DBW Weekly Roundup, 6/23/11

DBW Weekly RoundupDigital Book World presents a weekly roundup of some of the most interesting news and commentary related to publishing that you may have missed, from all over the digital book world.

Borders: Where’s the Silver Lining?

As Borders staves off immediate liquidation of major store locations, the retail giant continues to bleed dry, even though its May numbers showed a slight improvement: a silver lining, perhaps? Publishers Weekly has all the numbers:

As talks progress about the sale of most of its assets, Borders Group reported that its net loss in the May 1 to May 28 period was $35.4 million, down substantially from the $132.2 million the chain lost in April. Revenue also dropped significantly as sales from the going-out-of-business sales fell to $15.5 million from $72.1 million in April. Sales from going forward stores dropped to $81.6 million in May from $101.0 million in April. The company’s loss from ongoing operations was also reduced in the period to $18.1 million from $32.1 million.

In the meantime, the courts have loosened the terms of the loan, granting Borders a brief reprieve to find buyers and avoid further store closings. From Bloomberg News:

Borders plans to file a proposal by July 1 to sell itself at a court-approved auction with a guaranteed buyer, known as a stalking horse, making an initial bid, Mary Davis, a company spokeswoman, said in an interview.

U.S. Bankruptcy Judge Martin Glenn, who is overseeing Borders’ bankruptcy in Manhattan, approved the changes today after a hearing in New York. Borders needed to extend deadlines in its $505 million bankruptcy loan that were set to expire this month to avoid being forced to immediately start liquidating 40 stores, most of them profitable, that the company wants to include in a sale, Davis said.

Who are the two most promising potential buyers for Borders to off-load locations? According to Dennis Johnson over at MobyLives:

[Alec] Gores, 58 years old, runs the Gores Group, a private equity firm with interest in the financial and entertainment fields, wants to spend $250 million for about 250 of Borders remaining 400 hundred stores, “the bulk of them so-called superstores, which he intends to revamp into more appealing destinations akin to Apple Inc.‘s outlets.” Yes, you heard that right: Gores believes he can turn poor old floundering Borders into a rival for the breathtakingly well run (and stupendously profitable) Apple stores.

[Jahm] Najafi, meanwhile, an owner of the Phoenix Suns basketball team, is better known to publishers because he owns the Book-of-the-Month Club, which he picked up when he also bought the Doubleday Book Club and Columbia House from Bertelsmann AG in 2008. His plan is to take over about 300 Borders stores. And what are his motivations? According to Spector and Trachtenberg [of WSJ.com], “Najafi could bolster his book clubs by tapping the more than 43 million Borders customers who are members of the chain’s rewards programs and put outposts in the chain’s stores.” Plus, “He believes Borders has a strong brand that retains an attractive base of customers Borders can build on by providing them with additional goods and services, much the way he increased revenue at Network Solutions by offering e-mail and e-commerce capabilities.”

No doubt the market disruptions caused by the Borders bankruptcy saga go from top to bottom. On a local level, Crain’s Detroit Business has an interesting close look at Agree Realty Corp.’s recent SEC filing about granting rent concessions to Borders for the 14 properties that the retailer rents from the Michigan-based company.

On a wider scale, the repercussions of Borders’ liquidation may have extended to competing retailers, such as B&N, which in the words of this quick piece at WSJ Blogs Marketplace, is being “singed by Borders’ fire sale.” Perhaps a less-than-diplomatic way to spin Barnes & Noble’s unanticipated sales losses in 4Q but check out the official statement here.

Are We Worried Enough About B&N Yet?

The less-than-stellar financial report from Barnes & Noble is troubling, but really it’s hard to tell where B&N is going to go, especially since in this latest report, the retailer declined to forecast on fiscal 2012 as the Board of Directors reviews last month’s takeover bid from Liberty Media.

At the same time, though, Barnes & Noble also announced that its ebooks outsell its print books 3 to 1, but the costs of its digital plan tempered the news.

From PC World:

The increasing e-book business did not save the company from a loss, however. For the fourth quarter, the company reported a consolidated net loss of $59 million on total sales of $1.37 billion, compared to a loss of $33 million on sales of $1.32 billion a year earlier.

The company is continuing to invest in the burgeoning digital business, Lynch said. The company expects e-book prices to fall as self-publishing applications gain a foothold, [CEO William] Lynch said.

This paradox inspired BNET blogger Erick Sherman to question the numbers and ask, “If Neither E-Books or Paper Can Save Barnes & Noble, What Can?”:

The company credits digital books and the Nook for its 65 percent year-over-year sales growth. However, all of the e-book sales happen online, and the online division’s revenue was only about a fifth of retail sales, even though digital books now outsell paper three to one. It raises the question of what business Barnes & Noble can actually be in. Sounds like it was more the Nook with minor assistance from digital books that pushed the numbers…

If it’s the Nook that is really driving growth, the company is in deep doo-doo. Human readers turned book purchases into B&N’s annuity.

But for hybrid retailers like Barnes & Noble, things are likely to get more complicated, as Google continues to extend into the publishing retail space by opening up the Google Ebooks Affiliate Program to bloggers and continues its digitization program with a massive acquisition of 250,000 public domain titles from the British Library.

Amazon’s Tablet Is Just Around the Corner?

Things might get even more interesting very soon; rumors coalesce that Amazon will release a tablet device by August – at least, that’s the scuttlebutt at CNET, ZDNet, and others, all sourcing the Taiwan-based gadget rumor-monger, DigiTimes.

Yet, as Laura Hazard Owen over at PaidContent.org reported earlier this month, the Kindle already accounts for over 15% of Amazon’s revenue and still holds 60% market share in ereader devices, even as Barnes & Noble’s Color Nook and Kobo’s eReader Touch were both launched at the end of May.

Recall, though, that Amazon CEO Jeff Bezos hasn’t exactly been denying that an Amazon tablet-style device could coexist with the Kindle, as reported in this conversation with Consumer Reports back in May:

Asked today about the possibility of Amazon launching a multipurpose tablet device, the company’s president and CEO Jeff Bezos said to “stay tuned” on the company’s plans. In an interview at Consumer Reports’ offices, Bezos also signaled that any such device, should it come, is more likely to supplement than to supplant the Kindle, which he calls Amazon’s “purpose-built e-reading device.”

Bezos acknowledged the popularity of reading e-books (many of them sold by Amazon) on tablet computers such as the iPad. But he added that this popularity doesn’t spell the demise of the Kindle.

“We will always be very mindful that we will want a dedicated reading device,” he said. “In terms of any other product introductions, I shouldn’t answer.”

I suppose we’ll know soon if the rumors are true.

Has Self-Pub Gone Too Far?

Talking about Amazon seems a perfect segue to discuss the latest self-publishing news, as independent author John Locke becomes the first independent author to join the Kindle Million Club (8th overall). Through Kindle Direct Publishing, Locke had penned nine novels, but his latest is a DIY marketing guide for self-published authors, How I Sold 1 Million eBooks in 5 Months.

But things aren’t all sunshine and roses over at Kindle Direct Publishing. The presence of copyright-violating self-published titles and the more disturbing trend toward outright “spam” ebook titles have become points of contention over at “Spamazon,” an issue that has gotten picked up by both tech sites like PCWorld and business bloggers like BNET.

Reuters points out how ebook spammers are using Private Label Rights, which allow junk ebook-makers to purchase and repackage prefabricated content and quickly turn around titles. It’s clear that the scant 48-hour Amazon approval process isn’t catching copyright violations, book “spinning,” or classic spam. I hate to bring this up, but “phishing” with hotlinks and other commonplace email spam tactics are probably just around the corner.

So what’s the solution?

One is for Amazon to take a stronger curatorial role and, in effect, become a publisher – a development already underway in various Amazon imprints and in the Kindle Singles store. At least one blogger has suggested that authors should be charged for using Kindle Direct Publishing; even a fee as low as $10 might be enough to deter the most egregious ebook “publishers.” Still another solution is for Amazon to filter out these titles from search results, but that also seems to require significantly more vetting than what Amazon is currently doing anyway.

Should Bookstores Charge for Author Events?

Since this roundup seems heavy on news about authors and retailers, it seems appropriate to highlight the latest controversy in independent retailers: brick-and-mortar bookstores charging admission fees for author events, a trend that came to the forefront when The Boulder Book Store in Colorado announced that it would charge $5 for in-store events. Reaction is, of course, divided.

From The New York Times:

Heather Gain, the marketing manager of the Harvard Book Store in Cambridge, Mass., said that in recent years the store had begun doing more events that required the customer to buy a book, constantly reminding them that “if they aren’t purchasing the books from the establishments that are running these events, the bookstores are going to go away.”

“We’re a business,” Ms. Gain said. “We’re not just an Amazon showroom.”

Facing the severe pinch, independent retailers such as Christin Evans of Booksmith in San Francisco are calling for a radical rethinking of the American Booksellers Association’s approach to technology and the IndieCommerce e-commerce platform. Writing a two-part piece for HuffPo (here and here), Evans writes:

The ABA as the organizing body for independent bookstores must change its culture to be more nimble, open, welcoming and experimental. This recommendation made the top of my “how to” because in the past several years, I have met at least 10 people (creative booksellers, prospective technology partners, and innovative publishers) who each have individually approached the ABA about partnership and hoped to receive access and welcoming open arms. Each had an eerily similar story to tell: that the ABA gatekeepers were unreceptive.

These conversations were missed opportunities. These potential partners represent the best hope for independent bookselling. In spite of a shrinking market, they are entrepreneurs who are passionate about our industry. They are looking for ways to connect & work with the independent bookstores they love and admire.

Instead of putting all eggs in one basket (indieCommerce), the ABA needs to plant many seeds in the form of many nascent projects with a little resource and a little funding and some clear goals and measurable outcomes. Then, see which ones flourish. And, be tolerant of failure but deliver rewards only to those projects that succeed and have real results.

That’s just a taste of what you may have missed this week. To stay on top of the most interesting news, commentary and tweets related to publishing, keep in touch via our RSS feed, follow us on Twitter, join your publishing colleagues in our LinkedIn group, and connect with the broader DBW Network.


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