The Elhi Publishing Section** 1.Major Publishing Corporations 2.Textbooks 3.Supplementals 4.Testing 5.Key Elhi Market Drivers **All numbers rounded off in the Elhi and college presentation and may not add up to 100%.
Elhi Publishers U.S. $ Billions (B) or $ Millions (M) % Change Pearson$2.538 B$2.852 B12.4% Harcourt$1.640 B$1.636 B-0.2% McGraw-Hill$1.520 B$1.331 B-12.4 School Specialty$977.0 M$1.043 B6.8% Houghton Mifflin$926.0 M$900.0 M-2.8% Scholastic$416.0 M$413.0 M-0.7% Haights Cross$184.0 M$190.0 M3.3% Total$8.201 B$8.365 B2.0% Source: Corporate Annual Reports, Quarterly Reports, Quarterly Conference Calls. Totals include: textbooks, supplementals, testing, software, online, and various educational products and services.
Elhi Net Publishers Revenues: Textbooks and Supplementals ($ Billions) Totals% Ch. Textbooks % Ch. Supplementals % Ch. 2006$ $ $ $ % $ % $ % 2008$ % $ % $ % 2009$ % $ % $ % 2010 $ % $ % $ % 2011 $ % $ % $ % 2012 $ % $ % $ % % Ch.36.00% % % Source: Greco. All numbers are calculated and then rounded off and may not add up to 100%.
Elhi Textbooks and Supplementals: Market Share Subject Area Textbooks Supplementals Reading/English/Language Arts38.6%53.2% Mathematics29.8%10.5% Science10.5%4.0% Social Studies9.3%4.1% Total88.2%71.8% All Others11.8%28.2% Source: Greco. All others include: foreign languages, ESL, music, art, vocational, computers, technology, health, etc.
Elhi Testing ($ Billions) Totals % Change 2006$ $ % 2008$ % 2009$ % 2010$ % 2011$ % 2012$ % % Ch.63.11% Source: Greco. All totals rounded off and may not add up to 100%.
Key Elhi Market Drivers 1.The growth in enrollments 2.Funding sources 3.Per pupil expenditures 4.Adoption schedules 5.Other media competition to textbooks and supplementals 6.Technological changes 7.The used textbook market Source: Greco.
1.The Growth in Enrollments (In Thousands) Total Public SchoolsPrivate Schools ,10862,30810, ,55462,64710, ,92862,93110, ,33263,23511, ,77963,57411, ,25263,94811, ,82964,41111,418 % 3.72%3.38%5.72% Change Source: U.S. Department of Education, National Center for Education Statistics, Digest of Education Statistics (annual). Private schools refer to independent schools, religious schools, etc.
1.The Growth in Enrollment (In Thousands) Pre-K Thru 8Grades 9-Thru 12 Public PrivatePublic Private ,906 5,05515,042 1, ,990 5,07415,101 1, ,154 5,10515,013 1, ,350 5,13914,917 1, ,618 5,18114,797 1, ,907 5,22414,730 1, ,297 5,28014,641 1,429 % Ch. 4.10% 4.45%-2.67% -1.85% Source: U.S. Department of Education, National Center for Education Statistics, Digest of Education Statistics (annual).
1. The Growth in Enrollments U.S. Department of Education Projections: Pre-K-8 +5% % 23 states will have increases in K-12 enrollments: 2 states +15% 11 states between 5% and 15% 10 states less than 5% 28 states will have decreases in K-12 enrollments: 11 states more than 5% 16 states between 0.1% and 4.99% Regions: The West 13% The South +5% The Midwest -2% Northeast -5%
1. The Growth in Elhi Enrollments: Adoption States U.S. Department of Education Projections: Alabama-4.1%Arkansas-0.5% California+14.2%Florida+9.9% Georgia+8.7%Idaho+13.8% Indiana+2.5%Kentucky-6.5% Louisiana-3.3%Mississippi-4.8% Nevada+28.4%New Mexico+5.7% North Carolina+3.3%Oklahoma+0.3% Oregon+6.7%South Carolina-2.7% Tennessee+0.1%Texas+15.6% Utah+14.9%Virginia+2.1% West Virginia-9.8%
1. The Growth in Elhi Enrollments: Non-Adoption States U.S. Department of Education Projections: Alaska+7.7%Arizona+14.5% Colorado+10.9%Connecticut-0.6% Delaware-2.0%District of Columbia-2.8% Hawaii+5.0%Illinois+1.6% Iowa-6.3%Kansas+0.1% Maine-12.8%Maryland-1.0% Massachusetts-6.5%Michigan-3.2% Minnesota-2.5%Missouri-1.6% Montana-5.9%Nebraska-0.2% New Hampshire-7.1%New Jersey+3.5% New York-6.0%North Dakota-10.2% Ohio-4.7%Pennsylvania-7.7% Rhode Island-3.6%South Dakota-3.6% Vermont-15.2%Wisconsin-3.9% Washington+4.1%Wyoming+0.9%
2. Elhi Funding Sources ($ Millions) Federal StateLocalTotal % Ch. 2000$26,346 $183,986159,421369, % 2001$28,009 $198,310170,076396, % 2002$32,101 $206,139178,514416, % 2003$35,598 $212,965185,340433, % 2004$38,856 $217,140196,798452, % % Ch % 18.02%23.45%22.46% Source: U.S. Department of Education, National Center for Education Statistics, Digest of Education Statistics (annual).
2. Elhi Funding: Total Amount and Percent of G.D.P. Total Funding from All Sources % of G.D.P % % % % % % Source: U.S. Department of Education. Estimates are utilized by Education; and totals can vary depending on the data sources (including other sources) used by Education. Also: K-12 teachers spend an avg. of $475 of their own money annually for classroom materials and supplies. This could hover near the $2 billion mark.
2. Elhi Funding Sources: State Revenues State revenues in FY 2007 from personal, corporate income taxes, sales taxes,, etc. were 2.4% higher than original projections. corporate income taxes +10.9% personal income taxes +2.4% sales taxes +0.6% State tax revenues up in 27 states, on target in 14 states, and below targets in 9 states Governors recommended budgets projected to be 3.3% higher than estimated fiscal collections Source: National Association of State Budget Officers, The Fiscal Survey of the States.
2. Funding Sources: States Total state funding allocations: Medicaid 22% Elementary and secondary schools 21.5% Higher education 10.7% Transportation 8.7%Corrections 3.4% Public assistance 1.9%All other 31.6% Source: National Association of State Budget Officers.
2. Funding Sources: States State funding increases: YearNominal IncreasesReal Increases %3.1% %5.4% %5.3% %1.0% Source: National Association of State Budget Officers.
2. Elhi State Funding: Selected List of States ($ Millions) CT.$2,372$3,089$3,336 MASS. 4,064 5,334 5,659 NJ 9,093 9,80510,330 NY18,82819,88021,074 PA 8,994 9,59810,022 ILL. 8,512 8,960 9,077 IND. 4,915 5,239 5,356 MICH.12,44612,51512,923 OHIO 9,323 9,65010,444 Source: National Association of State Budget Directors.
2. Elhi State Funding: Selected List of States ($ Million) FL. $10,676 $11,489 $12,558 GA. 7,625 7,761 7,895 N.C. 7,226 7,697 7,542 VA. 4,762 5,417 5,730 TX.17,11817,70318,601 CA.36,87941,11246,076 WA. 6,136 6,243 7,104 Source: National Association of Budget Officers.
2. No Child Left Behind (NCLB) Purpose: to reflect student achievement test results and hold the school level educators accountable. Year Funding Amount % Change 2002$1.363 Billion $1.452 Billion6.53% 2004$1.508 Billion3.86% 2005 $1.583 Billion4.97% 2006 $1.758 Billion11.05% % Ch % Source: U.S. Department of Education
2. Elhi Funding Sources Average Elhi School Budget: Contractual Obligations:91% Faculty and Admin. Salaries72% Mandated Employee Benefits19% Variable Expenses: Purchased Services, etc.3% Educational Supplies, Textbooks, Supplementals, etc. Instructional Supplies5% Textbooks1% Source: U.S. Department of Education.
3. Elhi Per Pupil Expenditures Expenditure% Change $7, % $7, % $8, % $8, % $8, % % Ch.18.72% Source: U.S. Department of Education, National Center for Education Statistics, Digest of Education Statistics (annual).
3. Per Pupil Expenditures: Adoption States 2003 [21 States] Alabama$6,300Arkansas$6,482 California$7,552Florida$6,439 Georgia$7,774Idaho$6,081 Indiana$8,057Kentucky$6,661 Louisiana$6,922Mississippi$5,792 Nevada$6,092New Mexico$7,125 North Carolina$6,562Oklahoma$6,092 Oregon$7,491South Carolina$7,040 Tennessee$6,118Texas$7,136 Utah$4,838Virginia$7,822 West Virginia$8,319 Source: U.S. Department of Education.
3. Per Pupil Expenditures: Non-Adoption (Open) States 2003 [30 States] Alaska$9,870Arizona$6,282 Colorado$7,384Connecticut$11,057 Delaware$9,693District of Columbia$11,847 Hawaii$8,100Illinois$8,287 Iowa$7,584Kansas$7,454 Maine$9,344Maryland$9,153 Massachusetts$10,460Michigan$8,781 Minnesota$8,109Missouri$7,349 Montana$7,496Nebraska$8,074 New Hampshire$8,579New Jersey$12,568 New York$11,961North Dakota$6,870 Ohio$8,632Pennsylvania$8,997 Rhode Island$10,349South Dakota$6,547 Vermont$10,454Wisconsin$9,004 Washington$7,252Wyoming$8,985 Source: U.S. Department of Education. The District of Columbia is listed as a state.
4. State Adoption Schedules (Selected List) Elementary School Categories ReadingLiterature Indiana 2007Indiana 2008 Oregon 2007Alabama 2008 Tennessee 2007 Oklahoma 2008 West Virginia 2007 Florida 2008 Alabama 2008 Louisiana 2008 Oklahoma 2008 Idaho 2008 California 2009 Georgia 2009 New Mexico 2009 Source: U.S. Department of Education.
4. State Adoption Schedules: Selected List Elementary School Categories MathematicsScience California 2008California 2007 Mississippi 2008South Carolina 2007 South Carolina 2009Arkansas 2007 Kentucky 2009Georgia 2008 Idaho 2009Kentucky 2008 Tennessee 2009 Oregon 2009 Mississippi 2009 Source: U.S. Department of Education.
4. State Adoption Schedules: Selected List High School Categories ReadingMathematicsScience Indiana 2007Texas 2007Arkansas 2007 Tennessee 2007New Mexico 2007Georgia 2008 West Virginia 2007Georgia 2008Kentucky 2008 Florida 2008Mississippi 2008South Carolina 2008 Alabama 2008North Carolina 2009Tenn Louisiana 2008Kentucky 2009Oregon 2009 Oklahoma 2008Idaho 2009Mississippi 2009 Idaho 2008 New Mexico 2009 Source: U.S. Department of Education.
4. California Adoption List California 8 th Grade Science Short List of Publishers CPO Focus on Physical Science Glencoe/McGraw-Hill Holt, Rinehart and Winston Its About Time McDoudal, Littell & Company/Houghton Mifflin Pearson Prentice Hall Source: California State Department of Education.
4. Indiana Adoption List: High School Science Short List (Covering July 1, 2005 Through June 30, 2011) 1 st Year Biology1 st Year Chemistry Addison Wesley Longman*Addison Wesley LongmanGlencoe/McGraw-Hill AGS/GlobeHolt Rinehart & Winston* Holt Rinehart & Winston*Kendall/Hunt Kendall/HuntMcDougal Littell*Prentice Hall 1 st Year Physics Addison Wesley LongmanGlencoe/McGraw-Hill Holt Rinehart & WinstonIts About TimePrentice Hall Source: Indiana Department of Education. *Addison Wesley Longman is Pearson; Holt Rinehart & Winston is Harcourt; McDougal Little is Houghton Mifflin.
4. California Adoption: 8 th Grade Science Price Glencoe/McGraw-Hill (Selective Price List) Students textbook$68.47 Class Interact. CD-ROM $ CD-ROM$87.73 Super DVD $74.89 Lab manual$9.60 Instruction Folders $42.79 Teachers text. edition$92.29 Consumable Kit $ Teachers CD-ROM ed. $ Equip. Kit $1, Classroom resources$ Non-consumable kit $ Chapter resources$ Transparencies $51.36 Teachers lab manual$14.96 Reading essentials $31.01 Exam Suite CD-ROM$ Chapter outlines $46.00 Source: California State Department of Education
5. Elhi Content: Use of Non-Textbooks & Political Issues Other Materials Used in Elhi Classrooms Teacher created resourcesTrade books Reference booksInternet Videos/DVDsNewspapers MagazinesMaps Globes Political Issues Regarding Textbook Content Various special interest groupsReligious groups Ethnic groupsRacial groups Source: Greco
6. Technological Changes: Computer Use in Elhi Classrooms Public schools with computers (in thousands of computers): Number ofStudents per computerscomputer Elementary schools5,4125, Middle schools2,3782, High schools3,9484, Source: The U.S. Department of Commerce, The Statistical Abstract of the U.S
6. Technological Changes: Computers in the Classroom Percent of SchoolsPercent of ClassroomsWith Internet Access ElementaryHigh SchoolElementaryHigh School %65%8%8% %100%76%79% %100%92%91% %100%93%94% Source: U.S. Department of Education
6. Technological Changes: Computer Usage At Home 2003 AgesPercent Using At HomeComplete School Assignments %16.6% %42.7% %61.8% %68.1% Males 68.0%47.5% Females 69.3%50.9% HHI <$20, %36.2% $20,000-34, %38.2% $35,000-49, %50.5% $50,000-74, %57.6% >$75, %67.0% Source: U.S. Department of Education.
6. Technological Changes Some 9 th grade students in certain (mainly affluent) school districts receive a laptop from the Board of Education-high school that contains ALL of the textbooks, supplementals, study manuals, lab manuals, etc. The laptop is used in the classroom and at home. This allows publishers to sell electronic versions of educational materials to a school district, thereby reducing P & L expenditures for printing, paper, and binding, warehouse expenses, etc., and increasing margins.
6. Technological Changes Publishers are finally starting to see substantive results from their investments in educational technologies. With increased use of computers in the classroom and the home, publishers are getting closer to a transformation of a print world to a digital world, with the possibility of better margins. Pearson has the number 1 market share because of strong product lines and an early 2000 technology adopter strategy (about $3.3 billion in 2007 dollars). The goal was to create a blended learning approach to Elhi learning. The other publishers are trying to catch up to Pearson. U.S. Dept. of Ed. projection: between 700,000 and 800,000 classroom teachers are expected to retire in the next decade. So the educational technological revolution is likely to occur as these techno-literate people enter Elhi schools as teachers.
College Publishers U.S. $ Billions (B) or $Millions (M) % Change Pearson$1.527 B$1.558 B2.0% Thomson$1.200 B$1.240 B3.3% McGraw-Hill$570.0 M$570.0 M0.0% Houghton-Mifflin$228.0 M$225.0 M-1.3% John Wiley$203.0 M$215.0 M5.9% Total$3.728 B$3.808 B2.2% Source: Corporate Annual Reports, Quarterly Reports, Quarterly Conference Calls. Totals include textbooks, electronic products, etc.
College Market Drivers 1. Faculty adoptions 2. Total student enrollments 3. Student enrollments in specific academic fields 4. Funding sources, economic conditions & student tuition 5. Book prices: suggested retail prices 6. Return rates 7. The used book market 8. Electronic distribution of content 9. Alternatives to textbooks: cases; ERES; Blackboard; custom course packs; etc. 10. Backlash: CALPIRG; Congress; states; newspapers; etc. 11. Exports and imports
1. Faculty Adoptions Faculty members individually (or in some instances a department) will select a textbook based on: 1. Support and supplements (Power Points; computer disks; publishers online services; etc) 2. Comprehensive content (depth) in textbook 3. Textbook content up to date 4. Price 5. Textbook blends with professors teaching style or orientation 6. Opinion (or use) of a previous edition(s) of the textbook 7. Reputation of the textbooks author(s) Source: Greco; interviews/discussions with faculty members in various disciplines.
2. College Student Enrollments PublicPrivateTotal% Change ,2834,06817, ,5184,14617, ,7524,22317, ,0344,31618, ,2514,38918, ,3804,43618, ,4944,47818, ,6124,52019, Source: U.S. Department of Education.
2. College Student Enrollment Projections: Ages 18-24:+16%Ages +35:+5% Men:+12%Women:+21% Full-time:+20%Part-time:+14% Undergrads:+16%Grad Students:+21% 1 st Professional:+32% Public:+17%Private:+19% Source: U.S. Department of Education.
3. Student Enrollments In Ten Largest Academic Majors 1. Business Administration & Accounting 2. Social Sciences & History 3. Education 4. Psychology 5. Engineering 6. Visual & Performing Arts 7. Health Professions 8. Communications 9. Biology 10. Computer & information Science Source: U.S. Department of Education
3. Student Enrollment: Top Selling College Textbook Categories Business Administration & Accounting:15% Mathematics:11% Computer Science:8% English:7% Psychology:5% Biology:5% Sociology:3% Education:3% History:3% Other:40% Source: Greco
4. Funding Sources: States: 47 states increased funding 1 state no change in funding 2 states cut spending U.S. Government: 2003:+28.45% 2004:-2.64% Source: U.S. Department of Education
5. Book Prices: College Bookstores 2006 Major College Bookstore Management Companies Follett:729 college stores Barnes & Noble:550 college stores** Nebraska/NBC:120 college stores Major Used Book Distributors FollettBarnes & Noble/MBS** Source: National Association of College Stores; ** Separate from the chain bookstore operations.
5. Book Prices: College Bookstores Gross Margins As % of Net Sales New textbooks25% (standard discount) Custom materials23% Used textbooks35% Insignia products40-50% Store fee to college13.3% of sales (average; varies) Source: National Association of College Stores;
5. Book Prices: P & L #1* Basic Assumptions Print run (litho):275,000 copies Free copies:4,000 Gross sales:271,000 Returns:62,330 (23%) Never shipped:4,010 (1.48%) Sell through:204,660 (75.52%) SRP:$ Avg. Discount$25.00/copy (25%) Publishers net income$75.00/copy Royalty:10% ($7.50/copy sold) Source: Greco. *Assumes: P & L for a new textbook in its first edition; and a standard three year revision cycle; domestic and export sales.
5. Book Prices: P & L #2 Basic Assumptions Foreign rights:$100,000 Author:$50,000 (50% share) Publisher:$50,000 (50% share) Unit PPB:$15.94/copy (U.S. printer) Plant:$50,000 (editorial, art, design, etc.) Authors advance: $500,000 Marketing:$400,000 Source: Greco
5. Book Prices: P & L #3 Gross sales:$20,325,000 each) Returns/never shipped:$4,975,500 $75 each) Net sales:$15,349,500 each) Expenses PPB:$4,383,500 each Plant:$50,000 Earned royalty:$1,534,950 (net Marketing$400,000 Inventory write-off$1,057,459 each) Total costs:$7,425,909 Source: Greco; all numbers rounded off.
5. Book Prices: P & L #4 Net sales$15,349,500 Other income$ 50,000 (foreign rights) Total income$15,399,500 Total costs-$7,425,909 Gross margin:$7,973,591 (total income minus total costs) Overhead:-$4,604,850 (30% of net sales) Total profit:$3,368,741 (gross margin minus overhead) Total profit % net sales:21.95% Source: Greco; all numbers rounded off.
6. College Textbook Return Rates: National Averages For Hardbound and Paperbound Books Source: Book Industry Study Group.
7. College Textbooks: Used Books Revenues%Units% ($ Billions)Change(Millions) Change 2005$ $ % $ % $ % $ % $ % $ % $ % Source: Greco. Revenues from college bookstores and online Shopbots.
7. Used Textbooks: New vs. Used Prices N. Gregory Mankiw. Principles of Economics (Cengage Learning*) 4 th ed.Published 2/16/06 List price:$ (September 2006) $ (September 2007): +8.4% Used price:$36.40 (inc. S/H) 3 rd ed. List price:$ (Published March 2003) Used price:$10.44 (inc. S/H) 2 nd ed. List price: $ (Published June 2000) Used price:$4.24 (inc. S/H) Source: Greco; survey of Shopbot prices. *Cengage Learning formerly Thomson Learning.
8. Electronic Distribution of Textbook Content Numerous texts available online. So far small number of sales. Grecos student focus groups (225 students): Are you willing to buy and read electronic versions of a textbook? Yes. 78% female undergrads81.4% male undergrads 60% female grad students66% male grad students Options: E-books (on an E-book reader) Direct sale by publisher or from publisher to distributor to students laptop/desk computer Chapter sales by an aggregator: I-Tunes business model POD
9. Alternatives to College Textbooks Case Studies (HBS) ERES Blackboard Custom Packs Articles Hand-outs/photo copies Lectures
10. Backlash Against Publishers CALPIRG:Rip-Off 101 (1 st ed.)Rip-Off 101 (2 nd ed.) Congressman Wu (OR): National and Congressional hearings on the price of textbooks Turn the Page: Making College Textbooks More Affordable (A Report of the Advisory Committee on Student Financial Assistance; U.S. House of Representatives) College math professors: petition signed by hundreds of professors sent to publishers protesting the cost of textbooks and urging professors to use older editions of a text rather than a new version.
10. Backlash Against College Publishers: States CA: The College Affordability Act, SB 832 Requires publishers to provide faculty a price list of all books in a subject area, an estimate of how long the publisher intends to keep the text(s) on the market, and a list of substantive changes the newest edition contains. ILL: Bill require publishers to be more transparent about the cost of materials when marketing them to professors. ARIZ Board of Regents: Would create book buyback incentives, encourage the use of non-print materials and other alternatives to textbooks, and establish textbook-rental programs at each university campus. Source: Greco.
10. Backlash Against Publishers MASS: Bill requires publishers to provide faculty with a list of the companys products, wholesale prices, and estimated length of time the publisher intends to keep the product on the market…limits companies from bundling books. CT: Bill limits bundling The complete list of states considering textbook legislation (for state funded colleges) is 20 pages long. Source: Greco
10. Backlash Against Publishers Newspapers: The New York Times Help, By The Book (5/1/07) What Should A Textbook Cost? Do The Math (5/5/07) Course Requirement: Extortion (8/12/07) Knowledge Is Priceless But Textbooks Are Not (8/30/07) San Jose Mercury News Backers Hope Governor Signs Textbook-Affordability Bill (9/21/07) The [Charlotte, NC] News & Observer Sticker Shock At Campus Bookstore
11. Exports and Imports ExportsImports $ MillionMillions $ MillionsMillionsUnits 2003$355,0714,034,898$197,1751,560, $402,0574,233,249$217,4131,194, $413,4085,225,705$232,5181,615, $425,9513,196,269$243, , $191,9421,181,497$147, ,000 YTD Source: U.S. Department of Commerce, International Trade Administration