Textbook publishers embrace the Web

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by Lisa Shuchman

(IDG) -- While accompanying his college-bound daughter on a tour of Duke University recently, Bob Christie felt a sense of awe as he stood in a library reading room lined with books. He remembers thinking the Gothic-style hall was magnificent, noting some of the books were probably more than 100 years old.

But what really got his attention was the ambient noise. "All you could hear," he says, "was the clicking of keyboards."

The irony of students surrounded by pulp and paper but glued to the screens of laptop computers did not escape Christie, who took it in stride. As president and CEO of Thomson Learning, it's Christie's job to make sure his company, one of the nation's largest textbook publishers, doesn't get left behind. "The Web is transforming the way people learn," he notes.

Indeed, the $7 billion textbook publishing industry is undergoing a transformation. Once staid and conservative, the nation's major educational publishers -- Harcourt, Houghton Mifflin, McGraw-Hill, Pearson and Thomson -- are all moving to take advantage of the Net, digitizing textbooks, creating e-learning Web sites, offering distance-learning classes and helping teachers put courses online. In effect, they are infiltrating the space that until now has been dominated by Internet companies, attempting to be dominant forces in the new economy as well as in the old.

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The contrast between the two worlds is particularly acute for textbook publishers. Until this year, they had been sitting on the sidelines, watching startups like Classroom Connect, Family Education Network and Lightspan all test the emerging e-learning market.

But then Pearson, the behemoth of educational publishing, started making moves. In recent months, the company acquired National Computer Systems, the nation's largest commercial processor of student assessment tests and a major provider of back-end systems for education. It announced the creation of the Learning Network -- a huge Web-based educational portal serving four markets: kindergarten through 12th grade, higher education, professional development and lifelong learning. And it bought Family Education Network, which develops learning tools for parents, teachers and students.

Suddenly, competitors started waking up. "Pearson pulled the trigger," says Peter Stokes, executive VP of Eduventures.com, an education research and consulting firm. "Now the race is on."

Last month, Boston-based Houghton Mifflin announced it has joined with Sylvan Ventures, an investor in education technology companies, to create Classwell, a company that will provide online content, tools and services for teachers of kindergarten through 12th grade. New York-based McGraw-Hill recently started offering teachers the ability to create customized e-textbooks from its Primis Online digitized textbook database. The company also plans to launch its own online learning network before the end of the year. And Harcourt General has gone so far as to create an independent university called Harcourt Higher Education -- an accredited, online college that will grant degrees and will begin offering courses this fall.

Behind these moves is a strong belief that the economics of publishing are demanding change. More than 20 percent of publishing costs are associated with printing, according to Michael Moe, a Merrill Lynch managing director who analyzes the education industry. Eliminating much of this expense by making content available on the Web could help the publicly traded companies' bottom lines.

In addition, the new textbook market has to compete with used-book sales. In colleges, for example, about 30 percent of students buy used books. Publishers believe that by offering textbooks online -- or even portions of textbooks -- they could recapture some of the lost business. A student could go online and buy only the relevant portions of a textbook instead of the entire book, saving money in the process.

"We all have to do this," says Christie at Thomson Learning, which now holds a majority stake in WebCT, which provides tools that let teachers put courses and materials online. "We don't see textbooks going away, but we have to deliver content in any form the customer wants."

That's already happening to some degree. Textbook publishers now offer customers supplementary materials through the Web. Students assigned a chapter on the Civil War in a history text might be able to access additional reading online, for example. For now, this is offered at no extra cost. But eventually publishers would like to license their material and offer courses and curricula through the Internet.

That's an expensive proposition, requiring a huge commitment to technology. It's also a gamble: No one knows if or when the companies will begin to see returns on their investment. Nevertheless, they're all moving ahead. Thomson, for example, no longer produces any content that isn't available in digital form and linked electronically to other materials. Christie reports his company is investing about 8 percent of more than $1 billion in revenue on technology.

There's a payoff: By making materials available on the Net, for example, they'll be more useful to teachers, who often wait six or seven years for updated editions. And more updates mean more purchases.

Finally, the higher-education textbook publishers are convinced that moving online will give them an additional market: students. Many college and university students don't buy course books, which can cost as much as $100, because they know only a few chapters of the book will be required reading. But they may be willing to buy just those relevant chapters -- especially if they can view them on the Web.

The publishers' push isn't just about digitizing textbook content, though. Thomson has a site that provides online educational counseling, has searchable databases and interactive tools for contacting U.S.-accredited institutions, and offers a program to help students decide where they should apply to college.

Moreover, the Houghton Mifflin-Sylvan Ventures project Classwell is scheduled for launch next year. Sylvan has an interest in Chancery, which provides back-office solutions for schools, and MindSurf, which offers wireless services for the K-12 market. Like Pearson, Classwell seeks to be a one-stop-shop for education. The site will integrate Houghton Mifflin's content with tools to make life easier for teachers and students, says Classwell president and CEO Dave Cappellucci.

All these Internet initiatives appear to be a dramatic departure for a generally conservative business that has long had to be sensitive to state educational standards and requirements. But Liz Hacking, Houghton Mifflin's senior VP for strategic development, says it is merely a natural evolution for an industry that isn't really in the book publishing business as much as it is in the business of education.

"The word 'book' isn't even in our mission statement," adds Hacking. "Our business is shaping ideas and aggregating and vetting content."

If that's the sort of jargon you'd expect to hear from a dot-com executive, well, that's the point.

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Houghton Mifflin Company
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Pearson Education
Thomson Learning
National Computer Systems, Inc.

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