Bloomsbury Caught in the Harry Potter Spell
Byline: The CFO interview Colin Adams Bloomsbury Publishing
Colin Adams, group finance director of Bloomsbury Publishing, the company that brought Harry Potter into print, has a lot to smile about - even though he gave his first edition of Harry Potter and the Philosopher's Stone away. Not only does the long-anticipated film of the first Harry Potter book open this week, but Adams will be seeing the film tonight (Monday), at a Bloomsbury private view in London's Leicester Square Odeon cinema, where the film previewed earlier this month to rave reviews. The rest of us will have to wait until at least Friday, and probably weeks longer - if stories of massive pre-selling of tickets are to be believed - before we too are able to embark on the Hogwarts Express.
Bloomsbury will not benefit directly from the film. It owns only the worldwide English rights (excluding the US) for the Harry Potter books, and some merchandising rights. However, the film will boost already-buoyant book sales, a formula that has already worked with Bloomsbury titles such as The English Patient and The Piano.
The film's launch hasn't exactly been bad for Bloomsbury's share price either; it has recovered from a temporary dip below [pound]6 in September to well over [pound]8. The longer-term trend has been positive, too. Bloomsbury, which went public in 1994 with a value of only [pound]9m (E14.6m), is now worth more than [pound]140m. And, Adams believes, there is plenty more upside ahead. He has recently resisted cashing in share options with a strike price of 83p. "We are a company with a bright future," he says.
It is hardly surprising to discover that Bloomsbury's share price and JK Rowling, the author of the Harry Potter books, have risen alongside one another. "Harry Potter has been a golden ticket. It has transformed Bloomsbury," says one analyst. The Harry Potter story has not only attracted investor interest, but has also ensured that Bloomsbury gets its pick of new children's books and early warning of acquisition opportunities in the industry.
However, while Adams would not deny the Potter effect, he is quick to emphasise that Bloomsbury is not a one-product company and that its relationship with the financial community was already healthy. "Harry Potter is the icing on the cake," he says, pointing out that Bloomsbury publishes 470 books a year from a strong line-up of authors that includes Joanna Trollope and Margaret Atwood. The firm acquired A&C Black, a leading reference book publisher, last year and is developing new business streams, such as audio books, electronic publishing and a children's department in the US. Nevertheless, analysts estimate that Harry Potter now contributes at least 50% of Bloomsbury's revenues, a figure that, for reasons of author confidentiality, Adams refuses to comment on.
Looking back from today's Potter frenzy, it is hard to imagine a world without Harry Potter. But neither Rowling nor Bloomsbury were overnight hits. Eight publishers had rejected the first Harry Potter book before Bloomsbury's then-embryonic children's books department bought Rowling's manuscript for "very little".
Harry Potter and the Philosopher's Stone came out in hardback in 1996 and, although it has since become the biggest selling commercial book ever, it wasn't until the second book in the series came out a couple of years later that the Harry Potter phenomenon really took off. Now, first editions are changing hands for thousands of pounds and Rowling is a multi-millionaire, worth [pound]63m by some estimates.
Like Rowling's writing career, Bloomsbury's life as a listed company also got off to a slow start. Following its IPO in 1994, the shares languished around their listing price, falling as low as 67p in early 1998. Adams puts this down to lack of experience and poor communications. "None of the board had City of London experience, or corporate PR experience, and for three years we didn't do much," he admits. …