Startups Are About to Blow Up the Textbook

Wednesday, March 20, 2013

Call it a math lesson. Why would a school pay $80 for a textbook that may quickly become irrelevant, when it could pay around $5 or less?

A cadre of so-called open-education publishers is slowly beginning to gain the trust of schools and university systems by posing that question. Using free, open-source education materials, firms like CK-12 and Boundless are building digital textbooks and learning materials (mostly for math and science) that students and teachers can use and edit as they wish. While no single outfit yet dominates, the better such offerings get, the more traditional textbook giants like Pearson (PSO), Reed Elsevier (RUK), and Cengage ought to fear for their business models.

The U.S. spends more than $7 billion every year on K-12 textbooks, according to the FCC. And college textbook prices have increased by a whopping 812% since 1978, according to the American Enterprise Institute, surpassing inflation, college tuition increases -- even the much-discussed rise in medical expenses during that time period. College students report that they pay an average of $655 a year on books and supplies, according to a 2012 report from the National Association of College Stores.

Major budget constraints on school districts and public universities have given open-source materials a shot. Open-source outfits have begun wooing traditional textbook industry talent over to their cause. Former McGraw Hill Higher Education general manager of digital products Jay Chakrapani jumped to CK-12 in February to serve as president at the nonprofit open-education tech venture.

Chakrapani, 41, had spent five years at McGraw Hill, working to build up its digital offerings and bring the legacy textbook publisher into the future. "I can tell you that the aspirations of a McGraw Hill or a Pearson are in this direction," Chakrapani says. "I think the problem is that they are basically in the model of retrofitting existing content into these [new, digital] systems, and you can only go so far before it becomes garbage in, garbage out."

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