Scholastic CEO Peter Warwick in Conversation

Well, thank you. I've got a terrible cold, so if I sort of croak and cough and sneeze, that's why. We forgive you. I think the big thing which is really driving our strategy is the literacy crisis, which exists in so many parts of the world, particularly obviously in the United States, which is our largest market, but also in many other countries as well. I think that because Scholastic is so much associated with literacy and reading, and we're facing a situation where clearly more funding, more attention, more activities around literacy need to happen, those are things that we particularly want to connect to. Why that's important is clearly because you have to learn to read in order to learn, as they say. So from the point of view of any individual reaching their full potential, literacy really matters. I think literacy also matters because you can't really play a full part as an individual in society unless you can read and read well. Also, it's been shown that those kids who read well and read often and enjoy reading have fewer mental health problems than those who are infrequent readers or find difficulties reading. I think that especially after COVID, the whole area of mental health amongst children is something that really matters. The key things around literacy that guide you going forward are: first of all, you have to make the books engage you; you have to really focus on making books engaging because that's key to getting kids interested and improving their literacy skills. I think you also have to find new sources of funding, because there's a lot of money from unconventional sources going into resources for kids and for reading, particularly those who are from underprivileged or underrepresented communities. I think also you have to think about technology, because blended learning—a mixture of both digital and analog tools—is something which is really important in schools in terms of learning to read as well. So we're really focusing on that at the moment.

Yeah, there's definitely an issue because it's something like only around half of kids in schools are at the required level for their grade. If you then look at minority communities—Black, Asian, Indigenous, and so on—it's even lower. It was declining before COVID, I think almost throughout the world. Literacy rates have declined during COVID because there was a disruption to the normal systems of teaching and learning. There's a lot of resources now being devoted to trying to alleviate that situation.

Well, I think there are some specific things which we are doing. I mentioned that there are a broader array of funding sources available for books to enable kids who were behind in their reading to get more reading material that they can use at home with their families. Whereas education funding might have been primarily done through federal and state education systems in the US, now there are other initiatives to get books on a regular basis to homes because it's felt that that's a key thing to do. It's somewhere where we as Scholastic can really help because we're the largest publisher, and because we also publish school market editions of many other publishers' books, we can work with states, private philanthropists, or other private sector foundations to get more books into the hands of kids at home. That's a key initiative going on at a time when there's a great deal of fuss around what books kids should be reading—book banning and all that kind of thing. But there's one thing that everybody's agreed on, and it's the lever that I try to use: we need to tackle literacy and low levels of literacy. It doesn't matter where you are on the political spectrum; that's something you can agree on, and it's important. So that's a key thing for us. For example, one of my colleagues has taken on a role as Chief Impact Officer to work full-time on finding new sources of funding to get books into the hands of kids from underrepresented, underprivileged communities, particularly to get books home, because there's clearly a relationship between the number of books you have at home and your likely ability to read well.

Well, we have a scheme—it's mainly in the US, but there is a scheme in New Zealand, for example, which is quite similar, where the government through the Department of Education works with us to provide a certain number of books per home to kids. I think gradually people will see that this is a key initiative. Getting books directly into homes is pretty important. It's done as well through our book clubs and book fairs in the US, Canada, the UK, Australia, and New Zealand. It's really driving how we feel about our business. We like to feel that as a business we have a strong mission: to publish books for all children so that all children have an opportunity to read.

Yeah, well, if you're specifically thinking about the book trade in most developed countries, we're doing a lot of work in terms of focusing on new formats and making sure that we're being innovative. Graphic novels is something that we were associated with right from the beginning, and it's clearly an expanding area for kids. We do a survey of children and reading. For example, in 2018, we asked kids what sort of books they favor, and 22% said they favored graphic novels. We did the same survey very recently, and that number went from 22 to 37 percent. So if anybody's thinking about what we should really be focusing on, I think you have to say that graphic novels is one of the key areas to focus on. The other thing you can do is take existing series that you have. From a publishing point of view, if you can get a kids' series going, it's the best thing ever. You can convert more conventional chapter books into graphic novels—we did it with The Baby-Sitters Club, for example. It's a way of expanding the market. The thing about children's publishing is you've got a constant revolving cycle of customers, so you can reinvent those things for the market at the time. We're also looking at other innovative things. Next year, for example, we'll publish our first manga series of books from Japan about a unicorn, Unico Awakening, designed for a middle-grade audience. Later this afternoon, David Saylor, who's the publisher of that, is going to be on the panel, and you can ask him about manga and its opportunities, because manga is one of the fastest-growing book formats in the world. People have consistently had trouble finding manga suitable for children, because manga isn't always exactly what you might want for younger children. The idea is that this series in particular, and other ones that David is discussing to sign up from Japan and release here, are important. We've also done things like for our next Goosebumps season, we're partnering with Roblox, for example, to get different platforms. The whole idea is to try to grow in a time when sales through the trade have been declining from all-time highs—down, but we have to try to be as innovative as possible.

Yeah, and one of the things that we're just about to benefit from in the next few weeks is this cycle: if you have a book and then it's adapted for TV, for streaming, for a film—even if you don't own those rights, in some cases we do, but for a lot of them we don't—there's a virtuous circle: book, screen, book. You can see that in what's going to happen with our business, I hope, over the next few weeks. First of all, last Friday, Friday the 13th, there was a live-action version of Goosebumps launched on Disney+ and Hulu. It had over the weekend 4.2 million viewings. It's been the most successful Disney TV launch weekend for three years. That should drive interest amongst kids, even younger kids, because in the actual film the kids have been made a bit older than they are in the animated versions in the past. The other thing happening is we published The Hunger Games, and there's a live-action film of the prequel, The Ballad of Songbirds and Snakes, being released next month in November. Even with just the trailers, various Hunger Games books have gone to number one in the kids' list. We released a new paperback edition of Songbirds and Snakes. So you get a virtuous circle. If you've got stuff that is appealing enough to filmmakers and TV makers, that's a really good way of driving revenues.

Well, I think when you think about AI, it's worthwhile dividing it into two categories. AI can be used in a really unequivocally helpful way to help drive your marketing, customer service, operations—it applies to every industry, and we're obviously very interested in that because it can really help us. Where it gets complicated is in the whole relationship between generative AI and creativity. That's the area we have an internal working group working on. Our board of directors are always wanting to talk about it. Otherwise, we don't have a specific point of view, except that there are clearly some issues around contracting, issues around being able to use copyright material for generative AI models. We're already talking to authors and agents who want to talk about it and what it means. So we're just trying to keep up with everybody else in terms of that.