The Coming Revolution in Textbook Publishing

Gone is the textbook?  With big players Pearson and Cengage changing the textbook model are we finally witnessing an inflection point?

Last week Pearson, PLC launched a direct-to-student content app that give student subscribers access to Pearson’s entire 1500 textbook catalog. Cengage bravely launched something similar a few years ago and the strategy was seen almost as a hail Mary pass to save the company’s business model. As most will understand, the textbook sales model – particularly in undergraduate education – has been challenged for many years. In the eighties and nineties textbook companies consolidated and textbook prices started to increase which slowly eroded sell-through. At the same time, the secondhand market became more organized as retailers saw margin benefits in their efficient buy-back programs. Later, further dislocation occurred via the Internet and new company entrants like Chegg brought rental to the college market. 

The ‘print’ textbook is about to be revolutionized. New digital apps from Pearson and Cengage will focus on engagement, retention and outcomes which will encourage new approaches to content, tools and add-on partnerships - to the benefit of the student

For publishers, these changes meant they could no longer rely on price increase driven revenue growth despite the captive market. Revenues started to slip and expectations about the long-term viability of the textbook model declined. All the while, the potential of electronic delivery – even embedding textbook payments into the college fee structure – suggested that there could be a brighter future for textbook publishers.

In 2018, Cengage took the riskto go direct to students. The all-inclusive offer provided a student with access to the entire Cengage catalog for an amount far less than buying print textbooks for each class (requiring a Cengage textbook). Since launch, Cengage says they have sold more than 4.4 million subscriptions and saved students an astonishing $270mm. Their recent annual report states the company saw net digital revenues up 6% year over year which suggests the strategy is working. (Overall revenues slipped).

Both Pearson and Cengage are betting that the subscription model for textbook content will be more reliable and resilient than the print model. It is anticipated that having more students pay a comparatively (to print textbooks) smaller amount will generate more overall revenue. Note that right now most students end up paying nothing to publishers each semester. By delivering content via an app, the publisher is also able to add in more interactive tools and support material to improve the utility of the core content. As an added benefit, the ability to change test banks within the app might undercut some nefarious players who provide students with answers to printed textbook test bank questions, many of which are used by professors for testing and grading.

Direct-to-consumer will be a viable option and the app platforms will provide publishers a base to add in more content, tools and learning aids and partnerships. Most consumers today are comfortable with subscriptions and students are no different. Publishers will also gain deeper insight into their end-users: In the past, other than their purchase behavior, publishers were almost completely in the dark about their student customers. That said, a potentially better model would be to charge all students a fee as part of their tuition for access to all their class materials. As I’ve discussed before, this is a model used by UC Davis and it has been so successful the school is expanding it.

Pearson will charge $9.99 per month for one Pearson ebook and $14.99 per month for access to 1,500 Pearson ebooks

Cengage Unlimited provides access to more than 20,000 Cengage products across 70 disciplines and 675 course areas for $119.99 a semester. For 12 months' of access, the price is $179.99, and for two years the price is $239.99

UC Davis provides some important benefits for both publishers and students. For publishers, the administrative burden of managing content provision to UC Davis students (I have seen) is significantly less than managing content intermediaries and even their own all-access solutions sold via bookstores. And easier for students because they ‘pay’ just one fee and don’t have to manage a bunch of textbook subscriptions.  On day one, they get access to all the materials they need for class and, if they major in an ‘expensive’ STEM discipline, are not penalized because of the higher cost of their course materials.

At the very least, the Pearson news validates Cengage strategy, but it is more than this: While todays’ students may still prefer printed textbooks, they will benefit from large publisher investment investing more in improving the eBook experience. Students will rapidly accept and embrace the better digital products that result. At the same time, publishers will benefit from flexibility in pricing models as they aggressively establish these platforms with administrators and faculty.  Furthermore, as market positions solidify, these platforms could become access points to students, resulting in partnerships and associations that will add further value. Lastly, publishers might be able to glean some real intelligence about their users and develop true lifelong learning programs. I once participated in a consulting pitch at Cengage (Thomson Learning) in 1998 at which we proposed an engagement to develop a “lifelong learning” strategy. We didn’t get the engagement, but at the time, Cengage didn’t execute any strategy either.  Delivering on that long term strategy is looking much more likely now.

 

Michael Cairns is a business strategy consultant and executive. He can be reached at michael.cairns@infomediapartners.com or (908) 938 4889 for project work or executive roles.