U.S. District Judge Robert P. Patterson has ruled Steven Vander Ark's "Harry Potter Lexicon" website and proposed book infringe on copyrights held by author J.K. Rowling, and awarded Rowling and Warner Bros. -- a division of Time Warner (NYSE: TWX) -- $6,750 in statutory damages. Given that Rowling earned an estimated $300 million last year, it's doubtful she was in this one for the money.
While authors are generally allowed to use material from other books in reference titles, the judge ruled that this case went beyond fair use because it "appropriates too much of Rowling's creative work for its purposes as a reference guide."
Rowling had testified that the pending release of the guide had caused her great stress and interfered with her work on a new novel.
The hp-lexicon.org site has already been taken down. It's a little bit disenchanting to see Ms. Rowling suing a former school librarian for producing a work that is clearly designed to appeal to die-hard Harry Potter fans, but she's certainly within her rights.
Warner Bros. -- a division of Time Warner (NYSE: TWX) -- made the surprising announcement that it's delaying the release of the sixth installment in the Harry Potter saga: Harry Potter and the Half-Blood Price.
The release is being pushed back from November 11 of 2008 to July 17 of 2009. Warner Bros. President Alan Horn blamed the writers' strike, saying that "We agreed the best strategy was to move 'Half-Blood Prince' to July, where it perfectly fills the gap for a major tentpole release for mid-summer."
I'm not convinced -- isn't it a little close to the previously scheduled opening for the writers' strike that ended on February 12 to be the reason? Pali Research analyst Rich Greenfield wrote that "We believe TWX is shifting the film to help it achieve earnings expectations in 2008 (moving expensive P & A out of Q4 2008, at the same time that several successful films are set to hit DVD for Warner)."
If that's the case, investors should be concerned. Any time that a company starts messing with its operations in order to improve short-term earnings reports, you have a situation where long-term objectives could be neglected in favor of satisfying Wall Street expectations. In the long run, such a strategy will neither please Wall Street nor set the stage for long-term growth.
If you have children in elementary school, then you know Scholastic Corporation (NASDAQ: SCHL), operator of the annnual school book fair. Scholastic does an excellent job publishing high-quality children's literature and other educational materials. If only it could do so at a profit. Scholastic has been the U.S. publisher for the Harry Potter series these past few years. But even during the height of Pottermania, Scholastic did not turn much of a profit. This year is no exception. The company recently released 3Q 2008 results. Revenue increased $12 million to $458 million, yet losses continue to widen to $4.6 million for the quarter in which there was no Harry Potter release.
YTD 2008 figures show revenue increased 20% and net income more than doubled due to the last Harry Potter release in the previous quarter. Yet YTD net loss now totals $9.3 million or $0.24 per share compared to net income of $20.5 million in the previous year. To be fair, Scholastic has taken huge losses -- $82 million in Q3 2008 alone -- to exit its direct-to-home sales channel. This led to a $77.5 million net loss in Q3. But even with all business segments "performing solidly," according to CEO Richard Robinson, the company continues to bleed money.
Bloomsbury Publishing PLC, the British publisher of Harry Potter, recently reported robust sales and profit from Harry Potter books. Given that Scholastic also published this year's Caldecott Medal winner, Brain Selznick's The Invention of Hugo Cabret, why is the company still drownding in red ink? S&P Equity downgraded the comapny from Buy to Hold.
As a former English teacher, I can't count the times that I had to listen to a student complain about the "relevance" of this book or that book. I usually tried to explain how literature affects culture and books change the world. I only wish that I'd thought to check out Scholastic Corporation's finances.
On Thursday, citing a tough economy, Scholastic Corporation stated that its expectations for the forthcoming year were somewhat dark. This, combined with a considerable quarterly loss, led to a 13.5% drop in its stock value, leaving it at $30.69 per share. Today, it dropped slightly more, and is currently at $30.25.
I have fond memories of reading Scholastic's books when I was a kid, and I certainly don't like to see the company in pain. However, as an author, I have to admit a certain amount of wondrous amazement at the situation currently unfolding. You see, Scholastic's dire predictions for 2008 center around the fact that it will not have a "Harry Potter" book to give its sales a shot of adrenalin.
The Wall Street Journalreported [subscription required] this morning that Time Warner (NYSE: TWX)'s Warner Bros. Pictures plans to film the adaptation of the seventh "Harry Potter" book in two parts. The first part of Harry Potter and the Deathly Hallows will be released during the holiday season of 2010 and the second part will follow six months later. A similar proposal was made for the filming of the fourth book, before enough material was cut from the book to facilitate a single film. Warner Bros. Pictures said that filming the book in two parts was "necessary to stay true to the tome."
The five "Harry Potter" films released thus far have grossed $4.5 billion according to the Journal, and expectations are high that the sixth film, Harry Potter and the Half-Blood Prince, will repeat that success when it is released later this year. Current director David Yates will stay on board for the final two installments, after directing the fifth film and the upcoming sixth film. In addition to "staying true to the tome," WB President Jeff Robinov admitted that "Harry Potter and the Deathly Hallows is 'packed with vital plot points' and that 'the best way to do the book, and its many fans, justice is to expand the screen adaptation.'"
Clearly, part of the scheme of adding an eighth film to the series is to continue the success the films have seen, as well as the record-breaking sales that the book's have enjoyed as well. Fans will likely welcome the decision, although not the time lag between the films, and question why similar methods were not taken for the longer fourth and fifth books. At the same time, they may also question the economics of it but the films will likely still do quite well and bring in further revenue that Warner Bros. looks toward.
All movie studios want to find their own Lord of the Rings/Harry Potter franchise. Disney (NYSE: DIS), for example, seems to be headed on the right track with its Narnia brand. Viacom (NYSE: VIA) made a solid effort this past weekend by releasing The Spiderwick Chronicles to the mass multiplex marketplace -- unfortunately, things didn't turn out so well, at least as I'm seeing it.
According to Boxofficemojo, Spiderwick is in a battle with Disney's Step Up 2 the Streets for second place. The latter is right now estimated to have grossed $19.7 million for the three-day weekend of February 15 through February 17; the former has just over $19 million to its credit. So, Spiderwick could exit its current third-place showing and move up in the rankings, but it won't catch up to the big winner, News Corp.'s (NYSE: NWS) Jumper. I'll tell you, I had no idea this one was going to "jump" -- what a horrible, horrible pun, huh? -- to the top of the box office charts this weekend with a $27 million take.
Final numbers will be coming later today, and we'll get a better indication of how all the movies did once Monday's holiday figures are added; also, the second weekend is always the ultimate tell. But, as of now, I don't think Viacom's Spiderwick fantasy -- which is distributed by Paramount and is co-branded with Nickelodeon Movies -- will approach the economic prestige of Time Warner's (NYSE: TWX) Potter property. Better luck next time.
The Tales of Beedle the Bard, a book of fairy tales created, hand-written and illustrated by Harry Potter author J.K. Rowling, sold for nearly $4 million at a Sotheby's (NYSE: BID) auction on Thursday.
The book is one of seven copies Rowling made, and she gave the other six away to people involved with the Harry Potter collection. The book had only been expected to fetch about $100,000, but soared far beyond that and was eventually sold to a London art agent for $4 million.
The proceeds will benefit The Children's Voice, which campaigns for rights of children who grow up in institutions, particularly in Eastern Europe. To learn more about the charity, or perhaps make it part of your holiday giving plan, visit its website.
It's impressive to see that the first thing that Rowling released upon the completion of the Harry Potter series was not another book to cash in on her name. In fact, Rowling, who is already a billionaire, won't be making any money from this book.
J.K. Rowling has conducted herself with unbelievable class, and her good works and wariness of diving right into another book should only help build anticipation for her next project.
Harry Potter fans looking for a peak of what the book consists of should head over to Amazon.com, which has a terrific series of photos and a video about the book. More photos and reviews of the stories will be uploaded.
If you have a child younger than high-school age, then you know about Scholastic Corporation (NASDAQ: SCHL), the world's largest publisher of children's literature and educational material, and the sponsor of the annual school book fair.
Not incidentally, Scholastic also is Harry Potter's publisher, which one would think would be a fairly lucrative revenue stream. Apparently not. Ellie Berger has been named President of Trade for Scholastic in part to figure out how to turn over a new (and hopefully profitable) leaf for Scholastic. Despite record-setting revenue in 1Q FY 2008, which included the release of Harry Potter and the Deathly Hallows, Scholastic still managed to post a loss. On revenues of $587 million, a 75% increase, Scholastic posted a net loss of $2.8 million for the quarter. But this loss is a huge improvement over the $47 million net loss a year earlier.
This summer was a very profitable one for box offices nationwide, with four movies grossing over $300M, and at least another nine grossing over $100M -- signaling in a big way the resurgence of the movie industry, which had been struggling for the last few years.
The four big $300M+ winners of the summer were Sony Corporation (ADR) (NYSE: SNE) 'sSpider-Man 3, which grossed $336M in the U.S., Viacom, Inc (NYSE: VIA)'s Paramount's Shrek the Third, which grossed $320M, Transformers, also from Paramount, which grossed $311M, and The Walt Disney Company (NYSE: DIS)'s Pirates of the Caribbean: At World's End, which grossed $308M.
Three of the four were third installments of well established big-budget franchises, so their success is hardly shocking, but the Transformers success clearly marks the start of a new blockbuster franchise (the release date of the sequel has been announced -- June 26, 2009). The robot-action extravaganza, which was directed by Michael Bay, was definitely a surprise, as I remarked in my summer movie preview that Transformers "has flop written all over it... there cannot possibly be enough substance in a story about alien robots that transform into vehicles to make this a hit with the general public." I was wrong -- very wrong. The movie killed at the box office, grossing over $330M on a $150M budget, and prompting a re-release on IMAX, which opened last week.
Bookseller Borders Group Inc. (NYSE: BGP) continues to bleed money even with the release of the latest Harry Potter volume. If anything, the losses, already substantial, are getting bigger. Despite the fact that consolidated sales as reported in 2Q 2007 results were up 10% to $945 million, the company still posted a net loss of $25 million, or $0.43 per share, a 25% bigger loss than Wall Street had anticipated. Things have gotten so bad that CEO George Jones remarked he was encouraged by flat sales at Waldenbooks. For the last 7 quarters, Waldenbooks' same-store sales have fallen.
Borders stores posted a total sales increase of 9.7%. Excluding Harry Potter, organic sales growth -- a misleading term in this instance -- was less than half of 1%. This is an expensive business model that is not working. In an effort to lure customers into stores, Harry Potter was sold at a large discount to match prices at discount chains. Administrative expenses increased a bit, but debt increased by almost $200 million, to $663 million. No wonder Borders is now negotiating to amend its credit agreement with its banks and considering the possibility of selling its Borders International segment, which still somehow posted a $10 million operating loss even while total sales increased 31% to $170 million.
Waldenbooks is in an even worse situation. Total sales declined 7.7% and operating losses were the same as one year ago, meaning the chain has made made no improvements to its bottom line situation. BGP shares began the year trading at $22.46, reached a high of $23.41 in late May and have been tanking ever since, closing at $14.66 on Thursday, down $0.28.
Book seller Barnes & Noble Inc. (NYSE: BKS) pulled a rabbit out of its own hat and posted diluted EPS of $0.26 in 2Q 2007 last week. But there is always a catch. $0.12 of those earnings derived from a tax benefit and $0.03 derived from lower than expected costs related to closing a huge distribution warehouse. Net earnings for the quarter were just over $18 million or $0.12 per share. Total sales increased 7.6% to $1.2 billion. In-store sales were up 4.4% while online sales were up 18%. Enjoy these increases while they last. Almost all of the good news is a result of the release of the last Harry Potter installment. Barnes & Noble sold just over 2 million copies of the title as of early August. Without Harry Potter, sales increased barely 1%.
Bricks and mortar book stores are a mature business. Possibilities for growth are very hard to come by. CEO Steve Riggio admits as much even while trying to sound upbeat about 3Q releases planned by former President Clinton, former Fed Chair Greenspan and musician Eric Clapton. No offense to these gentlemen, but Harry Potter they ain't. 3Q store sales are forecast to be flat with a loss per share of $0.06-$0.10. Barnes & Noble also posted losses in 1Q, so an increase in FY guidance to $1.69-$1.87 from $1.49-$1.67 is puzzling. Perhaps management is expecting a huge 4Q surge in book buying for the December holidays. Guess they missed the recent report stating 25% of adults surveyed in the U.S. read ZERO books the previous year.
The company is still buying back its shares, adding 500,000 repurchased shares in 2Q to the 750,000 shares repurchased in 1Q. Barnes & Noble has budgeted $400 million for stock buy backs. The stock is surprisingly volatile. It began the year trading at $40.29, hit $42.88 in May, but closed at $35.80 on 27 August. By all means, shop at Barnes & Noble, but spend investment dollars elsewhere.
As previously noted this morning, Time Warner Inc. (NYSE: TWX) did post gains on an EPS that were slightly ahead of expectations on revenues that were a tad under the estimates from First Call. The new $5 billion share buyback plan was to replace the recently completed $20 Billion share buyback plan. The company also reaffirmed $1.07 as its EPS target for the conglomerate. Going into the conference call, shares are down about 3.2% to $18.64.
At the start of the conference call, CEO & Chairman Dick Parsons reaffirmed 2007 OIBDA guidance and is maintaining growth at projections AOL and is maintaining its leverage. It reaffirmed $1.07 EPS for 2007, or $0.95 outside of items. Parsons also stated the following: Time Warner Cable (NYSE:TWC) is on track for objectives with more upside to come. The legacy footprint has growth and the Adelphia adds should grow. Cable will continue to be a growth generation for years to come.
Harry Potter has generated nearly $700 MILLION in worldwide sales already.
AOL is continuing to make progress for OIBDA growth, it also expects page view growth at AOL this year. This was the first quarter where page views grew, but there was a slowdown in ad growth as certain deals were winding down from the subscriber days. Email and search changes are building and increasing monetization. The team is satisfied with the results so far. Advertising is also seeing some shift to third party advertisers, but its advertising.com is seeing gains. The total AOL expectations are being stepped back from original projections that it will grow above the market rates [that is the first time this has been stated]. It has relaunched the AOL homepage in a new format and is in the process of new finance and other pages. It has spent over $500 million in acquisitions over the last 16 (or 18) months to build the AOL franchise.
In late April, Amazon.com (NASDAQ: AMZN) wowed Wall Street with first-quarter earnings that topped expectations. Its first-quarter profit increased 38%, while net income jumped to 115%. The following session, Amazon shares jumped more than 25% higher, and these gains have not been given back. In fact, the stock has continued higher since this bull gap, easily into territory not seen since early 2000.
At that time, the online retailing giant looked ahead to the second quarter, projecting revenue between $2.7 billion and $2.85 billion. Tonight after the close - fresh from a wild weekend of Harry Potter fulfillment - the company will issue its earnings for the second-quarter reporting period. Analysts are expecting per-share results between 16 and 17 cents per share, a notably improvement from year-ago earnings of a nickel per share.
So are expectations inflated ahead of tonight's earnings report? Sentiment indicators don't suggest so. For one thing, short interest is near a historical high. About 23% of the equity's available float for public trading is devoted to the short side.
Analysts are cautious as well; data from Zacksindicates that just five covering brokerage firms have named Amazon a "buy," leaving eight "holds" and four "sells," three of which are of the "strong" variety. From a contrarian perspective, this lack of love from Wall Street could be a good thing, as it suggests muted expectations ahead of Amazon's earnings report this evening. Another positive surprise may elicit an upgrade or two from this skeptical bunch.
(Scholastic Press, NYSE: SCHL)'s Harry Potter won't rank on the New York Times (The New York Times Company (NYSE: NYT))' best sellers list. You might wonder how could that could possibly be true. It's simple. In a move which is said to have been a knee-jerk reaction to complaints by the sellers and publishers of more "serious" books, The New York Times banished "children's books" to a secondary list of their own, thus clearing the Harry Potter series from its ownership of three spots within the top fifteen positions on best sellers lists. That was supposedly to open those spots for occupancy by more deserving titles.
How yawn inspiring is that? We all know just how well those Harry Potter books have sold. What the whole thing signals to me is that the book watchers of The New York Times were just too stupidly motivated to stop and think that the Potter-displacing category change would only further instill the obviousness of their palpable impertinence.
The Harry Potter books don't need The New York Times, they never did and they never will. As a matter of fact, good literature never needed the Times. The Harry Potter books made J.K.Rowling the wealthiest author on the planet by virtue of Harry's own magic. Frankly, the Times and their top ten list had little to say about that.
U.S. District Judge Robert P. Patterson has ruled Steven Vander Ark's "Harry Potter Lexicon" website and proposed book infringe on copyrights held by author J.K. Rowling, and awarded Rowling and Warner Bros. -- a division of Time Warner (NYSE: TWX) -- $6,750 in statutory damages. Given that Rowling earned an estimated $300 million last year, it's doubtful she was in this one for the money.
Warner Bros. -- a division of 
The Wall Street Journal 
The Tales of Beedle the Bard, a book of fairy tales created, hand-written and illustrated by Harry Potter author J.K. Rowling, 
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In late April, 
Should you sell into today's rally? Yes, if you think there are more surprises to come (I do)
The week in preview: Mulling over techs, financials
'Crash-and-burn economy?' 'Bailout beer bust?' What should we call America's economic disaster?
