How to replace Potter magic?

By JAMES ASHTON
Updated:

 

Nigel Newton is sanguine about life after Harry Potter.

The boss of Bloomsbury Publishing has long ago overcome the sinking feeling that millions of children will feel this summer when they have devoured the final installment of the boy wizard's adventures - only to realise there will be no more to follow.

Of course, Newton can look forward to another bumper year thanks to the release on July 21 of Harry Potter and the Deathly Hallows.

By then, Britain will already be in the grip of another wave of Harrymania, as the Order of the Phoenix, the fifth Potter film, opens in cinemas a week earlier.

But what the company does next is occupying the thoughts of investors. Its reliance on the inmates of Hogwarts School was laid bare in last year's profits, which slumped 74pc to £5.2m. The total dividend edged up 1.7% to 3.66p per share.

Richard Menzies-Gow, at Dresdner Kleinwort, has pencilled in a £17.3m surplus for 2007, falling away to £8.2m the year after.

Up to half of group revenues, which stood at £74.7m last year, down 31%, come from Potter.

In its children's division, sales slid by £42m because Bloomsbury had nothing to match 2005's hardback release of Harry Potter and the Half-Blood Prince, volume six in the series.

Newton owned up to a ' challenging year', which ended with a December profits warning as Christmas sales underperformed.

He has been preparing for the future for a long time now, with a string of small acquisitions and setting up shop in America and Germany. But how successful he has been is open to question.

Menzies-Gow said: 'Diversifying and delivering to date has still been relatively little, but behind the scenes there is a lot that has been done.

'The US and Germany are not contributing much at the moment, but the infrastructure has been set up. The real story there will be over the next two years.'

Efforts are being accelerated. Sat on £24m of cash, Newton flagged up acquisition hopes. He said: 'We have made 10 already and we are looking for further and bigger acquisitions that complete our core strengths in either adults, children's or reference publishing.'

They could also be outside its traditional publishing activities, such as content rights exploitation. Also in the pipeline is a giant finance database, in the same vein as its successful Encarta dictionary. More obliquely, it has already invested in a community website for the book industry.

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Of course, Bloomsbury (down 6¼p at 185¼p) can carry on milking the Potter franchise for another five years with box sets and audio books. The phenomenal success of the series is not bad for a £2,500 advance that Newton risked on a sample chapter written by an unknown author a decade ago.

And it is not that Bloomsbury did not have a strong pedigree before JK Rowling came along. The company, set up in 1986, published Michael Ondaatje's English Patient, which spawned an Oscar-winning film.

It also has close relationships with Donna Tartt, Joanna Trollope and William Boyd, whose Restless won the Costa Novel of the Year prize.

On the flip side, David Blunkett's memoirs, for which the former home secretary received a reported £400,000 advance, did not trouble the bestseller list.

Certainly, times are tough for booksellers. US chain Borders is selling its UK shops, including Books Etc, after sustaining losses.

And struggling HMV is closing 30 branches of Waterstone's. They are complaining about the lack of blockbuster releases and the price-cutting threat from internet rivals.

If Newton has his way, he will track down the next bestseller. But the City can't help feeling that replicating the Potter magic will be a tall order.

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