When Simon & Schuster acquired Macmillan Publishing in 1994, headlines touted the deal as another step in the creation of the nation's largest college publisher. But the purchase also laid the groundwork for what has turned out to be a longer-lasting asset to S&S—the formation of a major children's book publisher. While Viacom sold S&S's educational and professional divisions in 1998, the S&S children's group has morphed from a $20-million unit pre-Macmillan to one of the country's largest children's book publishers with 2004 sales of $185 million.

The integration of the Macmillan children's group, which was larger than S&S's children's division, was overseen by Willa Perlman, then president of S&S's children's unit, and involved dropping the Macmillan name while absorbing Atheneum. Perlman headed to Golden Books in 1996, and Rick Richter took over expansion of the division. Richter, who left the children's group to head sales in 1999 before returning in 2002, attributed the division's steady growth to the commitment to diversify the list by adding new businesses.

One of Richter's first major moves was the creation of Simon Spotlight in 1997, a unit devoted to publishing media tie-ins, many with parent company Viacom. Simon Spotlight has been one of the division's fastest-growing imprints and along with the recently launched Simon Spotlight Entertainment, accounts for about 25% of the children's group revenue.

The fall 2004 launch of SSE has been "a home run," Richter said, and has helped S&S boost its sales in the teen and 20-something market. At a time when the conventional wisdom is that teenagers aren't reading, Richter said that S&S's teen business has been growing at a 30% clip over the past few years; he maintains that "teens have never been reading more."

The key to S&S's success with teens was to break out publicity to the age group from the rest of children's marketing and to have more mature stories. "The books and marketing need to reflect a teenager's world," said Richter. To reach that world, S&S launched its simonsaysteen.com Web site last June, which includes discussion boards and book clubs. S&S also utilizes such guerrilla marketing techniques as blogging, podcasting and cell phone promotions to get to teens, said Suzanne Murphy, v-p of marketing.

S&S's diversification has helped it to continue to grow when one part of the market slows. Weak institutional funding has hurt sales of backlist, and the picture book market has also suffered in recent years. But Richter said soft sales of midlist picture books "by no means indicates that picture books are in dire straits," adding, "Big books sell more than ever." He acknowledged that the picture book market has changed; it's now "very competitive" and "star oriented." A number of S&S stars will have new picture books out this fall, including John Lithgow, Spike Lee, Tiki and Ronde Barber, and Carson Kressley. A new Eloise title, Eloise in Hollywood, is also planned for the fall.

Despite softness in 2004 in the children's hardcover segment, S&S's hardcover operation remains the single largest unit in the group, with 189 titles set for release this year. In addition to picture books, other big hardcover titles are due from Lynne Cheney (a book aimed at families) and Jay Leno (a how-to-tell-jokes book), while a 250,000-copy first printing has been set for Arthur Spiderwick's Field Guide to the Fantastical World Around You.

Richter sees sustaining growth as his major challenge. To that end, the group's management team has been revamped and Richter is still looking to fill one vacancy. "We have a new team with big ambitions," Richter said.

To keep the sales momentum moving forward, the launch of S&S's coloring & activity unit in 2006 "is job one," Richter said. In February, he appointed Stephen Weitzen to head the new merchandise group (News, Feb. 14), which will house S&S's children's proprietary publishing efforts (sales of which doubled in 2004) as well as new coloring and activity books. Success in the c&a field depends heavily on licensed properties, and Richter said S&S will work in close cooperation with Viacom in launching its newest line. "We will publish everything that we can that makes sense," Richter said about S&S's relationship to other Viacom media holdings. And while work on the c&a unit advances, plans are being drawn up for at least one more new business. "We're serious about continuing to diversify," Richter said.