Harry Potter and the diminished returns

NEW YORK — The numbers are staggering: More than 12 million copies of the final Harry Potter book have been printed and are ready for shipment. Booksellers expect 7 million copies to be sold in the first 24 hours. Even more copies are being rushed into print, even though the hotly awaited title will not be released until midnight Friday.

It should be a great moment for the publishing industry, which for years has been limping along with flat sales. But amid this avalanche of commerce and pre-publication hype, the book business is ruefully taking note of a startling incongruity: Very few U.S. booksellers will be making big money from "Harry Potter and the Deathly Hallows."

Indeed, as the competition heats up this week to lure customers, a price war has slashed the retail cost of J.K. Rowling's final installment by 40% to 50% at chains, big-box stores, and online retailers such as Amazon.com. They're selling the books for little more than they paid the publisher.

Call it Harry Potter and the Vanishing Profits.

"Virtually none of these sellers stand to make big money on a book that is likely to be the biggest-selling hardcover title this year," said Albert Greco, a publishing industry analyst and business professor at Fordham University. "The larger retailers are selling the books at pennies above cost, mainly because they don't want to lose an edge to others offering the same deal."

When it comes to bestselling books, retailers typically get discounts of up to 50% off the list price from publishers. But Jeff Bezos, Amazon.com's boss, bluntly warned shareholders last month that his company didn't expect to make a profit on the final Potter book. At Barnes & Noble, Kim Brown, vice president of merchandising, said the chain had to cut the price to be competitive.

Boon for book world

During the last 10 years, the Harry Potter phenomenon has sparked major changes in the book world: The series transformed young-adult fantasy fiction into a hot genre for adult readers too. It brought Hollywood-type sales figures into the publishing business and set off a stampede among hungry publishers to find the next Harry Potter bonanza.

As the final book's official July 21 release nears, the fifth Potter film, "Harry Potter and the Order of the Phoenix," took in $44.8 million in its U.S. box office debut Wednesday alone. It's one of those rare moments when an impending book appears to have ignited the market for a movie. With 121 million copies of the novels in print in the U.S., and 325 million worldwide, the audience is ready and waiting for any Potter product.

But among booksellers, the seven-part series, along with other blockbuster books, has fueled a heated competition to keep or increase their market share at a time when sales are steadily decreasing in bookstores.

The basic strategy for chains such as Barnes & Noble and Borders as well as online sellers is simple: They hope to attract more customers with lower prices. The chains in particular want to build loyalty by holding elaborate release-night parties, just like independent stores do.

"Our everyday best-seller list is 30% off, so this lower price is not all that drastic," Brown said.

But will the strategy work? Some call it a dangerous gamble, because the so-called halo effect, in which customers come for one book but buy other similar titles as well, has rarely materialized. "Harry Potter is a remarkable phenomenon," Greco said. "But he's a one-hit wonder."

Indeed, at big retailers like Target, Costco and Wal-Mart, the wizard from Hogwarts is just one more loss leader — a heavily discounted brand name that brings in people who also buy toothpaste and beach chairs.

In a cruel irony, these giant retailers have become a supplier of Harry Potter books for smaller, independent book shops, which in some cases get better deals from big-box stores than from regular distributors.

These independent stores, in fact, may be the biggest losers of all, because they operate on smaller economic margins and cannot afford to offer such deep discounts. In Southern California and across the nation, many are offering the book at or close to its full $34.99 price, hoping that the elaborate Harry Potter parties they throw on the night the book is released will attract large crowds of loyal customers.

At Village Books in Pacific Palisades, the owners will throw a release party on Friday night and offer a 20% discount on the book. Still, the shop stands to break even at best when all the excitement dies down.

"I don't think [the Harry Potter series] has been the profit center it could have been if the publishing world had tried to keep this a book for booksellers," said Katie O'Laughlin, the shop's owner. "That's a sad thing. This was the one time you had a book that people really wanted."

Tina Jordan, vice president of the Assn. of American Publishers, said discounting worked, because sales were higher during a Harry Potter year.

Veteran agent Jane Dystel said, "The excitement over a new release gives the business an uptick for two to three weeks."