Magic School Buzz

A guy, fresh out of Harvard and an aspiring writer, eschews joining his father’s modest publishing company, choosing to support himself instead through a series of laborer jobs-bricklayer, lumberyard worker, railroad switchman then goes back to graduate school and teaches high school English for two years before taking a humble associate magazine editor position with the family business, which, 13 years later, he winds up running.

This would make a great plot line for a novel if it weren’t the already true-and only slightly apocryphal-seeming-story of Dick Robinson, the 60-year-old chairman, president, and CEO of Scholastic Inc., the international children’s multimedia company and a far cry from the children’s magazine publishing house founded by his father, M.R. Robinson, in 1920. Of course, any self-respecting novelist would have incorporated a little angst into the subplot-at least some guilt. But to hear Robinson tell it, the tale is even devoid of irony: “I was going to be a teacher and a writer-joining Scholastic was never a consideration, and my father knew that.”

If Robinson’s career took off in a different direction, the lower-Manhattan-based company he joined in 1962 and of which he has been chief executive since 1975has gone through some of its own incarnations as well. A household (well, classroom) name, Scholastic made its mark with magazines for students and teachers, and currently publishes more than 50 titles. Today, it’s also one of the country’s largest children’s book publishers and distributors, selling more than 150 million books a year to kids between the ages of three and 12, mostly through classroom book clubs and book fairs. In fact, 80 percent of the company’s revenue comes from its core print business. But Scholastic’s recent forays into multimedia-producing videos, software, online services, TV programming, and movies-has not only been responsible for getting the company plenty of buzz, but growing its bottom line. Total revenues for the company in 1992 were $489 million. For the 1996 fiscal year, which ended May 31, 1996, Scholastic’s revenues were $928.6 million, with operating income at $82.1 million.

All of which has to be very gratifying for the once reluctant company man. “We’ve had some very fortunate years,” says Robinson, with the kind of modesty he’s come to be known for. “Scholastic has always been organically grown, and everything here is a group effort. Communication among our division helps keep all of us informed of our audience’s changing needs and the niches within the market that we might be able to fill.”

Still, the picture isn’t completely rosy. After a great ’95, Scholastic’s stock price stagnated during ’96. In late February 1997, the price plunged from $60 to $36.75, after the company reported third-quarter losses stemming from slower than expected sales of its celebrated “Goosebumps” series and book club offerings. Some analysts have concerns about Scholastic’s re-entry into the textbook publishing arena, where it has stumbled before. And as the company branches out into licensing and merchandising, it has to face media giants, such as Disney and Viacom. But if Scholastic has an ace up its sleeve, it has to be the country’s 1 .4 million teachers-its core constituents from day one, according to Robinson. “We have a solid commitment to our teachers,” he says. “Gaining and keeping their trust is at the foundation.” Or, as Eric Philo, a former analyst for Goldman Sachs, wrote to his customers after attending a recent convention for reading teachers, “Teachers love Scholastic.”

And not so coincidentally, teaching was Robin-son’s original (professional) link to the company. Though he left a job teaching high school English in Evanston, IL, for a position on one of Scholastic’s literary magazines with the idea that it would provide a springboard to the writing world of New York-it was his experience in the world of education that kept him at the company. “Since I had been a teacher, I had a feel for what teachers and students needs,” he explains. “It was intensely challenging and gratifying, as I got involved in one project after another, to discover I had something to offer the company.”

A quick study of the business’s learning curve, as it were, Robinson was soon promoted to editor of Scholastic Literature Units and launched a magazine for challenged junior high school English students. From there, he was appointed editorial director for Scholastic’s English and Language Arts Department. And in 1971, nine years after his arrival, Robinson became vice president and publisher of Scholastic’s School Division, which, at the time, comprised 80 percent of the company’s business. Three years later, he was named president; the next year, CEO; and when his father died in 1982, he took on the title of chairman.

While climbing the ladder, Robinson was also expanding the company’s focus. It was his idea to get Scholastic into book publishing. “It was a matter of looking at what was out there and asking, ‘Is this something we should be doing ourselves?” he explains. “And one of our proven strengths has been attracting creative people who originate much of what we publish”-which includes such major franchises as “The Baby-Sitters Club,” “The Magic School Bus,” “Goose-bumps,” and “Clifford the Big Red Dog.”

He also moved the company into the educational technology market in the ’80s, and today Scholastic supplies schools and homes with instructional software programs. “We knew we had to use the media kids are using. And so we’re now into CD-ROM publishing, and we have our own teacher-based online service that reaches kids indirectly, through the teacher.”

Yet, one of the most important Robinson-engineered moves has been translating the company’s ink-and-paper products into other media. Under the Scholastic Productions unit, a division Robinson launched in the late ’70s, children’s television programming has evolved into a textbook example of synergy at work. The company’s popular Magic School Bus series of science books for grade schoolers has been reincarnated in two forms: as an Emmy Award-winning animated series on PBS and in three CD-ROM games, produced in partnership with Microsoft. And then there’s “Goosebumps,” the live-action TV show (based on the Scholastic-published R.L. Stine horror stories), which has been the most-watched children’s show since its fall 1995 debut on Fox.

Financially, Scholastic Productions is a small piece of the nearly $1 billion company, having provided a bit more than 4 percent of its 1996 fiscal year revenues. But the unit is also Scholastic’s fastest growing segment, more than doubling the last fiscal year’s numbers to $39.8 million. And even if some of its projects fail to meet expectations-such as two feature films (and box-office disappointments), “The Indian in the Cupboard” and “The Baby-Sitters Club”-they have “an echo effect on the rest of the company,” says Robinson, by helping to sell more books and spin-off merchandise.

Still, not every path Scholastic has taken has been gilded. Example: the company’s unsuccessful foray into the textbook market in the late ’70s. “Education went through tough times in those years,” says Robinson. “School budgets were slashed, and the perception was that public schools were horrible places. It became clear that our timing was off. We pulled back from elementary textbooks in the early ’80s.” In addition, Scholastic’s customer base was shrinking; births in this country dipped under 3 million for the first time since the Depression. And finally, competition among book-clubs shook Scholastic’s footing in that market.

As a result, revenues languished. And in 1986, Robinson made the decision to take the company, which had been publicly traded since 1969, private. “We needed to pay attention to our business without having to issue reports or worry about what people were thinking of us,” he says. It proved a smart move, and when the company went public again in February 1992, the stock opened at $26 – 15 percent above what underwriters were expecting. “After five years of being private, we were much bigger, more profitable. We were able to reintroduce the company as something else.”

Robinson has recently made another tough, even controversial decision in revisiting the instructional curriculum market. For starters, this puts Scholastic head-to-head with such market behemoths as Houghton Mifflin and McGraw-Hill. And according to Rudolf Hokanson, a printing and publishing analyst for Deutsche Morgan Grenfell, “The company and its prospects would be much more attractive if they hadn’t gotten into [the curriculum area].”

But Robinson, for one, is convinced this is the right approach (and hopeful that it’s the right time) because of its link with the most important piece of Scholastic’s franchise: teachers. “I’ve often said to people here that if every product disappeared, we still have our teachers who are there expecting something from us,” he says. “Without teachers, just forget you ever heard the word Scholastic. Without them, we’re gone.”