Bloomsbury seeks new magic to break the Potter spell

Publishing group looks to end dependence on JK Rowling publishing success

After ten years of stock market success Bloomsbury Publishing is best known as the home of the Harry Potter books.

After ten years of stock market success Bloomsbury Publishing is best known as the home of the Harry Potter books.

The UK company has built the publishing phenomenon of the past decade on the back of JK Rowling's trainee wizard franchise; but the magic looks like it is beginning to wear off and investors are starting to ask whether forays abroad and investment in new authors can keep the company growing at a similar rate.

Despite announcing group sales up 22.2 per cent to £83.1m yesterday for 2003 and pre-tax profit up 38.3 per cent to £15.38m, the Harry Potter spell has lost its power as far as Bloomsbury's rating is concerned. The company's shares, up 4.5p to 249p yesterday, are trading on a price earnings multiple of about 15 times this year's earnings, quite a discount to the media sector's average of about 19.

The reason, after 10 years of unbroken stock market success, is the uncertainty surrounding the question of what comes next for a company that derives about half its sales from the J K Rowling series.

The answer, according to Nigel Newton, the company's chairman, lies overseas ­ always a risky business for a relatively small company ­ and investment in new titles and authors.

"We are seeking our future growth in the two book markets in the world that are larger than our own: the US and Germany," says Mr Newton. "This move makes good sense because our bigger titles in the UK are big sellers in these other markets. If we discover them, why not be in a position to publish these in other markets as well?"

What really excites Mr Newton, more perhaps than even this year's Harry Potter paperback launch, is an acquisition his company made in 2003. A first novel by the author Susanna Clarke, called Jonathan Strange and Mr Norrell, is being talked about by Mr Newton as one of the biggest of the year. "We bought the world-wide rights for this book with the view to it being a bigger seller in Germany and the US than here in the UK."

Already in the US Bloomsbury is publishing a growing a list of titles originated both here and in North America. Its US children's list is firmly established with titles such as Herbie Brennan's Faerie Wars, and its adult list includes such well know titles in the States as Sloane Tanen's Bitter with Baggage Seeks Same. Sales in North America are now running at £9.06m.

In Germany, Bloomsbury last year bought Berlin Verlag, a local publishing house controlled by Bertelsmann, the media giant. It has stripped out costs and is running the business as an independent publisher. A German children's list has been launched, called Bloomsbury Kinderbucher, and the adult list combines local authors such as Mirjam Pressler with international bestsellers. It is contributing to European sales up from £3.4m in 2002 to £11.3m last year.

So at the heart of Bloomsbury's future success are books like Ms Clarke's doing well internationally, along with Mr Newton's ability to reinvest wisely the prodigious amounts of cash that his company's Harry Potter publishing rights generate. Are we therefore seeing the emergence of the post-Potter Bloomsbury?

"That would be one way of putting it, yes," said Mr Newton, who founded the company in 1986 and floated it on the stock market eight years later. His relatively modest 5 per cent stake in the company is now worth about £8.5m.

"When I left university books were an attractive area to go into. I loved books. After I joined Macmillan I came to love everything about making and publishing books: not just reading them, but also selling them and being involved in the process of them being brought to the attention of literary editors.

"When we started the company we were in three areas: publishing literary fiction, reference works and a publisher of general non-fiction. When we floated on the stock exchange in 1994 we started on new ventures in the field of children's books and paperbacks.

"One of the first children's titles was Harry Potter and the Philosopher's Stone, and one of the first paperbacks was Snow Falling on Cedars, which went on to sell more than 1 million copies. These were our core areas. Then in July 2000 we bought A&C Black, a long established publisher of reference works." Since then Mr Newton has added more reference works such as Who's Who and Whitaker's Almanack.

Born in California, the 48-year-old Mr Newton has now built a business that would certainly stand alone these days even if he had never heard of Hogwarts and the rest. One analyst said yesterday: "If you split Bloomsbury in two and separate out the Harry Potter business you would still be left with a publishing business that most bigger houses would be extremely envious of."

Bloomsbury's other fiction authors include the likes of Donna Tartt, whose second novel, The Little Friend, was Bloomsbury's biggest seller on its adult fiction list last year. Its paperback titles were further strengthened in 2003 when the full paperback rights to the back list of Michael Ondaatje, including The English Patient, reverted to Bloomsbury from a third-party publisher.

It publishes other big names such as Joanna Trollope and owns such non-fiction classics as Peter Collin dictionaries, a share in the Encarta reference works, and Wisden Cricketers' Almanack. Another recent bestseller on Bloomsbury's list was Schott's Original Miscellany, a surprise hit ever since it appeared in 2002. In fact while Bloomsbury is still almost universally known for its Harry Potter associations, its interest in the global franchise is actually quite modest.

Its ownership of the character extends to the English-language publishing rights around the world, but not in the US. Foreign-language rights are also excluded. So the two book markets bigger than Britain, Germany and America, are outsideBloomsbury's grasp as far as Harry Potter is concerned. The wizard movies belong to Warner Brothers, while all the merchandising is licensed to various toy manufacturers around the world.

That said, what rights it has to Harry Potter are currently generating at least £40m a year for Bloomsbury. Such a valuable endowment is helping the company generate operating cash flows of £14.65m. At the end of 2003 its net cash position stood at £28.32m and shareholders' funds were £58.8m.

Harry Potter represents a valuable annuity income, presumably stretching far into the distance. The key for Bloomsbury shareholders is how Mr Newton uses it. "You only have to look at Tolkien to be reminded that some of the biggest books are the children's classics written many decades ago," he says.

But this year, Harry Potter may be big but other developments at Bloomsbury will be bigger, at least as far as the company's long-term future is concerned. "The important thing about 2004 is that we will see bigger contributions from some of our previous investments and acquisitions. We will see the first full 12-month contribution from Berlin Verlag while our biggest growth prospects are in the US," says Mr Newton.

Suggested Topics
Sport
Alexis Sanchez has completed a £35m move to Arsenal, the club have confirmed
sportGunners complete £35m signing of Barcelona forward
Voices
Poor teachers should be fearful of not getting pay rises or losing their job if they fail to perform, Steve Fairclough, headteacher of Abbotsholme School, suggested
voicesChris Sloggett explains why it has become an impossible career path
Sport
world cup 2014
Sport
Ray Whelan was arrested earlier this week
PROMOTED VIDEO
Arts and Entertainment
In a minor key: Keira Knightley in the lightweight 'Begin Again'
film
Arts and Entertainment
Celebrated children’s author Allan Ahlberg, best known for Each Peach Pear Plum
books
News
peopleIndian actress known as the 'Grand Old Lady of Bollywood' was 102
News
Wayne’s estate faces a claim for alleged copyright breaches
newsJohn Wayne's heirs duke it out with university over use of the late film star's nickname
Life and Style
It beggars belief: the homeless and hungry are weary, tortured, ghosts of people – with bodies contorted by imperceptible pain
lifeRough sleepers exist in every city. Hear the stories of those whose luck has run out
News
Mick Jagger performing at Glastonbury
people
Life and Style
fashionJ Crew introduces triple zero size to meet the Asia market demand
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Santi Cazorla, Mikel Arteta and Mathieu Flamini of Arsenal launch the new Puma Arsenal kits at the Puma Store on Carnaby Street
sportMassive deal worth £150m over the next five years
Arts and Entertainment
Welsh opera singer Katherine Jenkins
musicHolyrood MPs 'staggered' at lack of Scottish artists performing
Life and Style
beautyBelgian fan lands L'Oreal campaign after being spotted at World Cup
Arts and Entertainment
Currently there is nothing to prevent all-male or all-female couples from competing against mixed sex partners at any of the country’s ballroom dancing events
Potential ban on same-sex partners in ballroom dancing competitions amounts to 'illegal discrimination'
News
business
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Business Analyst Consultant (Financial Services)

£60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

Systems Administrator - Linux / Unix / Windows / TCP/IP / SAN

£60000 per annum: Harrington Starr: A leading provider in investment managemen...

AVS, JVS Openlink Endur Developer

£600 - £700 per day: Harrington Starr: AVS, JVS Openlink Endur Developer JVS, ...

Technical Support Analyst (C++, Windows, Linux, Perl, Graduate)

£30000 per annum: Harrington Starr: A global leader in trading platforms and e...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice