The book publishing industry was just beginning to grapple last week with the many repercussions the Borders Group Chapter 11 filing will bring to all facets of the industry. The most immediate impact, of course, is the loss of revenue associated with the bankruptcy itself. The 30 largest creditors are owed approximately $314 million, with Penguin Group (USA) owed the most, at $41.1 million, followed by Hachette Book Group, out $36.9 million. Penguin issued a statement last week, saying it will work with Borders to help it emerge as a stronger retailer, and noted that it "has taken appropriate steps to mitigate the financial impact of the company's bankruptcy on Penguin."

How hard publishers' profits will be hit is hard to judge. Simon & Schuster released its 2010 results the same day Borders filed for Chapter 11. Despite taking a charge for Borders, S&S's operating income increased 43% over 2009. S&S CEO Carolyn Reidy said she hoped the provision S&S took last year would make it unnecessary to take another charge this year, but acknowledged she couldn't be sure. "It's a fluid situation," she said. Macmillan is not only owed $11.4 million from Borders but is out approximately $10 million from the bankruptcy of its Canadian distributor, H.B. Fenn. HarperCollins is owed $25.8 million from Borders, and its Zondervan subsidiary is owed $1.9 million. Ingram, which had been supplying Borders after the largest houses stopped shipping books to Borders after it missed its December payment, is not among the largest creditors because, as the filing notes, Borders "generally paid cash on delivery" for inventory in January.

While the largest publishers are owed the most, independent presses could face more serious ramifications. Although a number stopped shipping to Borders, many continued to. NBN, owed just under $2 million, was only shipping books to the outlet after clients agreed that NBN wouldn't be responsible for money lost in bankruptcy. Perseus Distribution Services is owed $7.8 million. The country's largest distributor has various kinds of agreements with its publisher clients regarding the Borders bankruptcy, with some houses more exposed than others. NBN and Perseus battled over acquiring PGW clients when parent company AMS went bankrupt late in 2006, and helped keep some struggling houses afloat. It's unclear if they will be able to help again in a much different publishing environment.

The trickle-down impact will affect everyone from manufacturers to agents. Borders accounted for about 8% of overall industry sales, a higher percentage in some categories. A downsized Borders means publishers are likely to receive smaller orders and in turn place smaller first printings, resulting in less business for printers. The likelihood of lower print sales, one publisher said, means that books acquired one or two years ago when Borders was much bigger will have a more difficult time earning the advance back and that less shelf space could mean lower advances.

The loss of shelf space could be mitigated if other bookstores move to abandoned locations. "Holding on to the volume will be key," said Reidy. There was a report last week that Books-A-Million was exploring the possibility of moving into Borders stores in Massachusetts. Landlords looking to keep a bookstore in their development might be willing to offer deals to lure an independent or Barnes & Noble outlet.

As for what lies ahead for Borders, the chain faces an enormous task in rebuilding trust among publishers and carving a niche for itself in a market where the demand for its main product, printed books, is in steady decline. The company promises that despite closing 200 of its 488 superstores, it will remain a national chain as the map on pages 8–9 shows, Borders will have outlets in most states where it had been operating, although as many as 75 stores, on top of the 200, could be closed. Trident Media group chairman Robert Gottlieb believes Borders's best chance of survival will be to ramp up its digital business. Although Borders lags behind its competitors in this area, Gottlieb believes the chain can find success "with the right leadership in place and the right outlook."

To access bankruptcy court filings and to see our online coverage, go to