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?

December 7, 2010

Will You be a Googler?

Yesterday, Google Books opened for U.S. residents. This is the long-awaited bookstore, although after a browse of it, I’m not sure why. The question that remains to be seen is whether this bookstore will be very competitive and whether it will challenge Amazon.

Also in yesterday’s news was the rumor/announcement that Borders, in conjunction with the private equity group that currently is keeping Borders afloat, plan to make a bid for Barnes & Noble. This will be interesting.

But the two bits of news really belong together.

Google Books has one thing going for it: it will be a way for independent bookstores to provide an ebook service to their customers. Powell’s in Portland, OR, has already indicated it will be partnering with Google Books. But a look at the Google bookstore doesn’t leave me chomping at the bit to buy books from it, whether print or ebooks.

Try finding customer service. I had difficulty finding it and, more importantly, had difficulty determining whether Google Books is a cloud-only service or a combined cloud-download service. The former I would never buy from (unless I absolutely had no choice) whereas the latter at least gives you the option of maintaining a copy of your purchase on your desktop. But what happens if I purchase a book only to discover after purchasing it that it is not downloadable, something that appears very easy to do at Google Books? Trying to get your money back and have the book removed from your cloud-based library looks to be a herculean task, in contrast to the ease of access to customer service at Amazon, B&N, Kobo, and Sony, to name a few competitors.

There are lots of problems with Google Books. One would think that a company as resource-rich as Google would hire better specialty designers, but I guess even money doesn’t cure the hit-or-miss school of design.

Yet, I suspect that in the not too distant future most of us will become Googlers, that is, buyers of books via Google Books, unless we become Amazoners. I think that the foretold shakeout of the ebook retail industry has just begun. Here’s why and what I would do —

I’d like to be sitting on the cash — note it is cash — that Google is because I would now take the steps necessary to thwart Amazon and Apple’s ebook business. First thing I’d do is buy B&N. Google can do it for cash; Borders can’t compete, Jobs doesn’t believe in reading and so won’t compete, and Amazon could never buy B&N and get past antitrust concerns. And no matter what Leonard Riggio thinks, a serious bid for B&N by Google would be insurmountable by Riggio. It isn’t exactly like he has been such a great leader in recent years that private equity would simply line up and beg him to lead a takeover.

Second, I would put Borders out of its misery. Buy it and merge it into Google Books. The only real value to Borders is its customer list.

Third, I would approach Sony and offer a deal for its ebookstore. I doubt Sony could resist any reasonable offer, especially if Google made a deal to scrap the nook device and help Sony make its devices more price competitive. The reality is that the Sony devices are probably the best dedicated reader devices available except that they cost so much more than the Kindle, nook, and Kobo (and other third-party devices), they can’t get the kind of traction in market share they deserve. Combine Google financial power with Sony technology and suddenly you would see a truly competitive ebook market.

Finally, comes Kobo. The Kobo device isn’t something I would write home about; it’s OK but not a class leader. But the Kobo ebookstore is a different story. If the ebook race were to be decided simply on the quality of the ebookstore and customer service, the race would be between Amazon and Kobo, none of the other major players would even be a blip on the horizon. Kobo is aggressive and provides customer service at the vaunted Amazon level. So what I would do is see if I couldn’t partner with Kobo, perhaps pay a fee to bury the brand and merge it into the Google Books brand but have the Kobo personnel essentially run Google Books.

Ultimately, I think the only ebook bookstore survivors of the major brands will be Amazon, Google, and Kobo. Sony’s ebookstore isn’t bad, but Sony hasn’t got a clue how to promote either its reading devices or its ebookstore. B&N and Borders are mismanaged; B&N does do some great promoting but drops the ball after the promoting. Borders doesn’t seem to do anything right. Apple is really a nonentity as regards ebooks. It’s hard to become a real competitor when the only person who matters doesn’t believe in reading.

Google Books is the unknown in the lion’s den. Google certainly has the fiscal resources to take on Amazon, which is the key player today, but whether it has the vision and the stamina to do so remains to be seen. If we begin to see improvements in the Google bookstore, especially in customer service options, and see Google make moves to create a true competitor to Amazon, then many of us may well become Googlers. Until then, I think Google Books will be last in the race.

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