Wednesday, June 21, 2006

Can Scholastic Innovate?

Moody's has downgraded its ratings on Scholastic stock to junk
. Guess that's the problem when your margins are built on hits like Harry Potter. In Scholastic's defense, they've built a series of terrific businesses in places where they hold virtual monopolies: book fairs and clubs, Read 180, etc. They're easily my favorite major publisher when it comes to running their businesses, mostly because they are not burdened by basal sales. The problem at publicly traded companies is that Wall Street likes growth businesses, not mature ones. And monopolies don't tend to grow quickly.

Will Dick Robinson expect the education group to make up the difference? Is that even possible? The question for HBS students is: Can Scholastic innovate? If they can't, neither can the major publishers...

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