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How Media, Comic Books Could Remake Scholastic

Chris Katje
·4 min read

Scholastic Corp (NASDAQ: SCHL) has long been synonymous with books and book fairs in schools. Over the years, the company has released many books for children.

The last few years have seen the company dominate in graphic novels and comics, along with children’s books. A new slate of media properties based on the company’s intellectual property could put the stock in the spotlight.

Scholastic's IP: Scholastic is not new to licensing out its properties for television and movies. Properties like Clifford the Big Red Dog, Magic School Bus and Goosebumps have been turned into shows and movies.

A new shift to creating content for streaming providers bodes well for a company like Scholastic, as it has the rights that content makers need. A show based on the Scholastic property, "The Baby-Sitters Club," premiered on Netflix Inc (NASDAQ: NFLX) in early July.

A new deal for Scholastic’s Animorphs book property is noteworthy. In June, Scholastic partnered with newer media company Picturestart to reboot Animorphs into a live-action property.

The series became a television show back in 1998 that aired on Nickelodeon. New publishing efforts for Animorphs also include a graphic novel of the first book due out in October.

Erik Feig, who was previously at Lions Gate Entertainment and oversaw teen properties like "Twilight" and "The Hunger Games" franchises, is the CEO of Picturestart and could be just the man to turn Animorphs into a blockbuster media property.

"The Magic School Bus," which recently launched as a new series on Netflix, will also get the big-screen treatment.

Scholastic partnered with Universal Pictures to make a live-action hybrid movie based on the popular series.

Scholastic and Universal are hoping this family-focused brand will appeal to the people who grew up with the brand. A large consumer products program will be launched for the property with apparel, toys and science kits planned.

Walt Disney Co (NYSE: DIS) optioned Scholastic property Upside Down Magic to turn into a Disney Channel original movie.

Josephson Entertainment and Twas Entertainment partnered with Scholastic on a live-action hybrid movie based on Ghost Squad.

When you hear comic books, you probably think of the big players like DC and Marvel.

Scholastic is becoming one of the larger players in comics and graphic novels thanks to its built-in target audience of teens and pre-teens. The company’s "Dog Man" book series has been one of the hottest properties for kids and is topping charts.

A 2019 analysis of kids graphic novels and comics showed that Scholastic had 16 of the top 20 selling books to bookstores and Amazon.com (NASDAQ: AMZN).

"Dog Man" topped the charts, with "For Whom the Ball Rolls" selling 1.1 million copies. Six other "Dog Man" books were all in the top 10 for sales.

The "Dog Man" series comes from the Graphix line, a producer of graphic novels for kids that is owned by Scholastic.

The books are written by Dav Pilkey, author of the "Captain Underpants" series.

A new "Dog Man" book was mentioned as a positive for the third quarter. The newest book in the series comes in September and a new spinoff series is scheduled for December.

For the fifth year in a row, Scholastic was the biggest Western publisher on the list.

With a 40% market share, Scholastic outpaced the competition by a wide margin. This is impressive since Scholastic only started producing comics in 2005. Scholastic had 73 comics in the top 750 selling properties.

The company’s 270 comic/graphic novels sold 6.87 million copies to bookstores and Amazon, an increase of 48.6% over the prior year, bringing in an estimated $88.9 million in retail sales.

Scholastic's Financial Performance: Scholastic's revenue rose 4% in the third quarter to $373.3 million, typically a slower seasonal quarter for the company. Scholastic pulled its guidance due to the coronavirus impact, but has said it is aggressively reducing costs.

Scholastic also shifted to help provide teachers and parents with learning resources at home, as millions of students stopped going to in-person classes. The fourth quarter will show how big of an impact the virus has had on Scholastic.

Scholastic Stock: Scholastic shares are down 27% in 2020.

The closure of schools could be a major headwind for the rest of 2020 and provide uncertainty into the back to school season.

Smart licensing and media deals are a great positive sign for diversification away from school-related revenue.

The company becoming the king of comics and graphic novels for kids could be a huge growth piece as well and provide more media and licensing opportunities in the years to come.

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