BISG's MIP for Higher Ed 2012 -- SHAPIRO
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Making Information Pay for Higher Education Publishing
Gary Shapiro SVP Intellectual Property
Follett Higher Education Group
Follett Corporation Founded in 1873 Revenue: $2B+ 930 Physical; 330 Virtual Stores 5M + students 400K Faculty/7M+Parents/Alumni/Fans eFollett is the 56th Largest US
ecommerce site w/13+M Unique visitors Integrated Inventory Mgmt System CafeScribe econtent platform (2007) Staff: 8,000 Regular full and part-time
FSLG: Library, Educational Services;
Software
Follett Higher Education Group (FHEG)
February 17, 2012 Page 1
2
Follett Offers Course Materials Across All Formats and At Many Price Points
Follett provides complete coverage of the course materials business spectrum
New Textbooks/
Digital
Used Textbooks
Rental
Over 140,000 titles Bundles and custom products represent
significant share of volume 25-30% new text sales are digital
content, monetized by a print sale CafeScribe 2.0 launched July; contracts
with all top publishers; growing catalog
Attractive option for students seeking to manage costs Generally retails for 75% of new price
Introduced in Fall 2009 with national roll-out Fall 2010 Answered market demand for low
price alternative
FHEG Textbook Revenue – FY12 YTD
3
New/Digital Course Materials by Product Type
What Do We Know?
The cost of textbooks is a real issue But hype exceeds the reality (students don’t pay full new price)
Students are acquiring required materials (89%) But not as much from traditional channels College stores have seen a dramatic decrease in market share
79% buy some materials from college stores 42% buy at least one item online; 1/3 of all purchases online
Rental has become significant in Higher Ed Channel(s)
Digital content accounts for about 30% of textbook revenues, but etexts a very small share Monetizing digital through print sales Like publishers, Follett is making significant investments in digital and
partnering with new technology providers
Channel Impact of Text Rental
FHEG (incl. eFollett)
Off-Campus Store
Online Trad. (Amazon, Half)
Peer-to-Peer (& “didn’t buy”)
Pub Direct
Online Rental (Chegg. Book Renter)
“Post-Rental” Market Share Competitiveness in a world with rental
• Ability to spread inventory risk and systems investments across 900+ stores
• Market intelligence allows optimized title selection • On campus presence provides convenience advantage
• High inventory risk (local) • Systems investments are substantial
• Without acquisition, difficult to enter rental due to lack of “title intelligence” and organizational considerations; “point of
presence” sales tax concerns
• Rental options available to students keep P2P prices low • Rental books returned to store not available for P2P
• Number of students not buying should also decrease (?)
• High cost to administer B2C rental program • (Has advantage on titles with pass codes, custom and
supplementary online materials)
• Low cost, centralized model with ability to spread inventory risk • Agility to re-price quickly, focused marketing
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Stakeholders Have Diverging Interests
Students Very price focused Tech savvy Engaged with
social networks Beginning to
accept digital course materials content
Institutions Concerned about affordability Interested in digital
alternatives; market differentiation
Changes in financial aid distribution
Need commission income Faculty requiring fewer titles;
using Web-based content
Environmental Factors Poor economic climate Enrollment changes/declines (“For Profit” Institutions; Community Colleges) Competitive bidding for clients Startups/venture investments leading to significant noise; sales impact OpenSource endorsed by PIRGs, legislators Investment(s) needed to compete
Publishers Rental, Marketplaces,
OpenSource impacting sales
Driving digital, custom, direct-to-student sales and institutional relationships
Want more control over terms/conditions
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15%
20%
25%
30%
35%
FY08 FY09 FY10 FY11
Positioning to Win Against Local and Online Competition
booknow allows students to purchase all new and used textbooks and course materials at time of class registration
First and only registration integration system in the industry
Allows Follett to maintain and gain share in an increasingly competitive environment
Stores
Marketplaces
Rental Sites
Publisher Direct
All text formats available (Used / New / Rental / Digital) X Limited X Accepts all tender types (Cash, check, credit card, campus card, financial aid)
X X X
Offers in-store pickup X X X
Integrated with campus systems (LMS, SIS, registration system) X X X
Assurance of right materials from one place
X X
Growth in financial aid as tender – a strategic advantage (% of tenders using financial aid)
X
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Traditional texts 6 major publishers One text per course Significant pedagogy 2 page spreads; graphics,
color; chapter exercises Highlighting and underlining;
memorization Publisher support Average Price: Over $75
% o
f New
Equ
ival
ent R
etai
l $’s
Tra
nsac
ted
100%
80%
60%
40%
20%
0%
60% 40% 20% 0% 10% 30% 50%
% of Titles
100% of retail = 142,762 titles (100%)
80% of retail = 15,066 titles (10.55%)
50% of retail = 3,585 titles (2.51%)
The majority of titles are trade books and monographs
The majority of dollars of sales are
traditional texts
The Majority of Sales Are From Traditional Texts
Trade books and monographs 8,000 publishers / distributors Original materials Multiple books per course Linear reading Average Price: Under $50
Source: Internal FHEG data
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Textbooks
Evolving into native digital
(adaptive learning) products
9
Evolving into enhanced
print products
The discipline will determine how technology will change course materials and how fast they will evolve – significant differences in
product types leads to different impact from digital
Supplementary content
Homework management tools
Assessment products
Other digital components
Product Evolution Will Differ Based on Discipline
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Textbooks
Evolving into native digital
(adaptive learning) products
10
Evolving into enhanced
print products
The discipline will determine how technology will change course materials and how fast they will evolve – significant differences in
product types leads to different impact from digital
Supplementary content
Homework management tools
Assessment products
Other digital components
Product Evolution Will Differ Based on Discipline
• Problem-based disciplines • Digital = Interactive • Technology replaces print • Solo learning • Digitization leads to better
student performance, engagement, retention
• Driven by publisher investment • Format = faculty decision
• Theory based disciplines • Digital = Digital replica;
enhanced print • Technology enhances print • Social learning • Digitization = lower cost,
convenient access, search capability, note sharing
• Format = Student Decision or Campus Requirement
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Native Digital/Adaptive Learning Enhanced print course materials
Books on reading devices
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Device requirements Large / quality display Good connection, significant memory Optimal devices Multimedia-optimized tablets Applications Highlighting, note-taking and sharing Links to other resources
Devices and applications will differ by category
Key questions: • Does it support the unique content critical to teaching and learning? • Will students use a dedicated reading device or want a multipurpose device? • Is the device affordable for students; esp. with the additional cost of the content? • Does the primary content provider support all platforms and devices?
PLATFORMS Download, Cloud
DEVICE REQUIREMENTS Quality screen (eInk)
OPTIMAL DEVICE SOLUTIONS Tablets and Readers, Smartphones, eink devices
Monographs
APPLICATIONS • Interactive
• More like traditional software or web- accessible content PLATFORM
• Student uses on publisher servers (Cloud) DEVICE REQUIREMENTS
• Fast connection • Speedy Input (Keyboard) OPTIMAL DEVICES
• Laptops, desktops, netbooks. • Possibly larger format tablets
APPLICATIONS • Highlighting, note taking and sharing
• Links to other resources
PLATFORM • Cloud, download
DEVICE REQUIREMENTS • Quality (larger) screen
• Good connection; significant memory OPTIMAL DEVICES
• Laptops, desktops, netbooks • Sophisticated tablets
Digital “Tailwinds” in Higher Ed
Rise in availability and use of quality homework management, assessment tools
Standards are making it easier to integrate econtent with LMS
Declining print sales challenging publishers to create new models
Rapid rise in tablets & smartphones
Availability of digital content (& favorable pricing)
Growth in distance learning/use of digital
Rapid growth of ebooks in trade and professional markets
February 17, 2012 Page 12
Digital “Headwinds” in Higher Ed
Tablets not affordable option for many students
Most digital content unexciting replica of printed text; extended reading on desktop/laptop is difficult for most
Premium digital content selling for premium price
Digital, while cheaper than new print, is more expensive than traditional (buy used/sell back) model; rental countering cost savings of digital
Student access to quality bandwidth not ubiquitous
Some faculty still resistant to technology The number of classes taught by adjuncts
ADA concerns
February 17, 2012 Page 13
Channel Impact of Digital
FHEG (incl. efollett)
Off-Campus Store
Online Trad. (Amazon, Half)
Peer-to-Peer (& “didn’t buy”)
Pub Direct
Online Rental (Chegg. Book Renter)
“Post-Digital” Market Share Competitiveness in a world with digital
• Access to the customer becomes even more critical as publishers move toward agency pricing reducing price competition
• Customer-centric systems which provide convenience (virtual), easy purchase and access are key
• Unlikely to survive as course materials outlets due to investments required to support digital
• May have significant position depending on ability to be customer access point of choice
• However, will lose share to institutional decisions (licenses) and one-fee-like programs
• Not a legal option
• Potential for publishers to disintermediate all other channels, IF they remain the primary content providers
• Would have to fundamentally revise business model to play in this space, and even at that unlikely to have significant customer access
required for success
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0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Traditional Print Custom Text (Print) Bundles (Print + Digital)
ebooks Native Digital
Today 5-7 Years
New/Digital Course Materials by Product Type
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FHEG is Encouraging Institutions to Think Strategically About Course Materials
Mitigate risks Managing number of platforms and applications adopted and used Assuring productivity increases, not decreases Faculty can teach, not provide technical support and/or have to learn to effectively
use multiple technologies (from LMS to publisher platforms) Students focus on learning the material, not different but similar technologies Managing demand for bandwidth and infrastructure
Minimize costs Potential new administrative and legal costs (i.e., managing licenses) Integration with technology infrastructure and support
Selling the need for strategy Choosing among options (both by students and faculty) becoming complicated Good strategy leads to improving student success while:
Optimizing their investment in course materials Ensuring quality of instructional content Sustaining faculty's role in selecting course materials and instructional resources
Student success leads to better engagement and retention Ability to capitalize on technology investments
The “Endless Aisle”
The “Endless Aisle”
Objective: Increase revenue and wallet–share through implementation of
broader inventory visibility and order management functionality – leveraging the entire enterprise
How? Fulfill any order, any channel, from any location Centralized customer service support Increased assortment through 3rd Party Vendors Full tender availability from original store Inventory visibility across the network Centralized distribution support
Order Management – Product Sourcing
Online Order Placed at Boston
College
Order Management
System
Proximity to Destination
Nationwide Proximity
FHEG Distribution Center
3rd Party Drop Ship Vendors
New Distribution Center
New, 550,000 sq. ft. Distribution Center adds needed capacity to expedite “click & mortar” strategy
Featuring state-of-the-art Kiva
Robotics Increased order put-through
capability to respond to increasing demand:
Further mission of driving
sustainable practices
Page 21
Follett’s Hammes Notre
Dame Store at Eddy Commons
Not Just a Bookstore
Thank you!
Questions?
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