The world's largest educational publisher, UK-based Pearson PLC, is in crisis. Last month, the company, whose 2015 revenues totalled nearly £4.5 billion, revealed that net revenues for the fourth quarter of 2016 fell by 30 per cent due to a sharp drop in sales of its products to higher education students, especially in the United States. The company's share price also dropped sharply. Today its stock market value is less than half of what it was 18 months ago.
It's worth noting that Pearson's skidding sales numbers coincided roughly with the start of the fall academic year. As late as September, Pearson reported that North American revenues were down only 3 per cent for the year to date, and expected trends to improve in the final quarter. But when students and professors returned to campus this year, sales did not follow.
In response, Pearson CEO John Fallon said that the company would shift its focus from print publishing to digital products and services--which he expects to make up 75 per cent of revenues by the end of the decade.
The burning question is whether or not he's got that much time. Educational publishing is ripe for digital disruption, and when digital disruption hits any industry, it swiftly turns assets--capital investment, boots-on-the-ground distribution networks, long-term contracts with suppliers--into cost centres or even legacy liabilities.
The college classroom, which has changed little since the invention of the blackboard some two centuries ago, is finally catching up with the times. Now that free WiFi has become ubiquitous on campuses, students and instructors are making more use of online resources. Faculty are constantly updating course syllabi to keep up with new knowledge, tools and technologies. They are gamifying their learning objectives. They are flipping their classrooms by encouraging students to watch explanatory videos at home and then come to class ready to solve problems in teams.
The traditional textbook is out of place in this new classroom. From the perspective of today's digital-native student, textbooks are an expensive anachronism. According to the Oxford University Press, paper, print and binding account for one-third of the cost of any textbook. Digital publishing dramatically reduces many of those costs, and purely digital publishers never have to transition their way out of them. Already some new firms, including my own, are bypassing the traditional textbook model and passing the savings onto students. We are connecting students and instructors to bodies of knowledge virtually, as well as with educational tools that help with comprehension, retention and engagement. End-of-chapter discussion questions are no longer sufficient.
The traditional business model of academic publishing can no longer keep pace with the very thing it sells: information. As the pace of knowledge creation grows ever faster, the traditional way of distributing it to college classrooms--revising or adding new chapters to textbooks, and then translating, printing and shipping them in hardcover by the tens of thousands--is obsolete. Knowledge is weightless, and no longer needs to be turned into reams of paper in order to be spread.
A sign of what's to come can be seen by looking at how other industries have been disrupted by technology. The mobile taxi-app maker Uber revolutionized car travel worldwide in less than a decade, in part because it had no fleet of vehicles to maintain and no investments in fare meters to write off. Similarly, while it took AirBnB four years to reach its first million bookings, it now handles one million bookings every single day--always expanding its available accommodations without ever building a single hotel.
The impetus for any digital disruption is the way in which technology connects users directly to each other, replacing traditional distribution channels with lower-cost peer-to-peer connections. Educational publishing would benefit from this kind of disruption, and there are increasing signs that university students and instructors are ready for it.