Next Jump, the firm that managed Borders’ Perks program and was then sued by the bookseller, is fighting back. Two weeks ago, Borders sued Next Jump, accusing the firm of trying to steal half-a-million of its rewards customers. Now, Next Jump says that lawsuit was an effort to deflect Borders’ own incompetence, and it is counter-suing to recover $1.8 million it says it will have to pay as a result of that screwup by Borders.
The case turns on a rewards program that once generated $400,000 a month for Borders and Next Jump in transaction fees. The rewards program had a total of about 40 million members, of which some 7 million of them had actually accumulated points. Next Jump says that when bookseller headed into bankruptcy, it created anger and confusion by failing to tell its Perks customers what would happen to their rewards points. Next Jump says it agreed to assume a $1.8 million liability in unpaid rewards points at its own website, OO.com, but that the customer list is now worthless because Borders refused to help migrate the customers. (Some half-a-million Borders members responded to OO.com’s solicitation — those are the customers Borders says Next Jump essentially stole.)
Next Jump says that because Borders didn’t help with the transition, many of the formerly loyal rewards members bolted. “They unsubscribed in astronomical numbers,” said CEO Charlie Kim, adding that Borders’ recent decision to sue to stop Next Jump to prevent it from using its trademark was a final act of ingratitude. He said Borders had “sucked punched” Next Jump.
In a court filing late last week, Next Jump said an initial buyer for the customer list bolted after its due diligence value revealed “the assets were virtually without value because of a low response rate and high unsubscribe rate.”
It is unclear what effect the Next Jump dispute will have on the auction of Borders’ intellectual property that is slated to go ahead this week. Although the controversy over the Perks program may have eroded remaining goodwill in the Borders brand, the winning bidder will still obtain access to a vast customer database of book lovers. According to Kim, the customer list includes not only the 7 million Perks members but an addition 33 million people who signed up for a more basic form of Borders rewards.
David Peress of Streambank LLC, the company that is managing the auction, told paidContent that he had received numerous bids and that there was “substantial interest” in the Borders name. The auction will take place in New York City on Wednesday.