Harry Potter digital arm loses £6m and sheds jobs

IT WAS hailed as a revolution in publishing that would allow one of the world’s best-selling authors to control her own empire and add to her fortune.

IT WAS hailed as a revolution in publishing that would allow one of the world’s best-selling authors to control her own empire and add to her fortune.

But a pioneering venture set up JK Rowling to sell digital versions of her Harry Potter novels has lost some of its lustre, with the company running up multi-million-pound losses and shedding a quarter of its staff.

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The Pottermore initiative was hailed by literary observers as a major shift in publishing, allowing Rowling – who owns the digital rights to the Potter series outright – to cut out the middleman and enjoy vastly increased profits by selling directly to her fans through a dedicated website.

Announcing the launch of the site in 2011, Rowling – until then a digital refusenik – expressed optimism in the model. “It is my view that you can’t hold back progress,” she said. “Ebooks are here to stay.”

But amid a decline in ebook sales and a print renaissance, even the phenomenon that is Harry Potter is not immune to global trends.

The latest accounts for Pottermore show its turnover has plummeted from £31.8m to just £7m in 2015, a drop of 351.6%. The fall has caused Pottermore to plunge into the red. Having registered a profit of £14.9m in 2014, it made losses last year of £6m. The firm has also cut jobs, with the average monthly number of employees culled from 40 to 30 over the same period, the records show.

However, Rebecca Salt, Rowling’s publicist, told Scotland on Sunday that over the “last few years”, Pottermore had proven “healthy and profitable”, and was well placed to grow in the future.

The sharp decline in revenue is largely down to the expiry of an affiliate agreement Pottermore had with Sony, understood by Scotland on Sunday to be worth around £24m in royalty fees last year alone.

The entertainment group was one of the earliest partners in the venture, a deal which allowed it to release licenced Harry Potter video games and a free ebook with its Sony ereader device.

But the arrangement was discreetly brought to an end in 2014, cutting off a major revenue stream for Rowling’s burgeoning digital shop front.

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At the time both companies parted ways, Pottermore said it was “extremely well-positioned to build upon its success and enter its next phase in its development both creatively and commercially”.

But paperwork filed with Companies House suggest that assessment was premature. Its annual report for the year ended 31 March, 2015, shows the dramatic downturn in royalties impacting on Pottermore’s balance sheet.

Online sales generated by fans buying digital copies are also on the wane, down from £4.7m to £3.9m over the same period. Given that sales stood at £5.9m back in 2013, it indicates that Pottermore is struggling to attract new converts to a franchise that has sold around 450 million print copies worldwide.

However, Neil Blair, Rowling’s agent and one of the directors of Pottermore, said that between 7,000 and 9,000 new users sign up to Pottermore every day.

He and the team behind the company have embarked on a major strategy shift, redesigning the site and loosening their grip over how and where fans can buy Potter ebooks and ­audiobooks.

Last October, it struck a deal with Apple, which released all seven books on the iBooks platform, the first time they have been made available outside Rowling’s site. Since then, other retail partnerships have been struck with popular outlets such as Blackwell’s.

Lisa Campbell, news editor of The Bookseller magazine, which has chronicled Pottermore’s fortunes over the years, said: “The ebook market has moved at a fast pace between 2012 and 2015 and what might have worked when Pottermore was first established doesn’t necessarily work now.

“Other booksellers, such as Blackwell’s, are certainly delighted about the opportunity of selling Harry Potter ebooks directly through their websites instead of diverting customers through the Pottermore website to buy the books and more retailers are expected to offer this service throughout 2016 as Pottermore extends its retail partnerships.”

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Salt told Scotland on Sunday that December had been a “record breaking” month for Pottermore, with more ebooks and audiobooks sold than in the rest of 2015. Based on average sales over the past few years, she explained, the business was deemed “healthy and profitable”.

She added: “Pottermore has the full support and confidence of its board of directors, who believe this will only ­improve, as Pottermore is perfectly positioned to capitalise on the massive global interest in the Harry Potter franchise and the wider wizarding world.”