Indeed, authors respond to such intimacy with loyalty, says Louise Barton, a publishing analyst with the London brokerage firm Investec, whether their books are best-sellers or midlist mainstays. "I don't think it matters how much money bigger publishers offer Rowling," Barton says. "I can't see her quitting Bloomsbury."

In fact, Bloomsbury has tried to incorporate that kind of intimacy in every aspect of its business. "Publishing is a human-scale activity, and our principal suppliers -- writers -- are human beings, not companies," Newton says. "So we choose to occupy the same universe as they do. Most of our authors write from home, for example, so we operate from an 18th-century house, rather than an impersonal office block."

And while analysts like Barton expect Bloomsbury to increase profits by at least a quarter this year, Newton keeps his editors focused on another sort of fraction altogether: He expects them to fail with a third of their output. "You have to take big and small risks in this business," says Newton. "If you're not having a fair degree of failures, you're not exposing yourself to the upside of getting it dramatically right on dark horses. If you don't like going home at night with a feeling of uncertainty, then you're not cut out for it," he adds.

Uncertainty, he says, is what leads to discovery: "If you try too hard to improve your failure rate, you become afraid of your inbox, terrified by the proposals made by authors and their agents. You end up having either no output or a book that is so bland that no one will want to read it. Discovering J.K. Rowling has reminded me of the sheer fun of knowing long before anyone else that you have something that will change the world."

Contact Nigel Newton by email (nigel_newton@bloomsbury.com), or learn more about Bloomsbury on the Web (www.bloomsbury.com) .

Sidebar: Publishing Wizard

Nigel Newton, chief executive and chairman of Bloomsbury Publishing PLC, has made his money in magic and authored a new chapter on publishing. Here are four lessons from his school of wizardry.

Make quality your quest. "We were told trashy books would rule the day," says Newton. "But the best-seller lists are dominated by good books that command higher retail prices. There's just as much effort in shifting books at the lower end of the market, but there's a much smaller reward."

Cast your own die. "Don't be enslaved by professional advisers. Recognize when an entrepreneurial decision is required. We IPO'd in 1994, a year in which at least 200 floats were pulled. Make a big step in your company's history because it's right for you and it's right for the firm, not because it's right for the market."

Take risks -- within reason. "We're in the business of portfolio management, laying off risks at different levels. Our mission is to be a great publisher of literary fiction, reference books, and nonfiction. But we have never strayed outside the areas that senior managers have experience in."

Be the best, not the first. "Many of our rivals got stung pouring money into CD-ROMs. It's a much better idea to back the market leaders who will fight platform wars for you. E-books might be a phenomenon waiting to happen, but there will be no prizes for being first. The public wants the greatest books -- not the books from those publishers who happen to be first."