Approximately three months have passed since Borders filed for bankruptcy. In that time, we’ve seen the bookseller announce the closure of more than 200 stores. Other stores are figuratively holding their breath as they wait to see if the axe will fall on them. Booksellers and other vendors suspended deliveries to Borders for a time before going to a cash only business. I’ve shaken my head as reports came in that, amid all the closures and employees losing their jobs, Borders wanted to pay their senior execs millions in bonuses. And still there has been no business plan released to the court or creditors and no reorganization plan pulled together.
What more could happen to drive my sense of disbelief higher?
Simple, the CEO of Borders, Mike Edwards, could give another interview.
The article starts by noting that Edwards, while optimistic that Borders will successfully emerge from bankruptcy, is placing the burden on publishers. Without publishers agreeing to new terms under which they will ship books to Borders, the company will fail. While he doesn’t say it, I can’t help but wonder if these new terms are actually the old ones — deliver books to us without us having to pay for them. Trust us, we’ll pay you sometime down the road. Trust us, we’re your friend.
February 16th saw Borders filing for bankruptcy. Since then it has closed — or announced upcoming closures — of approximately 230 stores. As the article says, Borders “continues to bleed cash” to the tune of a $52.6 million loss from January 1 – March 26.
My disbelief at Edwards’ disconnect grew when he commented about his disappointment at how the Ann Arbor community hasn’t rallied around to support Borders. A community already hard hit by the struggling economy, a community that had been so proud of its ties with Borders until the company morphed into something the founders probably could never have imagined, and he is disappointed it hadn’t rallied around to support it. I have friends in the area who probably asked themselves what Borders had done to help the community in recent years.
And let’s not forget that in the same metaphorical breath, Edwards said that Borders corporate HQ could be leaving Ann Arbor. That’s really giving them a reason to support the troubled company, isn’t it?
I guess what baffles me the most is Edwards’ attitude that publishers, vendors, landlords and employees must make concessions to save his company. He wants publishers and vendors to forget the past non-payments and start supplying him with products on a wink and a handshake. He wants landlords to redo lease terms to lower Borders’ payments. Employees by the thousands have lost their jobs. The ripple effect of all this goes into each community — and he doesn’t seem to want to consider this.
I guess that’s why I’m not impressed when he responds to a question about executive bonuses by saying these probably won’t be paid. In other words, he doesn’t think they can meet the goals required for the bonuses to kick in. If they can’t meet these goals, is there any real chance Borders can come out of bankruptcy?
Oh yeah, these goals also hinge on concessions from landlords, creditors, etc.
Edwards did say in the interview that Borders has come up with a business plan it will be sharing with publishers in the coming days. This plan includes terms Edwards described as a “shared risk scenario”. Am I the only one who sees big problems with publishers taking on any more risks right now? Especially with the rumbling storm off their metaphorical coast as authors start looking more closely at their sales figures and royalty reports?
Another indication that Borders refused to see the writing on the wall and then, when the wall smacked them in the face still wanted to put the responsibility on others is the comment from Edwards that they only reason they closed the almost 230 stores is because publishers wouldn’t agree to concession in January. If these concessions had been agreed to then, only 110 stores would have been closed.
Maybe I’m slow here, but Borders initially announced that these stores were closed because they weren’t profitable. Is Edwards saying he’d have kept unprofitable stores open — and continue an even larger cash bleed than it is experiencing now — if publishers had agreed to continue supplying books without payment? The mind boggles.
Then comes his disconnect, or at least putting on of blinders, about the future of e-books. He notes that, when he joined Borders a year and a half ago, e-book sales were approximately 1% of the market. According to him, at that time the Kindle didn’t have “any traction”. And he is oh so surprised by the increasing popularity of e-books and the increase in their sales numbers.
I’m sorry. All he had to do was look at the sales figures for the last ten years. They’re available. A simple google search will find them. If he didn’t want to do that, just look at what was happening from his competitors at the time. Amazon had brought out the Kindle 2 by then. The Nook was coming out. Sony had a dedicated e-reader. Baen Books had been successfully publishing and marketing e-books for years, as had other publishers.
Edwards is disappointed publishers haven’t been more supportive of them during these first few months of bankruptcy. But there is one word he uses that everyone should note and remember — especially if you happen to be one of the publishers he’s asking for concessions from. According to Edwards, “If all the pieces have to come together, the terms commitment then drives the financial sponsorship.” Note the last word — sponsorship. That really is the crux of what they are wanting. They want publishers — who are facing their own financial crises right now — and other vendors to SPONSOR their debt.
After reading this interview, my confidence in Borders is even lower than it had been and that saddens me. I love bookstores. I think they are a vital part of a community. But this sense of entitlement, of trying to put the responsibility on others instead of where it belongs bothers me a great deal. Unfortunately, it doesn’t surprise me from a corporation that has shown more concern about rewarding execs who didn’t read the writing on the wall, or who at least ignored it, than about the employees who have suffered as a result.