When was the last time you were in a bookstore? Exactly. On-line books sales and electronic readers have replaced our primary need for going there. There are other reasons to go to a book store, to socialize, or see what new books are out, but they have little to do with actually buying a book.
And that's the conundrum facing the nation's second largest bookstore chain, Borders. Shares of Borders fell to below $1 after it announced that it couldn't afford to pay publishers for their books at this time and would have to delay payment.
That news followed an earlier report in which Borders said a third party had lowered the value of its inventory in the event it had to sell the company or go out of business. That hurt Borders' ability to borrow and forced it into talks with senior credit facilities to refinance its debt.
Borders spokeswoman Mary Davis says that as part of this potential refinancing, it is necessary for Borders to restructure its vendor financing arrangements and is delaying payments to some of its publishers. Davis added that Borders has notified the publishers and will be working with them to restructure payment arrangements.
According to The Wall Street Journal, Borders admitted that there can be no assurance that its refinancing efforts will be successful. The company reiterated an earlier disclosure that without refinancing, it could violate its existing credit agreements in the first quarter of 2011 and experience what it called "a liquidity shortfall."
Earlier this month, there was a report that Bill Ackman, who runs the Pershing Square Capital hedge fund, was going to help finance a Borders-led takeover of Barnes and Noble, the nation's largest bookseller.
Analysts say that deal would have made sense because it would put Borders deeper into the digital book store and hardware game, via Barnes and Noble's Nook. Now, however, they say the real problem isn't where Borders needs to be, it's where it is now, with a lot of property no one is visiting, or if they are visiting, just not buying books when they do.
Consumers are simply buying less published material in stores than ever before. That trend is not likely to change. But both Borders and Barnes and Noble have excessive real estate holdings that need to be cut.
In December, Borders reported a loss of $74.4 million for the third quarter, nearly twice as deep as the loss posted a year earlier.
Meanwhile, sales of electronic books and the devices used to read them exploded in popularity. Amazon, which sold about 2.4 million Kindles in 2009, is expected to at least double that number in 2010. Apple has sold about 7.5 million iPads since April.
Barnes and Noble announced that same-store sales fell more than 3% in the most recent quarter at the same time the Nook, its e-reader, was breaking sales records.
Barnes and Noble, which even put itself up for sale, so far hasn't attracted any buyers other than possibly Borders. But then that would appear to be like the Hindenburg buying the Titanic.
Meanwhile both Borders and Barnes and Noble are closing stores. Borders is scheduled to close its downtown Portland store on January 7. The rest of the chain could be right behind.
If you wonder what the future is for books, just think about the last time you bought a CD or even a DVD. It's unlikely that the physical book is going away completely, just as some audiophiles still prefer to listen to their music on vinyl. But there will probably be fewer print versions of books than there are today.
Studies show people with e-readers are reading more than they did before. I know that's true among the people I know who have them, and they love their iPads, Kindles and Nooks. Still, it's a little sad to see bookstores close, even though I never go there anymore.
I guess I just like to see them there when I drove by.