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And They’re off!! Who will Lead the First Lap of the Educational Publishing Race?

The Contenders

By now you have probably read the headlines and commentary about the McGraw-Hill and Cengage merger announced May 1st, 2019. It’s a big deal. The newly named McGraw Hill will have revenue of over $3B and over 40,000 titles. Each company brings their own management teams, business lines and models and adaptive learning platforms to the merger - creating opportunity and complexity.

This is a bold move following the transformative business model transition to Cengage’s “Unlimited” program. The bet with Cengage Unlimited is that where there is an adoption of one of their textbooks, for significantly less than the cost of another textbook the student can have access to their entire digital content library available. In other words, where a Cengage product has been adopted in a particular course, students pay a little bit more and have access to a library of more than 22,000 products at a cost of $119.99 for 4 months or $179.99 for 1-year. By combining Cengage Unlimited with McGraw-Hill’s Inclusive Access program, affordable access to digital content would expand significantly.

The Dark Horse

John Wiley & Sons has made an alternative move for a lot less money, with a much lower integration risk. Are they the dark horse that will come out the winner in this educational publishing race? (Pardon the reference, but it is Triple Crown season).

On May 6, 2019, Wiley announced its intention to acquire Knewton. This acquisition brings in a new adaptive platform, bolsters Wiley’s courseware business, and expands their commitment to OER (open educational resources). According to Inside Higher Ed, both Wiley and Knewton have been working with OER provider OpenStax. Why? Affordability. Knewton’s Alta is less than $50 per course or $9.95 per month. Today it focuses mostly on intro-level courses, starting with Math, but it will likely expand across Gen Ed as part of the acquisition.

The Race

This is the first lap in what we expect to be a period of trading assets and further consolidation. Perhaps affordability is written across the finish line in this educational publishing race. McGraw, Cengage, Wiley and Knewton all tout affordability as the overarching theme behind their respective merger and acquisition. Education is changing and there is a tension between cost and quality. What should these publishers choose as their priority ?

  • Access to affordable course materials?

  • Technology platforms, often leveraging AI, to support personalization of learning?

  • Developing courseware that moves learning online, integrating content and assessment?

And The Winner Is…..

According to the Chronicle of Higher Ed, “Unlike textbook publishers such as Pearson (the biggest) and Wiley, who have diversified into services like managing online programs, Cengage, which is now No. 2, and McGraw-Hill, No. 3, have stayed focused on the textbook and courseware market and moved toward digital products and adaptive-learning tools, such as the Aleks individualized-tutoring system.”

McGraw-Hill and Cengage each have great talent, with people who are smart, decisive and innovative and these companies have complementary offerings. However, there are questions as they merge their organizations:

  • Who will stay and lead business units?

  • How will they consolidate operations (sources say they call for $300M in cost reductions)?

  • How are they going to unite their courseware and adaptive platforms (MindTap, Aleks, etc.)?

  • What business lines will they divest?

  • How will they combine their business models?

These and other things will take time, and will be a complicated, political, distracting process.

Wiley’s acquisition of Knewton, arguably for much less money, may transform the perception and reality of the Wiley business quicker and with lower risk. Why? The amount Wiley will spend on Knewton pales in comparison to the McGraw Hill merger. Wiley’s is a technology buy that brings capability rather than different cultures, management teams and competing product lines together.

For this comparably small sum, Wiley expands their catalog of OER content (affordability-check), brings in an adaptive learning system (personalized learning-check), and increases their courseware offerings (online learning-check). The faster player may indeed have a near-term advantage in this race.

The Finish Line

The educational publishing industry was established to support educators, creating high quality learning materials in the form of textbooks. The market is undergoing a rapid, painful process of consolidation and change with OER front and center, being referred to by some as the panacea.

The goal is for students to have a chance to achieve the best learning outcomes. Digitization and courseware open up the potential to support personalizing of learning. In the end the true question is - will the students win? This will be the topic of a future blog post.

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