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
PROMOTED VIDEO
Arts and Entertainment
tv
News
Katie Hopkins appearing on 'This Morning' after she purposefully put on 4 stone.
peopleKatie Hopkins breaks down in tears over weight gain challenge
Life and Style
fashionModel of the moment shoots for first time with catwalk veteran
Life and Style
fashionAngelina Jolie's wedding dressed revealed
News
i100
Sport
Alexis Sanchez, Radamel Falcao, Diego Costa and Mario Balotelli
footballRadamel Falcao and Diego Costa head record £835m influx
News
i100
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Madame Vastra and Jenny Flint kiss in Doctor Who episode 'Deep Breath'
tv
Arts and Entertainment
Olivia Colman topped the list of the 30 most influential females in broadcasting
tv
Life and Style
techIf those brochure kitchens look a little too perfect to be true, well, that’s probably because they are
Arts and Entertainment
Danish director Lars von Trier
tvEnglish-language series with 'huge' international cast set for 2016
Life and Style
tech
Latest stories from i100
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

Executive Assistant/Events Coordinator - Old Street, London

£35000 - £38000 per annum + benefits: Ashdown Group: Executive Assistant/Event...

HR Generalist (standalone) - Tunbridge Wells - £32,000

£30000 - £32000 per annum: Ashdown Group: HR Generalist (standalone) - Tunbrid...

Derivatives Risk Commodities Business Analyst /Market Risk

£600 - £800 per day: Harrington Starr: Derivatives Risk Commodities Business A...

Power & Gas Business Analyst / Subject Matter Expert - Contract

£600 - £800 per day: Harrington Starr: Power & Gas Business Analyst/Subject Ma...

Day In a Page

'I’ll tell you what I would not serve - lamb and potatoes': US ambassador hits out at stodgy British food served at diplomatic dinners

'I’ll tell you what I would not serve - lamb and potatoes'

US ambassador hits out at stodgy British food
Radio Times female powerlist: A 'revolution' in TV gender roles

A 'revolution' in TV gender roles

Inside the Radio Times female powerlist
Endgame: James Frey's literary treasure hunt

James Frey's literary treasure hunt

Riddling trilogy could net you $3m
Fitbit: Because the tingle feels so good

Fitbit: Because the tingle feels so good

What David Sedaris learnt about the world from his fitness tracker
Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Second-holiest site in Islam attracts millions of pilgrims each year
Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering