Although Borders has been struggling financially for years, for the first time the book industry is openly, and in many cases actively, planning for what business will be like without the nation's second largest bookstore chain. At last week's meetings with publishers, some of which included Bennett LeBow, Borders chairman and largest shareholder, it was clear that while publishers want Borders to survive, there are limits on how much support the major houses are able to provide. Borders's proposal to turn the delayed payments owed to publishers into interest-bearing notes met with a cool reception, and publishers were frustrated that Borders executives couldn't supply more information. Further details about the company's financing and turnaround plans are expected this week.

The lack of specifics and what appears to be a deteriorating situation reportedly prompted one publisher to tell Borders it should go ahead and file for bankruptcy. Indeed, there appears to be a growing sentiment that Borders's best option might be to file for a prepackaged bankruptcy. Such a filing would need creditor and shareholder support, but would be cheaper and quicker than a regular Chapter 11 filing, and it would give Borders the chance to shed unprofitable leases, something Borders is eager to do since expensive leases are one of the retailer's biggest problems.

The lack of clarity about Borders's future is causing publishers to rethink author tours and in-store events at the retailer (Simon & Schuster has already canceled a few appearances) and complicating print runs for books due out this spring since it is uncertain how many stores Borders may be operating in a few months' time. Even if it finds new financing, Borders will be selling fewer books due to a combination of store closings and carrying fewer titles in the stores that remain open. At the end of the third quarter, Borders had 674 stores, down from 877 in the previous year, and has said it plans to close more superstores and mall stores.

Despite its problems, Borders still accounted for 8.5% of dollars spent on books in the third quarter, according to Bowker's PubTrack service, compared to 17.4% for Barnes & Noble. For many publishers, Borders remains their third largest account behind B&N and Amazon. A Borders bankruptcy or other actions that would result in a dramatic downsizing of its store count would be a boon to B&N and would further cement its place as the country's largest bricks-and-mortar bookseller. B&N inserted itself into the publisher-Borders negotiations last week when it said it expected publishers to offer all booksellers, including itself and independents, the same terms it gives to Borders. Independent booksellers have taken note of B&N's call for a level playing field and will be watching to see how aggressive B&N may be in ensuring that all booksellers get equal treatment.

While there is speculation that Borders's troubles will help indies rebound, it is not clear how much they may benefit other than stores that are in direct competition with the chain. In recent years, Amazon, and now e-books, have provided as much, and in some cases more, competition to indies than either Borders or B&N. But with fewer stores, those that remain would become all that more important for publishers to support.