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I was so very sad to see the news that Borders is failing and has not being able to keep up with the digital era. I saw it with Tower Records — falling to iTunes and other downloadable music; Blockbuster  –falling to Netflix, and now Borders falling to…Amazon’s Kindle? Barnes and Noble’s Nook?

The top 3 comapnies we see in this industry:

-Amazon.com, inc.

-Barnes & Noble, inc.

-Apple inc.

There are many reasons as to why the bookstore giant is losing share, but at the heart they simply missed the digital trend and did not keep up with the rapidly changing industry. The lesson here is they are in a long line of businesses that failed to adapt to digital media fast enough and they will probably not be the last.

This same fallout happened in the movie rental industry, with Blockbuster going down for the count. In 2000, Blockbuster declined several offers to buy Netflix, for a now trivial price; ten years later they declared bankruptcy. Netflix now has more subscribers than the entire population of Australia, and the thought of driving to the store to pick out a movie seems archaic. The problem is that Blockbuster can’t keep up with mail delivery and Redbox type vending machines. (Full disclosure – I have been a Netflix customer almost from the beginning because I knew the management team so I am a little biased.)

This chart illustrates the effect that Netflix has taken on Blockbuster.

Also, Netflix streaming video, which was in their strategy from the beginning but which took a while to make reality is what’s making them #1. Netflix now accounts for more than 20% of the bandwidth in America during peak internet hours and it is going to get worse from here. With the flexibility of streaming to your PS3, Xbox 360, television, Nintendo Wii, iPad, Tivo, iPhone and more—it’s hard to beat the immediacy.

Tower Records also missed the mark in this age of downloading, and it cost them greatly. They prospered through the days of the cassette tape and compact disc—but when Tower didn’t react fast enough to the decrease in sales of tangible items, current music giants like iTunes quickly took over. Tower filed for bankruptcy in 2006, and their failure to adapt to the ever-changing technology cost them everything.

With even the Dalai Lama making appearances on twitter several times per week, it is no surprise that everything is becoming virtual. Medical records, newsstands, bank accounts, and college textbooks…what’s next?

Back to books. It is also interesting to see why Barnes and Noble has survived and may thrive in contrast to Borders even though on the surface they seem the same. The fundamental difference is that BN saw and acted quickly on the digital trend, unlike Borders who dragged their heels and only brought up their website 3 years ago. Barnes and Noble’s “Nook” has more than 2 million titles to download, and its easy-to-read screen and inexpensive price has made it a tough competitor. Amazon’s fabulous Kindle has increased their share price over 60% in the last year.

The bottom line is that our society is going digital. Perhaps it’s our laziness, or ability to create, but as H.G. Wells puts it nicely—“adapt or perish… is nature’s exorable imperative.” So who is responsible for killing Borders, Blockbuster, and Tower? Themselves.

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