Borders Group Inc. said it would liquidate after the second-largest U.S. bookstore chain failed to receive any offers to save it.
Borders, which employs about 10,700 people, scrapped a bankruptcy-court auction scheduled for Tuesday amid the dearth of bids. It said it would ask a judge Thursday to approve a sale to liquidators led by Hilco Merchant Resources and Gordon Brothers Group.
The company said liquidation of its remaining 399 stores could start as soon as Friday, and it is expected to go out of business for good by the end of September.
Borders filed for bankruptcy-court protection in February. It has since continued to bleed cash and has had trouble persuading publishers to ship merchandise to it on normal terms that allowed the chain to pay bills later, instead of right away.
Borders President Mike Edwards said.
"Following the best efforts of all parties, we are saddened by this development. We were all working hard toward a different outcome, but the head winds we have been facing for quite some time, including the rapidly changing book industry, [electronic reader] revolution and turbulent economy, have brought us to where we are now."
Borders's best chance for survival fell apart last week when talks with private-equity investor Jahm Najafi to buy the company collapsed. Borders scrambled unsuccessfully over the weekend to find other potential buyers who would keep the chain alive.
The chain's demise could speed the decline in sales of hardcover and paperback books as consumers increasingly turn to downloading electronic books or having physical books mailed to their doorsteps.
David Young, chief executive of Lagardère SCA's Hachette Book Group, which Borders owed $36.9 million at the time of its bankruptcy filing said.
"When you lose literally miles of bookshelves, it's going to have an impact. I hope other retailers will now step up and make offers for what they consider to be the prime sites. It's a tragedy Borders didn't make it through."
The loss of Borders may also make it more difficult for new writers to be discovered.
Michael Norris, a senior analyst at Simba Information, a unit of MarketResearch.com said.
"The liquidation of Borders is an irreplaceable loss of a big part of the book-discovery ecosystem. Thousans of people whose job consisted of talking up and selling books will eventually be doing something else, and that's bad for authors, agents, and everyone associated with the value chain in books."
Mr. Norris said other booksellers, including Barnes & Noble Inc. and Amazon.com Inc., will go after the shoppers who formerly considered themselves Borders customers.
"They won't be able to pick up everyone," he added. "If shopping at your local Borders is part of your weekly routine, and then Borders is gone, you may end up doing something other than buying books."
COMMENTARY: I've been covering the book industry for some time now, and it's difficult to find any positive news. To make a long story short, hardcover books have fallen victim to disruptive technology and more cost-effective distribution channels. These forces have affected all forms of media: film, video, music, magazines and newspapers, not just hardcover books. The damage has been huge.
Let's look at the dynamics of the hardcover book industry: How do books reach the reading consumer, who's reading books, where do consumers buy their books, the emergence of digital books, who are the major players in hardcover book sales,
Book Value Chain
The book value chain Includes book authors, literary or author's agents, book publishing companies, book printers, distributors, wholesalers, book sellers and retailers and ebooks and consumers.
Who Reads Books
Book readership among Americans varies by age group. 83% of Americans 25 to 44 years of age and 78% of Americans 45 to 64 years of age represent the largest group of book readers. Young Americans are simply not reading--only 17% of Americans 14 to 18 years of age and 30% of Americans 18 to 24 years of age read books.
Where Americans Buy Books
American's purchase their books from a wide variety of retail channels and retailers. Today almost 93.4% of American's say they purchase their books through Amazon.com. Fewer Americans are buying their books from large book retailers--only 18.9% said they purchased their books from Barnes & Noble, while only 8.9% said they purchased their books from Borders Books & Music stores.
eCommerce Versus Brick-and-Mortar Book Retailers
More Americans prefer to buy their books online, primarily through Amazon.com instead of large brick-and-mortar book retailers like Barnes & Noble and Borders Books. Although B&N and Borders also sell their books online, Amazon.com is winning the war for the book reading consumers wallet. The evidence is clear: Amazon.com books sales increased from $2 billion in 2002 to $7 billion in 2010.
Breaking Down The Book Publishing Sales Pie
Book sales are split as follows: 39.5% is spent on designing, producing, printing, book royalties and marketing costs, 10% goes to the book wholesalers and distributors and 45% goes to the book retailers. The book publisher only makes 5.5%. It's a very tough business, and the book publishers makes the least and takes on most of the risk.
Book Industry Revenues
According to the US Censur Bureau, book industry sales for the year ending 2010 were $15.662 billion. Book industry sales peaked in 2007 when sales hit $17.184 billion. Prior to 2007, book sales had increased for four straight years beginning in 2002. Since 2007, book sales have declined three straight years, and 2010 sales ($15.662 billion) now approach 2002 sales of $15.450 billion.
The Association of American Publishers provides statistics on wholesale hardcover book and e-book sales figures. The latest report includes information for all of 2010. According to the AAP, total book sales for the year 2010 were $11.67 billion, an increase of 3.6 percent over 2009's $11.25 billion.
According to the AAP, E-book sales for the year 2010 were $441.3 million, an increase of 164.4 percent over 2009's 166.9 million. E-book sales represented 8.32 percent of the trade book market in 2010 vs 3.20 percent the previous year. A chart tracking nine years of E-book sales is included below.
E-Book Reading Devices and E-Book Content Sales
Sales of e-book reading devices and digital books or e-books have taken a tremendous toll on the sale or hardcover books. Between 2008 and 2010, as the number of ebook reading devices increased, sales of e-book content increased, and hardcover book sales decreased three straight years.
eBook Reading Device Unit Sales
There are three major "pure" e-book reader manufacturers:
- Sony - In September 2006, Sony introduced the Sony Reader PRS 500. Borders Books was the first book retailer to sell it. Sony has since introduced eight newer models.
- Amazon.com - In November 2007, Amazon.com introduced the Kindle ebook reader. Amazon has since introduced three newer models.
- Barnes & Noble - In October 2009, Barnes & Noble introduced the Nook. In November 2010, the Nook was replaced by the B&N Nook Color. In June 2011, the Simple Touch Reader, a touchscreen e-book reader was introduced.
According to Caris & Co, Amazon.com sold 4.75 million Kindles in 2010, and projects 8.01 billion will be sold by 2012. According to Caris, combined Kindle readers and eBook revenues were $3.3 billion in 2010, will increase to $5.4 billion by 2011, then reach $8 billion in 2012.
Apple released the iPad tablet computer in April 2010, and sold 3 million of the devices in 80 days. In 2010, Apple sold 14.8 million iPads worldwide. The iPad is a full-fledged multi-media device, allowing users to read e-books, surf the Internet, watch videos and listen to music. In March 2011, Apple introduced the iPad 2, a thinner and more powerful replacement for the original iPad. In July 19, 2011, Apple announced that it had sold 9 million iPad's during the Q2 2011, more than all other tablet PCs combined. For the year 2011, it is expected to sell 27 million iPads, and take 83 percent of the tablet computing market share in the United States. Below are the projected 2010 e-book unit sales for Sony, Barnes & Noble, Amazon.com, Apple and miscellaneous Chinese e-book reader manufacturers.
eBook Reading Device Revenues
Sales of eBook readers began to takeoff in 2009. According to Yankee Group, $1.273 billion (at wholesale) in eBook readers were sold in 2010, and sales of eBook readers are expected to generate $2.5 billion by 2013.
eBook Content Sales
According to Yankee Group forecasts, U.S. consumers will purchase 381 million e-books by 2013, roughly four times the amount they purchased in 2010.
Average selling prices of e-books will plummet. In 2010, consumers saw e-book prices fall 50 cents. This trend will continue. By 2013, the average e-book retail price will fall to $7, down from an average of more than $9 in 2009.
The Major Book Retailers
2010 revenues of the top four retail book retailers:
Book Industry Outlook
The overall weakening will be spurred by a 5 percent decrease in the CAGR of physical book sales from 2010 to 2014, according to IHS. While e-book sales will soar by 40 percent during the same period, such an increase won’t be sufficient to compensate for the contraction of the larger physical book market, the firm said.
Total book revenue will fall to $22.7 billion in 2014, down from $25. billion in 2010, according to the HIS forecast.
In 2014, e-books will represent 13 percent of total U.S. book publishing revenue, up from 3 percent in 2010 and 6 percent in 2011, according to IHS. However, average selling prices for e-books typically are 40 percent lower than those of paper copies, driving the deterioration in price, the firm said.
IHS analysts expect these trends to spread throughout the world as non-U.S. sales of e-readers increase.
Shipments of e-book readers, also known as e-readers, are expected to more than triple during the period of 2010 to 2014, according to IHS research. Global unit shipments of e-book readers will rise to 30 million units in 2014, up from 9.7 million in 2010, according to the firm.
The IHS iSuppli forecast is lower than the consensus outlook of 43.4 million units in 2014. Because of competitive and pricing factors, e-book reader shipments are unlikely to achieve some of the more optimistic forecasts, the firm said.
Mather said.
To achieve higher profits, e-reader makers must move beyond e-books and offer other items including magazines, enhanced books, and Amazon Singles—or very short books introduced by the online retail giant—as well as games such as Sudoku and Scrabble, and news subscriptions, according to IHS.
Courtesy of an article dated July 19, 2011 appearing in The Wall Street Journal, an article dated April 29, 2011 appearing in EE Times, Association of American Publishers and Book Sales Statistics by Foner Books
Nice job!
Thank you so much
Posted by: Bzibzou | 08/03/2011 at 04:42 AM