Publishing without Borders

Last month there was talk of Borders potentially purchasing Barnes and Noble.  I find this confusing in a couple respects.

A)    Barnes and Noble is the larger company with a greater share of the bookselling market.

B)     Borders doesn’t have two nickels to rub together.

If these two did merge in the future, I would consider it monopolistic.  There are other retailers who sell books as ancillary items — Walmart, Costco, Target, etc. — but the only strictly “bookstore” chain that would remain is Books-A-Million, which are more regional stores in the south.  (There are a couple others, but those are specialty stores.)

As these box chains suffer from too much overhead, this will allow Mom and Pop bookstores to flourish in their wake.  This is good news.  Right now local booksellers account for 10-15% of a book’s total sales.  They’re largely unable to compete with the larger chains because they can’t afford to discount bestselling titles so steeply as the big stores.

In late 2009 Borders UK filed for bankruptcy protection.  American operations haven’t been much healthier, and the Hail-Mary pass they’ve come up with in the interim has been . . . wait for it . . . teddy bears.  I’ve seen this implemented already in certain Waldenbooks (which is owned by Borders).  Rather than redoubling efforts to sell more books, Borders has instead launched a partnership with Build-A-Bear Workshop to bring outside merchandise into their stores.  I’m all for diversifying, but where is the line drawn?  These are bookstores, yet they rely increasingly more on other products:  indoor cafés, office supplies, board games, electronics, greeting cards . . . and teddy bears.  How soon until blue jeans, tires, groceries and jumbo packs of diapers are included?  I’m being facetious, of course, but my point remains valid.  When does Barnes and Noble transform into Sam’s Club?

These companies spent the last two decades buying up competition and putting others out of business.  I fondly remember bygone chains like B. Dalton’s or Media Play from my childhood.  Those that survived are dealing with the excess of success.  They’re simply too monolithic for the recent realities of publishing, the tectonic shifts incurred from moving into the digital age.  To stay viable they will need to be far more nimble (and probably a good bit smaller). 

Of the three top retail chains – Barnes and Noble, Borders and Books-A-Million – none is doing great financially.  On a good year the publishing industry limps along with anemic profits; in this economy these resellers are being hammered relentlessly.  There will be casualties.  Any profits they have posted in the last couple years have been from cutting costs rather than selling books.

The latest development in this saga has come to light over the weekend.  News has broken that Borders is unable to pay its vendors.  Certain publishers won’t be paid money they’re owed.  What happens next decides whether Borders really has a future.  Some publishers have halted sending them new stock, what I assume is a ploy to make sure those same houses are among those compensated.

If Borders goes under, this will put untold stress on the entire distribution pipeline, which would set off a vicious cycle.  Author J.A. Konrath calls this a “death spiral” and has forecast something similar for months now.  I can’t explain it more succinctly than him, so as Joe puts it on his website:

1.Borders withholds payments.
2. Publishers demand to be paid.
3. Borders returns books.
4. Fewer books means fewer sales, which means smaller profits.
5. Publishers tighten their belts and don’t buy as many books.
6. Fewer books published means fewer books sold.
7. Bookstores close, meaning fewer books sold.
8. Fewer books sold means fewer books bought by publishers.
9. Authors, unable to sell to publishers, decide to self-publish.
10. Self-pubbed books means fewer books sold in bookstores, and fewer sales for publishers.
11. Repeat.

And the entire house of cards comes toppling down.  Will it happen so dramatically?  I doubt it.  Keep in mind the Big Six publishers long ago abdicated their corporate independence.  Nowadays they merely serve as the publishing arms of global media conglomerates and are being propped up with profits from their parent companies.

Eventually those parent companies will realize how much money is being lost, hemorrhaged away on these investments.  And the next logical step is . . . another post for another time.

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