Monday, May 14, 2007

Harry Potter and the Disappearing Profits

As I've long suspected, the appearance of a new Harry Potter book doesn't seem to add much to the bottom lines of the retailers involved, be they the big bookstore chains or small independent shops. The impact of a Harry Potter book is felt in the secondary sales that might follow when Potter fans return to the stores for something new to read, still excited about books and the fun that they offer.

Harry Potter has become the ultimate loss leader in the book retailing industry.

It is expected to become the fastest-selling book in history, smashing the record set by Harry Potter and the Half-Blood Prince, which sold 6.9 million copies within 24 hours of being launched in 2005.

With two and a half months to go, alone has received more than one million pre-orders. Potter 7, as Deathly Hallows is known in the trade, should provide a huge boost to book stores. After all, fat sales should equal fat profits.

But Hogwarts is not the gold mine it might seem. Indeed, for all the hype and bluster, the book might as well be retitled Harry Potter and the Damp Squib as far as retailers' profits are concerned.

Due to rampant discounting, few shops selling the book, from Waterstone's to Tesco and Amazon down to small independents, will make any money. Most will break even and many will make a loss.
Meanwhile, far from looking forward to the historic launch with fevered anticipation, many retailers are privately fuming that such a huge event will leave them no richer.

"It really is incredible that no one apart from JK and Bloomsbury will make a shekel. When you think of the work we have to do and the hoops we have to jump through around the launch, it is unbelievable," said the managing director of one of the United Kingdom's largest book retailers.

The Harry Potter situation is emblematic of wider shifts going on among book retailers. The emergence of supermarkets as a new force in bookselling has resulted in fearsome price wars surrounding big titles.
...the book will be a tremendous footfall generator, getting people into stores and spending money.

"We look at Harry Potter in terms of our commercial position. We see it as beyond just a book. The most exciting thing about it is that it will be the biggest day of footfall in the whole year. It is good to see that number of people in the stores and they will like what they see," Johnson said.

One thing is clear though: for retailers, Harry Potter is a decidedly mixed blessing.
I'm seriously thinking about hitting one of the Barnes & Noble stores up here, camera in hand, just to experience some of the craziness of this last Potter frenzy. I'm off to mark it on my calendar...


  1. I can see bookstores losing money on this - for one, at our store, it'll be 40% off; secondly, EVERYONE will be working and the store's staying open longer hours. So, they're not making money on the book, but they're shelling out lots of money to handle the demand and control the crowds.

    Our store is having a party on the 20th, with food and costumes and events, and we're staying open so that at 12:01 AM on the 21st, we crack open the boxes and start selling. And we're not allowed to ask off for that whole week. It'll be an interesting night, that's for sure!

    You're brave to venture into a bookstore; if I didn't have to work, I'd be avoiding bookstores like the plague that day. ;-)

  2. In the UK I think the last book was the only one that was discounted.
    I know a lot of people don't like Rowling, but the librarians at my local library say she has done a great job in getting many youngsters interested in books. That has got to be good news for the kids themselves and society in general.

  3. Sam, I'm tagging you for the 8 Things meme. The details are on my blog (no obligation if you don't feel like it!)

  4. I suppose, Anne, that there must be enough profit in the other sales that the bookstores attribute to the Potter books as secondary to the loss they take or they wouldn't make such a big deal out of a new Potter book. Sounds as if they are afraid to lose customers to the stores that go all out and that they really count on all those Potter fans to return to them at some later date to buy other, higher profit, items. Maybe it works for most of them but I suspect it's more a fear of looking like a party pooper than anything else that makes them so willing to lose money this way.

  5. Nick, I do think that Rowling has made books exciting to a whole generation of kids in a way that has to have created some long term readers in the process. There is quite a large group of religious conservatives who see her books as bad things, however, but they don't seem to have any impact at all on her sales. Personally, I see nothing wrong with the books...but I have a hard time understanding all of the hype surrounding them.

  6. I agree that the Potter series has done only good and no harm to the reading trend. At least a whole new generation of children are introduced to the fun of reading. Potter has become alomost like a compulsory read, for not having read Potter, for children, might become a social catastrophe.
    However, though I agree that your idea that people return to the bookstores for another good book because they are fixed might be true, I am not sure how much book trade has earned out of the business. My local bookstores have, however, found a not so appreciable way of selling other books through Harry Potter craze. They are offering great discounts on the new potter book if you make a purchase of 'n' amount. I don't know how much it helps book trade, but am sure that the Potter series deserved accolades for the sheer pleasure. I have booked my copy and am going to keep 21st free.!

  7. BookCrazy, I have to ask whether the bookstore promotion that you mention actually works for them. It would seem that with so many booksellers willing just to take a loss on the book by deeply discounting it that any incentive program would be doomed to failure.

    I'm not a fan of the books but I hope to be able to get some good pictures at one of my local bookstores when the last one is released. I've never seen anything quite like what happens when a Potter book is released. The only thing that I can compare it to is the release of some major pop star's new CD or the release of a new version of Play Station, etc. But for a book, this seems to be unique.