e-Literate

Present is Prologue

Tag: edunomics

  • The Coming Digital Textbook Wave

    Xplana has published some interesting growth projections on digital textbooks in the U.S. higher education market. If you’ve been frustrated by the slow adoption rate, then you’ll like what they have to say. First of all, and unsurprisingly, they see the proliferation of mobile devices (e.g., the iPad and other tablets, netbooks, smart phones, etc.) as one of the drivers of the change. As I have written here before, I believe the lack of a ubiquitous form factor that works well for eBooks has been a very serious limiting factor on the growth of digital textbooks in general and OERs in particular. But here’s the passage of the report that really caught my eye:

    Current product publishing and finance forecasting within textbook publishing are based on traditional models of print textbooks sales. Viable textbook projects are generally required to have projected revenues of at least 6X plant costs in order to justify company investment. Within this traditional model, digital textbook sales are currently counted as incremental volume, or as added revenue (again, incremental to print), when bundled with a course cartridge or internal assessment solution.

    Once digital textbook sales reach 13%, however, the finance model breaks down significantly as digital textbooks are no longer incremental and, instead, actually begin to pirate print sales deeply (6.5% decrease in revenue on the average title). When digital textbooks sales reach 20% of new textbook sales, based on current production and revenue models, textbook publishers will see a 10% decrease in revenues and a 13% decrease in project margin. At this point, publishers will have little choice but to change product, production and distribution strategies in favor of digital versus print.

    Impact of Digital Text Sales on Print RevenuesTextbook publishers shoehorn their digital textbook sales into a pretty traditional revenue model. It’s an afterthought rather than a main driver, and it usually gets treated that way. But there is a tipping point. Once digital textbooks begin to cannibalize a surprisingly low percentage of traditional print sales (13%), then the traditional revenue model for textbooks starts to fall apart quickly. At that point (which the Xplana authors project to hit some time in 2014),  expect the textbook publishers to become a lot more aggressive about eTextbooks if they haven’t already. It will be life or death for them then.

    But that’s not the end of their worries:

    Currently, textbook publisher production models are based on print workflows. Digital textbooks are created at the end of the production cycle when compositors create final production-ready files. As sales of digital textbooks begin to cannibalize print sales, and as their inevitable future as the replacement of print textbooks becomes more apparent, publishers will be forced to alter current production workflows to favor a digital-first process with POD available from XML files and templates.

    Textbook publishers have production models that are optimized for producing—wait for it—textbooks. Many of them are going to have to retool their processes in order to make their costs manageable when their main product is digital.

    It’s not all bad news for them, though. Even though the costs of the digital textbooks will significantly lower than paper textbooks, the publishers may make up the revenues by “renting” the textbooks via some form of DRM. Basically, it will kill the used textbook market, which hurts their sales badly within a couple years of producing a book and forces them to invent reasons to create new editions in order to keep selling. Students, in turn get lower prices for assets that they usually don’t want to own after the end of the semester anyway. Prices will come down for this reason alone. Add to that the increased competition from new entrants, including but not limited to OERs, and there should be significant downward price pressure on college textbook costs in the next five years. Given that the U.S. Government Accountability Office has found that textbooks and supplies account for 72% of the cost of a 2-year college education, that’s a pretty important change.

    Update: You can find the GAO report here.

  • DIY U: Is There a Bubble in the Higher Education Market?

    Update: Coincidentally, Anya Kamenetz just posted an interview in which she briefly compares the student loan situation with the real estate bubble here.

    When I opened my email the other day, I was greeted by the following blurb from Today’s Campus:

    The U.S. college-buying public numbers in the tens of millions.  Many of them are first-time purchasers.  Most of them are not.   Among a marketplace of that size, one ‘buying cluster’ could supply enough students to fill several campuses.  One very interesting cluster we’ve identified is husbands purchasing higher education for their wives.  Click here to order a free sample report with our compliments.

    We don’t often hear higher education talked about in such baldly commercial terms. Most faculty and campus administrators have visceral negative reactions to this kind of language. But that doesn’t mean that colleges—even not-for-profit colleges—aren’t essentially run as businesses. It just means that (a) they’re often run as businesses badly because it is considered distasteful to draw on the lessons and vocabulary of the business world, and (b) educators often fail to identify the tensions between their school’s mission and its operating model, thus making it less likely that they will be able to confront some of the system’s ethical challenges successfully. But since the heart of DIY U is an economic argument, it is worthwhile to try framing issues in the language of economics. As the title of this post suggests, the specific question I want to address is whether there is a bubble in the college education market.

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  • A Closer Look at Mobile App Development for Higher Education

    I have been blogging a fair bit lately about the competing mLearning efforts between Blackboard and the Moodle community. Much of the conversation so far has focused on the front end apps and whether web-based or native apps are better. (The latest is that there is a native iPhone app for Moodle in addition to the mobile browser app.) But let’s be clear: Many of the smartphone apps you have for your iPhone, Android, Blackberry, or whatever were built by lone developers working part time. I don’t want to trivialize that work, but it’s hard to see how one platform is going to achieve a durable competitive advantage against the others based on its mobile client.

    I’m going to draw on some recent conversations about mobile apps in the Sakai community to reflect a little on what it takes to build an mLearning platform. In the process, I’ll also think out loud about what kind of a business this area will or will not sustain in the long run.

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  • Thoughts On Anya Kamenetz and the Open Education Movement

    Many thanks to Cable Green for linking to this interview with Anya Kamenetz:

    Kamenetz’s recent article in Inside Higher Ed has also been getting a lot of attention, as has her blog, as she promotes her new book DIY U: Edupunks, Edupreneurs, and the Coming Transformation of Higher Education. I have my copy on order and look forward to reading it. Kamenetz is obviously bright and seems to have synthesized a number of important trends in a fresh way. She is impressive.

    A couple of things struck me as I watched this interview. First, this seems to be evidence of a possible game changer for the more radical end of the open education movement. I have tended to be very skeptical of theories that higher education will become profoundly more self- and peer driven and will eventually break its bonds with traditional institutions and formal certification. The university is an incredibly stable and change-resistant institution. It has lasted over a thousand years without much evolution in its basic structure. There are a lot of reasons for this, but one big one is that it has tended to reinforce class differences. Late Twentieth-century efforts to make college accessible to everyone notwithstanding, higher education has generally been a strong marker of class status throughout its history. College has been seen as a way to get ahead or, much more frequently, stay ahead. But when you have bright, articulate, talented young professionals—including the child of two college professors, no less—saying that formal higher education may not be the best path to a fulfilling career, it is a sign that, finally, the institution of the university may be under serious threat. Middle class tuition-paying students who grow up to become middle class endowment donating alumni are the economic lifeblood of the university. If they begin to skip college in larger numbers, it would probably force some big changes.

    On the other hand, it’s worth thinking about who might get left out of this potential revolution. Folks in the field of educational technology tend to romanticize the notion that the university shall wither away (to borrow a phrase). But ed tech is full of autodidacts, much more so than the general population. I think we tend to assume too often that all people learn the way that we do. (Note that I am not accusing Kamenetz herself of this tendency; I haven’t seen any evidence of it in the bits of her work that I have seen so far.) If you talk to typical community college professors in the United States, they will tell you that their classrooms are not filled only with the idealized digital natives about whom we gush in admiration, wonder, and possibly envy. They see many students who have not been taught how to read, think critically, or even follow directions. Increasing numbers of them are autism spectrum, mentally challenged, or mentally ill. I’m talking about people who tend to subsist on the fringes of the economy. Many are marginally employable in good times and unemployable during serious economic downturns like the one that we are in now. In times like this, they return to the same education system that they dropped out of in the first place because it wasn’t able to meet their needs,  hoping desperately that it will make them employable again (which is one reason why your friends teaching in community colleges may look more stressed than ever this year). These students are not autodidacts, they are in the most dire need of a good education of anyone in our society, and it is not clear to me that the blossoming of open education for their more fortunate peers will do anything for them other than suck the much needed funds out of an already badly underfunded education system.

    Don’t get me wrong; I don’t think the DIY U vision is a bad one. To the contrary, there are many aspects of it that are good, necessary, and overdue. I just don’t think it’s a complete vision. If we are not careful, open education may actually end up reinforcing economic divides, all while we pat ourselves on the back for giving away “free education.” We are failing to educate millions of our citizens in this country, and billions around the world. It’s easy for those of us in the open education movement to see our work in opposition to proprietary technology companies, proprietary textbook companies, and the gatekeepers in the university system. But it’s not the “evil” LMS companies, or the “evil” textbook companies, or the “evil” administrators and bureaucrats that are failing these students. It is all of us. Education is an affirmative responsibility. We need to make educational resources freely available to those who need them, but we also need to do much more than that.

  • The Cost of the Blackboard Patent Suit (and Who Pays It)

    An e-Literate reader comments on my post about Blackboard owing Desire2Learn money:

    The amount [that Blackboard will have to pay Desire2Learn, including the original award plus interest] will probably be over $3.8M USD from my rough estimates which is higher than the expected writedown Blackboard took. This should result in additional expenses that will have to be recorded by BBBB.

    What’s also interesting is that Blackboard’s top execs made record bonuses before this writedown, at the same time they took away any salary increases and the 401K plans for the regular staff. I think that is the bigger story.

    Blackboard reported a $2.8 million net profit in 2008. The $3.3 million write down brings them to a $500,000 loss. An additional estimated write-down of another half a million would bring them to a $1 million loss for 2008. In the same year, Michael Chasen received $545,833 in salary, $663,039 in bonus, $1,833,560 in stock options, $80,466 in shares of restricted stock, and $14,911 in “other compensation”, for total compensation that was valued at $3,137,809. Matt Small received $370,833 in salary, $166,544 in bonus, $722,966 in stock options, $40,233 in shares of restricted stock, and $17,372 in “other compensation”, for a total compensation of $1,317,958. Coincidentally, if you add up the 2008 bonuses for the five Blackboard executives listed in the company’s proxy statement, the total is $1,074,127—almost exactly what the company’s final adjusted net loss for 2008 may turn out to be.

    Moving forward, Blackboard is apparently going to incur the additional expense of an attempt to appeal their failed patent suit to the Supreme Court, even though Matt Small is on record saying that it is highly unlikely they will succeed.

  • Blackboard Owes Desire2Learn Over Three Million Dollars

    IOU
    (cc) photo credit: zolierdos

    I’m a little late on this one, but late last week the U.S. Court of Appeals denied Blackboard’s rehearing petition. Their only recourse now would be to appeal to the United States Supreme Court and hope that the court miraculously decides to hear their case. As a result, Blackboard will have to return roughly $3.3 million to Desire2Learn, wiping out 100% of the company’s earnings for 2008.

    This does not mean that the litigation is over. Blackboard is still suing D2L in Canada for infringement of the original patent, and the company has been granted continuation patents (basically revised versions of the original patents) that they could assert.

  • Blackboard vs. Moodle: North Carolina Community Colleges Assessment

    A while back, I wrote a post giving advice to small schools about selecting a new LMS. That post turned out to be reasonably popular. Today somebody sent me a link to a study done by the North Carolina Community College System comparing Blackboard to Moodle and, in particular, talking about the experience of some small colleges that had migrated from the former to the latter. The results are pretty consistent with the advice I gave.

    Here are the highlights, along with their correlations to my earlier points: (more…)