- The Washington Times - Thursday, July 19, 2007

The release of the seventh and likely final “Harry Potter” book Saturday will mean the end of the cash cow for its U.S. publisher, and it won’t be bringing big profits to booksellers.

Scholastic Inc. will release J.K. Rowling’s “Harry Potter and the Deathly Hallows” at 12:01 a.m. Saturday. Many bookstores are expecting hordes of people for the book release, especially with a fifth movie in theaters and an announced Potter theme park for Orlando, Fla.

“It’s unique in my book-selling experience,” said Carol Troxell, owner of New Dominion Bookshop in Charlottesville. “There’s just been incredible interest in the release date.”

Despite the popularity, booksellers won’t be making much money off the new book, said Laura Dawson, a consultant for the book publishing industry. To draw customers, Amazon.com Inc. is discounting the book by about 50 percent, while Barnes & Noble Inc. and Borders Group Inc. are both selling it 40 percent off. Amazon.com, which has more than 1 million preorders, has said it does not expect to profit on the book.

Discounts create competition for independent sellers, which often cannot survive pricing books below cost, Mrs. Troxell said.

“It’s a constant problem for booksellers,” Mrs. Troxell said.

Large bookstores like Barnes & Noble aren’t profiting as much as they used to, since the sales period for the book has been compressed, said William Armstrong, an analyst with C.L. King & Associates. Excitement. Though, it is still good for business, he said.

“Anything that brings customers into the store can’t be a bad thing,” Mr. Armstrong said.

Never a bad thing but not always beneficial because since the extra customers may be interested only in the specific book, said Gordon Dickerson, owner of the Corner Shelf Bookstore in Culpeper, Va.

Also, he said the profit potential for independent bookstores isn’t what it used to be — his store will sell the new book at a 15 percent discount to compete with chain bookstores.

“The independent bookstore gets undercut by big-box retailers and particularly the Internet,” Mr. Dickerson said. “As an extremely popular book, they have to pull the price down because there are so many people trying to profit.”

In an effort to compete, other independent booksellers are offering the book at a discount. At Olsson’s Books and Records in Alexandria, shoppers can buy a voucher for the book at 25 percent off through today, said Sara Krauss, assistant book manager. The book will then sell regularly at 20 percent off.

Vertigo Books in College Park will pair a 20 percent discount with a midnight release party, said Rebecca Semiatin, who works at the bookstore.

“We can try to compete with some of the bigger stores, even though it’s really not possible,” Mrs. Semiatin said. “But we do well. We have a good base of very loyal customers, and we throw a great party.”

Potter parties are one of the strategies booksellers, both independent and chain, are using to draw in customers.

The series has proved immensely popular for Scholastic and its British publisher Bloomsbury Publishing PLC. Together, the two have sold more than 350 million copies of the first six books, contributing up to $800 million in revenue for Scholastic, said Drew Crum, an analyst with Stifel, Nicolaus & Co.

But the end of the series ends Scholastic’s money maker — one that has been a distraction from other parts of the company’s business, Mr. Crum said.

“There’s a lot of buildup, a lot of momentum ahead of the publication date, but then you have to fall back on the legacy business ex-‘Harry Potter,’ ” he said. “And quite frankly, the earnings power of the company ex-‘Harry Potter’ has not been great in the last several years.”

Each book in the series has had predictable success, but it is not any different from other best-sellers, Mrs. Dawson said. The series has, however, increased focus on the often-successful children’s fantasy genre.

“[‘Harry Potter’] is not that much of a phenomenon,” Mrs. Dawson said. “ ’Harry Potter’ is essentially a fluke, but it is a seven-book fluke.”

Scholastic’s focus on Potter has distracted the company from its troubled direct-to-home business, which markets to prekindergarten children, Mr. Crum said. Problems in that business have caused a loss of about $20 million per year while a break-even year for that segment implies a huge 30- to 35-cent swing on earnings, he said.

That focus on “Harry Potter” also causes more resources go toward the series instead of other parts of the children’s book division, Mr. Crum said.

“If you look at children’s book performance ex-‘Harry Potter,’ it’s better in years in which they don’t publish a new ‘Harry Potter’ book,” Mr. Crum said.

Still, Potter backlist sales will continue to generate between $5 million and $10 million in revenue annually for the company, Mr. Crum said. And its relationship with author J.K. Rowling could produce future blockbusters because the author still wants to write, he added.

“I don’t think the series is going to die off any time soon.”



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