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The Friday Project crashes/Borders US for sale

7 April 2008

The collapse of The Friday Project with debts of £360,000 ($718,000) has startled the book world, especially since their turnover in the last year was only around half of their costs. Child of the Internet, it commanded the headlines and seemed to have a golden halo of success. Set up to source book projects from the web, the company was based on an idea whose time seemed to have come. Scott Pack, formerly of Waterstone's, joined the original founders and proved a controversial and highly visible figure, guaranteeing the company a stream of publicity.

But this week The Friday Project went into liquidation and many unhappy creditors will see little of the money they are owed, although it looks as if the skeleton of the company will be bought from the liquidators by HarperCollins UK.

So where did The Friday Project go wrong? Anthony Cheetham, a major investor, said this week: 'In retrospect, you can say the company was overvalued, but in my view they never raised enough funds in the first place to be able to invest enough in the bigger projects that would have pulled their profits up.' Small can be beautiful in publishing, but only if a publisher has small ambitions and is very carefully run. If you are trying to play with the big boys you need the deep pockets of the corporation to buy potential bestsellers and promote them heavily.

Meanwhile the world credit crisis is beginning to affect the book world. Borders, the second biggest book chain in the US, has been forced to put itself up for sale and was valued recently in the stock market at only $30m (£15m), 8% of its total annual sales. Group sales in 2007 were $3.8 bilion (£1.9bn), but it made a loss of $157m (£787m) and the total group debts were $554 million (£278m). The company sold its British and Irish arm to the entrepreneur Luke Johnson for £10m ($20m) last year, incurring a charge of $125 million (£62.6m) in dong so.

It seems unlikely that Barnes & Noble, Borders' major competitor, will be able to raise the cash to buy Borders, even if they wished to do so. Perhaps Amazon, which has had a considerable effect on Borders' sales, will seize this opportunity to marry clicks with bricks.

Unfortunately the current instability in the bookselling world does not bode well for authors or for readers, both groups being extremely dependant on the bookselling chains' continued ability to get books to readers.