Martyn McLaughlin: Harry Potter magic still potent despite losses

Sorcery indeed - it is now ten since the publication of the concluding chapter of Harry Potters story. Picture: Phil Wilkinson

J.K Rowling's empire remains a commercial phenomenon despite a tricky digital venture, writes Martyn McLaughlin

For the generation that has grown up with Harry Potter, the realisation that next year marks a decade since the publication of the concluding chapter of his story must seem tantamount to sorcery.

J.K Rowling’s boy wizard is soon to turn 36, old enough to have paid off his student debt from Hogwarts and turn his attentions to grown up matters, such as worrying whether he has put the junk mail in the wrong coloured recycling bin. Yet his youthful visage remains omnipresent, a commercial force that shows no sign of being withered by age.

It is with some surprise, then, that the latest accounts for one of Rowling’s flagship firms suggest Potter’s potent spell may be wearing off. At the weekend, I reported how Pottermore, the innovative publishing arm which sells digital versions of the novels directly to fans, has racked up losses of £6 million and seen its turnover fall from £31.6m to £7m. The numbers seemed inexplicable. Pottermore, controlled by Rowling, was heralded by industry heavyweights as a pioneering move that would allow prominent authors to free themselves from the stranglehold imposed by publishing houses and retailers, on whose historic business-to-business relationship they have depended for exposure and revenue.

Jonny Geller, joint chief executive of Curtis Brown, indicated at the time of Pottermore’s launch that it could be a “gamechanger in how global brands, the authors, can reach their readers,” while Wired magazine declared it as the day “book publishing finally has its ‘Radiohead’ moment’, a reference to the bestselling band’s decision to self-release their seventh album, In Rainbows, on a pay-what-you-want model; in doing so, it famously became one of their most profitable LPs. There are, of course, important caveats to consider when dealing with an author’s of Rowling’s stature. The average Scottish writer ekes out an annual income of £6,000. All but a miniscule minority of those who wield a pen for a living lack the means or acuity to grow a character into an international multimedia brand in the way the 50-year-old has marshalled her young wizard. Throughout the dizzying rise that has transported Potter from the page to the big screen, Rowling’s acumen has been evident.

One of the most beneficial deals, however, may have been an act of providence. When the series was picked up by Bloomsbury’s Barry Cunningham in August 1996 for an advance reputed to be around £1,500, Rowling retained the digital rights. One publishing source I spoke to suggested this was simply an oversight on the part of an industry that failed to heed what the future had in store, understandable perhaps given the Kindle did not appear until 2007.

Whether it was accident or design, Rowling’s control over the rights allowed her to continue her winning streak with Pottermore, at least to begin with. The site generated revenues of more than £1m in its first three days of trading. By the end of its first month, sales stood at £3m. Factor in the wider commercial value of holding data on the millions of registered users and little wonder those in the book trade were looking on enviously.

But the revelation that the company’s revenue was largely reliant on an affiliate agreement with Sony – worth £24.5m in 2014 – shifts the goalposts. Since the deal ended, Pottermore’s finances look less healthy, with two successive annual declines in ebook and audiobook sales.

It is the first time one of Rowling’s ventures has endured a difficult time, but suggestions the Potter bubble might be on the verge of bursting are premature.

Pottermore’s decision to maintain an exclusive grip over the digital editions allowed Rowling to command a larger proportion of a smaller group of sales. Now, as that market nears saturation, she has plumped for a smaller proportion of a larger group of sales. It is savvy business.

The company is quietly but ferociously expanding its retail partnerships, allowing the books to be sold via Apple, Amazon, Google and other major outlets. With the promise of further tie-ups in the months ahead, it would require disastrous mismanagement not to return to a positive balance sheet.

In any case, the old Potter magic remains strong. Sales of Bloomsbury’s print editions jumped 29 per cent last year after they were reissued with new covers, while Rowling’s entire back catalogue - which includes the works of her crime writing persona, Robert Galbraith - earned her £8.3m last year, an increase of 51.6 per cent.

The 50-year-old is pressing ahead with further plans to expand her universe. In the summer, the stage play Harry Potter and the Cursed Child will open in London’s west end; a few months later, the film, Fantastic Beasts and Where to Find Them, written by Rowling, will open in cinemas worldwide.

There is a danger of course that Rowling could end tinkering too much with the Potter canon. The folly that allowed George Lucas to besmirch his beloved Star Wars franchise with ill-conceived prequels until Disney made him an offer he could not refuse should be an instructive case study.

Rowling, a careful curator of her creations, has not reached the point where Potter’s appeal is at risk of being diluted, but the travails of Pottermore, however temporary, show she cannot afford to be complacent, and prove how even at a time when traditional media models are being disrupted, the old behemoths of entertainment and publishing remain as important as ever.