A British Publisher's Dreams Of Empire

Grassroots sales help Dorling Kindersley push into multimedia

Munching bread sticks with garlic dip and sipping white wine, nine women squeezed into the living room of bridal-salon owner Alison Drury in the middle-class London suburb of Tonbridge one recent Thursday evening. As the wine flowed, the talk turned from homes and families to the Amazon rain forest and the Arctic Ocean. A home study group? Hardly. This was a Tupperware-style party with a difference: On sale were elegant reference books and multimedia titles for children and adults. By the end of the evening, the guests had bought $430 worth.

Parties thrown by hosts such as Drury are firing up sales at fast-growing London publisher Dorling Kindersley Holdings PLC. But they're just one facet of the growth strategy of Chairman and CEO Peter D. Kindersley, 55, who co-founded the company in 1974 with now-retired Christopher Dorling. Increasingly, he is moving DK into publishing its own books in new markets, such as Russia and South Africa, instead of licensing them. In a risky move beyond print, Kindersley is expanding rapidly into CD-ROMs. And he plans to launch a TV advertising campaign in the U.S. next year, with Britain to follow.

Kindersley, a former book designer, helped create what DK calls lexigraphics to convey the information in its books. Each page is dominated by a main picture, which is surrounded by explanations and supplementary information. With this marriage of words and pictures, says Kindersley, "the information leaps off the pages." Such an approach also makes it easy to translate books and multimedia products for the global market, with 77% of DK's sales coming from outside Britain.

The global push by DK Family Library, the home-sales unit started in 1992, seems like a safe bet. Its sales force could balloon from 20,000 currently to 70,000 over the next few years, with the launch of home sales in Russia and Australia this past September and expansion into India set for next spring. Kindersley plans to roll out Family Library in one country per year. Prospects are "extremely good," says Lorna Tilbian, a media analyst at Panmure Gordon & Co. Aside from yielding higher margins, this direct route helps insulate DK from the ups and downs of store-based book and CD-ROM retailing.

Since 1993, the first year after DK went public, revenue has doubled--to $279 million in the year ended on June 30, with a $27.8 million profit, up 37% year on year. DK Family Library brought in $26.4 million in revenues, up 76% over the previous 12 months.

The cloud on DK's horizon: CD-ROMs. Its 20 titles, from The Way Things Work to Dinosaur Hunter, priced from $46 to $78 in Britain, posted sales of $33.9 million in the latest fiscal year, up 62% over the previous year. But DK faces fierce competition in the overcrowded U.S. CD-ROM market from competitors such as U.S.-based Microsoft Corp. and Broderbund Software Inc. Some of the hottest rivalry is in hybrid multimedia CD-ROMs, which include free "seamless" access to proprietary Web sites offering such features as updated information, games, and the opportunity to talk to authors. To keep its product line innovative, DK will push increasingly into online ventures, though it hasn't yet discovered how to make money from them, admits Alan Buckingham, DK Multimedia's managing director.

"QUALITY." While DK is smaller than Microsoft and Broderbund, its CD-ROMs have won such awards as the prestigious Milia d'Or of the Cannes multimedia festival. "DK has a very well-thought-through line that is certainly higher quality than average," says Ted Pine, president of consultant InfoTech Inc.

That edge may be crucial to survive the expected shakeout in the multimedia business in the U.S., which accounts for nearly half of DK's multimedia revenues. The proliferation of new titles in the U.S. market far outstrips the growth of sales volume and available retail space. Fears of such a shakeout have helped push DK's share price down 16%, to $8.91, since its May peak.

But Buckingham believes that the company's global spread, its innovative hybrids, and its selling route straight into homes will cushion the blow. Currently in the U.S., "there is only room for a few brands," says David Tabizel, director of research at London consultant Durlacher Multimedia Ltd. "Dorling Kindersley would be one." Certainly, the folks at Alison Drury's party would agree.

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