How fast is the education market moving from print to digital delivery? In its Q2 2013 earnings conference call with investors last week, Pearson, PLC, the world leading provider of educational materials and services provided some interesting data.
In answer to a question, “Do you have a goal in mind… for the percentage of print sales against total sales”, John Fallon, CEO, Chief Executive of Pearson’s International Education Businesses, said “our goal is to have 70% of our revenues from digital and services by the end of 2015. And clearly, overall, the plan is to achieve that by driving faster growth in our digital and services rather than presiding over the rapid decline of our print-based revenue.”
In answer to a question about the “new adoptions” part of the educational publishing business, William T. Ethridge, Executive Director and Chief Executive Officer of Pearson Education North America said, “if you put it in context, when I first talk(ed) of our U.S. School, the new adoption business is about a $1 billion business. It's now less than $400 million.” (Ethridge was elevated to his current position in 2008.)
So we’ve seen a dramatic decline in the educational book business. More and more of Pearson’s revenue is coming from digital delivery of products and other services. (This does not mean that Pearson’s revenue as a company has been declining. Through judicious acquisitions, and lines-of-business other than educational publishing, the gross revenue of the company has grown steadily over the last five years.)
Fallon said, “We know that our organic investment across Pearson is still, for all the progress we've made, too heavily weighted towards print-based products that are in long-term decline and to geographies where growth is harder to come by.”
But, what my readers are interested in is what has been happening with educational products that use pictures.
In North America college enrollments are down again this year meaning a decline in the sale of books and a decline in the inventory college book stores keep on hand.
- Given the high costs of books more students are turning to used books.
- Pearson has exited the highly specialized niche higher education publishing in the U.K.
- The K-12 market in North America is likely to remain subdued as school systems struggle with the uncertainties of implementing Common Core.
- The growth in demand is in the emerging markets, not North America and the UK. By 2015 Pearson expects the emerging markets to represent 25% of its revenue.
- By the end of 2013 “in the United States and South Africa, in the U.K., in Australia and throughout Europe, we [Pearson] will… have significantly fewer people engaged in the publishing, distribution, production and manufacturing of textbooks,” Fallon said.
Fallon added, “I think we've been very clear about the things that Pearson must do more of: digital learning, data analytics, education services, developing markets, learning outcomes.”
Some Things To Think About?
1 – For the most part photographers and stock agencies are licensing for print use based on circulation. They tend to offer an add-on of unlimited digital for little or no additional money. Print circulations will decline resulting in lower prices overall. Digital use will skyrocket quickly.
2 – It seems likely that in many cases more images will be needed for digital products. Up to now, when images are needed for a digital product, the per-image budgets tend to be a fraction of what they were for print. This makes it possible for the overall product budget to remain about the same even though it uses 5 to 10 times the number of images as comparative print product might have used.
3 – Many of these digital products will be licensed by subscription to school systems. Once produced, they may generate license fees forever. Under the current licensing system creators have no way of benefiting from use of their images when subscription products are successful. Licensing fees will probably be based at levels that will enable publishers to realize a profit on even marginally successful products.