Publisher Rises With Harry Potter

Although he started as little more than a glimmering image in one woman’s imagination as she traveled from Manchester to London 10 years ago, young Harry Potter has become the biggest book publishing and e-commerce event ever.

The fourth Harry Potter book, Harry Potter and the Goblet Fire, due out Saturday, is the largest advance printing of any trade book in recorded history.

J.K. Rowling, the mysterious author who conceived of Harry on a train ride through the English countryside, stands to earn $10 million or more on the first printing of Goblet of Fire. Not bad compared with the $3,300 advance she received from her British publisher for the first Harry Potter book.

But apart from Rowling, perhaps no one has felt the success of Harry Potter more than the book’s American publisher, Scholastic Inc.

Scholastic is expected to report $100 million in revenue from the first three books for the fiscal year ended June 30. And that doesn’t include the company’s other well-known children’s titles. For the nine months ended last Feb. 29, revenues rose 22 percent to $1 billion, while net income jumped 37 percent to $19.7 million.

Harry’s Potion for Profits

Scholastic, an 80-year-old publisher of children’s literature and educational materials, anticipates Goblet of Fire and the previous three books combined will bring in another $75 million in the coming year.

“I think there’s a lot of things that aren’t recognized about Scholastic. It has a number of popular titles. But there’s no doubt Harry Potter has helped raise the company’s public profile and investor interest,” said Rudy Hokanson, an analyst at CIBC World Marketing in New York, who expects the stock price to reach a record high of $74 per share by the end of this year.

The stock is currently trading in the low $60s. And in the past four months, Scholastic’s shares have jumped about 40 percent, approaching a 52-week high.

But the Harry Potter gravy train doesn’t stop there. Warner Bros. plans to release the first Harry Potter film, which is based on the first book, in November of next year and has rights to the entire series. The company says licensing deals — for children’s shampoo and invisibility cloaks and the like — may generate up to $1 billion.

Even Scholastic, the publisher of children’s series such as The Babysitter’s Club, Clifford the Big Red Dog, Goosebumps, The Magic School Bus and Captain Underpants seems stunned by the book’s success.

“It’s just an extraordinary publishing event. There hasn’t been anything like it,” said Judy Cowman, the company’s vice president of corporate communications.

I Want What I Haven’t Got

Scholastic has printed an unprecedented 3.8 million copies of Goblet of Fire. Since the first Harry Potter book came out two years ago, Scholastic has sold 20.9 million copies of the first three books in the United States.

So far, Goblet of Fire has already broken records at Amazon.com and Barnes and Noble for advance orders. The two booksellers each report more than 300,000 advance orders, about five times what most bestsellers warrant, for the new book.

“This is probably the biggest e-commerce event yet. We’ve certainly never seen a book that sells like this one does,” said Lynn Blake, general manager of Amazon.com’s bookstore.

The success of Harry Potter has also helped the company and wary investors recover from Scholastic’s 1997 debacle with Goosebumps, the popular children’s paperback series.

“Goosebumps was the hot thing at the time,” said Hokanson. Until Harry Potter, it was the best-selling children’s series ever. But Scholastic’s distribution of Goosebumps was ill-planned.

So when demand for the series suddenly fell off in 1996, the company’s distribution network choked on the extra copies clogging its channels. Scholastic’s stock price and earnings for that quarter plummeted. Only now, with the frenzy over Harry Potter, is the stock price approaching its 1996 high of $70 a share.

“Harry Potter is completely different from Goosebumps,” maintained Cowman. Harry Potter books are first published as a hardcover, which the other series are not, he explained. And the Harry Potter series will only be seven books. “You’re talking apples and oranges.”

Hokanson added that the Goosebumps fiasco “was probably more of a learning experience than Scholastic ever wanted.” It’s also one reason why Harry Potter and the Goblet of Fire is being so carefully guarded and distributed by Scholastic this time around.

“But that’s also very good marketing on their part,” said Hokanson. Don’t you want something even more when you know it’s hard to get or you can’t have it?”

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