Romance, Historical, Contemporary, Paranormal, Young Adult, Book reviews, industry news, and commentary from a reader's point of view


Dear Author

Borders Files Bankruptcy

This morning, Borders filed for Chapter 11 bankruptcy which is an attempt to discharge (get rid of) bad debt and reorganize itself into a profitable business. According to the report in Publishers’ Weekly, Borders will close around 30% of its stores. Borders has 642 stores and plans to close 200 of them. Borders’ bankruptcy will be meaningful to the publishers’ bottom lines in short term and the long term. In the short term, this means that the debt owed by Borders to the publishers will be represented as a loss:

The announcement made this morning was foreshadowed last night when it implemented an ordering freeze and Ingram, its lifeline to the publishers, stopped shipping books. Publishers are on the hook for hundreds of millions of dollars led by Penguin Group (USA) which is owned $41.1 million, followed by Hachette at $36.9 million, Simon & Schuster at $33.8 million, Random House at $33.5 million, and HarperCollins at $25.8 million. Neither major book distributor, Ingram or Baker & Taylor were among the leading creditors, and only one book distributor, National Book Network, which is out $2 million.

All these publisher debts are unsecured which means that they will have lower priority with the bankruptcy court. Unsecured debt is debt that is not secured by an asset. In our lives, credit card debt is unsecured whereas a mortgage is secured (secured by the home). Ordinarily, a chapter 11 will result in a debtor being paid cents on the dollar owed. In the long term, the contraction of Borders will translate into smaller print runs (the number of books printed in one order in advance to the retail sale).

Another bankruptcy that will adversely affect the bottom line is the bankruptcy of Fenn in Canada. Fenn was Canada's largest book distributor. It’s largest unsecured creditor is Macmillan to whom Fenn owes $10 million and Harper Collins is owed $3.3 million.

There is no mention as to what will happen to Kobo. Maybe one of Borders’ most valuable assets is its minority share in Kobo. Borders has a 20% investment. My guess is that the plan for restructuring will include the Kobo business at its center. EBooks are on the rise while retail store book sales are declining. According to preliminary US Census Bureau data, bookstore retail sales fell 1.4% whereas general retailer sales rose 6.6%.

Based on Barnes & Noble’s success with the nook (as opposed to book retail sales), a book retailer without a digital plan probably doesn’t survive on a national scale.

Other investors in Kobo include Indigo; Instant Fame, a subsidiary of Cheung Kong (Holdings) Ltd. of Hong Kong; and REDgroup Retail of Australia. Kobo also announced it had raised $16 million CAD (about $15.1 U.S.) in financing from its investors. Indigo will retain approximately 58% ownership of Kobo. Source: News Release

Kobo put out a release to assure customers that their ebooks are safe and that it is unaffected by the Borders’ bankruptcy:

Will I lose access to ebooks I have purchased at
Your ebook library is perfectly safe. The Borders ebook experience is powered by Kobo, an entirely separate company from Borders. Kobo is financially secure and will continue to maintain your ebook library no matter what happens.


Nothing. Kobo is an independent, financially secure company that provides a Global eReading Service. Today will be another day filled with books being downloaded every second by Kobo users in over 100 countries.

The list of 200 stores to be closed have not yet been announced. Wall Street Journal has posted a sortable list of the 200 store closings. I’m curious which of our readers shop at Borders and may be affected by the closures.

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Monday News Links: Diana Norman/Ariana Franklin passes away

Monday News Links: Diana Norman/Ariana Franklin passes away

Ariana FranklinAriana Franklin aka Diana Norman passed away on January 27, 2011.   This news came to me on Saturday and I passed it on immediately to Jayne. She’s a huge fan of Franklin’s books and wrote me back to tell me she was “desolate.” Franklin’s historical mystery series ended with a cliffhanger and thus the outcome of the series is unknown.   Franklin was 77 and had been ill and in the hospital.   Our “letter” in the upper right hand corner actually contains text from one of Jayne’s reviews of Franklin’s books.   She will be missed.


Freebies from Samhain this month include:


Amazon reported its first $10 billion sales quarter ever and announced that digital book sales had exceeded the sales of paperbacks for the first time (both trade and mass market).   One person commented to me privately that Amazon had never been a dominant player in the paper book sales market so this shouldn’t come as a surprise.   The official statistic is that for every 100 paper books purchased, 115 digital books are purchased.   Digital books at Amazon outsell hardcovers 3 to 1.

Another statistic that is being bandied about with great hope is that ebook readers are buying more print books but here is what I believe that statistic means.   Amazon is gaining new book purchasers and these individuals are consolidating their purchases in one spot.   So whereas customer A prior to owning a Kindle might have bought books at the supermarket and a brick and mortar store are instead buying everything from Amazon because they are now part of the Amazon eco system.   Thus, at Amazon there is a rise in paper book purchases but it is not an overall industry trend.   The AAP numbers don’t support this.

The stock price of Amazon fell by over 7% despite the big quarter because operating expenses were higher in the 4th quarter and Amazon had experienced an adverse impact due to unfavorable exchange rates. Overall, though, Amazon met the analysts predictions.


Borders did get a $550 million loan committment from GE Capital but it came with strings attached.   One of the requirements is that the publishers accept notes for the delayed payments.   Yesterday, Borders sent out notices that payments would not be made in January.   The conditions are unlikely to be met and I would expect Borders to announce either a Chapter 11 reorganization in a few weeks or complete liquidation. In order to undergo Chapter 11, Borders would have to have sufficient capital to see it through the reorganization period.


At least one industry person believes that Barnes & Noble is positioning itself to be sold.   The Riggios are book people and in order for BN to succeed in the future, it needs to be a technology company.


According to Nielsen, customers have been enjoying a record high percentage of discounts on print books in 2010 (thereby making the digital customer jealous and unhappy).   Print books are not subject to agency pricing model:

Retailers slashed a total of  £600m from the price of books in 2010 as book-buyers enjoyed their best year for bargains since records began.

The average discount given off a book’s r.r.p. last year was 26%-’ slightly deeper than in 2009, when books were discounted by an average of 25.5%, according to Nielsen BookScan data. This means that for the ninth consecutive year, since BookScan Total Consumer Market records began in 2001, discounts have deepened. In 2001, discounts averaged a much shallower 17%.


I’m sure that most of the savvy readers of Dear Author recognize that the celebrity books, by and large, are ghost written.   For example, LuAnn McLane helped pen the Wynonna Judd “Restless” hardcover romance release.   Globe and Mail looks at a few other celebrity books and their ghost writers. Often a reader will never know the real name of the ghostwriter, but in certain circumstances, like the McLane/Judd book, it is openly acknowledged.