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McGraw-Hill's
Kids Group Sets Sights on the Trade
FROM PUBLISHING
TRENDS (APRIL 2001)
Eleven
years ago McGraw-Hill Inc. sacked more than 1,000 people
and gutted its own infrastructure, shrinking its operating
units from what had once been five, to three, and then
two. Corporate vultures were regularly dive-bombing
the company’s Sixth Avenue headquarters, girding for
the last great hostile takeover opportunity left in
publishing. And among other shut-downs, the company
ordered lights out at its tiny general trade book division,
leaving titles such as Shirley Temple’s bestselling
tell-all Child Star for mere orphans on the firm’s
freshly downsized doorstep.
What a difference a decade makes.
Now better known as the McGraw-Hill Companies,
the $4.3 billion business is on the offensive — and
switched back on an inbound track toward trade book
publishing. In the last year, the company has set into
motion what executives call “a major growth strategy”
to take its educational products beyond the classroom
and into the home, vowing to cultivate “a significant
presence” in children’s literature. Capitalizing on
the McGraw-Hill name — it has a 75% brand recognition
among moms — company strategists are dusting off their
current assets with a Quidditch broom, and meanwhile
casting a wide net to snag acquisitions that will give
an instant kick to budding trade lists.
They caught a whopper last September, of course, when
McGraw-Hill completed its purchase of Tribune Education
for a final cash outlay of $671.8 million. The group
was among the “non-core assets” Tribune had jettisoned
in the wake of its Times Mirror merger, unloaded
as part of the ever-messianic quest for “shareholder
value.” The buy, as everyone recognized, instantly rocketed
McGraw-Hill to the top K–12 publisher slot in the US.
But it also left open a slew of questions about how
the company will proceed as it plots to capture a larger
chunk of the competitive — but booming — kids’ book
trade.
Bringing
Home the Booty
What’s
certain is that the McGraw-Hill Children’s Publishing
unit is being maneuvered into place as a drawbridge
that executives hope to lower directly into the Barnes
& Nobles of the universe. “We are at this point
the number one children’s educational publisher for
the mass retail market,” says Jeanne Finestone,
who recently came on board as vp marketing for the children’s
group. “We’re definitely looking to increase our shelf
space and our market share.” With some 70 trade titles
on tap this year, the children’s division, headed by
Vincent Douglas and headquartered in Columbus,
Ohio, expects to turn in over $100 million in revenues.
That figure includes sales from the educational dealer
side of the group, which focuses primarily on the teacher
market and is headed by George Bratton.
“Our
goal is to create literary books in the traditional
children’s area,” says Tracey Dils, trade publisher
for the children’s group. For starters, she’s pocketed
two of the Tribune imprints — Bedrick Books and
Lowell House, both part of Tribune’s NTC/Contemporary
trade unit — which include Bedrick’s “high class” reference
and trade titles, plus booty from Lowell House that
includes workbooks for gifted and talented students.
The rest of Tribune’s NTC group, however, will be shunted
into McGraw-Hill Professional’s Business/General
Reference Group. All in all, Finestone says less than
10% of the children’s trade-side activity is coming
from the Tribune acquisitions.
A larger share of the trade business involves pivoting
McGraw-Hill’s school assets into the home. “Obviously
much of our name recognition stems from children who
are bringing home McGraw-Hill imprinted books from their
classroom,” says Finestone. For example, a new series
of first readers is in the works that will be illustrated
by Mercer Mayer’s Little Critter characters,
which according to Dils may be the first reader series
based on a reading curriculum that’s used in the classroom
— McGraw-Hill’s Open Court program. Then there’s
the company’s Spectrum imprint, which Dils says
is her strongest workbook line and has been “very successful”
in the trade. New workbooks in the pipeline include
the Read and Learn series, which is based on classic
children’s stories, but comes with a handy reading comprehension
pullout section.
The unit has also plunged into the battle for license-driven
coloring, activity, and picture books. Among them is
the Cricket imprint, which will kick off with
three picture book series based on the Carus
Publishing Company’s Cricket magazine brand,
which is well-known in public schools and libraries.
Other licenses include some Winnie the Pooh workbooks,
and, says Finestone, “There will be more product coming
your way out of our relationship with Disney.”
There should also be more product shot ’round the globe.
Last month Carole Mills was named managing director
for the children’s group’s Cambridge, UK offices, where
she’ll handle global expansion as the unit seeks to
develop selling relationships in all world markets.
“We have the ability to be a force in English as a second
language,” says Finestone, adding that initial ESL efforts
will kick off with workbook sales in Asia and Latin
America.
Back in the States, the children’s group plies the spectrum
of sales channels — booksellers, mass merchants, educational
dealers, and direct-to-consumers. The group’s test prep
materials have done “exceptionally well” in both Barnes
& Noble and Borders, driven by the increasing
reliance on standardized testing, which Dils says has
boosted the trade line across the board. And kiddies
have been tossing tons of the unit’s products into the
shopping cart at Sam’s Club. This June a postcard
mailing will hit a list of Sam’s Club clients who have
purchased education-oriented products, to promote books
that will be stocked in the warehouse club during the
back-to-school frenzy. Also watch for a promo blitz
at Borders later this year, and keep an eye open for
a “major ad campaign” launching in the next few weeks
that will lend a helping hand to children’s group vendors,
aiming to drive in-store traffic.
Mission:
Profitable
So
far, so good for parent division McGraw-Hill Education,
which turned in an operating profit of $308 million
last year on revenues of nearly $2 billion — up almost
15% from 1999. (That revenue included $86.4 million
from Tribune Education.) Much of this growth is based
on bullish textbook adoption cycles, where McGraw-Hill
has scored big in the classrooms of California, Texas,
and Florida. Nonetheless, “Children’s Publishing will
experience the biggest impact from the Tribune Education
acquisition,” according to a company statement. “The
greatly expanded division will publish in higher-end,
more profitable categories of children’s publishing:
education, supplementary materials, religious, picture
book, and nonfiction.” Sales to the trade in the children’s
group “increased substantially,” McGraw-Hill recently
told its shareholders, “comparing favorably to the overall
children’s retail book market growth rate of 12%.”
By contrast, the other bastion of the company’s trade
activity — the McGraw-Hill Professional division — turned
in results that were nearly flat with the prior year,
while “all three major imprints experienced difficulty
in achieving growth,” according to the company. The
Business/General Reference group was seriously affected
by the year-to-year fall-off in its Electronic Day
Trader series, which didn’t stand a chance of being
recouped even by Joan Lunden’s bestselling Wake-Up
Calls. The company blamed fierce competition for
retail shelf space and a glut of business books devoted
to e-commerce.
For its part, the children’s group has taken a cautious
line on Internet initiatives. “They’re not huge revenue
generators for us, but they’re a powerful marketing
tool,” says Finestone, adding that 92% of visitors to
the children’s site (www.mhkids.com)
buy products at retail. A B-to-B site will launch soon,
servicing the group’s vendors. But it’s an understated
online play, given the bravura of other company divisions.
For example, McGraw-Hill unfurled AccessScience.com,
a subscription database with 7,000 articles from the
McGraw-Hill Encyclopedia of Science and Technology.
Elsewhere, 50,000 professors have registered to use
the company’s PageOut software program, which
is distributed free when professors buy textbooks for
classes. And the children’s group has only been peripherally
involved in the McGraw-Hill Learning Network
(www.mhln.com), an
“online classroom” for parents, teachers, and students.
The company’s grand vision can occasionally seem unsteady.
There’s the fitful jostling of division titles: McGraw-Hill
Education was renamed last year from Educational and
Professional Publishing (a move to bolster brand recognition),
and “Consumer Products” was ditched in lieu of “Children’s
Publishing” (indicating a more refined market focus).
The company’s shares also slipped in February, on news
that fourth-quarter net was down 12%. But who knows?
Now that the nation’s school-age population has topped
49 million — the highest number since the baby-boom
peak of 1972 — anything’s possible. “We’re already broadly
based in children’s publishing,” as Dils explains. “Now
we’re really going to blossom in children’s literature.”
You can at least buy a lot of corporate seedlings with
the proceeds from a $4.3 billion empire: “The next time
a viable, available company comes on the boards,” Finestone
adds, “we will certainly take a serious look at it.”
©2001
Publishing Trends
