This weekend, Borders a chain of bookstores, that also sells e-books online announced that they have serious liquidity concerns. 

With a major e-book retailer in danger of insolvency, this raises some interesting questions for book publishers. What would, for example, happen to a customers account full of e-books if the Borders website were to simply vanish? Right now it’s unclear.

The emergence of e-books has transformed the book market in recent years. When Apple released the iPad, they not only set off a revolution in mobile computing, but they also created a huge wave of change in e-books. Two big changes were increasing popularity of e-books among the general consumer public and introducing the book-as-app (also known as enhanced e-books) category.

Another important development is the introduction of a new pricing model for e-books. In the past, retailers, like for example Amazon, could sell a book at whatever price they chose, but would compensate the publisher based on the list price. 

With the release of the iPad, Apple forced everyone — including Amazon — to accept the so-called agency pricing model, which gave publishers the ability to set prices. The move to the agency model results in bigger margins for publishers and a more direct relationship with the customer. Now book retailers feel pressure of going out of business.

Today, in The New York Times, Michael Wolf sees Borders stumble and raises the question: What if they do? Could the authors themselves become responsible for customer relations? Mark Coker, CEO of indy book platform Smashwords, expects that that a major bookseller like Borders, with lots of accounts, would no doubt sell its assets (and its liabilities) to another party in a bankruptcy, which means that someone — possibly even Apple, Amazon — would inherit those consumer retail relationships.

With e-books, an independent author can essentially become a publisher himself on Amazon or another platform. Amazon isn’t going out of business soon. But, in the future some authors might sell through a multitude of different sales platforms, including many with shady balance sheets. Would these author/publishers themselves ultimately be responsible if an e-bookstore went out of business and a consumer’s e-book disappeared? To be continued.

Source: The New York Times