Harry Potter and a nightmare for the high street bookshops

Millions of readers around the world may be shivering with excitement at the thought of Harry Potter and the Deathly Hallows being released at midnight on 21 July, but to those who sell the book, it is more likely to be remembered as Harry Potter and the Nightmare on High Street.

For, to them, Harry Potter is a loser. And that, ironically, may well include Bloomsbury, the publisher who found a diamond in the rockface when it discovered the author J K Rowling.

The problem is that the seventh and last book in the Potter series is expected to be the fastest-selling book of all time.

So the supermarkets, never ones to miss a "pile 'em high, sell 'em cheap" trick, will sell it way below cover price. And that means trouble for every other retailer, even the book chains.

Small bookshops, especially, will suffer as they struggle to keep up with the discounts offered by the industry's big players.

Shop owners like Marilyn Brocklehurst of Norfolk Children's Book Centre in Alby, near Cromer, said she will have to stock the book, once again, against her will for the 21 July launch.

"We will make a loss on it, but we can't afford not to sell it," she said. "We have to pay Bloomsbury £10.74 a copy, so I can't afford to sell it for the price it is in Asda." Thousands of bookshops around the country will face the same situation.

At £8.87, almost half the £17.99 cover price, Asda is treating the book as a loss leader to tempt customers through its doors rather than those of one of its rivals. Even the UK's biggest book chain, Waterstone's, is feeling the squeeze.

Simon Fox, who runs its parent company HMV, lamented last time round that high street bookstores looked uncompetitive, forcing him to offer the latest installment for £8.99.

But the traumas that Potter is causing bookshops pale next to the trouble the boy wizard is inadvertently causing Bloomsbury.

The publishing house was transformed from feisty independent with a few big names, such as Margaret Atwood and Will Self, to a stock market star with the world's most valuable author.

Two years ago, the penultimate Potter novel, Harry Potter and the Half-Blood Prince, sold more copies in one day than Dan Brown's Da Vinci Code did in a year.

And next month's launch of Harry Potter and the Deathly Hallows will see it top the bestseller charts with sales of £17m, doubling the amount normally sold in each week.

The flipside is that when Potter hangs up his wand he will also leave a big hole at the publisher. Already Bloomsbury is facing a financial crisis with shareholders suffering from post-Potter jitters.

The value of the company has fallen by half, from £285m to £134m, because of fears about what will happen when Harry is no more.

The first clues of what this will mean financially came in April, when Bloomsbury revealed its profits had collapsed by three-quarters to £5.2m. The shortfall was due to last year's lack of a Potter title and a string of flops.

The marketing director of one rival publisher said: "I think Potter has put Bloomsbury under unrealistic pressure. Most publishers operate on a 5 per cent profit margin. So effectively in non-Harry Potter years, Bloomsbury is being asked to make four times that - 20 per cent. That is an unrealistic amount of money in publishing."

In search of a new cash cow, the publisher last year was accused of being the Roman Abramovich of publishing, shelling out several eye-watering advances: £2 million apiece for historian William Dalrymple and cookery writer Hugh Fearnley-Whittingstall, as well as the over-sized deal for David Blunkett's diaries, which didn't sell.

The one positive legacy Potter-mania will leave behind, however, is a healthy market for children's books. J K Rowling proved, contrary to popular opinion, that boys read.

As a result Harry Potter has led to a tide of writers following in her wake - Daniel Handler (Lemony Snicket) and current favourites Anthony Horowitz (Stormbreaker) and Charlie Higson (Young James Bond).

Wizard Facts: Harry and the money trail

Bloomsbury has paid J K Rowling an undisclosed fee in advance of the publication of 'Harry Potter and the Deathly Hallows'.

At least three million copies of the 608-page hardback will roll off the presses to meet first-day sale orders on 21 July.

Asda has proclaimed its intention to sell copies of the book for £8.87, an apparent net loss of £1.87.

Books are dispatched to retailers by wholesalers for £10.74 per copy. The hardback price is £17.99.

Amazon will ship out 1.5 million copies and more of the book at a price of £8.99 each.

As Tesco and Asda put their books out on the shelves, small retailers will be forced to buy stock from supermarkets so they can sell copies at a competitive price.

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