Kobo trying to untangle itelf from Borders mess

Kobo powers Borders e-bookstore and e-reading apps. Now that Borders, which still holds an equity stake in Kobo, is liquidating, Kobo is doing its best to migrate Borders' digital book customers to its platform while contending with some murky issues surrounding Borders' minority stake.

Borders and Kobo have been working to migrate customers to Kobo now that Borders is liquidating. Screenshot by David Carnoy/CNET

When Kobo first partnered with Borders on the e-book front, things were a bit confusing. You had a Borders e-bookstore and e-readers powered by Kobo, while Kobo had its own e-bookstore and e-readers. You also had separate e-reading apps from Borders and Kobo.

Now Canada-based Kobo is doing its best to migrate Borders' e-book customers over to the Kobo platform as Borders goes out of business and closes all its stores. And as evidenced by the recent e-mail above (sent out this morning), Borders is also encouraging its own customers to make the move.

What adds some intrigue to the situation is that Borders is an investor in Kobo and holds a 11 percent minority stake. What happens to that stake in the liquidation is unclear, for it's possible that the stake will someday be worth a lot of money should Kobo end up being acquired (a distinct possibility) or go public. The company recently released the Kobo Touch Edition e-reader here in the U.S. and has announced it will soon be launching the e-reader Germany and other European countries with country-specific e-bookstores and apps.

A Bloomberg article yesterday said that Kobo along with other creditors filed motions in a Manhattan court objecting to the hurried liquidation of Borders.

The article noted that Kobo said it should have "the right of first refusal for any transfer of Borders' 11 percent stake in its equity, and Borders' shouldn't be allowed to sell information that Kobo has licensed to Borders."

In a separate e-mail sent out to the the press, Kobo sought to clarify "misconceptions about Kobo that have been inaccurately reported by the media and misunderstood by consumers."

Here are some of the bullet points it wished to convey. These are all direct quotes:

  • While Borders is one of the early investors in Kobo, it holds only a minority stake in Kobo, approximately 11 percent. The Borders shares are subject to the terms of the Kobo shareholders' agreement which, among other things, restricts their transfer or disposition.
  • Borders serves as part of Kobo's distribution in the U.S. along with Best Buy, Wal-Mart, Sears, and other top retailers.
  • Kobo does not rely on Borders for content. Kobo owns the publishing agreements and has direct relationships with all major publishers, including Random House, Simon & Schuster, HarperCollins, St. Martin's Press, and many more. Kobo is solely responsible for payment to publishers for e-books sold through the Kobo platform and publishers will continue to be paid on time as usual.
  • For some time, Kobo and Borders have been in the process of transitioning Borders' customers' e-book accounts to Kobo, in order to provide such customers direct access to the most up-to-date eReading functionality, apps, and devices. All Borders customers that have transitioned to Kobo shall enjoy uninterrupted access to their e-Reading accounts. Kobo shall continue to work with Borders to transition customer accounts to Kobo.
  • For those Borders customers who haven't transferred their e-book libraries to Kobo, the process is quick and easy. Borders customers can visit kobo.to/bmigrate to transfer their Borders e-book library to Kobo. No additional steps are required to continue reading on your Kobo eReader. For those Borders customers that are using Borders apps to access their e-book libraries, visit Kobo.com to download a free Kobo eReading app for your computer, smartphone, or tablet.
We'll see how this all ends up playing out, but it should be noted that Borders only held a tiny share of the e-reader and e-book market in the U.S., so Kobo should be able to move beyond its association with the Borders brand fairly quickly, though the issue of the investment stake may linger for a while.
 

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