Tipping Digital and A New Content Platform

Wiley and the Digital Tipping Point

In June John Wiley & Sons, Inc. reported their fourth quarter, and year end earnings. The report was interesting not only for what it says about Wiley, but also what it indicates about the digital course materials market. In October of last year Wiley acquired Deltak, an online learning management company, for $220 million. Wiley reported that Deltak contributed 28% of Wiley revenue for the fourth quarter. Wiley's move into online education management also serves to leverage Wiley Plus adoption. Wiley Plus is their online teaching and learning solution. Wiley Plus contributed 20% of Wiley’s revenue for the quarter. Together Deltak and Plus contributed 48%, exceeding Print Textbooks at 40%. And Print Textbooks is the only revenue stream in Wiley's education division that is in decline - down 26%. Here are some excerpts from the report:

• Fourth quarter revenue grew 25%, to $63 million. Excluding Deltak ($17 million), revenue fell 9% due to a decline in print textbook sales including for-profit institutional sales.
• Fiscal year digital revenue grew $51 million to 30% of revenue vs. 15% in the prior year mainly due to the addition of Deltak revenue, +26% growth in WileyPLUS, and increased ebook sales.
• Education revenue fell 9% due to a sharp decline in print textbooks, which more than offset growth in Wiley PLUS and other digital revenue.

Nook + Microsoft Apps + Pearson Content  = Interactive Platform for Digital Content

Meanwhile on August 20, Barnes and Noble reported their first quarter earnings. With Retail down 9.9%, and Nook down 39%, College is the lead performer for the quarter, up 2.4%.During the B&N Earnings conference call, there is reference to the "exploding demand" for reading devices in education in terms of the Nook, and the "strong future" B&N sees for their College division based on their investments in digital and ecommerce. Then B&N President and CEO MIchael Huseby says that together with B&N's "primary partner" Pearson, they will develop digital products and services that "will be delivered in the near term." 

As you know, last year Pearson took a %5 equity position with the Nook by investing $89.5 million. Earlier in 2012 Microsoft acquired 17.6% equity in Noon with their investment of $300 million. So that Nook is now tracking a 39% decline does not tell us the entire story of the Nook's future. For that we need to consider B&N' s strategic goals for the device. As well as what plans Pearson and Microsoft may have for the Nook.

"With this investment we have entered into a commercial agreement with NOOK Media that will allow our two companies to work closely together in order to create a more seamless and effective experience for students."    - Will Ethridge, CEO Pearson North America

Let's return to a January article in the Financial Times, which actually originated from dealReporter, a news service focused on providing event-driven intelligence for investors. Citing "two sources familiar with the matter", it says that B&N plans to launch an interactive platform with the goal of becoming a leading distributor of electronic textbooks. A person close to B&N says that the Pearson investment could be one of several publisher partnerships to come. According to an "industry banker", developing such a digital distribution platform could be a step toward providing the software applications which the education market "desperately" needs. Hence the Microsoft partnership.

Leasing Trend Acceleration?

What might a B&N-Microsoft-Pearson (and other pubs) platform mean in terms of the growing trend of leasing college stores? College is the lead performer for B&N in their first quarter with a "strong future" based on B&N's investments in digital and ecommerce. And they refer to their first quarter growth of fifteen new leased college stores with sales totaling $35 million. 

Have you noticed the new direction of the marketing campaigns from leasing companies? Where as in the past their messages were about being as popular as an on-campus pizza franchise, or their legacy of book retailing, their new campaigns promise the digital future and a reliable connection with the student market.


From Stacy Waymire, ICBA Executive Director