Pearson's Digital-First Strategy Will Change How Students Get Textbooks

https://www.forbes.com/sites/billrosenblatt/2019/

07/20/pearsons-digital-first-strategy-will-change-how-students-get-textbooks/#3434c3505f30

Pearson, the world's largest textbook publisher, announced last week that it is moving from a traditional to a "digital first" publishing model. This development upends several traditions that are more than a century old. It will bring about a digital transformation in textbook publishing that has been in the works for a long time and will fundamentally change the way college students get their educational materials.

The traditional model for publishing textbooks has been simple: An author, typically a full-time college professor, writes a textbook under contract with a publisher. The publisher puts out a print edition, gets course instructors to adopt it and sells it in college bookstores. If the textbook is popular, the professor will write an updated edition under a new contract every few years. A highly popular textbook will last through many editions; Paul Samuelson's Economics, for example, dates back to 1948 and is now in its 19th edition.

This model has serious limitations, which the digital age has thrown into sharp relief, making it increasingly untenable. First and foremost is the problem of used textbooks. Students generally don't need to hang on to their textbooks for more than a semester or two. It's perfectly legal to resell your textbooks and to buy used ones, so students do it all the time, and of course, publishers make nothing from resales. So a main reason that publishers push authors to write new editions of textbooks is to give course instructors reasons to adopt them; still, writing, producing, printing and distributing a new textbook just because some small amount of material (or the formatting or cosmetics) has changed is quite inefficient.

Second, it's much easier nowadays for course instructors to find materials other than textbooks to assign to their students. Free web content, magazine articles, open educational resources and trade books (books sold at regular consumer bookstores for much lower prices than textbooks) are increasingly popular curriculum elements. And course instructors often adopt textbooks only to assign a few chapters in them.

Publishers have reacted to this mainly by raising textbook prices and depending on course instructors not to care about imposing those costs on students. And those prices have gone up into the stratosphere. The seventh edition of Samuelson's Economics sold for $10 in 1969; it retails for $220 in hardcover today. Even when adjusted for inflation, the price has more than tripled over the past 50 years.

For a while, many students simply put up with this, but then more and more alternatives became available. It was no longer necessary to look at notes pinned up on the dining hall bulletin board to find copies of used textbooks; you could get them online on websites like Chegg, and college bookstores began to buy and resell them. And professors could find alternative materials online.

Then there are e-textbooks. E-book versions of textbooks have been around for a while, but they haven't been very popular. Most of them have been "shovelware"—that is, simply digital versions of print textbooks with little additional functionality other than text search. Publishers haven't spent much effort marketing them, in some cases out of fear of cannibalizing revenue from print books. Reading text material on PCs and Macs is not a great experience, and the PDF format that most early e-textbooks use is not amenable to mobile devices. More recently, publishers grudgingly started offering e-textbook "rentals" (e-books with DRM that makes them "expire" when the semester is over).

Pearson's announcement disrupts the status quo by moving textbook production and distribution to digital-first. Most of the 1500 titles that Pearson publishes in the U.S. will switch to a model in which the e-book is the primary delivery vehicle. E-textbooks will be in "reflowable" XML-based formats for a decent reading experience on mobile devices, and semester (or school year) length rental, for an average price of $40, will be the primary distribution term. Pearson will still make print books available, but it won't sell them; instead it will only rent them directly to students. It will stop updating the print editions of all but 100 of its titles.

The advantages of digital-first include that it will be much easier to distribute updated content in e-books than with print books, and it will no longer be necessary to produce entirely new books to incorporate a few changes. This will make it unnecessary to convince course instructors to adopt new editions of textbooks. Digital-first also makes it easy to reformat materials to reflect changes in reading devices and apps.

There are also strategic advantages of this scheme for Pearson, despite the much lower prices it will be able to charge. Pearson is using digital-first as an occasion to take control over distribution channels. By renting textbooks directly to students and largely bypassing intermediaries such as college bookstores (a market dominated in the U.S. by a single company, Follett), Pearson can increase its margins and get better data about sales that will lead to smarter product decisions.

The move to digital-first is not trivial; it entails fundamental changes in the way a publisher produces text materials. Instead of creating a textbook edition until it's ready to be printed, authors are now committing to continuous updates of bodies of material over a long period of time. That's a major change for professors who have expected to be able to write a textbook, put it on their CV, and then move on to the next project. Textbooks have to be created with or converted to XML-based layout technologies rather than print page-oriented tools such as QuarkXPress and Adobe InDesign. Rights to the many materials used within textbooks—photos, illustrations, quotations, tables, etc.—have to be re-cleared for digital-first usage.

Pearson has been laying the groundwork for these changes for several years. Other major educational publishers have been working towards it, but Pearson is the first to complete the transition.

While Pearson is the first educational publisher to move to digital-first editorial processes, it's not the first to try a new distribution model. Last year, Cengage, another major publisher, launched a subscription service called Cengage Unlimited. In this service, students can pay $120 per semester or $180 per school year and get access to e-book versions of any titles that Cengage publishes, or rent them in print for an additional $8 per semester each. It even offers an online calculator so that students can see if they will save money each semester by signing up for Cengage Unlimited instead of buying textbooks outright.

In other words, Cengage is also taking steps to extend its control over distribution channels. This contrasts with a move that the major educational publishers made in the late 2000s: they formed a joint venture called CourseSmart, a single place where students could buy or rent e-textbooks from all the participating publishers. In anticipation of the publishers' desires to take control over distribution channels, they sold CourseSmart to publishing services giant Ingram Content Group in 2014 and stopped making some of their titles available through the service.

The educational publishing industry is going through this digital transformation now because the high-priced print book model just isn't working anymore. Cengage's subscription plan is a risk that the company took to help it emerge from a 2013 bankruptcy; it led inevitably to lawsuits from authors (since settled) over rights and royalty issues. It announced a merger with McGraw-Hill a few months ago. And Pearson expects its U.S. revenue to decline 5% this year. As the music industry has shown over the last several years, there's nothing like financial pain to encourage innovation.

The other major higher education publishers—such as Wiley and Macmillan as well as McGraw-Hill/Cengage—will undoubtedly follow Pearson's lead into digital-first textbook publishing; this will change how American students pay for and consume text materials. Yet it could backfire: if other higher ed publishers follow Pearson and Cengage's lead in taking control of distribution channels, then college students could find themselves having to do the equivalent of signing up for Hulu, Netflix, HBO GO, Amazon Prime, CBS All Access, and Apple TV+ (instead of signing up for just Spotify or Apple Music, or CourseSmart) in order to get e-textbooks each semester. This fragmentation could put a damper on students’ interests in getting their text materials digitally instead of in print.

However, one thing hasn't changed: Regardless of their format, publishers still produce monolithic objects called "textbooks." The next phase of the industry's digital transformation will be a long-sought move to producing content in smaller recombinable digital "learning objects." That requires another set of fundamental changes in editorial, production, and distribution processes. It will be interesting to see what pain points hasten that transformation.

Pearson Turns the Page on College Textbooks as Digital Courseware Demand Grows

https://www.pearson.com/corporate/news/media/news-announcements/2019/07/pearson-turns-the-page-on-college-textbooks-as-digital-coursewar.html

Major Shift from Print Reflects Company Commitment to Lowering the Cost of Higher Education

London, UK (JULY 16, 2019)—Pearson, the world’s learning company signaled a strategic commitment to the digital future of higher education, affordability and lifelong learning by announcing today it is breaking from the traditional education publishing model of lengthy and expensive print revisions, which has defined U.S. college publishing since the 1970’s.

Instead, all future releases of Pearson’s 1500 active U.S. titles will be “digital first” and updated on an ongoing basis driven by developments in the field of study, new technologies, such as artificial intelligence, data analytics, and Pearson’s own efficacy research. Pearson is the only education publishing company setting out to do this across all of its active titles. It’s a product as a service model and a generational business shift to be much more like apps, professional software or the gaming industry.

“Students are demanding easier to access and more affordable higher education materials, with nearly 90% of learners using some kind of digital education tool,” said John Fallon CEO, Pearson. “We’ve changed our business model to deliver affordable, convenient and personalized digital materials to students. Our digital first model lowers prices for students and, over time, increases our revenues. By providing better value to students, they have less reason to turn to the secondary market. This will create a more predictable, visible revenue stream with a better quality of earnings that enables us to serve the needs of learners and customers more effectively.”

“Our digital courseware makes learning more active, engaging and immersive, improving outcomes for students and their teachers, and helping college leaders meet the growing demand for lifelong learning.”

College students already access over 10 million digital courses and e-books each year from Pearson. This move continues to reduce costs and improve the experience for students. With the switch to digital, students can expect to pay less, with an average price of $40 for an eBook and $79 for a full suite of digital learning tools. Students who still want a print textbook will be able to rent one from Pearson for an average price of $60. For students at one of the 700 U.S. colleges or universities using Pearson’s “Inclusive Access” offering, prices are even lower.

This move comes as Pearson releases its popular Revel product on the company’s new Global Learning Platform, an engine that will enable Pearson and its partners to launch personalized learning experiences more quickly and with better outcomes. Revel also is now the first-and only-college courseware compatible with Amazon Alexa. And, in the fall, Pearson will release its Aida app, a breakthrough AI enabled calculus tutor to help students learn with step by step feedback.

Pearson is committed to lifelong learning, with the goal of giving everyone from college students to people in the workplace affordable and easy to access digital higher education materials and assessments. 62% of Pearson revenue now comes from digital or digitally enabled products and services that make lifelong education possible.

For more information please visit www.pearson.com.