Tag Archive: textbook industry news

Pearson and Chegg Partner on Exclusive Rentals

In an effort “to make college more accessible and more affordable for students” (and to maintain a foothold in a changing textbook-distribution landscape), Pearson Education (NYSE: PSO) has partnered with Chegg (NYSE: CHGG) in an exclusive eBooks/textbook-rentals crossover plan.

Rollout Expectations & Textbook Conditions

Pearson will make available — via Chegg only — roughly 50 deeply-discounted high-sales textbooks in time for Fall 2017 semester.

Each of these 50 selected textbooks will meet the following criteria:

  • Not for purchase; available as rental only
  • Consigned to and rented exclusively through Chegg
  • Available as print OR digital download
  • Renting at a price point of $100 or less

Upon success of the rollout, Pearson plans to release more Chegg-exclusive titles for future terms.

Phase Two of the Pearson Plan

This announcement follows one made in January when Pearson announced immediate plans to reduce the prices of 2,000 eBook titles by up to 50 percent. Whereas that first phase lowered prices on eBooks only, this second phase does so for print books. It also makes them available as Chegg-only rentals. Pearson estimates that this will allow them to cut the costs of these books by up to 60 percent.

The Lead-Up

Perhaps most interesting about the Pearson-Chegg partnership is the way in which it combines rentals and eBooks. In the past, we’ve seen companies like Chegg and CampusBookRentals bank heavily on print rentals. Publishers like Pearson and Wiley have distributed their new print textbooks through college bookstores and kept eBook offerings to direct website downloads.

In assessing the Pearson-Chegg announcement, we must consider that just a few years ago, textbook conditions were limited to:

  • bookstore and Internet sales and rentals of new and used print textbooks
  • a small selection of academic digital downloads specific to publishers and/or usage platforms

Then we saw the blurring of textbook-condition boundaries in the forms of:

  • an increasing number of eBook textbook titles available as rentals for various durations
  • print textbook sales and rentals that contained complementary or supplementary digital content as well
  • digital-only direct distributors such as RedShelf who offered academic titles from multiple publishers for both sales and rentals

Reconfiguration Rather Than Innovation

In the latest Pearson-Chegg endeavor, we see a new kind of blurring: publisher-specific budget-priced textbook titles available only as rentals and only through a single website. That website is the work of the company most responsible for making print textbook rentals what they are today.

Offering multi-publisher print rentals online and outside of the college boosktore, Chegg undoubtedly changed the game in the mid-to-late 2000s. There is also no doubt that direct-from-publisher digital downloads disrupted traditional college bookstores in the years following the rentals boom. In the upcoming scenario where Chegg exclusively offers heavily-discounted Pearson titles, we see a reconfiguration rather than innovation or even reinvention.

It isn’t the same sort of game changer but it may be a smart way of creating a new option that students find attractive. Surely one must imagine that if initial rollout is successful, Pearson will increase the number of titles offered and other publishers will follow suit. This would be yet another blow for bricks-and-mortar college bookstores who will be excluded from yet another distribution model and revenue stream.

About That B&N Edu Stock…

I’ve talked about the volatility and drop of B&N and B&N Edu stocks. Now it seems like things are about to get even more interesting for stock-holders (not to mention accountants and lawyers).

Today’s News Regarding NYSE:BNED Stock:

  • Srijayanth “Jay” Chakrapani, Vice President & Chief Digital Officer at Barnes & Noble Education, sold 6,500 shares on Friday, March 17. Details are here and that article includes a link to the SEC filing.

Insider trading is a tricky thing for obvious reasons. Sometimes a sale is just a sale; other times a sale is a dump by someone who knows something indicating a downward turn. What this is (and keep in mind that Chakrapani still owns more than 60,000 shares) remains to be seen, but a B&N Edu exec selling one-tenth of his shares on a Friday afternoon when the stock has seen better days is worth a Guru mention.

The Textbook Guru Roundup: March 3, 2017 Edition

Seriously busy week and one that’s been heavy on textbook-related news. Here’s what’s on my mind as I head into the weekend.

Lesser News But Still Worthy of Our Attention:

A Very Big Deal: B&N Acquires MBS

Barnes & Noble Education Acquires MBS Textbook Exchange: The Guru’s First Thoughts and a Little Background on the Deal

In less than a month of being the new Guru, I’ve already talked industry consolidation (Follett acquires Baker & Taylor) and touched upon Barnes & Noble Education’s stock woes. In today’s post about the B&N Edu $174.2 million acquisition of MBS Textbook Exchange, I combine the two.

A Bit of Background About the Deal

  1. B&N Edu and MBS have a long-standing sister-company relationship. B&N runs college bookstores and MBS does textbook fulfillment (B&N gets preferred used-book inventory). This relationship comes down to Len Riggio, who, even though now retired from B&N, holds a lot of B&N stock and is Chairman of the MBS Board and holder of 49% of MBS stock.
  2. B&N Edu is a leading campus bookstores retailer with a large physical and online presence. MBS is a leading textbook wholesaler, college-bookstore systems provider, and provider of 700+ direct school-associated online fulfillment for both colleges and K-12 institutions.

What we have in this acquisition is really just two connected, complementary companies becoming one. But what’s it all about?

In a nutshell, it’s about classic textbook vertical integration where the same company controls both the retail and wholesale market in order to drive efficiencies and reduce costs and redundancies, while also shortening the supply-to-sales chain, and empowering bookstores with tighter inventory control and pricing.

B&N has historically relied upon acquisition-and-consolidation has historically as its driving growth strategy. Since purchasing the company in 1971, B&N as guided by Riggio, has acquired bookstore chains, including:

  • Bookmasters
  • Supermart Books, which operated The Missouri Book Company (All retail stores sold to Barnes & Noble College Stores. Name changed to MBS Textbook Exchange, Inc. and company focused on textbook supply, store systems, and direct fulfillment.)
  • B. Dalton Bookseller
  • Doubleday Book Shops

B&N’s super-size retail presence was massive, and in addition to putting numerous independent bookstore out of business, it also took a toll on larger competitors:

  • Superstores: Borders — filed for Chapter 11 in 2011.
  • Mall stores: Waldenbooks — (owned by Borders) also defunct in 2011.
  • College bookstores: Follett and Nebraska — the former acquiring the latter in 2015 and then wholesaler Baker & Taylor in 2016.

The Missing Link Is Put Fully Into Place

B&N has had (and continues to have) a strong grip on retail bookselling. What they did not have prior to the acquisition of MBS was a wholesale book distribution operation. This absence, however, was not for lack of trying. In 1999, Barnes & Noble (the nation’s largest bookseller) announced its plans to buy Ingram Book Group (the nation’s largest book wholesaler). Within six months, B&N called off the $600-million deal as a result of the FTC stating intent to oppose the deal on grounds that it was “anti-competitive.”

And now B&N has finally filled that void. That B&N Edu acquired MBS Textbook Exchange less than one year after Follett acquired Baker & Taylor could not be less surprising or more timely. It is both a reaction to Follett taking ownership and control over the second-largest book supplier and an action that has been expected for decades and likely would have transpired regardless of Follett’s acquisition. Now that it’s happened, expect B&N stock to get a much-needed bump and for the B&N Edu vs. Follett fight for college bookstores to intensify.

Follett Names New COO

Follett Corp. Names George F. Coe (Baker & Taylor) As COO

Follett got its man as the college bookstore giant named George F. Coe (formerly of Baker & Taylor) its new COO. This is in no way unexpected as Follett continues its rapid consolidation of the college bookstore market. Take a look at what Follett has scooped up in terms of both retail and distribution in less than two years:

  • June 2015: Follett acquired Neebo, Nebraska Book Company’s retail division, adding 200+ college bookstores both on campus and off campus (not to mention Neebo.com).
  • April 2016: Follett acquired Baker and Taylor, thus taking control of the distribution side of academic bookselling.
  • February 2017: Follett names former B&T executive Coe as COO effective March 31, 2017.

Follett’s strategy of vertical integration makes sense in light of the necessity of competing against Amazon. Coupling its already significant college bookstore footprint with Neebo, in addition to buttressing its logistical back-end operations with the Baker & Taylor acquisition, gives Follet a strong bricks-and-mortar competitive advantage that is difficult to replicate. It remains to be seen whether this will be enough to withstand the Amazon juggernaut.

Barnes & Noble Education and Pearson PLC Stocks Getting Crushed

The Bad News from the Textbook Market Keeps Coming

Both Barnes & Noble Education and Pearson PLC saw double-digit drops in their stock prices recently after sales failed to meet Wall Street expectations. B&N Education (NYSE: BNED) CEO Max Roberts said that the decline was related to lower enrollment at colleges and a “softer retail environment.”
Taking a hit far worse than B&N Education, Pearson PLC (NYSE: PSO) lost 29% of its value in one day in mid-January after dramatically lowering revenue-and-profit expectations for 2017. How bad has it gotten for Pearson? Well, the folks at The Motley Fool writePearson stock is now down 66% over the past three years, and the market is showing no confidence that the company will turn itself around anytime soon” and Bloomberg’s “Pearson Forecasts Years of Textbook Gloom; to Sell Penguin” is in no way reassuring.

The Elephant in the Room

B&N Education and Pearson are really proxies for the whole textbook industry. The underlying causes of the industry malaise are rooted in two powerful trends: demographics and technology. After reaching a peak of 17.3 million students in 2010, college enrollment decreased 4% between 2010 and 2014 to 16.6 million in 2014 (according to the National Center of Education Statistics). This falling college enrollment is unprecedented, and obviously fewer students equals fewer textbook sales. Technical trends, including new business models (rentals), online sales, and digital books, further undermine the old model of new textbook sales to students through brick-and mortar-campus bookstores.

While the publishers try new tactics such as access codes and custom publishing in order to revive sales of new textbooks and shrink the used-textbook marketplace, the fact of the matter is these types of tactics only serve to alienate their customer base. Students are not stupid; they realize that algebra doesn’t change that much from year to year, so why should the textbook? The publishers would be well advised to create value-added services or pass on savings for students instead of thinking up new ways to milk students for their last dollar by inflating book prices.

The textbook industry is in the midst of some serious disruption. It will be interesting to see how it all plays out.

Guru Roundup: Special eTextbooks Rentals Edition

Business Wire: CampusBooks Finds Just 18% of Textbooks Available on Amazon’s Kindle Rental

“CampusBooks.com compared pricing data for the top 100 college textbooks against Amazon’s new Kindle Rental service, and found that Kindle Rental often has the best prices, but only 18% of the titles. Renting a Kindle book for the advertised 30-day period yielded the highest savings, often in the double-digits over traditional rental, used and new textbooks, but only five of 100 titles were available for the month-long range. The other 13 titles available had minimum periods of 60 days, and the savings were less. However, if students were to rent via Kindle for a whole semester (120 days), only half of the time was Kindle Rental cheaper than buying and selling a used book . . . ” (more…)

Guru Roundup: Bringing You the Industry’s Need-to-Know News

Business and Industry News and Findings

First, the biggie that’s on everyone’s mind:

New York Times DealBook Blog: Calling Off Auction, Borders to Liquidate

“The Borders Group said Monday that it would liquidate, shutting down the 40-year-old bookseller after it failed to find a last-minute savior. Though it is not a big surprise, the move will still strip the publishing industry of shelf space that is becoming increasingly scarce as brick-and-mortar stores continue to founder. Borders said it would proceed with a proposal by the private equity firms Hilco and the Gordon Brothers Group to close down its 399 remaining stores. That liquidation plan will be presented on Thursday to the federal judge overseeing the company’s bankruptcy case. The company will begin closing its remaining stores as soon as Friday, and the liquidation is expected to run through September. The chain has 10,700 employees…”

(more…)

Guru Roundup: Bringing You the Industry’s Need-to-Know News (Tech-Talk Edition)

Content and Publishing

PR Newswire: AcademicPub™ Signs Leading Publishers and Sets Key Distribution Partnerships

“AcademicPub, the higher education unit of SharedBook Inc., made a three-part announcement underscoring rapid adoption of the service since its April 2011 launch. According to Caroline Vanderlip, CEO, SharedBook Inc., entered into two new publishing relationships, including one with industry-leader Springer Science + Business Media, and two new distribution partnerships. These innovations will ease the ability of educators to create content and obtain AcademicPub products. Additionally, a new academic advisory board has been created to help guide the unit through an accelerating period of customer growth. ‘We are moving on multiple fronts, a necessity in a higher-ed market as dynamic as this one,’ said Vanderlip . . .”

Campus Technology: Open Textbook Groups Join Forces

“The colleges in 15 states and one Canadian province that make up the Community College Consortium for Open Educational Resources (CCCOER) will now be able to tap into the collection of open textbook resources compiled by the international group of institutions that make up the OpenCourseWare Consortium (OCW Consortium) and vice versa in a new partnership. The community college consortium, which represents 200 schools, has become an associate consortia member of OCW Consortium, and its advisory board will effectively act as a voice for the two-year colleges within the global consortium’s organization . .

Digital Devices

Campus Technology: Is the iPad Ready To Replace the Printed Textbook?

“After trying out the Apple iPad for a short period–about three weeks — three out of four college freshmen said they’d be willing to purchase an Apple iPad personally if at least half of the textbooks they used during their college career were available digitally, according to the results of a classroom poll at Abilene Christian University. According to Scott Perkins, coordinator of mobile learning research in the Adams Center for Teaching and Learning at the Texas university, a similar willingness to purchase the devices was borne out among participants in semester-long pilots, which included both graduate and undergraduate students . . .”

Guru Roundup: Bringing You the Industry’s Need-to-Know News

This installment of the roundup contains some big news, so let’s start there and focus this post on business, corporate, and industry doings. I hope everyone has a safe and fun holiday weekend!The big news:

Publishers Weekly: Nebraska Book Co. Files for Chapter 11

“NBC Acquisition Corp., parent company of Nebraska Book Company, the country’s third largest operator of college bookstores as well as a major wholesaler of college texts, filed for Chapter 11 bankruptcy protection Monday morning in what it says is part of a plan to recapitalize its debt. According to its filing, the December 31 maturity of a $200 million loan has raised concerns among some publishers about NBC’s ability to finance its back to school textbook and merchandise purchases, and the company was unable to reach a refinancing agreement with all of its lenders without filing for Chapter 11…” (more…)