Move to Digital

This is the final post in a three-part interview with Eric Frank, the founder and president of Flat World Knowledge, a leader in open-source and digital textbooks. You can find first part of our interview here and the second here.

The biggest points brought up this week were:

  • PUBLISHING PROCESS COSTS:  “I think that at some point the real pain in the industry is having to invest a lot in switching to getting a publishing process that gets your costs down dramatically that allows you to price at a very different price point for digital.”
  • CREDIBILITY OF EBOOKS: “I also think that the online industry is missing a rating/credibility system, as you alluded to. There’s nothing besides professor’s choosing by adoption, nothing tells a teacher what’s a better version of a basic algebra book out there is.”
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Jeff Cohen, The Textbook Guru: How is your pricing in comparison to a new or a used book?

Eric Frank, Flat World Knowledge: By and large our e-books are priced at 25 dollars, so for that e-book you pay 25. For a black and white book you pay 35 and for a color book you pay 70. So for an audio book you play about 39 dollars depending on the book. So that’s where we are at. So by and large certainly the black and white book will always be less then any other book than any other option on the market. Color book sort of becomes competitive with used book prices generally on a color book.

JC: So is there any resale market with the Flat World book. If a school is readopting it, is there technically a used version that could be available?
EF: Yeah, we’re definitely seeing some used book activity. Certainly dramatically less then what we were seeing when I was at Pearson or Cengage, but we definitely do see local resale.
JC: You’re finding that the bookstores are including those as buy back pieces when they are developing their buy back catalog?
EF: Idiosyncratically, we are definitely seeing some bookstores opt out for reasoning’s ranging from the low price to begin with—by the time you re-buy it and resell the margins are too thin—to fear of customization over the summer, the replacement of the old version. We’re seeing some stores exclusively opt out, and we’re seeing some stores exclusively opt in to include them in the buy back.
JC: How do you think the market is going to shake out in terms of the difference in Merlot, Connections, MIT OpenCourseWare, Global Text Project, College Open Text Project, WikiBooks, Google Books, and Project Gutenberg? I think your product stands in a little different category than those. But the amount of information that is being provided in the open course arena has dramatically expanded—how do you see this all playing out? What’s the future of the physical textbook?
EF: You know I agree with the statement. We tried to create a new category because historically they had traditional print, and now traditional e-book, and then you’ve got on the other side, open content and open textbook. I do think those open textbooks have been kind of community generated. I by and large believe that the quality of the author makes a big difference to the end user—who that author is, what process that book has went through, whether it’s been edited, peer reviewed. Has it been professionally illustrated? Is it on a stable platform where I can count on it being there? Are there other test banks with supplements available with it? Are there customer service reps I can call?
I think all those things matter a lot when you try to move from the fringes of a movement to penetrating the mainstream of the market. It’s a lot like Linux–you know it certainly had a wide usage but it was on the fringes of kind of the expert programmer who wanted to sit at home and do hacking and didn’t want the operating system to be a black box. There was one place, Red Hat came around, and we’ll put this commercial flavor of this, we’ll debug it, make sure it’s stable, we’ll host it for periods of time, we’ll do new releases, we’ll help you install it, we’ll help you with customer service if it fails, we’ll help you do custom installs at your business, and then Linux bought a multi-billion dollar business and had the biggest IPO in history, and now Linux is sitting on half the boxes out there.
So I think Flat World is the Red Hat of the publishing world, and I think that more commercial open models will follow, and will help penetrate the mainstream of the market more quickly.
I think that print has some staying power. There are lot of different prognostications on that. There are a lot of good reasons for print to hang around for a while. It has good battery life, no DRM; it’s got no screen glare. It is easy to share. A lot of reasons—people know how to use it; it’s easy to bookmark. I think there will be a print market for some time. But I do agree with the general position out there, probably five years from today, while the dominant sales will be attributed to the print sales, the trajectory will be entirely digitally driven from the market place. I think that will create real shifts in the way in which people have to think about digital.
I think for the big guys the big challenge is print first publishing process in architecture that today means to produce digital books is an added cost on top of producing a print book. I think that at some point the real pain in the industry is having to invest a lot in switching to getting a publishing process that gets your costs down dramatically that allows you to price at a very different price point for digital. I think the industry is going to try to produce e-books at a very high price point. Because if you embed lots of Gigamo’s, I think they’re looking for the information, so I think the price pressure on digital is going to be severely down, and it’s going to force publishers to figure out how to either adapt their cost structures or start to pay a real price for that.
JC: Yeah I would agree. Obviously when I first started in digital eight years ago with MBS, we did the Universal Digital Textbook Project, which is still alive today, but that was bringing the e-book into the college bookstore. And I remember thinking at that point in time that the only interest–this is still my belief, although I think the belief has changed over time–back then the biggest interest the publisher had in e-books as a tool was to eliminate comp copies. Publishers really looked at the e-books and said, “wait, if I can give out 5,000 e-book copies instead of 5,000 print copies I just removed 5,000 used books from the market place that are in the market before my book even hits the shelf.”
There were the professors who were like “I’ll never review an e-book.” I don’t really understand, but I am sure the attitude has changed in seven years.  And then I think the attitude the publishers have had is that our content is so valuable and proprietary, we’re not going to let what happened to the music industry and we’re not going to let Amazon do what e-textbooks did with what they did with e-books, right? Where they were literally selling them for then their costs to get people to buy their devices. And now you don’t have to be one of the big six publishers to publish a book, get adoptions and have use.
I was talking to the guys over at Center of Mathematics the other and I think they’ve got a really neat program for calculus. They don’t go beyond the three calculus books that they have, but I thought it was really cool for calculus. But how do you remove Stewart calculus from the marketplace? They’re going up from such a dominant position from the print side, it’s almost kind of like I said to you about Flat World at the beginning: they should go after being a supplement to someone who is taking a Stewart Calculus book because there price point is so cheap. They’re almost like a hands-on tutor for Stewart Calculus.
I also think that the online industry is missing a rating/credibility system, as you alluded to. There’s nothing besides professor’s choosing by adoption, nothing tells a teacher what’s a better version of a basic algebra book out there is—do you use Deacon Academy? Do you use Flat World Knowledge? Do you use something from the MIT Course works? It can be a very daunting task as a professor to move to a new digital world—it’s kind of like when I graduated college in 1997, my last year we were using the internet, and I remember there were all these rules about what was considered a good internet resource or what wasn’t considered an internet resource. And you had to limit the use of Internet resources.
I’m sure that’s still an issue in college, although there is a much better understanding of what a quality website is versus Yahoo Answers. It’s just anyone who gave the answer; it doesn’t count as a credible authority in this space. I haven’t really seen anyone who’s stepped up into the ratings piece of this, the “bizz” rate if you will, or the bizarre voice of higher education e-books. It will be interesting to see how that plays out I also think it’s going to be very interesting to see—like you had mentioned—if the learning device get’s big enough, you guys would be willing to put your content on it. That’s the choice you have to make when you are building an Inkling, a vital source, a Café Scribe, you know any of these learning tools that are out there. You got a great tool out there, but now you got to get content.
EF: Yeah exactly, that’s why I think for us—I like the place we are in. We think of ourselves as a disruptive content business. And when we were going out and doing fundraising, we raised about 30 million in venture capital in the last couple of years, so we’ve done a lot of it, and we were talking to investors where we showed this graphic and it sort of shows you know you got an author, that’s where the process, the value of creation, begins, I forget the publisher role for a minute, it turns into a book, a faculty member who adopts it and then it goes to a student.
I draw a line between faculty and students and I look over at students and I say, over there, there are over a million players lining up for where the student is going to buy the book, whether that’s Amazon, e-bay, Craigslist, Apple, iStore, wherever. A million people vying for how that’s going to get purchased, and then you move over and who’s going to make the adoption decision today? The only ones going after that business should be the publishers, and what we are trying to do is to build a disruptive content play to get the decision. Once it goes to the student , our content, we don’t get it if it gets monetized for Flat World, in the college book store, via the e-pub file on the iPad, the relationship with Inkling, whoever. At that point we’ll let this thing go where they want to go to make their purchases and hopefully we’re in a lot of those places.