it means that Amazon gets an expanded role in the bookselling business, and may possibly aid smaller publishers and midlist titles, just by virtue of being there. Also, I can see this being a benefit for them, in that their consumers could now return books bought online, in store. That's a huge convenience.

If Scenario D happens, I don't know what happens.

Then, there is the so-called "doomsday scenario", which in this case, we'll call Scenario E. Scenario E is where Barnes & Noble goes under too. Currently, Barnes & Noble is trading at $14.61 a share, at the time of this post. I don't think it's in imminent danger of going the Borders route, but 2009 is predicted to be a very, very soft year for bookselling. For all retail in general, really.

So finally, let's address Scenario E. Let's assume, because we're exploring possibilities, that Barnes & Noble goes too. We then have no big chains in America. This reduces the booksellers to Amazon, indie bookstores (which there aren't many left of), Walmart/Sam's Club, Target, grocery stores, and airports.

It essentially means that midlist titles will get shafted, because everything in that list after indie bookstores doesn't stock midlist titles. They stock best-sellers. They stock the popular shit. And yes, some of it is good, and a lot of it is *really bad*. Since those retailers are going to be the only places with shelf spaces, other than indies, publishers are going to have to scale back on midlist titles drastically. I don't think it will necessarily be the death of the midlist or the death of publishing, as has been bandied around lately.

I do think that it will mean that editors are instructed to look for uber-commercial projects. That they'll have less leeway in buying good books that may not sell spectacularly. That smaller publishers may pick up the slack, or a new paradigm will need to be set.

I don't know, and not many people are in a good position to know what happens in Scenario E. And frankly, I don't think it's entirely likely that Barnes & Noble will go under too; I think it's more likely to pick up extra business from everyone who has been deserted by Borders going under.

But like I said, this is all professional speculation.

(X-posted to my blog, because I've apparently written a freaking essay. =)"
24 Responses
  1. Xenith Says:

    Borders in Australia & NZ was acquired by Redgroup Retail, who have Angus & Robertson, which is possibly Aus's biggest book "chain" (they're a combination of franchise & company opened shops).

    Whether that is any indication of what might happen in the US I don't know :) I only know this because I came across it on their website earlier this week when I was looking for something else. I also didn't know there are apparently 27 Borders shops in the country, last time I checked there was just one. There are none in my state. Obviously I'm a very reliable source on the state of publishing down south :)


  2. Ryan Says:

    I made a comment elsewhere that book prices are far too expensive. The average person should be able to walk into their local Borders and get any paperback for $5 or less. I know they are constantly throwing out there 25% and 40% coupons in email blasts, but seriously, I don’t want a gimmick. I just want to walk in pick out the books I want and by them without consulting my budget first. If they can offer you the discount when you bring in a magic coupon and still make money, then why not kick the coupons and offer better everyday prices. I know that coupons also serve the purpose to get you into the store where you may buy things at the inflated regular price, and that the emails are good publicity as a reminder of “Hey, we’re still here. We’re still open.” But the fact of the matter is their current ideology is broken since the sales aren’t coming.

    In my opinion, the over pricing of books plays a large role in dropping sales. Yes, I know that the economy is tough right now, and I know that buying extra books is an easy way to cut down on expenses of individuals. But still, I haven’t stopped buying books, but I do often go into Borders, browse their selection, (I like holding the true paper in my hands as I browse, rather than flipping through “best sellers” online) and then go home and order the titles I picked out for much cheaper off of Amazon or half.com.

    I would gladly buy the book right there in the store; in fact I would prefer it. But if I can get a large discount even after shipping, then can I really justify the extra cash just because I want the bookseller to stick around.


  3. Jenny Says:

    The history of Borders is that over the past 15 years it has already gone in and out of various ownerships. Most of them went the super-store route, taking on Barnes & Noble, which has always been much better at doing what it does than they are. I don't see anyone else buying them. Almost all of B&N's competitors have turned into roadkill.

    Amazon makes most of its money on third-party sales. They do better selling a new book third-party than stocking it themselves because there is no overhead or labor. Bookstores are much too much work for Amazon. If you'll remember, they partnered with Borders for years and could not figure out how to make that model--onlineAmazon/BordersStore work.

    Decreasing the number of stores will NOT decrease the number of books sold per title. It may decrease the number of RETURNS per title.

    Borders stocks fewer titles than B&N and those it stocks are all in B&N. There is a B&N in most markets that have Borders. Where there isn't, it is because B&N's understanding of demographics was much better than Borders' and it was a poor place to put a bookstore.

    I have seen this locally in my region where Borders located in poverty-stricken town where many people cannot afford front teeth to say nothing of books. B&N is 40 miles away in the University town. Guess which store is NOT empty.

    It's worth noting that the midlist was FAR healthier when I started out in publishing in the mid-1980s when there was no B&N chain but lots more smaller bookstores that were regional in scope.

    B&N has been very Wal-Mart like in how it has run its business and the pressures it has put on its suppliers. It has no interest in the quality of what it sells, only in numbers.

    B&N pioneered the ruthless system of "buy based on what the computer says the author's last book sold, and ignore previous sales" method that has killed a lot of mid-list authors.

    The very best thing that could happen to publishing would be:

    1. B&N goes away completely.

    2. Industry realizes that books are not a mass market product like shoes where people will have to buy whatever they are presented with as they have no other choice.

    3. Publishing companies, abandoned by the mass market executives survive only when run by businesspeople who understand publishing, reading, and who it is who buys books and why they buy them. These new executives will know that the profits from bookselling will always be far lower than those of mass market goods, but that if they aren't greedy, they can earn enough to stay in business. That is the traditional model for publishing and the only one that really works.


  4. Borders faces challenges not only from the world of books but from the broader retail strife.

    I have already written a few tombstones for my newspaper about the bleak retail climate. This holiday season is seeing a number of retailers who are already winding down their operations.

    Publishing and other forms of print media are confronted with numerous sources of turbulence. Don't even get me started on the newspaper scene. Forget about a "sea-change". This is a typhoon.

    If a buyer for Borders steps forward prior to any bankruptcy filing, the typical scenario is to eliminate the weakest stores and perhaps reinvent how the retailer operates.

    Rather than an attempt to compete with B&N, perhaps a smaller Borders is created to serve as the local book store. A buyer could also try to leverage Borders more as a regional player than a national chain, sticking to markets where it has some strength. This is purely speculation based on previous buyouts I have seen in retail.

    IF Borders files for bankruptcy protection, liquidation is still not guaranteed (though sounds like a serious possibility). Borders could attempt to reorganize, make its own sweeping changes to keep the lights on. But it would likely not be the same chain of stores as we've known. Fewer locations, smaller shops, etc. In bankruptcy, the company could go up for auction and find a buyer who again may try to reinvent the brand, connect Borders to another type of retail operation or liquidate the inventory.

    Amazon.com going bricks-and-mortar through Borders... Amazon seems content without the overhead from operating stores...


  5. NewGuyDave Says:

    I think book prices are fine. Other commodites have increased much more over the years.

    In 1977 the average price of a mmp was $1.71 and as of 2006 it was $6.82. Prices from the Bowker Annual 2007 displayed at this site:

    http://www.in.gov/library/files/workshopavgbkupdated.pdf

    Using most inflation calculators from the web, the 1977 price in 2006 accounting for ONLY inflation falls in between $5.69-$5.87. That does not account for industry specific cost increases.

    Tack on increases in the cost of raw materials, distribution, and money lost from the return system, and voila...reasonable prices for publishers trying to make a few dollars.

    I certainly understand wanting the lowest available price because I don't like to carry coupons or send off for rebates.

    Still, if publishers can't make a few dollars, they won't be around to print books...


  6. ehadams23 Says:

    Perhaps more indie bookstores will pop up in the wake of this. Most of the ones I used to go to were wiped out by Borders and B&N- but if the big stores are going down perhaps small, specialty bookstores will do better again.


  7. That is scary--really.

    And I really hope things do not go the self-publishing route. No offense to those who have done this, but it costs money--mainly with the marketing and publicity. I certainly wouldn't be able to afford distributing my book nationally with the marketing that would be involved to make a good number of sales.


  8. marikris Says:

    I've always kind of felt bad that the only bookstore near me (without driving more than an hour) is very small. I have bought books there and they don't have discounts. I feel the pain on hardcover books specially. Plus their selection is very small, so if you do place an order from their supplier, it takes a week to come in. 90% of the time, I just go to Amazon.com and order from there since it's easier (so I've been feeling guilty that I'm not supporting my local bookstore). I don't think Amazon will go the brick and mortar way - I think I read somewhere that they're happy in their niche.


  9. There is a B&N in most markets that have Borders. Where there isn't, it is because B&N's understanding of demographics was much better than Borders' and it was a poor place to put a bookstore.

    In my state, you drive a mile past a Borders and you trip over a larger Barnes & Noble with more cars in its parking lot.

    Borders:Barnes & Noble::Linens N Things:Bed, Bath, and Beyond


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  11. Nancy Says:

    Thanks Jenny and all you informative commenters. I'm curious to see how the whole publishing industry survives the current economic climate, especially with the advent of e-publishing and the like.
    I, personally, would hate to see things go the way of self-publishing entirely, because even authors who are decent writers don't always know what goes into publishing a good book. There's a lot that goes into the end product, including editing and design, that is valuable to the work. I don't want a bunch of dross floating around when there's already too much.
    As for books costing too much, I'd have to say anyone who makes that argument clearly doesn't know the cost of making a book in the first place. Most of the so-called inexpensive books consumers like to buy off the shelves are remainders, the books that didn't sell in the first round and were bought from the publisher or distributor at extremely reduced cost at a loss to the publisher. I understand times are tight and we're all on a budget, but it costs money to make anything, books included. So let's be real here.
    Nancy D'Inzillo
    http://www.mightypenediting.com


  12. So we all need to go buy a couple books - stimulate the economy - preferably our segment of it! I think B&N always had a stronger business model and foundation than Borders. Hopefully, Borders will restructure and somehow survive.


  13. Ryan Says:

    My point in lowering prices for books in general has nothing to do with a belief that the bookstores, publishers, or anyone else in the industry are somehow trying to gouge the consumer by artificially inflating prices. I know there is a large cost in the make ready for books, nor am I arguing that inflation isn’t a very real factor in every industry.

    My point is simply this. Books are not selling in large enough quantities to keep the doors of Borders open. Some piece (or more likely many pieces) of the system is broken. There is a wide range of places that an average person can find their “stories.” Movies, video games, and TV are the first few that jump into my head. None of these truly require the work that reading a book does. More than that, in the case of movies and TV, these stories are bite size. One can sit down with chips a dip for anywhere from a half hour to three hours, and complete the story. For books to compete in our society the barrier to entry needs to be as low as possible. Hence, if someone can pick up a book without feeling the sacrifice of money from wallet is too great then victory may yet be achievable.

    Create more readers by making reading as inexpensive as possible. This is only a piece of the puzzle, but if prices are allowed to inflate the uphill climb will be all the more steep.


  14. Mark Terry Says:

    Publishers--who, yes, have their own financial problems at the moment--might want to consider forming an organization and then buying Borders.

    Car companies, after all, have dealerships. LL Bean has its own store (though not franchises), and you only buy McDonald's at McDonald's, so there may be a need for another paradigm here. (Just a thought. What I THINK will happen is Borders will fold. It could be an opportunity for independent bookstores. Frankly, where I live, there are NO independent bookstores nearby and the closest bookstore, about 10-15 miles, is Borders. If it goes out of biz, I guess it's Amazon for everything, because B&N is more like 25 miles and I don't go in that direction for anything else. It's grim, though).


  15. Bibbit Says:

    I'm fairly optimistic about the likely failure of Borders... I expect that this is probably the true beginning of a vast shift in the entire publishing and bookselling industry - the end of which we can't predict yet.
    My best guess will be that this might leave room for something like "book on demand" kiosks. As in, you walk up to the booth, put in your cash (or card) and wait five minutes while the book you want is printed. No returns, no overstock, no shelves...
    I think as long as there is still a demand for physical books, people will figure out a way to produce and sell physical books. Probably more efficiently and effectively than the current methods.

    Beyond that, there's always the Kindle...


  16. Suzanne Says:

    I hope that at least Borders will be bought by another chain and remain a bookstore in some form. And yet, for every one book that I buy at Borders or B&N, I buy 10 via amazon. I love browsing bookstores, but it becomes a matter of economics when it comes to purchasing a book and realizing I can buy three at amazon for the price of two at a brick bookstore. All of which makes me feel a bit sad and guilty because at one time I dreamed of owning a small indie bookstore.


  17. Zoe Winters Says:

    On the cost issue of books:

    Both bookstores and publishers have a VERY narrow profit margin. Too many people have to get paid in this business for anyone to turn a strong profit. All the vendors required to produce the book: editors, cover artists, interior layout people, marketing department, printers.

    Then they have to of course pay the author. And they have to pay for shipping and warehousing. And then distributors get a cut because they don't sell straight to the bookstores.

    The price of books aren't inflated. They're the price they have to be for ANYONE in this chain to make any profit at all. Most publishers operate at about a 2% profit margin. That's nothing. And in any other business it would be considered massive failure.

    In addition, publishers have to eat the costs incurred from the bookstore returns system. I'm told bookstores don't really make much money on books either, because they're selling all that other totally unrelated to books junk at the front of the store. But nevertheless, they aren't eating any risk, because they can return any book they purchase at any time.

    As for coupons bookstores offer, they aren't making a profit off those books they have a big coupon for usually. That's just to get you into the store, where hopefully you'll buy either a lot of books, or a lot of the stuff crammed at the front of the store.

    If reading a book is work, then obviously the individual isn't a reader. I guess I find that a little bit offensive, that books should be cheaper because reading is more work than sitting and watching a movie for two hours.

    It's not work for people who love to read. I find books far more satisfying than visual entertainment like television and movies.

    There is no way to bring down the costs unless major publishers create their own brand stores. (Like what Mark mentions). There should be a Random House books, etc.

    For people who want cheaper books, there are ebooks. Ebooks should cost less than paperbooks. But it's just not feasible to bring down the cost of physical paper books here.

    I also agree that Amazon isn't buying Borders. They have no need. That would be a liability, not a profit center. They've already got a plum deal the way they're doing things.


  18. Zoe Winters Says:

    And I apologize if that part about being offended by the idea that reading a book is work, was too snippy. I reread it twice before I posted, and afterward read it again and thought it might be a bit too abrasive.

    I think the problem is that reading has never been a giant segment of the population in this country and it never will be. Reading is something a certain portion of people is very passionate about, some do occasionally, but most do never.

    And making a book cheaper, won't make more people read, IMO. Not if they consider reading in any way, "more work" than watching a movie.

    To me, watching a movie is more work. Because I'm obligated pretty much to sit in one spot for 2 hours straight.


  19. michael Says:

    As a bookstore owner in Vermont I have made trips to Costco to buy books for resale because the average discount is better than I receive from the wholesalers and darn near what I get from publishers( Now,I do this because the books are not available from my regular sources,usually because publishers sold all available stock to a Costco, which will probably send pallets of these unsold books back to the pubs, who then send me shelf worn copies to restock my shelves) and it's the holidays so my customers can't wait,and they are hot commercial books,but it hurts to do it. Everyone needs to remember that publisher prices are printed on the books and my cost is based on that price. No company...B&N,Borders or even Amazon is actually making money on the transaction if they offer the book at a greater than 40% discount...(Costco, I believe makes their money off of memberships) Market share and stock value make it possible to offer these discounts on line. Industry statistics show that the number of units(books) sold is static over the last 10 years while the average retail cost of the unit has risen. That is the only gain made by the publishers and it is small!Regarding midlist, the publishers chose years ago to concentrate advances on big names thereby killing off midlist authors. Did anyone see the articles about muli-million dollar advances to Sarah Palin? And a few years ago 8 million dollars were tossed at Hillary Clinton. Those publishers made the industry what it is today LOL. The biggest question is what would the financial fallout be if Borders goes belly up leaving publishers and wholesalers with million of dollars of bad debt. How about a government bailout? Perhaps Borders is too big to fail too. Hope you could follow all the plot lines here:) Hahaha. Happy Holidays


  20. I'm probably the exception to the rule, but I prefer our local Borders to our local Barnes & Noble. The staff at Borders encourages browsing and doesn't discourage you from sitting down at a table to read a chapter to see if you want the book.

    B&N is very much the opposite. They want you to get in, pick out your books and get out. They don't like browsers and leafing through magazines at the magazine racks will get you a request to leave the store. I'll be sad to see Borders go under.


  21. nerinedorman Says:

    What bugs me is not being able to find books by some of my favourite authors that have gone out of print. It's gotten to the point where I'll prefer to buy ebooks that take up little space so long as I can read the book ... yet it seems that there's only a growing bunch of new authors starting on ebooks with small publishing companies and all my old favourites are vaguely available on Amazon, who no longer mail to my country ... and our bookstores here in South Africa only carry the most popular titles across the genres. There's a big market gape for a PoD for good authors' out-of-print titles ... and even bigger if it can be sold as an ebook. (Says one who has run out of space in her home for all the books she owns)


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  23. AJ Says:

    Borders is clearly in trouble, deep trouble. They'll be given a NYSE delisting notice early in 2009. Borders will have some time to try to rectify that but doesn't really have any options.

    That doesn't mean they go bankrupt but it does mean that getting credit will become even more difficult. And Borders is already up to their eyeballs in debt!

    Borders has been frantically trying to right the ship. They sold their Australian chain, are shopping Paperchase and probably wanted to sell to Barnes & Noble.

    But 3rd Quarter Borders Group Inc. results included a small bit about the fact that they were no longer trying to sell the company. That's kind of a good thing because ... no one was buying.

    Is Borders Books going out of business?

    If they do, I doubt Amazon jumps in, they're not looking to go brick and mortar in this economy.

    Pershing Square Capital Management, the largest shareholder of Borders and recently provided financing to Borders, may simply take the company private. What they do with it would be anyone's guess.

    They could restructure under bankruptcy but I'm unsure they'd do well even then. Things are bad in retail, even worse for books.

    All that being said, I don't think they'll go completely belly up. Borders is an anchor tenant in too many malls in America. Someone will step in to ensure that doesn't happen.

    One of the problems for Borders (and B&N to a degree) is a staff that is less and less knowledgeable. They're treating books like widgets instead of ... books. Borders employees are angry. And that doesn't help anyone.

    I'd like to see Borders stick around to some degree. Anything that promotes reading and literature is good in my book.


  24. Tom Says:

    Should Borders fail: I think there may be a possibility that Wal Mart would buy them. They would probably keep the Borders name and other features but Bentonville HQ will call the shots. Wal Mart has launched their "Wal Mart Marketplace" where other retailers are selling products online and Wal Mart profits. Borders would be plum pick up if the price is right.