Borders stalls book payments, doubts survival in e-book era
updated 11:30 am EST, Fri December 31, 2010
Borders delays book payments in financial deals
Borders has been delaying payments to book publishers in signs that it may be one of the first major victims of e-books. Early reports from Publishers Marketplace on Friday said it was putting off the payments to help refinance its debt but also wasn't certain that the plan would be effective. It might have to break its existing credit deals early into 2011 after facing a "liquidity shortfall," it said.
The publishers weren't named by Borders when asked by the Wall Street Journal, but Hachette and Sourcebooks were named as two of those told they weren't getting payments due as soon as today.
Financial pressure has now become acute at the company and mimics that of Circuit City before it was defunct. The electronics chain's problems with sales were reinforced when it engendered a lack of faith from device makers, many of whom began insisting on cash up front and didn't trust credit from the chain. Borders lost $74.4 million just in its most recent quarter and has lost money in most every quarter for the past two years except for the holiday season, when the usual spike put it back temporarily into profits.
E-books have been credited in part to the damage done to Borders and even more successful stores like Barnes & Noble, where digital downloads are mostly replacing paper copies rather than adding to the business. Borders has been exploring the possibility of financing from an investor to buy Barnes & Noble and get a successful business through a takeover.
Any financial collapse at Borders could have a ripple effect on the e-book business. It would cost Kobo one of its most important markets for e-readers and would close one of the few major online book stores. The shift could feed Amazon, Apple and other survivors with extra customers.
Fresh-Faced Recruit
Joined: Jan 2001
To be clear...
Just as with Circuit City, Border's problems stem more from their own mismanagement and business malfeasance than necessarily external pressures from something like eBooks. I work in the publishing industry -- Ten years ago, before anyone knew what an eReader was, Borders was already having liquidity problems and issues with executive turnover leading to a lack of direction and inability to focus on growing and sustaining business fundamentals.
The influence of eBooks is profound, to be sure, but I can tell you from the inside that many publishers are selling more print books than ever. The entire market has grown due to economic shifts toward cheaper forms of entertainment, and books (in whatever form) always tend to benefit from that.