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Book and media retailer Borders announced today that it will hold off on paying some publishers in order to buy time and reorganize its debt amid a year of weak sales in its brick and mortar stores in the era of digital distribution.
The company has seen declining sales in books, movies and music since electronic book readers emerged and consumers started to use digital distribution marketplaces like iTunes. Borders’ revenue was down 17.5 percent in the most recent quarter when compared to the same quarter a year ago, according to its most recent filing with the Securities and Exchange Commission. Its loss has also doubled to $74.4 million, up from a loss of $37.7 million the same quarter a year earlier.
But despite losing out on sales of books and other products, Borders is essentially looking to pull a GameStop and stay focused on its brick and mortar stores. Borders acknowledged e-books and e-readers as a definitive threat to its business but expects its in-store sales to remain intact, according to its most recent 10-Q filing. That being said, the company doesn’t plan to open any new stores in the near future.
Barnes & Noble, the largest book retailer in the country, decided to take on the e-reader trend by producing its own electronic reading tablet, the Nook. The Nook became Barnes & Noble’s best-selling product in more than 40 years, according to a recent announcement by the company — beating out titles like Harry Potter and The DaVinci Code. Barnes & Noble also recently released the Nook Color, a light version of an Android tablet. The device includes Facebook and Twitter functionality as well as some apps like music service Pandora.
Borders doesn’t plan on developing its own e-reader and expects to find a niche as a neutral provider of e-books for every e-reader in the market. So why does Borders want to focus on its brick and mortar stores in the era of digital distribution and e-readers, where consumers can basically snap their fingers and get a book or song? There is basically no reason for an e-reader user to visit a brick and mortar store to pick up a new copy of a book.
It’s hard to argue with the popularity of e-readers, with companies like Barnes & Noble and Amazon seeing runaway successes with their versions. Borders’ shareholder confidence has already dropped off this year, with its share price dropping around 72 percent to less than $1 from its high of $3.29 this year. So now seems to be the best time for Borders to make a move into something new.