Wednesday, March 28, 2012

For-Profit Enrollment Increases Could Hasten Content-Consumption and Content-Subscription Models For Textbook Publishers

Well, a single year does not make for any kind of historical trend, but it's safe to say that folks in the music industry are breathing a small sigh of relief. The numbers are in for 2011 and, for the first time since 2004, the industry registered market growth. The growth was fueled by a 9.2% rise in digital sales (the sale of physical units dropped by only 7.7%), and overall digital made up more than half of industry revenues for the first time ever. There's obviously plenty of irony here, given that industry leaders once viewed digital formats as the death nail in their business coffin.

And speaking of growth, did you see the U.S. data for 2011 higher education enrollments? Overall, the numbers show a 2.8% increase from 2009 -- 21.6 million students -- with the greatest rate of growth in the for-profit sector. For-profits grew by 8.3 percent in 2010 compared to a 2.3 percent increase for public universities and 2.4 percent for private nonprofit colleges. For-profits enrolled a total of 2.43 million students, or 11.2% of the students in higher education.

I bring up both of these items -- digital music sales and for-profit enrollments -- as reminders of one key trend driving the increase in digital textbook sales in the U.S. While for-profits represent only 11.2% of the overall market, their adoption rates for digital content (not just e-textbooks) is as much as 3X-4X that of their not-for-profit counterparts. For-profits will continue to grow throughout the current decade and will likely top 20% of higher education enrollments by 2020. During that time, given current trends, we will see their adoption of digital content usage increase from an estimated 10%-12% today to more than 75%.

Unlike the music industry, however, the long-term tension for textbook publishers isn't necessarily found in the battle between digital and analog. OERs and other free learning content will also see huge gains due to the digital shift; and the focus of for-profits on overall cost management could lead to much heavier use of open content over commercial in that segment (particularly in General Education materials).

What's the solution for traditional textbook publishers? Follow the path of Blackboard and embrace services over products, maybe? Over the next five years, in fact, I think we will see two important business models emerge that actually drive the industry and define the services offered by traditional publishers -- content consumption and content subscription. Content-consumption models will be tied to publishers' (and any other content provider distributor) ability to wrap services around learning content that demonstrate usage and efficacy. Large for-profits will eventually gravitate to this model as it will allow them to pay only for what students actually use and what helps them achieve their goals. The content-consumption model will be fueled by analytics and adaptive learning services that allow the for-profits to manage costs and the publishers to replace lost content revenues with analytics and reporting services. On the not-for-profit side, subscription models will emerge. Most importantly, these will allow publishers to provide all-digital services through controlled, direct-to-institution distribution channels that help them eliminate losses due to used books, rental, and direct-to-consumer distributors.

Naturally, the flies in the ointment for these strategies are open content and the fact that, as the music industry has shown us, consumers don't always do things the way industry leaders want them to. I think we got a weird glance of that yesterday when the Pottermore site began selling digital versions of the Harry Potter series. The popularity of these books allowed an independent Web site, for the first time, to actually dictate terms to Amazon and other major online retailers. First, the books have no hard DRM -- they bear only dynamic watermarks. Second, the books may only be purchased from the Pottermore site. It was indeed strange to see Amazon and Barnes & Noble driving consumer traffic to an external Web site to purchase content. There are certainly potential implications there for the learning content market but I'll have to ponder them further before drawing any concrete conclusions.

And finally, today, I remind everyone that just when you think you have things figured out, new disruptive elements have a disturbing way to upsetting your neat numbers and charts. Such has been the case of smartphones, tablets, and apps. We thought we understood the world and its future pretty well before apps became the mainstream and now we can't imagine life without them. Along those lines, here's an article with some interesting statistics on how Apple's appstore reached 180,000 applications.

Suggested Reading
The Music Industry Is Finally Turning Around!
U.S. data show rate of enrollment growth slowing in 2009-10 | Inside Higher Ed
A Surge in Learning the Language of the Internet -
Blackboard Confronts Erosion of Market Share, Makes a Major Change in Strategy
Community College Spotlight | Software predicts who’ll pass the class
What’s the greater fear for publishers? Amazon or piracy? – The Shatzkin Files
Two Years Post-Launch, A Close Look At The App Store For iPad

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