An American Editor

February 16, 2011

The Demise of Borders, Blockbuster, and Choice

I admit that I’m not crying too hard over Borders’ troubles. I once worked for Borders Group (a lot of years ago) and even then I couldn’t figure out how it planned to survive. It has survived a lot longer than I expected.

I am crying a little bit harder over Blockbuster’s demise. My movie watching habits come and go in spurts, which is why I haven’t joined Netflix — why pay a monthly fee if I don’t regularly watch videos? And it is true that I have through Verizon’s FiOS video on demand, but I never use it. My current bill for Verizon landline telephone, Internet, and TV is already in heart attack country — the last thing I want to do is discover that I’ve added $30 or $40 (plus the fees and taxes) to an already outrageous bill.

But the demise of these two 20th-century behemoths got me thinking, especially when combined with the daily reports of another indie bookstore closing, another art gallery that didn’t make it, the lack of record stores, about how consumers are changing the cultural landscape.

You’ve heard me opine before about how I think the growth of the behemoths like Amazon are rally not good for consumers, and as each day passes, I become more convinced of the truth of that belief. I know that many of you, if not most, will talk up Amazon’s low prices, which is the short-term view to consumer well being. This short-term view is so pervasive that it extends from the consumer to our politicians who are deciding what budget cuts should be made to Wall Street’s emphasis on quarterly profits. Instant gratification with the least muss and fuss is the consumer-politician-Wall Street mantra.

Yet if we look objectively at the long term, we can see that we are only destroying the diversity and cultural norms that we say we value. When we oppose Walmart building a new store in our community because it pays low wages and its prices are so low that local stores can’t compete, we send a message that we value local businesses and community members. Yet we make that protest then shop at Amazon or the nearest Walmart because we value the low prices. The message and values are contradictory.

This is the problem with Borders’ demise. On some forums people are posting about how they miss browsing in their local bookstore, but then end their comment by stating that they never bought there — they would just browse, find what they wanted, and then order it online because it was cheaper. Then when the bookstore closed and the staff couldn’t find other jobs and began collecting unemployment, the complaint arose about how our taxes are and we should cut unemployment benefits.

It is a vicious cycle. We choose among our competing values and inevitably most of us choose cheap over any other value.

In my youth, many decades ago, we always bought locally. We knew the store owners and the employees — we went to the same schools as their children, to the same worship house, to the same cultural events, to the same social gatherings. Not today. Today, we rarely know the store owner or anything about him or her, let alone their family. And even if we do know the owner, we want to avoid paying sales tax and pay the lower price we can get from places like Amazon. The fact that Amazon simply takes our money from our community and never returns any of it doesn’t register — price is what registers.

In the brick-and-mortar retail world, Walmart has competition from Target and Costco and other discount retailers. But with the demise of, for example, Borders and indie bookstores (who would have thought that Powell’s, a bookworld icon, would need to lay off staff because of 2 years of losses?), competition in cultural venues is declining and local communities suffer — both culturally and financially. I find it distressing that young people will be within talking distance of one another yet prefer to communicate by texting or twittering. Or that their idea of a social gathering where they can interact with peers is an online game or Facebook.

Humans originally migrated to create clans, then villages, then cities, then nations, places where they could interact with other humans and develop what we euphemistically call civilization. We are beginning to see the cultural rollback to where each human stands alone in a world of their own. When we forsake local culture for price, we chip away at one of the pillars of civilization because those nonlocal places don’t give back any of what they take away.

The Internet age has its pluses, but it also has its minuses — minuses that we are only beginning to see and of which the demise of local, indie stores and outfits like Borders and Blockbuster that have a local presence are symptoms. The forsaking of choice for price as a value will come back to haunt us.

January 3, 2011

Call for Barnes & Noble! Call for Barnes & Noble!

I suspect most readers are too young to remember the heady days of tobacco company commercials, especially radio commercials, or even the cigarette brand Philip Morris. Its print (1940s) and early TV commercials featured a hotel bellhop carrying a tray with a pack of Philip Morris cigarettes on it and bellowing “Call for Philip Morris!” The radio version (also 1940s), popularly heard on programs like The Jack Benny Show, really was well done.

The commercial came to mind as I digested the recent news about Borders Group’s continuing quarterly losses. It was only a week or two ago that Borders wanted to buy Barnes & Noble. But now — if Leonard Riggio is doing any real thinking about the future — might be the opportune time for B&N to buy Borders.

OK, I hear the naysayers screaming that the last thing that B&N needs is Borders’ bricks-and-mortar stores. True, but that is narrow thinking. By buying Borders, which should be available for almost nothing, B&N can accomplish some important things, such as the following:

  • First, it can immediately close all the b&m stores that currently compete with its own brand. This would increase traffic to its own brand for those of us who like to shop at real bookstores rather than virtual bookstores. And it could convert Borders members to B&N members; there is a lot to be said for loyalty programs.
  • Second, it can replace Borders as a partner in Kobo. This strikes me as a good move for B&N because it would rapidly expand B&N’s ebook reach.
  • Third, B&N could become the partner with ebookstores like the Sony ebookstore, which is currently partnered with Borders. Where else could Sony turn? Perhaps to Kobo but if B&N was a significant partner in Kobo, it would still benefit. If you start adding Sony’s and other “independent” ebookstores that are really run by Borders, B&N could suddenly see a significant rise in its share of the ebook marketplace.
  • Fourth, by replacing Borders as a partner with these other “independent’ ebookstores, B&N would be in a position to incentivize these independents to upgrade to the B&N DRM version of ePub, which would expand its marketplace. (Yes, I know it is relatively easy to strip the B&N DRM, but most people don’t/won’t/can’t do it.)
  • Fifth, it would give B&N a further leg up against both the Amazon and Google juggernauts, something it is going to desperately need it the not-too-distant future.
  • Sixth, if B&N were smart, it could cut a deal with Sony to offer the Sony readers as premium readers — for those people who are willing to pay more for higher quality — and have Sony include perks, perhaps such as wireless access to the Sony, Kobo, and B&N ebookstores, that are not currently available on other devices. This would be a boost to both B&N and to Sony.

Unfortunately, no deal involving Borders is a problem-free deal. There are the debt problems and leases, but the easy way out would be to run Borders through bankruptcy. Inventory debt could be reduced by returning all of Borders’ inventory.

The real issue, I think, is who will be faster on its feet — Google or B&N. An unknown possible player would be Kobo or some of its partners like Chapters, but I don’t see any advantage to them in taking over Borders.

I suppose that someone could pump more capital into Borders but its management team certainly inspires no confidence. Consequently, I think that is a long shot. B&N should strike while Borders is crippled. The question is: Will B&N hear the call?

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