Can Textbook Publishers Become Software Companies?

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The Text and Academic Authors Association is a national membership association for textbook and academic authors providing resources such as grants, webinars, an online library of how-to articles, annual conferences, and a variety of mentoring and networking opportunities. For information visit TAAonline.net

A Companion Piece to Forming a Publisher Relationship:  The Acquisitions Editor

by Sean Wakely, Founder and Principal Adviser, Academic Author Advisers

A big thanks to the folks at the Text and Academic Authors Association (Mike, Maureen, and Kim) who invited me to write a three-part series of articles for their group’s newsletter. The topic is how an aspiring textbook author can get noticed by a higher education publisher, and then how to leverage that connection into a contract offer.

The first article appeared in TAA’s September/October 2014 newsletter. It focuses on the role of the typical higher education acquisitions editor (now often known as a product or brand manager) and what usually motivates her or him in the search for talent. In the next TAA article, due out later this fall, I’ll describe strategies for connecting with a publisher and submitting a winning project idea. For would-be authors/content writers who aren’t ready to commit to an idea yet, the final TAA article will discuss forming relationships with publishers that can become the basis for future projects.

Even with the space afforded by three installments, there just isn’t room in the TAA newsletter series to cover some important background information. In particular, there are a few topics I’d like to cover in greater detail:

  • Can higher education textbook publishers become software companies?
  • Higher education publishers’ changing product strategies
  • The acquisitions editor’s evolving role

So, as a companion to the TAA articles, I’ll share some additional thoughts in this blog.  This first post will cover higher education publishers’ aspirations to become software developers.  In future posts, I’ll address how that shift in thinking impacts product acquisition/development and explore in greater depth how the role of the acquisitions editor is evolving.

 

Path Through Gnarled Trees Melbourne  Australia

Publishers As Software Developers?

For a number of years, higher education publishers flirted with branding themselves as “software developers” instead of “textbook publishers.” Some have finally taken the leap (see Joseph J. Esposito’s insightful comments on this phenomenon quoted in Carl Straumsheim’s excellent Inside Higher Ed article). What’s prompting this identity change? Why are many higher education publishers trying to embrace a software model as their core competency?

Problems with Print. Much of educational publishers’ urgent desire to reinvent themselves is due to the crash in print sales they’re experiencing. For example, according to its chief executive officer, sales of McGraw-Hill’s non-customized, print higher education textbooks declined from 71% to 38% of total sales between 2010 and 2013. Aggressive price increases can sustain print products’ revenue performance for a while, but not indefinitely. In fact, price increases exacerbate the decline in publishers’ print unit sales. Furthermore, customized print versions might be picking up some of the slack, but probably not enough to offset most of the losses. How did higher education publishers get into this pickle?

How It Used to Be. Higher education publishers have traditionally published two kinds of titles: First editions and revisions. For generations, educational publishers have relied on the installed customer base of successful revisions to drive the lion’s share of their annual revenues. Consequently, enormous efforts are made to persuade or even force adopting faculty to assign the newest edition of a revision as soon as it’s published; this is known as “rolling over” to the new edition.

Roll overs are crucial to publishers’ sales performance because they make the existing supply of used books obsolete (publishers do not receive revenue nor do authors receive royalties from used book sales). During the first term following publication, with a few minor exceptions, bookstores must obtain a new edition from its publisher. Even today, while the business model is shifting, many higher education publishers almost certainly derive most of their core revenue from this product revision/roll over cycle.

After a new edition has been available for one school term, used books seep into the mix, and publishers’ sales begin taking a hit. Naturally, publishers feel the need to fight used book competition that deeply cuts into their revenues and greatly diminishes return on investment. The key industry response has been to revise successful introductory and mid-level titles about every three years. By the time a publisher’s sales of a particular edition collapse, sometimes sinking to zero or even to negative numbers, the next edition is published and adopters roll into it. The cycle then repeats.

For publishers and authors, this revision/roll-over strategy worked to their benefit for several decades—until the Internet disrupted long-established distribution channels. Then everything changed.

Yep, It’s the Web Again. Due to the Web’s inherent efficiencies, there’s been explosive growth over the last decade among companies that resell or rent new and used textbooks. In addition to current editions, previous editions that cannot be purchased from their publishers or found at local or chain bookstores are readily obtained online from Amazon, Chegg, AbeBooks, Half.com, and a host of other sites.

Lost Sales. Certainly, a publisher and author benefit from the first sale of a particular title to used-book resellers and renters. However, subsequent sales and rentals of that same unit represent lost revenue to publishers and lesser royalties for authors. To compensate for the lost revenue, publishers aggressively increase the price of each unit they can sell. Inevitably, customers complain and look even harder for alternatives to publisher-supplied, new books.

Any Old Edition Will Do. While never really popular on campus, higher education publishers are increasingly resented by customers who feel justified taking any possible measure to avoid buying a new, print book from a publisher (for an example, see this Vocative article).

Faculty members are changing their behavior in response to student demands, and they’re altering market dynamics in the process. Informal conversations over the past several months convince me that a new trend among faculty is magnifying the impact of used and rented books: College professors and instructors are increasingly directing their students to buy whatever fairly recent version of the assigned textbook they can find.

To make it easier for students to use old editions, faculty members may even provide multiple versions of course syllabi that are keyed to one or more superseded editions. The all-important roll over to new editions described above is being increasingly compromised, and publishers and authors are feeling the pain.

Competition from Open Educational Resources. Another factor that could one day increase pressure on publishers and authors is the open educational resources (OER) movement. Smart publishers and authors should note that OER’s attractions often transcend price considerations. Overall, OER is a relatively small player at present. However, sites such as OpenStax or Creative Commons and the free learning resource alternatives they offer might one day significantly cut into commercial publishers’ revenues and authors’ royalties.

Print is Not Dead, But It Might As Well Be. Ironically, the likelihood is that the majority of today’s higher education students at any given time are using (or would prefer to use) a print textbook, either alone or in combination with a digital learning component. For one example, see the results of a recent survey conducted by Hewlett-Packard at San Jose State University.  A BISG study indicates that faculty members are even more attached to print than students.  While a majority of customers want to use print textbooks alone or in combination with digital components, the reality is that print textbooks appear less and less likely to be purchased or rented from publishers. Nor does the trend show any signs of abating.

A Digital Solution. So what’s the solution? Many publishers, particularly the large and well-capitalized ones, have made a strategic choice. They’re racing to develop must-have, single-use, online products that can’t be shared, pirated, rented, or re-sold. This strategy is at the heart of what’s been called the “digital transformation,” although I think “digital transition” is more appropriate.

What is the Digital Transition? A typical higher education publisher’s digital transition strategy ports learning content into online, password-protected products; embeds homework and interactive experiences into those products; and ensures that each student user’s activity generates a unique experience.  The resulting, personally tailored learning experiences are most commonly driven by a publisher’s or its technology partner’s propriety algorithms and processed within their own engines, making it virtually impossible to share or pirate the online product.

Why is It Important? The digital transition’s underlying strategy presumes instructors will require every student to purchase and use a digital learning solution, because gradable events are key outcomes of students’ activities and highly valued by faculty. Students should benefit from interactive, digital learning environments that analyze real-time performance data to guide and optimize their learning experiences. Consequently, some publishers also refer to themselves as “digital learning solutions providers” or “learning solutions providers.”

When executed well, these high-value, customized, digital learning solutions provide a compelling reason to buy from a publisher or learning solutions provider. They significantly reduce demand for used and rented print textbooks, pirated copies, and shared books; they also raise expectations for functionality and personalization that the nascent OER movement must strive to meet.

The Holy Grail?  So far, so good. Just fully transition to digital, and everyone is happy, right? Hypothetically, the answer is a resounding yes (except from book resellers and renters, of course). But in reality, there are a number of challenges to overcome on the journey to the digital promised land. A few spring immediately to mind:

1. Publishers. Can publishers truly refashion themselves into software developers?

  • Do publishers possess the cultural frameworks and technical expertise necessary for a successful transition? Can they develop such capabilities within a reasonable timeframe?
  • Can they attract, develop, and retain the best engineering talent? How do conventional publishers compete with startups and the high-risk/high-reward opportunities they offer?
  • Can publishers imagine the right products, efficiently scale them across multiple course areas, and successfully execute and deliver on product plans in a reasonable period of time and on budget?
  • Can they successfully overhaul entrenched royalty accounting, permissions, financial forecasting, production, customer support, order fulfillment, and sales operations (to name just a few) to be consistent with digital software companies’ business models? Can they do so while adequately servicing the print business that currently drives most of their revenue and profit?
  • Will they be disrupted by smaller, more agile competitors who demonstrate greater digital savvy, customer intimacy, and flexibility?

2. Customers. Will customers accept fully digital solutions fast enough to replace declining print unit sales?

  • Are customers ready to forsake print altogether? If not, when will the tipping point be reached?
  • Will the need to meet short-run revenue and profit goals continue to drive aggressive print textbook price increases that will accelerate the erosion of unit sales?
  • Will customers continue to resist assigning or purchasing products they perceive to be unfairly priced? Will unit sales decline so fast that increased prices can’t make up for the lost volume, thereby impairing publishers’ investment capacity and performance?
  • Existing products are often poured into one-size-fits-all digital containers, but many customers want instruction tailored to the nature of the content itself. How do publishers reconcile the need to drive scale with the importance of delivering authentic learning experiences based on the content being studied? For example, should history, chemistry, beginning Spanish, and developmental English students expect the same interface, features, and interactions from their respective digital learning solutions?

3. Authors. Who gets to participate in the digital transition?  Will only the biggest authors receive the attention and investment necessary to succeed in the evolving digital environment?

  • Who is being held accountable for ongoing unit sales declines? Authors? Editors and Product Managers? Marketing? Sales? Technology? Management? How much of the erosion is at least partly attributable to slow or flawed digital transitions by the companies themselves?
  • Can a publisher afford the staffing and resource investments to transition all of its successful authors in a timely fashion? What happens to those who get left behind?
  • What skill sets do authors need to successfully transition to a digital future? How do publishers help their authors develop these skills in cost-effective ways? Who are the likely author/content expert candidates to be signed up for the new, digital learning solutions being developed from scratch?

Implications.  Some higher education publishers seem to be making the transition, albeit slowly and with some bumps along the way. Others may be ignoring the realities and hope to fly under the radar screen. Another group understands the gravity of the situation, but may not be prepared culturally, financially, or in a practical sense to resolve the many issues involved. The current state of disarray is unfortunate, because unit declines are accelerating, finger pointing has begun, and the time required to organize an orderly digital transition is quickly running out.

Next time:  Publishers’ Changing Product Strategies

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©Academic Author Advisers
Photos © Sean Wakely 
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