Crash and learn: upheaval in the college and university market makes publishers rethink strategies

Abstract

This sort of story has been replayed frequently in recent months. Earlier in the year, Oxford University Press bought McClelland & Stewart's college division (the list includes Greg Kealey's Canadian Social History series and popular textbooks such as Canada's First Nations, by Olive Dickason), and took over the agency for the Mayfield line, which includes anthropology, politics, and literature titles. Addison-Wesley, meanwhile, rounded out its offerings by acquiring college lines from Harper-Collins and Copp Clark Longman (Addison-Wesley and Copp Clark both belong to Pearson PLC, the U.K. conglomerate that owns Penguin). And ITP Nelson assumed sales and marketing responsibility for Houghton Mifflin's college division, which includes D.C. Heath Canada -- a deal that's a component of a wholesale shift at Nelson toward the publication of electronic information as well as books.

This spate of mergers is hitting the industry in two ways: on the employment side, the college sector has seen as many as 200 jobs disappear, the side effect of closings and downsizings at HarperCollins, Copp Clark, D.C. Heath, Times Mirror, M&S, and Houghton Mifflin. "I've been in the industry for 14 years now, and I've never seen anything like this," says [David Collinge], who did find a position at Prentice Hall, as manager of media acquisitions. Publishers like [Diane Wood] say the layoffs will mean a talent drain for college publishers. "You'll have lots of people consulting or spinning off related businesses, but I think there's still a big loss to the industry as a whole."

Consequently, over the past two years, the industry has been trying to determine what prompts a student to purchase a textbook, elementary though that question may seem. Interestingly, publishers for the first time are asking students, as well as instructors, for the answer. John Wiley & Sons recently conducted focus groups with undergraduates. Last spring, the Canadian Publishers Council surveyed about 1,000 students (as well as 700 faculty members) on this topic. And at Addison-Wesley, some textbooks -- like Principles of Economics by Michael Parkin and Robin Bade -- come with questionnaires asking students to itemize the book's positive and negative features, and comment on whether it had been used effectively. As incentive to reply, students can win books or cash if they respond, says Addison-Wesley's John More.

PURCHASING TEXTBOOKS is an unsettling experience for most university and college students, one marked by long line-ups, daunting reading lists, 800-page introductory tomes -- and an enormous bill. Most first year students may never have bought a textbook while in high school, notes John Fleming, president of business and science publishing for Prentice Hall. "Suddenly there's the shock of having to buy a $70 accounting text. [They] say, 'What's wrong with this picture?'"

But while acquiring textbooks is disorienting at the best of times, this fall proved to be an especially confusing season, say college publishers and campus booksellers. Government cutbacks have led to an unprecedented number of course cancellations. Moreover, across the country, hundreds of professors and instructors this spring took advantage of early retirement packages offered by administrators struggling to trim budgets.

With schools scrambling to find replacement teachers, many textbook adoption decisions were made very late. And that meant college publishers had to scramble to fill orders coming in at the end of August. Oxford University Press, for instance, had to fly in stock from England at its own expense. Firms also struggled with the opposite dilemma: "We're seeing returns at unprecedented levels in August and September," says Diane Wood, president of John Wiley & Sons. "The patterns are completely out of whack. The cycle is later and shorter."

We've never seen a fall like this," agrees Chris Tabor, general manager of the Queens University campus bookstore. Among his biggest headaches in September: a meltdown at Canbook (see p. 1) that delayed the delivery of scores of titles, ranging from Penguin editions of Russian literature classics to a popular first year political science text.

My sympathy goes out to the text managers and the floor staff because they're the lightning rods for all this. Students come in, they're looking for their books. They want to get ahead, but the books aren't there. It's the front line staff who are feeling the venting of that frustration."

The upheaval at campus bookstores is merely a symptom of the massive changes sweeping through college publishing. Besides the repercussions from government cuts, the sector this year endured a remarkable number of corporate consolidations, as high-level takeovers led to the sale or closure of several Canadian college operations.

The surviving firms have to fight harder to maintain their markets in a sales environment where enrollments are declining and institutions are streamlining programs to reduce duplication.

Publishers continue to experiment with the delivery of teaching materials in electronic format, and struggle to compete with a used textbook industry that has become considerably more aggressive. Amidst this shake-out, college publishers are starting to tackle a question they have come to regard as fundamental to the health of their industry: What ultimately makes a textbook valuable to the student who purchases it? Says John More, vice-president and director of Addison-Wesley's college division, "I do believe this is the core challenge for the industry in the next couple of years."

It was last January when takeover rumours began circulating around the Markham, Ontario offices of Times Mirror Professional Publishing. One held that the owners of the firm's St. Louis-based parent -- formerly Mosby Yearbook -- were making a bid for McGraw-Hill, the business information giant. Two months later, the company officials put the rumours to rest at what was billed as a "long-range planning meeting." McGraw-Hill, they announced, had acquired Times Mirror, or at least the firm's U.S. operations.

As a result of the deal, Canada's McGraw-Hill Ryerson is absorbing some of Times Mirror's Canadian editorial operation, which produced about eight to 10 titles a year under its Irwin imprint, a well known line of business books. Times Mirror's sales and marketing division will also lose the Mosby line of health science titles, which will now be represented by Harcourt Brace. Overall, almost 60 Canadian jobs were affected by the deal. "We ended up being a casualty of that whole transaction," says David Collinge, the former sales and marketing director for Times Mirror's Canadian college division.

Given McGraw-Hill's strength in business publishing, there will be some overlap in the publishing programs, although Ron Munro, McGraw-Hill Ryerson's vice-president and general manager, says there isn't a significant amount of duplication. Nevertheless, MHR is proceeding with a full-scale restructuring this fall. Munro declined to provide details, except to say that the merger presents an opportune time to overhaul operations. "Everybody needs to examine how they're doing business these days."

This sort of story has been replayed frequently in recent months. Earlier in the year, Oxford University Press bought McClelland & Stewart's college division (the list includes Greg Kealey's Canadian Social History series and popular textbooks such as Canada's First Nations, by Olive Dickason), and took over the agency for the Mayfield line, which includes anthropology, politics, and literature titles. Addison-Wesley, meanwhile, rounded out its offerings by acquiring college lines from Harper-Collins and Copp Clark Longman (Addison-Wesley and Copp Clark both belong to Pearson PLC, the U.K. conglomerate that owns Penguin). And ITP Nelson assumed sales and marketing responsibility for Houghton Mifflin's college division, which includes D.C. Heath Canada -- a deal that's a component of a wholesale shift at Nelson toward the publication of electronic information as well as books.

This spate of mergers is hitting the industry in two ways: on the employment side, the college sector has seen as many as 200 jobs disappear, the side effect of closings and downsizings at HarperCollins, Copp Clark, D.C. Heath, Times Mirror, M&S, and Houghton Mifflin. "I've been in the industry for 14 years now, and I've never seen anything like this," says Collinge, who did find a position at Prentice Hall, as manager of media acquisitions. Publishers like Diane Wood say the layoffs will mean a talent drain for college publishers. "You'll have lots of people consulting or spinning off related businesses, but I think there's still a big loss to the industry as a whole."

From a corporate organization perspective, the domestic college sector is now comprised of just seven large players, only one of which is Canadian-owned (Nelson). It's too early to say how the consolidation will affect publishers' lists, but industry executives are already making some predictions. Publishers like Diane Wood worry about a reduction in choice, not just for students and teachers, but also for authors. "The fewer competitors there are, the fewer options everyone has."

Other industry executives disagree, saying the consolidation will simply weed out marginal textbooks, or force publishers to make tough decisions about which areas they want to compete in. "It may reduce the number of offerings," says Prentice Hall's Collinge, "but it may improve the quality."

Oxford's college division director Ric Kitowski sketches out another scenario: with the departure of the $10-million-a-year firms, giants in the $25-million-and-up range may increasingly focus their considerable sales and marketing resources on the lucrative first and second year course markets, where some publishers will deploy dozens of reps to sell expensive introductory textbooks to tens or even hundreds of thousands of students.

For comparatively smaller houses like Oxford, this dynamic could eventually translate into more sales opportunities in the upper year or graduate program markers. "My instinct tells me that the big companies won't be interested in the third or fourth year texts," says Kitowski.

STUDENT GIVEAWAYS

In the last several years, Prentice Hall, Canada's largest educational publisher, has done a brisk trade in the booming computer book market: there are the Idiot's guide trade titles, the Que College series, aimed at the career college market, and the amazingly popular Canadian Internet Handbook by Jim Carroll and Rick Broadhead. So it's not surprising that the company is turning to the internet to help sell its intro astronomy and chemistry textbooks.

The company isn't actually selling these titles on the internet. Rather, it has published scaled-down internet guides, which provide listings of web sites and other network locations geared to both disciplines. Free, the guides are shrink-wrapped with the textbooks, and are intended to complement first year courses.

Prentice Hall's John Fleming explains that these internet guides are designed to help those first year textbooks compete for student dollars against used editions that sell for 25% off the new price. He also notes that such guides will only be perceived to have an added value if the course instructor is willing to encourage students to use the internet as a resource.

Giveaways are not new in the college sector: publishers have always tried to influence instructors by distributing overhead slides, "desk copies" of the text, teaching aids, and, more recently, CD-ROMs. But in recent years, college publishers have started trying out the same techniques on students, such as including coupons for clothing chains like Roots with the purchase of the text. Says Fleming, "It's up to the publisher to come up with all the trinkets that will begin to influence the decision, 'who getsthe adoption?'"

The growing focus on students, the ultimate consumers, is noteworthy. For at least the past decade, college publishers have had to compete against used books, illegal photocopying, and customized study packs (a collection of copied materials compiled by the instructor, and bound on campus).

Since the recession, however, student budgets have become increasingly taxed by tuition increases and high youth unemployment. And that means undergrads are increasingly choosing not to buy, especially if they've heard on the grapevine that the professor doesn't bother referring to the text. "They're smart, these kids," says Wood. "They're savvy consumers."

Consequently, over the past two years, the industry has been trying to determine what prompts a student to purchase a textbook, elementary though that question may seem. Interestingly, publishers for the first time are asking students, as well as instructors, for the answer. John Wiley & Sons recently conducted focus groups with undergraduates. Last spring, the Canadian Publishers Council surveyed about 1,000 students (as well as 700 faculty members) on this topic. And at Addison-Wesley, some textbooks -- like Principles of Economics by Michael Parkin and Robin Bade -- come with questionnaires asking students to itemize the book's positive and negative features, and comment on whether it had been used effectively. As incentive to reply, students can win books or cash if they respond, says Addison-Wesley's John More.

All this market research has produced one clear answer: "It's not a question of price, but a question of value, and value is tied directly to usage," explains Chris Tabor of the Queen's bookstore. Last year, the store's board -- which includes student representatives -- held a strategic planning session on this topic, and the results dovetailed with other studies and surveys. "A $100 textbook isn't a problem if it gets used," Tabor says. "That, by far, is the first consideration."

This observation, which applies beyond the Canadian market, now informs publishers' sales and marketing strategies, such as Prentice Hall's decision to include the internet guides with its science texts -- although some publishers don't subscribe to the student freebie approach. Mainly, the response to the so-called value issue is to drive the message home to professors. The CPC even published the results of its survey in a brochure that has been distributed by sales raps to instructors and teaching staff across the country.

Front line observers like Chris Tabor feel that professors are beginning to have a better understanding of the issue. At the same time, however, college publishers operating in Canada now face an additional challenge in conveying this message because of the unprecedented turnover among the teaching staff.

In the first two quarters of this year," says Oxford's Kitowski, "we were dealing with a completely different market base than a year previous." Diane Wood notes that at community colleges, where instructors tend to be hired on contract, an increase in the number of off-campus, part-time teaching staff has made it even more difficult for sales reps to track down the people making decisions about textbook adoptions.

ABRUPT TRANSITION

In other words, sales raps are having to establish new relationships with instructors, who in turn may want to recommend a completely new set of texts for a particular course. The transition, which was both abrupt and occurred very late in the college publishing cycle, resulted in an extraordinary number of delayed orders this fall. Says Kitowski, "It's hard to sell to people who are distracted and understandably so." That observation also seems to apply to students this year. With recommended texts not in stock, sales were off as students scrambled to find alternatives by the end of September.

Chris Tabor points to a more long-term dynamic that may have a growing impact on future textbook sales, especially given the confusion this season. In the past five years, he says, professors have begun to take availability into account when they make decisions about recommended texts. "Publishers' service levels are now becoming an adoption issue and professors are coming to the bookstore to learn about these issues."

College publishers now look on the events of the past few months as a harbinger of things to come in this ever more volatile industry. This fall, in fact, was something of a watershed, the moment when a number of major convulsions, some the result of public sector decisions, others caused by market and corporate trends in the private sector, all seemed to strike at once.

For the next several years, college publishers will have to confront this fall-out and other significant trends, including the marketing of new media (see below), changes in author signing strategies, sluggish sales, the fall-out from the arrival of leased textbook stores, an ongoing reduction in textbook lifespan, and the introduction of direct-to-student sales via 800-numbers or the internet.

I don't think we're going to see anything of this magnitude again," says Prentice Hall's John Fleming, reflecting on the year past, "but [the effects] will continue for a while."