When Bloomsbury Publishing launched nearly 30 years ago, it didn’t set out to get into textbooks, exactly. It didn’t plan on publishing the best-selling children’s book series of all time. It had one specific goal: to bring high-quality books to the mass market. It has far exceeded that goal, publishing successful novels like The English Patient, The Kite Runner and of course, the Harry Potter novels.
One might assume that Harry Potter would encourage Bloomsbury to roll the dice again, taking risks on little-known authors in the hopes of finding the next international hit. It has, but those risks haven’t amounted to much (with a few exceptions), says Bill Sarr, CFO of U.S. operations at Bloomsbury. Rather, the company has seen its most sustained growth from a less … magical business: textbooks and academic publishing.
Sarr sat down with CFO at the CPM conference in New York to talk about how Harry Potter has bankrolled its expansion into the textbook business and how technology could change editorial decisions moving forward. The conversation has been edited lightly for clarity.
Did publishing the Harry Potter series change the company?
Harry Potter completely changed the company. The books were licensed to Scholastic in the United States, but Bloomsbury had licenses to sell Harry Potter everywhere else in the world. The seven books came out in the 10 years from 1997 to 2007, followed by movies from 2001 to 2011. So we just rode the wave. It had a substantial impact on the company in terms of giving us a huge amount of cash to invest.
Over the last 10 years or so the company has acquired 20 different businesses. Almost all of them are in academic and professional [publishing]. They are a lot less hit-oriented, but they provide steadier streams of revenue. Academic and professional can be a very nice business if you find the right niches. You can publish a book and have it last for four or five years. And if you find a set of professors who adopt your books, you can have a very good business. Still, the investors are saying, ‘Where’s your next Harry Potter’? They don’t want textbooks. They want something sexy, like The Hunger Games or something like that.
I would almost expect that the opposite would be true; that you’d have these really steady businesses and that those would allow you to take a risk on some book that might become a hit.
Well, in addition to buying 20 companies over the last 10 years, the company certainly made some big bets, both here in the U.S. and in the U.K., on titles. And for the most part the bets really amounted to nothing.
How is technology changing Bloomsbury and your role as CFO?
Technology has had a huge impact on the publishing business, really since the advent of the personal computer. People are spending more time on computers, less time reading books or magazines or newspapers. But technology has always been a part of the finance area, given the reams of financial data that any finance organization has to work its way through and crunch. It really is finance’s biggest friend as far as I am concerned. And you know, the continual march of technology, as it’s gotten better and better, should make a finance person’s job easier. But the more innovation there is in technology, the more data there is at the disposal of companies, and obviously the role of finance changes so that the finance team almost has to be the filter, differentiating what data is important to the organization and what isn’t.
What would you say is your greatest challenge as CFO at a publishing company?
I would say my biggest challenge is just getting finance to the point that it is the kind of business partner that I would like it to be. And that’s not just finance. I also have responsibility for IT, human resources, and legal affairs, so there’s a lot of support that the administrative function can provide. When it comes to finance specifically, we don’t support the businesses as analytically as we could.
I think that’s a challenge for all finance organizations. It’s got a lot to do with the amount of time that we have to spend on basic stewardship and operational responsibilities: closing the books every month, doing a forecast, doing the budget — and how much bandwidth we’ve got for other things that really support the decision-making of the business. So we’re kind of in that ‘walking before we run’ phase. We just bought a couple of new systems that we’re in the process of implementing and those will give us an opportunity to support the business a lot more than we are able to today.
How could finance better support the business?
The most important decision we make as a publishing company is what kind of an advance we’re going to pay to an author and what the size of that advance will be. And we’re typically involved when an author wants to auction off their work. So we’re very little involved in that decision and yet it can involve $100-, $200-, $300,000 that we’re about to spend. It’s the biggest single investment that we make on an ongoing basis. And there’s really very little in the way of analytical tools today that are brought to that decision.
Just deciding how much to spend?
To decide how much to spend, or whether we even want to be involved at all. Going back, taking a look at that author’s track record, looking at the specific genre of publishing that he or she is doing, and how that is going to work.
How do you make that decision currently?
It’s really made by the editor with help from some people in marketing who have a feel for the business. They’re certainly looking at some of the analytical data that they can get their hands on, but there’s very little involvement on the part of finance at the moment, and that’s something that I’d like to see changed.
Do you see that there might be conflicts with the people who were previously making those evaluations in your organization, and if so how do you sell it to them?
There will certainly be conflicts when finance inserts itself into the publishing decision. You can’t make any sort of a change in a business, where people have been used to making decisions on their own and all of a sudden there are some financial parameters put around [them, without some conflict]. You just have to manage through that change. And our adult publisher has said, ‘I would like you to be involved in some of these decisions because having finance involved in the decisions will help us make better decisions.’ I think that’s a real plus.
There’s also a video excerpt from the interview here.