Borders Files for Bankruptcy, Shows Broader Trend of Book Market

The bookstore chain Borders Group filed for Chapter 11 bankruptcy today and as a result will be permanently closing the doors on 200 stores across the nation. The company faced more than $1 billion in debt due to swift changes in the book market. Amazon has since mid-July 2010 posted higher sales in e-books than it has for paperbacks continuously from this point. While bankruptcy has seemed an inevitability for Borders for months now, shoppers, publishers, and competitors are taking this as a harbinger of the future for the paperback market. The market seems to have been forever changed with the advent of e-readers such as Amazon’s Kindle, the Nook, and Sony’s Reader among many others.

According to the court documents, as reported by the Washington Post, Borders will close nearly 30 percent of its 642 stores. In a statement from Borders President Mike Edwards, he indicated that the company simply “does not have the capital resources it needs to be a viable competitor.” The restructuring of the company will continue on the $505 million in funds provided by GE Capital. With the steady stream of dismal reports for the company and rumors surfacing that the company was on the verge of bankruptcy saturating the news, the stock was trading at 23 cents before the company filed for bankruptcy. Now that Borders has officially declared bankruptcy, the New York Stock Exchange has begun the delisting process.

Broader trends in the book market show that the niche e-book market is steadily becoming the predominant market with sales jumping 164 percent in the past year. However, outliers such as Barnes & Noble have managed to adapt to the changing markets bringing out its own e-reader, the Nook. According to the analysts, Borders made two crucial mistakes. First, it outsourced all e-book business to Amazon. Second, it endeavored to expand internationally which tied up funds to adapt to the rapidly changing domestic book markets.

Sources:

http://www.washingtonpost.com/wp-dyn/content/article/2011/02/16/AR2011021603930.html

http://www.miamiherald.com/2011/02/16/2070944/borders-files-for-bankruptcy.html

http://www.nytimes.com/2011/02/17/business/media/17borders.html