Harry Potter and the curse of the bestselling product

This story from Finance Week...........

Lord Voldemort may not have managed to slay his teenage nemesis, but creator JK Rowling is punishing the book trade through popularity, according to financial-page readers eyeing the red ink behind Harry Potter's runaway sales.
Britain’s booksellers are complaining that the seventh and final Harry Potter novel, probably the fastest-selling title in history, cast an evil spell on their profitability and may even drive some of them to the Deathly Hallows. Because of its assured popularity, the title was piled high and sold cheap by supermarkets and online stores, forcing the more traditional outlets into matching price cuts that in many cases meant those monster sales didn’t cover costs.
By snatching sales and shelf-space from other titles they might otherwise have sold at a profit, JK Rowling’s crowning achievement may have put an end to some of her sales channels as well as to her juvenile hero’s improbable education. While Potter worked a miracle for second-quarter booksales around the world, bucking a declining trend for embattled chains such as Borders in the US, he failed to wave a similar wand over the red ink those prized pages left behind as they vanished from the shelves.

The bespectacled boy wizard has gone the way of baked beans and designer jeans, becoming a loss-leader that gets sold at or below cost so as to draw customers into a store where they will splash out on more profitable lines. At the height of the Potter price war, supermarket chain Tesco – whose discount strategy has rapidly raised it to Britain’s biggest book and newsagent chain, alongside purveyor of one-third of its food – was selling the Deathly Hallows at £5, compared with a recommended price of £13.

Supermarkets wrested the sector from traditional bookstores as soon as they secured the abolition of the Net Book Agreement, which until 2001 had banned stores from selling books below the publisher’s stated price. This resale price maintenance had been preserved for books, newspapers and pharmaceutical products, even abolished for all other goods, on the grounds that this would keep shops alive on smaller high streets and allow them to stock slower-selling titles that the superstores ignore. The Publishers’ Association consistently fought its abolition despite bullish predictions of how much book sales would grow when prices were freed, recognising that competition would squeeze the sales of less popular titles and the profits on bestsellers.

Unfortunately for bookshops and other children’s authors, Potter has proved more a substitute than a complement for other contemporary fiction. So while shops’ loss on cheap beans and jeans is recouped on the basket that fills up around them, Rowling’s oeuvre has tended to fill the carrier bag on its own, depriving them of serendipitous sales with a more normal margin.
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