Last week, the educational publisher Pearson announced the release of a new app-based service that will allow college students to buy online access to its entire 1,500-title catalog of college textbooks, plus an array of value-added services such as online annotation, flashcards, quizzes, and real-time online support, across multiple devices, for $14.99 per month. (Students can also rent individual e-textbooks for $9.99 each, per month.) Called Pearson+, this product will be a direct competitor to Cengage Unlimited, which was introduced in fall of 2018 and offers students online access to a similar array of textbooks, resources, and support services at similar pricing — with the added option of borrowing a limited number of print copies of textbooks at no additional charge beyond shipping and handling. Now, calling these products “direct competitors” is a bit misleading, as each offers unique educational content and is therefore operating in a market of complements rather than a market of substitutes; in other words, if your professor assigns you a Pearson textbook, you won’t be able to substitute a different textbook on the same topic for that one, and you don’t have the option of buying the Pearson text from any provider other than Pearson, all of which complicates the concept of “competition” considerably. But that’s a topic for a different post.
Anyway. What might be the prospects for this product?
The central question for any new product or service is, “what problem does this offering promise to solve for the consumer?” In the case of Pearson+, one obvious answer to that question is “high textbook costs” — though it is interesting to note that according to data reported by research analyst Brittany Conley (via the Association of American Publishers), the amount of money college students spend on textbooks and other course materials has been falling sharply in recent years, from an average of $691 per year in 2015 to $413 in 2020 (figure 1). Market research group Student Monitor has reported similar findings.
Fig. 1 — Decline in U.S. textbook spending, 2008-2020 (Source: Association of American Publishers)
To the degree that these numbers are accurate, it suggests that the value proposition for products like Cengage Unlimited and Pearson+ may be eroding. After all, if I’m only spending $413 per year on textbooks now, how motivated will I be to get my Cengage and Pearson textbooks online for only a few dollars less — when I’m still going to have to buy my non-Cengage and non-Pearson materials separately at the usual prices? On the other hand, if spending is going down because students are increasingly unable to afford all the textbooks they need, then this would suggest that demand for services like Pearson+ and Cengage Unlimited could be growing.
This brings us to another question one should always ask about a new product: “how much value does it add?” And in response to this question, we can confidently anticipate that Pearson and Cengage will point to the rich array of supporting services and features included in their online products. Pearson+ and Cengage Unlimited are much more than just a bucket of textbooks, they’ll say; the subscription also includes features like online annotation, portability across devices, quizzes and flashcards, real-time online support, etc.
But as with any value proposition, this just begs another question: are you sure the features you’re proposing represent real value to your customers?
If this model does succeed, I suspect it will be specifically because subscribing to the service saves students money on the particular textbooks they need for their classes.
Frankly, I’m not sure that students are going to be attracted in significant numbers by the value-adds of online textbooks — I’m pretty sure the ability to annotate or highlight the books online, or take customized quizzes, or listen to a “non-robotic” voice read the text to them matters much less to them than cost savings. (I could be wrong about that, of course; when I was a college student we were listening to Erasure cassettes on our Walkmans and looking up journal citations in print indexes, and we liked it that way.) Nor, frankly, am I confident that the richness and breadth of the content itself will be as much of a draw as Pearson’s marketing team seems to think it will be. After all, college and university students already have access to far richer and broader collections of online resources than they could ever exhaust, and they’ve already bought access to those with their tuition and fees. Paying a separate fee for access to 1,495 textbooks they don’t need is probably not going to be a huge draw in itself. If this model does succeed, I suspect it will be because subscribing to the service saves students money on the specific textbooks they need for their classes.
But that value proposition alone could be quite compelling in many cases. Here’s a thought experiment: put yourself in the shoes of an incoming college freshman. Imagine that three of your first-semester classes are introductory courses in human anatomy, chemistry, and calculus, and that these Pearson titles are the required texts for those three courses:
- Human Anatomy & Physiology (11th edition) — $160 from Amazon (used)
- Chemistry: The Central Science (14th edition) — $100 from Amazon (used)
- University Calculus: Early Transcendentals (4th edition) — $129 from Amazon (used)
You could buy used physical copies of these three books for $389. Or, for $300, you could buy online access to them from September through May via Pearson+. Or, for $135 — less than half the price of online access to those three titles, and about a third the price of buying used print copies — you could subscribe to Pearson’s complete e-textbook service during that same period.
Now, those numbers may sound high in light of the research I cited above. I’m now putting my third child through college, and I can attest that students buy fewer textbooks — either new or used, in print or digital formats — than they used to. Every semester my son and I sit down and go through the ISBNs of the required texts for his classes, and we investigate the cheapest access option for each one, sometimes renting a printed copy, sometimes buying an e-copy, sometimes renting an e-copy, etc., depending on whether my son expects to want permanent ownership of the content. (He’s a physics major, so we actually end up spending quite a bit more than $413 per year on his course materials.) If only one of his textbooks is from Pearson, then a Pearson+ subscription would not likely be worth it, despite all the additional bells and whistles it offers. If, say, four of his six textbooks are Pearson titles, then a subscription becomes much more appealing. And here it’s worth bearing in mind that I’m a relatively well-off college parent; if our family were less fortunate, the prospect of saving several hundred dollars per school year would be even more of a decision driver.
What this all means is that the market dynamics of the landscape that services like Pearson+ and Cengage Unlimited have to navigate are complicated at best.
In a recent interview with Inside Higher Education, Pearson CEO Andy Bird expresses confidence that “many will buy” Pearson+. After all, he says, “we reach 10 million students a year” with Pearson products already.
But this logic should give pause to anyone with a stake in the success of Pearson+. While I have no reason to doubt that Pearson’s current products “reach 10 million students a year,” it would be unwise to infer from this fact that students feel anything approaching brand loyalty to Pearson, or any other textbook publisher. Students don’t select their own textbooks; they don’t say to themselves, “Let’s see, I’m taking an intermediate biology class — should I buy a McGraw-Hill text or a Pearson one?” Their class texts are assigned to them. I would be shocked to learn that more than a handful of students in the US could even tell you, without looking, who publishes any of the textbooks they are using. In other words, no student is sitting in her room right now asking herself, “How can I get access to more Pearson content?” I also doubt that many, if any, care much about access to online flash cards or the ability to highlight their online textbooks or ask questions of their peers online through a publisher’s platform. (It would be interesting to see some solid research on that question, though.) What I know for certain is that many are wondering how they will pay for college — and some are wondering more specifically how they’ll afford access to the course materials assigned by their professors. Now, the data do suggest that fewer and fewer are wondering that every year. If that’s the case, then the prospects for products like Pearson+ and Cengage Unlimited are likely dimming.
It would be unwise to assume that students feel anything like “brand loyalty” towards Pearson, or any other textbook publisher.
But this suggests another question: Cengage Unlimited rolled out for fall semester 2018, and has been in the marketplace for three academic years now — how is it doing? While Cengage hasn’t publicly provided detailed performance data for this product, it has made public statements at various points. In February 2019 it claimed to have sold one million subscriptions to college students since its rollout in summer 2018. In a conference call with creditors in November 2020, Cengage apparently presented evidence of further strong uptake for Unlimited (though the specific numbers were not made public), and last month it claimed in a press release that “more than 3.3 million college students have subscribed to Cengage Unlimited” — though how many of those have been continuous subscribers since rollout, and what percentage of that 3.3. million represents unique students (as opposed to the same students resubscribing), remains unclear. If we assume that “3.3. million students” represents unique headcount, that tells us that Cengage is adding 850,000 new unique users on average each school year. (For context, there were roughly 20 million students enrolled in US colleges in fall 2020.)
So: students are spending less and less on textbooks and course materials each year, but Cengage Unlimited seems to be achieving reasonably strong growth for its online textbook package each year. This suggests that Pearson (which currently enjoys a roughly 40% share of the textbook market by revenue) has good reason to expect some degree of success with Pearson+. Time will tell, and it will be very interesting to watch. Certainly my son and I will be keeping track of how many Pearson titles he’s assigned during this coming academic year, and who knows — maybe he’ll end up subscribing to Pearson+. It all depends on how the cost/benefit lines up.