Scholastic Corp is staging one of the biggest book-marketing campaigns ever to accompany the release today of Harry Potter and the Order of the Phoenix, the fifth book in the series about the boy wizard.
Scholastic will spend almost US$4 million on promotions ranging from electronic billboards to Harry Potter nights at Major League Baseball games, the company said. That's four times what it spent on the previous book, Harry Potter and the Goblet of Fire.
The new book -- which officially was to go on sale at midnight last night in London, and five hours later in New York -- already is setting US publishing records with two printings totaling 8.5 million copies. Scholastic's marketing blitz is expected to boost the New York-based publisher's annual profit and buoy the entire book business, investors and analysts said.
"It is extraordinarily important to the book industry this year," said Neil Godsey, an analyst at investment bank ThinkEquity Partners in San Francisco, who rates Scholastic's shares "equal weight" and doesn't own any. "It not only should itself generate a lot of sales, but it ought to generate sales of other books" by luring customers into stores.
Booksellers need all the help they can get. Growth was stagnant last year and has been slowing since 1999 at most stores owned by Barnes & Noble Inc, the New York-based company that is the world's largest bookseller. AOL Time Warner Inc, the world's largest media company, recently pulled its book-publishing unit off the block after getting bids it deemed unsatisfactory.
Scholastic's reliance on school sales has left it exposed to cuts in school budgets. While that's also true of Pearson Plc, Reed Elsevier NV and McGraw-Hill Cos, the only three companies whose 2001 North American book sales were higher, Scholastic's shares have performed worse than its rivals.
The shares yesterday fell US$0.02 to US$31.48 on the NASDAQ Stock Market and have declined 12 percent this year as the company cut its sales and earnings forecast. London-based Pearson's shares have advanced 2.1 percent this year through Thursday, and New York-based McGraw-Hill's 5.9 percent. Amsterdam-based Reed Elsevier's shares have fallen 8.9 percent.
"Harry Potter is sort of incremental to the story," said David Kalis of Chicago-based Segall Bryant & Hamill, which owned 512,400 Scholastic shares and had US$2.9 billion under management on March 31. Scholastic has "some underlying issues," he added.
Scholastic charges retailers US$15 per book and recommends they sell it for US$29.99, investors and analysts said. Barnes & Noble and two other big book sellers, Amazon.com Inc and Borders Group Inc, are discounting Order of the Phoenix as much as 40 percent, to US$17.99, to attract customers.
"The theory behind the best seller is it's a loss leader," said Constance Sayre, director of Market Partners International, a consulting firm. "It gets people into the stores, and they'll walk out with something else as well."
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