For Whom the Bell Tolls…It tolls for Borders and, quite possible, a number of publishers as well if they are foolish enough to buy into Borders’ latest attempt to save itself.
Much of the news from the publishing world this week has centered around Borders Books and its attempts — very late attempts — to save itself from bankruptcy. There have been firings, the announcement that it is closing one of its distribution centers and talks with publishers all so it can get refinancing on its outstanding debt. Is it a case of too little too late? In my opinion, yes. Worse, if the publishers buy into Borders’ “solution”, I won’t be surprised at all to see not only Borders but some of those publishers shutter their doors in the next year or two.
Here’s a quick time line of what’s been happening with regard to Borders since the first of the year. It started with a new round of firings or resignations in the executive suite. Gone are Thomas Carney, longtime legal counsel, Scott Laverty, the chief information officer, Tony Grant, v-p of real estate, Bill Dandy, senior v-p, marketing, and Larry Norton, senior v-p for business development and publisher relations.
Then came the news that Borders wanted publishers to push back the date for payment of outstanding bills — ie, Borders wanted to keep books already shipped to them by the publishers but not pay for them. As talks between Borders and the publishers commenced, we learned Borders wanted the publishers to convert this debt into “interest bearing loans”. This brought Borders stock tumbling to a low of 84 cents a share. From the same article: “Several publishers said Borders owed them millions of dollars in payments, up to tens of millions each for the larger publishers. Publishers said they had been told by Borders executives that more than two dozen vendors were owed money.”
Compounding the bad news is this report of the announced closure of one of Borders distribution centers. This center, located in Tennessee, had already seen layoffs of 200 employees. Now, another 300+ will lose their jobs. This is a cost-cutting move aimed at streamlining their distribution chain. Again, too little too late, in my opinion. This is something they should have realized before opening the center a couple of years ago.
Indicative of the problems facing Borders the announcement that Diamond Book Distributors has suspended shipments to them. DBD is a major source for graphic novels. From ComicsBeat.com: “They have informed their clients that since Borders has suspended payments to them, DBD is suspending product shipments and has put the Borders account on hold.” Now, you might not think this is major news, but think about it. Titles included in the DBD stable are Streetfighter, Gantz, Shrek, Transformers, G.I. Joe. Darkhorse Comics uses them as a distributor. We’re talking comics and manga. This is an entire demographic Borders has lost, for a short time at least, because of their halting of payments.
The latest news is that Borders has given publishers until Feb. 1st to accept or reject their latest proposal. According to the article, Borders is asking publishers to take on somewhere between one-quarter and one-third of the company’s “reorganized” debt.
All I can say to this is, WTF? I’m sorry, publishers are in trouble. They are barely keeping their heads afloat as is. Now Borders wants them to take on more debt. Where is the money going to come from? Ask most writers and you’ll find that advances are down — and that’s when they are able to find a traditional publisher for their books. Some are reporting late and/or incomplete royalty payments. There is a growing discontent linked to the belief royalty accountings are anything but accurate. Book prices continue to go up and sales of hard copy books continue to stagnate or decrease. What Borders is asking these publishers to do is tantamount to suicide for some. “Take on my debt, continue to supply me with books but don’t charge me for them, and I get to stay open. Oh, wait, you’ll have to close your doors? Sorry, can’t help you there. But we’ll send flowers to your corporate funeral.”
As much as I hate to see any business close its doors — not so much for the business itself as for the employees — perhaps it is time to let Borders take its lumps and either close or downsize to a point where it can stay afloat. But it has to be done in a way that doesn’t put the rest of the industry in jeopardy as well. I don’t have all the answers…not even a few of them. But I do know I don’t want to see the major — or minor, for that matter — publishers chain themselves to a sinking ship.
For an excellent overview of what went wrong with Borders, check out this article by Peter Osnos.
(Cross-posted from Mad Genius Club)