Specialist
Former Director at Cengage Learning Holdings II Inc
Agenda
- Higher education publishing operating environment, focusing on digital shift
- Expected market share shifts between Cengage-McGraw-Hill, Pearson (LON: PSON) and open educational resources (OERs)
- Cengage Unlimited growth prospects relative to inclusive access model
- Outlook for 2019-20 and beyond – future technology and content investments
Questions
1.
What are your thoughts on the higher education publishing industry, and what key trends or drivers should investors pay attention to?
2.
You said the TAM is shrinking, but do you think any companies are better able to either grapple with international market growth or shore up sell-through rates?
3.
Are sell-through rates substantially different for science, technology, engineering and mathematics [STEM] vs non-STEM? Do you expect sell-through rates to improve as the digital transition continues?
4.
How might the proposed Cengage and McGraw merger impact the industry, in terms of regulatory headwinds and the merged companies as a new competitor?
5.
In a successful Cengage Unlimited use case, which companies are immediately exposed from a market share standpoint? Is it going to be Pearson or the open educational resources [OERs], or do you consider the secondary market as potentially disintermediated?
6.
Cengage Unlimited has over one million subscribers so far. In terms of future growth, how would you differentiate between converting existing Cengage customers and incremental new customer wins?
7.
You mentioned the challenges of rolling out Cengage Unlimited. What is the most difficult aspect of this product – is it re-negotiating author royalties, area, discipline, and/or title selection, or brand awareness?
8.
Who do you think Cengage Unlimited’s market share gains are at the expense of? Would you say it comes at the expense of Pearson, or of OERs?
9.
What percentage of enrolments consider switching to OERs annually? What market share can Cengage Unlimited gain?
10.
Do you expect Pearson to respond to Cengage Unlimited with aggressive price discounting, and if so would you expect it to differ for STEM vs non-STEM?
11.
What are your thoughts on how unit economics will be impacted as Cengage Unlimited grows? Is a net effective price for Cengage Unlimited of USD 20-30, assuming that multiple courses are adopted, economically feasible for Cengage?
12.
Do you think Pearson would have to come in at a pretty high price point if it were to adopt a subscription model, possibly USD 250-300?
13.
You mentioned the Department of Justice [DOJ] is likely to have CengageMcGraw divest some disciplines. What content do you think is likely to go?
14.
Is it safe to say that author royalties are the largest cost line item for higher education publishers? Do royalties need to be driven down to the 10-15% range to make subscription services economically feasible?
15.
Is the textbook business a melting ice cube? What are the implications of pushback from faculty and students against digital-first textbook initiatives as it relates to the pace of decline?
16.
In general, do you consider the distribution model prime for disruption, given the digital transition? Is there a risk of losing business to wholesale or rentals as publishers try to drive digital-first initiatives?
17.
Is there anything else you want to discuss, or anything about higher education publishing we haven’t yet covered adequately?
