Scholastic is the worlds largest publisher and distributor of children’s books. This was a “family” company that was founded on the principle of ensuring children’s literacy. As the world moved on with technology, they stuck to their guns with focusing on children’s book publishing.

The founder’s son took over and ran the company on the same principals, mostly using it as a place to have sordid affairs with the mostly female employees of the company. He died in 2021 leaving the company to his ex-mistress rather than his kids. The mistress slowly sold off shares making it no longer a family-owned company.

Shares are now mostly held by institutional investors, presumably for the stable dividends. But it appears as if they bought the stock decades ago and forgot about it.

Strengths

• Children’s content is a cash cow
• They have IP to global franchises (Goosebumps, Harry Potter, Hunger Games, Dog Man, Magic School Bus, etc.)
• Trusted brand (Grew up with it)
• Proprietary distribution channels (School book fairs, trade agreements with retail store, and their website sells directly to customer

Why they’re dying?

Lack of innovation as they’ve gotten too used to relying on their cash cow of children books and pre-existing IPs. For example, in 2024 FY, they ended up losing majority of their profit because of decreased revenue from book fairs. This is going to repeat as the new administration starts banning these book fairs again or they get boycotted for capitulating to conservative demands.

Looking at their NI, it’s always been low, with the exception of 2022 and 2023 b/c ppl had nothing else to do during pandemic but read (per their F/S). Their online education segment got a boost. When quarantine ended, they ended up getting a higher-than-average revenue at their book fairs. It’s not something repeatable unless another pandemic happens.

Breaking into Entertainment

In 2024, they finally decided to do something about their stagnation and borrowed $225m to purchase a Canadian studio called 9 Story Media Group. They’ve worked with this studio for almost 20 years and in 2021 released “Clifford the Big Red Dog” to $64m gain.

If you’re Canadian, you’ve probably seen some of their shows on Nickelodeon like Max & Ruby, Magic School Bus, Blues Clues & You, etc.

• 9 Story Media Group
  • Industry leading production, distribution, and licensing capabilities
  • Extensive children’s content library
  • Highly talented team

The acquisition was to get control over the company’s catalogue of children’s book and access to their talented employees. Their hope is to turn these into global IP franchises like Goosebumps.   

The issue with this acquisition is that it’s a temporary band-aid. Sure they might make some money from creating movies but that takes a long time to produce and might not work with every IP. The loan is due in 2 years.

Political

• Public outcry against Scholastic for promoting LGBTQ in children’s book fairs. Elon isn’t happy with trans daughter. Scholastic got bycotted for censoring lgbtq when they tried to pander to conservatives, so they’re fucked either way.
• Trump is all for the privatization of schools which means school’s will no longer be obligated to use Scholastic books fairs to generate additional revenue.
• Education cutbacks and curriculum changes will impact their educational sales segment.
• Tariffs will make distribution of books/movies more expensive
• Bad economy will lower sales
• Canadian-made entertainment is subsidized by tax credits and the animators have no union to protect them from harsh conditions. (They're using 9 Story Media Group b/c its a Canadian company and gets tax credits which can be used to finance the movies.)
• AI technology is not something Scholastic can use for cost savings b/c the authors working with them would revolt.

tldr – I never got to buy anything at their book fair cus I was poor :(