I’ve recently had the opportunity to look into the publishing industry at Harvard Extension School. Over the past few years, the Higher Education Publishing industry has faced consumer and technology driven challenges and have begun to transform its delivery platform from classic hard-copy editions to e-textbooks and open textbooks.
The classic model is such that students are required to purchase a set of products (textbooks) decided upon by the professors. This has discouraged price competition among publishers, encouraged students to seek used books and book-sharing (or pirating), and has led to higher prices; between 1996 and 2004, the cost of textbooks rose by 240% (twice the rate of inflation). The cost of a college education continues to increase and, as a result, students often have a hard time affording the textbooks they need for classes.
- Annual cost to students for required college texts is just over $700.
- $5.5 Billion a year is spent on textbooks, only allowing for on-campus bookstore purchases.
- The average price of an individual textbook has risen more than 24% over the past five years.
- Digital textbooks may sell for up to half the price of a hard copy.
Despite a general world-wide economic downturn as well as negative consumer feelings towards the rising cost of textbooks, the Higher Education publishing industry experienced a 23.1% increase in net sales revenue over the past three years with a net revenue in 2010 of $4.55 billion (of an $8 billion dollar market).
In response to technological advances and unhappiness from consumers as well as Congress and other stakeholders, publishers have “been actively developing, producing and marketing the next generation of premium multiplatform learning solutions” which range from multimedia educational materials to e-books. While some students may prefer paper materials, at a cost of 52-80% less than a paper book, e-textbooks and open textbooks are growing in use and demand as the alternative to the classic textbook.
This is the market that publishers like Flat World Knowledge have successfully filled in recent years. Indeed, Flat World and similar companies – such as Textbook Media – have significantly lower operating costs and a flourishing business model. Therefore, the gap in pricing (which should only widen in the future), and other factors that will be addressed, points to a positive environment for the sales of digital textbooks.
Flat World Knowledge’s (FWK) most notable resources and capabilities are closely associated with its innovative business model (electronic, open, customizable, free textbook publication).
As a student, what more could you want than a cheap, accessible, interactive, customized textbook that matched your class perfectly. Sounds like a dream, but that is what Flat World Knowledge has created. The Flat World Knowledge approach to e-text learning platforms, itself, is rare; despite a number of companies who have done innovative work in the e-textbook forum, FWK seems to be the only company providing this customizable, inexpensive, and reputable approach to knowledge-driving e-content. The ability to provide reputable, reviewed, expert-authored textbooks at a low price in a still increasing educational market with ever-increasing prices, is also a difficult product to create. Additionally, growing needed brand-recognition in the higher-education industry is a challenge.
As an open, digital publisher, partnered with high-level authors, FWK allows its readers to choose formats ranging from digital and free to paper-version and cheap. As most college courses requires textbooks, there is a demand in the United States alone from approximately 17.5 million post-secondary education students per year. If each student takes two to six classes per semester, four to twelve courses per year, that is 70-210 million textbooks per year. In the search for an inexpensive solution to purchasing required texts, students resort to older books, used books, sharing, and pirating. None of those options provides higher educational value, and few of those options will be less than $40.00 for a printed customized text. FWK provides exactly that.
Seventy-Five percent of the student body still prefers the print textbook format.2 This would indicate that FWK’s product is very substitutable as there are still many more (albeit more expensive) options for textbooks. FWK takes the lead when it comes to price. Finding a substitute product at a similar price would be difficult; for this reason, FWK’s product is difficult to replace. Additionally, there is discussion among Universities to centralize textbook purchasing by using the online medium, dropping prices for students, and forcing e-texts and e-learning. This would force students to use the University-chosen texts but allow them to purchase print versions as desired.
For publishers and students, one of the challenges of the textbook cycle is that students don’t choose a textbook for a class. If they did, students could chose a text which best suited their learning style and strengths, and would purchase a wide-range of books. Instead, teachers and institutions pick a textbook that fits their class and curriculum. “Formidable barriers to entry into educational publishing, provided at every stage of production and marketing, favor large publishing companies” that have created substantial and long-term relationships with key authors and institutions. Large and established publishers “lobby state selection committees in large adoption states to obtain lucrative markets.” At this stage Flat World Knowledge does not have the budget to fund large lobbying efforts so they must use other marketing techniques.
Through trial and error, FWK has been utilizing different forms of marketing in order to get their textbooks in the hands of students. “For the 2009–2010 academic year, FWK experimented with new sales and marketing programs to attract faculty to adopt their textbooks;” the cost to FWK for each new teacher under this program was $2,500. Each teacher’s course generated approximately $250 in revenue, making this campaign ineffective.
The following year, Flat World Knowledge enhanced public relations efforts, customer relationships, and created a new Faculty Advocates program. “This Faculty Advocates program includes faculty advisors organizing educational workshops on their campuses about the benefits of open textbooks.” With the new marketing efforts costs to adopt a new faculty member dropped to $900. If a faculty member were to use a Flat World Knowledge textbook for more than three semesters the marketing plan would pay for itself.
Flat World Knowledge also generates a significant portion of their new accounts through referrals. In 2009, nine percent of new business was generated by referrals and in 2010 over 27% over new professors utilizing FWK’s texts were generated through recommendations from other professors. This is a healthy trend and suggests that the quality and value of FWK’s textbooks is greater, and recognized as greater by professors, than that of traditional publishers. Building relationships and maintaining them with schools and universities will be critical to Flat World Knowledge’s success.
In conclusion, a company like Flat World Knowledge, with its focus on and dedication to electronic publishing and digital textbooks, is able to provide content that is readily customized and easily accessible. While old fashioned printed textbooks are bulky and expensive, as well as containing a great deal of irrelevant information, e-textbooks provide exactly what college students need and want. Electronic formats also allow updates to outdated material to be made fairly simply, while printed books are unable to make that claim. In other words, students have access to a technology that is convenient and fits into their lifestyle, while saving a significant amount of money in the process.
Electronic textbooks should also appeal to educators, since the technology permits the construction of specific learning materials that are most suited to supplement course objectives. In addition, rather than needing multiple textbooks to prepare for one class, information can be easily consolidated into a single volume. This is part of the business model of FWK and is also why the company is increasingly successful. Commitments from industry leaders like Random House indicate that what FWK is doing has significant potential for the future. Random House also offers FWK the ability to enter existing foreign markets as it already publishes electronic titles in English, Spanish, and German. And, as indicated in this paper, experts do believe that, as new generations of students – who prefer the technology – become the dominant buyers of textbooks, e-textbooks may transform the educational publishing industry. With the continued growth of the e-textbook market, Flat World Knowledge is properly positioned to become one of the leading digital publishers for the foreseeable future.
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