Tag Archives: Borders

The end of a bookseller

As predicted, Borders will soon liquidate its remaining stores, leaving almost 12,000 men and women without jobs.  The bookseller will leave behind millions of dollars in debt still owed, much of it to publishers.  Landlords will be left with unfulfilled leases.  The financial impact on the cities where the stores are located will remain to be seen, but the loss of tax dollars these days is never a good thing.

Now, there is still a very small possibility that the bankruptcy court won’t approve Border’s plan to liquidate the remaining stores.  But, in my opinion, my chances of winning the lottery are greater than the court not approving the liquidation motion.

Mike Edwards, CEO of Borders, sent a letter to the bookseller’s employees yesterday explaining what is happening.  He admits that they have been facing “headwinds” for more than a little while now.  These difficulties, according to him, include the economic downturn, e-books and a rapidly changing publishing industry.  All of which is true.  But what he doesn’t address — and I probably shouldn’t fault him for it.  No one likes to focus on their own shortcomings — is how mismanagement and a failure to adapt to the changes in the industry also played a large part in the fall of the once might bookstore chain.

I’ve written previously on why I think Borders has found itself facing the inevitable.  I don’t want to rehash all that.  No, what we have to do know is figure out how this will affect the publishing industry as a whole and how we — writers, publishers and retailers — will be able to step in and fill the void left by Borders’ closing.  Can that void be filled?

In my opinion, the day of the big box store is over.  Barnes & Noble and some of the other chain may survive.  But they are going to have to continue adapting to changes in the market and consumer demands.  Does the closure of Borders herald the end of the print book?  No.  At least not for a long time.  Nor does it signal the end of bookstores.  Despite the cries of the doomsayers, e-books still hold too small a percentage of the market to kill off the printed book.   Nor does the continued success of Amazon mean bookstores are doomed.

What I think we will see are more specialty stores.  Smaller venues catering to customers looking for a specific kind of book.  These will very likely become boutique-type of stores.  Think books and wine bar or upscale coffee shop.  Atmosphere will play a part in the success of the shop.  But, more importantly, customer service and employee knowledge of the stock will be key.  Just like it used to be in the local bookstores before they were driven out of the market by the big box stores.

What’s that you say?  That those stores have been proven not to work because they were run out of the market when B&N and Borders and other “superstores” came into the area.  Of course they were.  Because we, the consumer, were blinded by the bright lights and huge selection those new stores offered.  Those stores could buy in larger quantities than the locally owned stores could, so they could sell books at a lower price. Something else we liked.  But where does that leave us now?

Think about it.  With Borders gone, especially if you live in a major metropolitan area, where is the closest bookstore?  Two years ago, there were at least eight major bookstores — and probably more likely a dozen.  It’s too early to figure it out exactly — within thirty minutes of my house.  Now, once Borders liquidates the last of it stores, there will be less than half that many.  The closest is ten minutes from my house.  Not that far but it’s located across from the mall where traffic is horrid at the best of times and parking is a pain.  In other words, not someplace I go unless I absolutely have to.

Now, if someone were to open a specialty shop up in the area, one that specialized in mystery or science fiction/fantasy and made it an inviting place to shop, I’d be there in a flash.  It would be worth waiting a few days and paying a bit more to have a bookstore that catered to my wants and interests.  But, whoever opened that store would have to do so with enough reserve capital to operate for at least two years before posting a profit.  That’s just common business sense — something that is often lacking these days in both small and large business ventures.

But there is something else we, as writers and publishers, have to be worried about with Borders closing.  There has been a lot written about how the loss of approximately 400 stores will mean there will be even less of an opportunity for new authors to be discovered.  That might be true, but that’s been the case for a long time.  No, the real impact is going to be on the mid-list writer.  These are the workhorses of the publishing world, and all too often the unsung heroes.  These are the writers who can be relied upon by publishers to deliver several books a year that will sell a certain level of books — or more — each time because they have a solid fan base.  It might not be huge by best seller standards, but it is there and these fans can be counted on to buy and talk about that author’s titles.

Unfortunately, it is the midlister who has been getting the short end for awhile now.  That will only get worse as publishers scramble to find ways to recover from the financial hit they will take with Borders’ liquidation.  Remember, at the time Borders filed for bankruptcy, it owed publishers close more than $190 million.  In the five months since that filing, you know that amount hasn’t been decreased by much.  Add to that the amount that will be owed to those publishers who agreed to ship stock to Borders without payment on delivery.  That financial hit is going to have to be dealt with somewhere and, unfortunately, I’m afraid it will be midlisters and readers who suffer the most.

So, the best thing we can all do is support your favorite author by buying their books and telling your friends about them.  Word of mouth is the best promotion there is.  If you are lucky enough to have a locally owned bookstore, support it.  Amazon and other online retailers are great, but not for everything.  You don’t get that special attention from them you get from a well-versed, fun to talk to bookseller.  The demise of Borders is not indisputable proof that bookstores are dead.  But it can be the tip of the iceberg if the industry doesn’t learn and if we, as consumers, don’t support the local indie stores.

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Alas, poor Borders, we will miss you

I grew up in a household where the book was valued, not only as a form of entertainment but as a friend.  A book was something that could transport you to faraway lands and worlds.  A book could teach you things you’d never learn in a classroom.  The author was respected for the work they did, even if you didn’t always agree with what they said.  After all, back in the days of Remington portable typewriters and IBM Selectrics, you knew how dedicated they had to be just to write the book.

But it went beyond that.  Books were affordable then, even taking into account inflation, rising prices, etc.  Publishers at least seemed to be better gatekeepers and they promoted books.  Newspapers had book review sections that were sections and not just a page or two in the entertainment section of the Sunday paper and they were filled with reviews not only from syndicated reviewers but local reviewers as well.

Something happened as I grew up.  Part of it was, I’m sure, the fact that I did grow up and I started looking at the world through slightly — okay occasionally very — jaded eyes.  Part of it was also the changing in economics and demands by big box booksellers that publishers change the way they dealt with bookstores.  And then, of course, there were the big box booksellers themselves.  They came in and pushed the smaller indie bookstores out of business.  Those small stores simply couldn’t negotiate the same deals with publishers that the big box stores could.

I was like so many back then, entranced by the larger selection of books.  Enthralled because I could buy my music at the same time I bought my reading material.  Then they brought in coffee shops.  Oh my, I’d died and gone to reader heaven.  Coffee and books!

But, like so many business ventures that look to be initially very successful, these big box booksellers made mistake after mistake.  They over-expanded.  Every mall had either a Barnes & Noble or a Borders (or similar big bookstore).  Almost always, you’d find their competition opening a store within a mile or two radius.  While there might not have been a bookstore on every corner, they saturated the market and still kept building.

Then there’s the change in how they ordered titles for each store.  Initially, store managers and district managers were allowed to decide which titles to stock.  Sure, the “best sellers” were stocked nationwide, as were titles where the publishers purchased endcaps etc.  But the stores were allowed to also buy based on their market.  So, if I walked into a Borders or B&N in Dallas and then took a jet and look at the same store in Boston, I’d find a different selection.  Why?  Because interests and buying patterns vary from region to region.

But just as some marketing guru has told grocery stores to put in long aisles with no middle break, someone told bookstores that they could save money and sell more books by changing their buying patterns.  Local buying control was moved to regional and then to national.  Not only that, but bookstores were suddenly being told to remove titles from their shelves based not on how well that title is moving in the store or locally but based on how it is moving nationally.  So, a book that could build a large following if left on the shelves long enough for word of mouth to build is removed after a week or two simply because it didn’t reach a certain level of sales determined by some bean counter in an office well removed from the sales floor.

A lot of stores also moved away from manning their staff with full-time employees to a roster of mainly part-time employees.  It saved the company money by going that route because they didn’t have to pay as much in benefits, etc.  But it all too often also led to a decline in customer service.  I’ll never forget the day I went into a Border superstore across the street from my son’s high school.  I wanted my coffee and book — remember, I’m a caffeine addicted book addicted writer — and was sure they’d have both.  Well, they had the coffee.  But they didn’t have the book, which happened to be the latest by David Weber.  DW is a best selling science fiction writer.  The book was new.  Baen is not some new, never heard of publisher.  So I checked the shelves.  Nothing.  I went to the new release table.  Nothing. I found, after some searching, an employee.  He’d never heard of the book or of DW, but he’d check their system.  Nope.  No book.  Did I want to order it?  Sure.

That’s when I fell down the rabbit hole and I’m not sure I ever climbed out.  He couldn’t order the book for me because their system didn’t recognize it as a legitimate title.  Five minutes later, the manager appears.  Nope, can’t order it.  Their system doesn’t recognize Baen as a legitimate publisher.  Never heard of Simon & Schuster, Baen’s distributor.  The manager only gets upset when I go to the stacks and produce DW’s previous books — almost all of them.  No, they won’t call anyone for help.  If I’m not happy, I can leave.

No, I haven’t fallen down the rabbit hole, I’m in the Twilight Zone.  I’ve been thrown out of a bookstore because — gasp — I wanted to order a book.

Then came e-books and, in the following years, viable and affordable e-book readers or reliable free e-reader programs for our computers, smart phones, etc.  Amazon, already seen as the bane of all things bookstore, brings out the Kindle.  Barnes & Noble follows, later than they should but at least they followed, with the Nook.  Borders played pretty much the same hand it did when it first tried to have an online presence.  The first time I tried to order a book online from Borders imagine how surprised I was when I was redirected to Amazon.  One one hand, Borders had been crying foul because Amazon was selling titles lower than anyone else.  On the other, they are using Amazon as their online store.  HUH?  Finally, after who knows how large a loss, Borders pulled out of that agreement and, for awhile, they had no online presence at all.  Then, finally, they were back and selling their own stock.

Enter e-books and the sound of crickets.  Because that was all you’d get for a long time if you wanted to buy an e-book from Borders.  They never came out with their own e-reader, instead opting to promote and sell other vendors’ readers in their stores.  If you bought an e-book from Borders, you were buying it from KOBO.  Again, too little, too late, especially when you have upper management making like ostriches and burying their heads in the sand.

Now Borders is facing, as I predicted months ago, having to auction off all their assets.  Their stalking horse bid has withdrawn the last I heard.  The deadline for a sale of the company, in whole or in part, is today.  The last I read about the process was that the liquidators have been named as the new stalking horse.  If this is the case and if nothing happens to change things, we will soon be without Borders Books.  As much as I’ve hated what the company has done, I still have fond memories of the stores when they first opened.  I still believe fervently in the importance of having bookstores.  I’d much rather pay a little more for a book that I can buy locally.  It helps the local economy for one.  But there is still something about going into a store and browsing the titles, finding a book I might not have heard about and flipping through it.  I’ve bought so many books, and found so many new authors to follow, by doing that.  It’s not something you can do with Amazon or Google books, etc.

I’m going to put on my rose colored glasses and hope something happens to save some, if not all, of the stores.  I want that for the employees and their families and I want it for folks like myself who still enjoy the bookstore experience.  But it will only work if the new owners learn from the past and do all they can not to repeat the mistakes made by Borders’ management.

If Borders is forced into liquidation, hopefully their fate will be a warning for other bookstores, especially the chains.  I do not want to see bookstores disappear any more than I want to see physical books disappear.

Cross posted to Mad Genius Club

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Bookstore sales increase, Borders approved to liquidate and NRP news

Months ago, when the first rumbles began about Borders possibly filing for bankruptcy, I predicted that we were seeing the beginning of the end for the bookseller.  I’d hoped I was wrong.  I love bookstores and think there is still a place for then.  But mismanagement and failure to adapt to changing times and technology have combined, it seems, to seal the fate of one of the largest chains in the U.S.  After creditors raised concerns about the proposed deal between Borders and BB Brands, the deal has apparently fallen through and the bankruptcy court has ruled that the liquidation sale will go forward.  This is a no-win situation for everyone involved — Borders and its employees, its creditors and, most of all, the book buying public. But it isn’t a done deal — yet.  There is still the possibility that BB Brands, or someone else, will emerge as the stalking horse prior to the deadline Sunday.  For more information, check out this article from Publishers Weekly.

At the same time we learn about the very real possibility of Borders being forced to liquidate their remaining stores comes news that bookstore sales were up in May.  The 1.5% increase comes on the heels of April’s 1.8% increase in sales.  Now, before everyone gets too excited about these figures, keep in mind that these sales included the going out of business sales at a number of Borders stores and also that these figures are for ALL sales from stores that earn at least 50% from the sale of books.  The exact figures for book sales should be available shortly.  I’ll report on them when they are.  Still, increased profita, from whatever source, are good for bookstores and for their customers.

Now for the news from NRP.  We are closing in on our first anniversary.  Because we have all been working seven days a week for a lot longer than that, the powers that be decided we needed some down time earlier this month.  Now we are back with recharged batteries and ready to hit the ground running.  That means a couple of things.  First, the blog will return to three days a week — more when needed.  Second, slush is being read and reports will be going out over the next few weeks.  I know there are two or three titles that were submitted in April that we haven’t reported back on yet and that is because they are with our editorial board for further consideration.  We will be in contact with those authors in the next few days.

But most importantly, it means you will see a flurry of new titles being released over the next week.  Come August, we will be back to our twice a month releases.

Of course, with our first anniversary knocking on the door, we have to figure out some sort of way to celebrate.  After all, who doesn’t like a party, even a virtual one.  So keep checking back for details.

–Amanda

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Friday Morning Links

I’m up to my elbows today in reviewing edits and such, so today’s post is going to be short.  Hopefully, I’ll be able to get back this afternoon and do a longer post.  Until then, here are a couple of links that caught my eye this morning:

Harper, Donnelley in Wide Ranging Supply Chain Deal — what this means in the long term for authors has yet to be explained.  However, I can’t help but wonder if this isn’t another way to prevent a title from going out-of-print.  If so, authors, you need to make sure your agents are taking that into account in your contracts.

Borders is once again in the news — twice.  The first is this call from the CEO Mike Edwards once more telling publishers to “trust me” and start sending stock under reasonable terms.  In other words, we’ll pay when we’re good and ready.  And he doesn’t understand why they aren’t willing to run the risk.

The second is this article from PW where it is speculated that there has been an offer for Borders.  Note, however, that in the link in the previous paragraph, Edwards does his best to downplay that possibility.

Finally, there has been an e-mail sent by Edwards to the Borders Reward customers.  In the same metaphorical breath as he tells everyone he is confident Borders will emerge from bankruptcy as a “best-in-class” bookseller, he also says they are expanding children’s games as well as their stationary and gift offerings.  Hmm…bookseller….riiiiight.  And in what I’m sure is a great cost-cutting measure — yes, I’m being sarcastic here — they are offering, for a limited time, free priority shipping to the customer’s home any title not in stock.  All you have to do is come into your friendly neighborhood Borders to take advantage of the deal.  Well, I checked.  My friendly neighborhood Borders is at least half an hour away, without running into traffic delays.  I’d pass at least two Barnes & Noble stores.  Hmm….why am I going to Borders?

Okay, more later.

–Amanda

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Borders CEO Speaks

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.

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Borders Security Breach and Book Country

Borders is once more in the news, this time because of a security breach that revealed the names and email addresses of some of their reward program customers.  Somehow, a marketing company created a searchable database that included information from the reward program.  Hopefully, Borders is right and “only” 150 or so customers were affected by this breach.  However, with their track record, I’m not sure I’m confident more customers weren’t exposed.  I guess what really concerns me is the fact that the first I heard of this was from this link, not from Borders itself.  As a reward customer, I’d expect the company to let me know of any possible exposure of my private data.  So far, I’ve seen nothing in my inbox from them– except, of course, for ads.

The same article by the Detroit News also notes that Borders needs an additional $50 million in financing to keep operating because some of its suppliers are demanding payment before delivery.  Without the additional funding, it only has enough capital to operate for another few months.  This from the company that keeps saying it plans to exit bankruptcy by August, even though it has yet to file an operating plan with the bankruptcy court.

I really do hope they can turn the company around and make a go of it.  But, unfortunately, I’m not seeing any real indication that they will be able to.  Hopefully, I’m wrong.

The big news in the publishing world came with the announcement that Penguin has a new venture — Book Country.  On the surface, this looks like a potentially very good thing for genre writers.  It is being billed as an online community where authors can post some or all of their work and get feed back.  In order to get feedback, you also have to give feedback.

I don’t have any real problem with that part of it.  That is pretty much standard for most legitimate online crit groups.  It’s also fair.  If an author wants critiques of his work, he should have to critique the work of others in the group in return.  No biggie and no surprise.

I even like the genre map.  I don’t love it simply because it is incomplete and I don’t necessarily agree with the placement of some of the genres.  But, as a visual aid, it is a good tool to help refine in your own mind where you own work falls.  I know that sometimes I have a hard time, especially when starting a new story or novel, figuring out exactly how to classify it.

However, I do have several concerns about this new venture.  The first is an old concern.  There are publishers who feel that posting a work-in-progress to a blog or even an online critique group constitutes publication.  It doesn’t matter how much of it you do.  Other publishers feel that if you post more than 1/4 – 1/3 of your work online to a group, that is publication.  The fact that Book Country will show up to 5,000 words (iirc) of any title posted without the reader having to register can cause trouble.  Are there procedures in place that might mitigate this concern?  Sure…but it is still a concern and something every author should keep in mind.

This is when I remind you that editors and agents do google authors’ names and titles when a submission comes across their desks.  I guarantee you, Book Country will be joined and checked as well.  So bear that in mind.

There was a time not too long ago when Harlequin was smacked, and smacked hard, by authors and professional groups alike for offering what was seen as a vanity press option for those unable to get their foot in the door at HQ.  Romance Writers of America and Mystery Writers of America even delisted HQ for a time.  That vanity press option evolved into Carina Press.

So, when I read that Book Country “will offer a suite of self-publishing services that will offer e-book and print publication for a fee.,” my alarm bells went off.  Penguin, in the guise of Book Country, will let the author pay them to publish digitally or in print their book.  Stop right there.  The money should flow to the author, not away from him.  You can already publish your e-books for free at Amazon, Barnes & Noble and Smashwords, just to name a few.  Using Smashwords alone, if you invest in an ISBN and meet a few minimal requirements, you can be listed in more than half a dozen major e-book retailer sites.  Other than the $10 or so that the ISBN costs, you have as much exposure as you need — if you are willing to bust your butt on promotion.

For print books, CreateSpace works with and through Amazon to allow authors and small publishers to put out dead tree versions of their books — again, only for the cost of the ISBN.  Okay, for wider distribution, you can pay an additional $40.  But again, that is minimal.

According to the Publishers Weekly article, “Book Country offers writers a place to upload new works and receive feedback and criticism from a community of writers and readers; a place for agents and editors to look for new talent”.  (I have to say right now, I don’t know many agents or editors who have enough free time to spend it going through sites like this looking for “new talent”.)  Now contrast the above with this statement from Book Country’s Terms of UseYou understand that this Website is not an official or unofficial channel for the submission of unsolicited manuscripts for publishing consideration by Penguin Group (USA) Inc.

Not quite the same thing, is it?

But keep reading the terms of use.  Now, boilerplate is just that, boilerplate.  Its sole purpose is to protect the person or entity offering it.  But some are more imaginative than others.  Some aren’t as blatant as others either when it comes to calling attention to the so-called limitation of liability.  But not Penguin.  Oh no…they call your attention to it by putting that entire paragraph in all caps.  And, what it all boils down to is they don’t warrant or promise anything…you may receive emails from them loaded with viruses — too bad.  Basically, you aren’t happy or you don’t like the services or anything else that might happen, well, all you can do is stop using the site.

I hope Penguin decides to simply leave Book Country as an online community when it comes out of beta testing.  I’m all for anything that helps writers network with one another, especially genre writers.  But I do have concerns if they offer the pay to publish bit because, folks, that sounds an awful lot like vanity publishing to me.  Only time will tell…well, time and a full disclosure of their terms for the publishing end of the community.

–Amanda

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Borders execs to get bonuses

Last Friday I wrote about Borders wanting another $50 million in financing, even though it has yet to file a new operating/reorganization plan with the bankruptcy court.  Well, on the heels of that news came news that the bankruptcy court has approved a “modified” bonus plan for some of the bankrupt bookseller’s top execs.  Yes, the same company that couldn’t see the writing on the wall and act before being forced into bankruptcy is going to reward its executives for doing a good job.

Okay, to be fair, this is a smaller bonus package than the one originally requested by Borders.  Several execs are now left out of the plan and the bonuses are tied more closely to how much money the company saves and manages to pay back to its creditors.  Still, color me skeptical, especially since there is still no plan for future operations on file with the bankruptcy court — at least not one that I’m aware of.

Borders had argued such a plan was necessary to keep its senior executives on board during the reorganization.  According to this article in the Detroit News, some corporate employees had left — 47 according to the article.  These departures had created a “leadership crisis” Borders alleged.  I can’t help but wonder if there wasn’t a “leadership crisis” at Borders that led up to the bankruptcy filing and that losing some of the flotsam might not actually help.  However, that said, I do recognize the need of any company to maintain a viable executive workforce in order for the company to function on a daily basis.

Flash forward to this past Friday.  Saying the latest bonus plan is “in the best interest of the debtors, their estates and creditors,” bankruptcy court Judge Martin Glenn approved the plan.  For 10 lucky executives, the bonuses will range from 40% – 125% of their base salary.  The amount will depend on how much money is saved by the company as it tries to come out of bankruptcy.  For the lower bonus to kick in, the company must have at least $10 million in lease renegotiation savings.  For the higher bonuses to kick in, they must recover in excess of $95 million for their unsecured creditors.

It is important to note that the bankruptcy trustee still argued that the bonuses were premature.  Borders has been in bankruptcy only two months and has yet to file a reorganization plan with the court.  So, to me at least, it appears like a case of putting the cart before the horse and that, unfortunately, seems to be the same old operating model that put Borders in the precarious position it now finds itself in.

I’ll be honest, I have grave concerns about how they are going to reach the lease figures necessary to meet the bonus levels.  To begin with, Borders said not too long ago that it was looking at closing even more stores — stores that were not on its initial closure listings.  To date, it has closed approximately 1/3 of its stores.  There comes a point where there aren’t enough stores left to cover the debt.  And, as was noted in last week’s post, one of the reasons Borders is looking for another $50 million is because it isn’t making as much in sales at it expected and because — gasp — its suppliers are insisting on payment before turning over stock to them.

How do you increase sales when you are continually decreasing your sales outlets?  I know Borders says part of what they want to do is increase their e-book presence.  Well, so far, I’m not impressed.  I looked up approximately a dozen titles in their e-book store yesterday and not a one was available.  These were titles from major publishers and authors.  And they weren’t there.  It’s hard to be taken seriously as an e-tailer when you don’t have what your customers are looking for.

I’d feel a lot better about the judge’s ruling if we knew Borders had a clue yet about what got them where they are and about how to get out of this mess.  Unfortunately, we don’t and that is what the trustee was saying.  Is it time to give up on Borders?  Not yet.  But I do hope the publishers and other vendors supplying Borders with stock continue to protect themselves because I’m not optimistic about its chances for emerging from bankruptcy, much less that it will emerge from bankruptcy and thrive.

–Amanda

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