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Pandemic helps push audience for textbook publishers into the digital age

Cengage, Houghton Mifflin, and Pearson have all seen a surge in interest for online learning options

Michael Hansen is CEO of Cengage, an educational publisher that's making a shift to digital books.
Michael Hansen is CEO of Cengage, an educational publisher that's making a shift to digital books.John Tlumacki/Globe Staff

From Michael Hansen’s perspective, the textbook industry is having a Spotify moment.

The chief executive of Cengage, a leading publisher, brought up the music streaming service on an investor call last month, in reference to a question about the future of physical textbooks.

Hansen knows just how disruptive streaming was to the music industry: He once worked for one of the biggest companies in the business, Bertelsmann. Spotify and other streaming services became popular once consumers realized they were getting a good value for their money, Hansen said. Boston-based Cengage now has its own digital subscription service, but for textbooks; subscriber numbers were up 19 percent, year-over-year, in the most recent quarter.

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Textbook publishers had been trying to shift from paper to digital for years. Then along came the COVID-19 pandemic, giving many reluctant educators and students the nudge they needed to make the leap to online course materials. In Cengage’s case, digital sales now represent 68 percent of total revenue, up from 58 percent three years ago. About half of its sales are to college students, and digital represents 82 percent of the higher-ed revenue now for Cengage.

“What we have preached for many years, hopefully, is finally coming into the spotlight,” Hansen said in an interview. “We can use this very unfortunate pandemic to create real impetus for positive change . . . to propel the educational system into the 21st century.”

What was once a traditional book-publishing business has been evolving into a software business. It’s a recurring theme among the major textbook publishers in Boston: Cengage, Houghton Mifflin Harcourt, and Pearson. (Pearson is British, but employs 350 people here.) The shift to digital that they’ve long sought is finally being accelerated, in large part by teachers seeking creative ways to accommodate their virtual classrooms during the pandemic. And the publishers don’t expect the old habits to fully return once classes are back to normal.

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The pandemic hasn’t been easy on these companies, by any means. College enrollments are down, on average, by about 4 percent this fall, and many K-12 budgets have been constrained.

As a result, in the first nine months of this year, total sales fell 14 percent at Pearson and 28 percent at HMH, compared to the same period in 2019. At Cengage, whose fiscal year starts on April 1, revenue was down 11 percent in the six-month period that ended Sept. 30.

In particular, HMH has had to react to the sales slump by making some severe expense reductions. The company cut 22 percent of its staff in the fall, or about 525 people, after the addition of new “digital first” positions were factored in. The company also announced it would be exploring the sale of its storied HMH Books & Media trade group, the one that has published everything from cookbooks to “Curious George.”

Matthew Mugo Fields, an executive vice president at HMH, said his company has focused on adding interactive features to the digital versions that are impossible to offer with print books. The goal, he said, isn’t just to replicate the paper textbook with an online alternative but to also provide tools for a virtual classroom.

For example, teachers don’t need to leave HMH’s learning platform to schedule a Zoom or Google Meet class. Instead, teachers can engage with students in groups or privately, with just a few clicks. “That wasn’t necessarily top of mind, as it became when the pandemic hit,” Fields said.

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A year ago, there was one device for every two students in grades kindergarten through 12 across the United States, Fields said. Now, that ratio is closer to one-to-one, thanks in large part to the pandemic. That has accelerated the adoption of online learning.

“Almost everybody has a device [now],” Fields said.

The digital shift has enabled publishers to realize the potential of previous investments, either in acquisitions of education-tech startups or in interactive software developed in-house.

At Cengage, the focus is on Cengage Unlimited, a subscription service that provides an all-you-can-read bounty of digital texts, along with all the company’s educational software, for either $120 a semester or $180 a year. The hope when it was launched in 2018 was to offer students a good enough deal to skip the headaches of the used-book market, and to swipe market share from other rivals. Hansen, the chief executive, also points out the increased interest in the company’s MindTap platform, which helps students learn at their own pace. Teachers can pull up dashboards on a daily or weekly basis to monitor their students’ progress.

“You can become much more of a coach, rather than a lecturer,” Hansen said.

Not everyone is enthused about this shift. The US Public Interest Research Group, the consumer advocacy organization also known as PIRG, has fought it for several years, arguing that publishers use access codes and expiring subscriptions to lock students into their software and prevent them from buying cheaper, used copies on the secondary market.

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Emily Vitale, a junior at Fitchburg State University and the local chapter chair for MassPIRG, said she has shared many of her physical textbooks with a friend who has taken several classes with her since her first year at the school. “It was one of the easier ways to relieve some of the costs of college,” Vitale said. “I can’t really give her my computer or my access code.”

Plus, Vitale said she finds it easier to learn by going through a textbook and marking important passages with a highlighter, rather than doing the same thing on a screen, in part because she can avoid the distractions that pop up on her computer or phone. She was intrigued when she was told about Cengage Unlimited, but saw only three of the textbooks she has used so far since coming to college have been published by Cengage.

Tim Bozik, global product president at Pearson, said the profit margins for print textbooks and digital ones, at least at his company, are roughly comparable. But there are significant benefits for publishers to make the digital shift, including developing direct relationships with consumers that could last long after college.

“There’s an opportunity to serve that student through a lifetime of learning,” Bozik said. “2020, for all its challenges . . . has accelerated a trend that we anticipated, that we think will be helpful. We’re ready to put both feet on the pedal behind that.”

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Jon Chesto can be reached at jon.chesto@globe.com. Follow him on Twitter @jonchesto.