1. Making Information Pay for Higher
Education Publishing
Gary Shapiro
Unsaved Document / 4/16/2011 / 16:46
SVP Intellectual Property
Follett Higher Education Group

2. Follett Higher Education Group (FHEG)
 Follett Corporation Founded in 1873
 Revenue: $2B+
 930 Physical; 330 Virtual Stores
 5M + students
 400K Faculty/7M+Parents/Alumni/Fans
 eFollett is the 56th Largest US
ecommerce site w/13+M Unique visitors
 Integrated Inventory Mgmt System
 CafeScribe econtent platform (2007)
 Staff: 8,000 Regular full and part-time
 FSLG: Library, Educational Services;
Software
February 17, 2012
Page 1

3. Follett Offers Course Materials Across All Formats
and At Many Price Points
Over 140,000 titles

Bundles and custom products represent

New significant share of volume
Textbooks/  25-30% new text sales are digital
Digital content, monetized by a print sale FHEG Textbook Revenue – FY12 YTD
 CafeScribe 2.0 launched July; contracts
with all top publishers; growing catalog
 Attractive option for students seeking
Used to manage costs
Textbooks
 Generally retails for 75% of new price
 Introduced in Fall 2009 with national
roll-out Fall 2010
Rental
 Answered market demand for low
price alternative
Follett provides complete coverage of the course materials business spectrum
2

4. New/Digital Course Materials by Product Type
3

5. What Do We Know?
 The cost of textbooks is a real issue
 But hype exceeds the reality (students don’t pay full new price)
 Students are acquiring required materials (89%)
 But not as much from traditional channels
 College stores have seen a dramatic decrease in market share
 79% buy some materials from college stores
 42% buy at least one item online; 1/3 of all purchases online
Rental has become significant in Higher Ed Channel(s)
Digital content accounts for about 30% of textbook revenues, but
etexts a very small share
 Monetizing digital through print sales
 Like publishers, Follett is making significant investments in digital and
partnering with new technology providers

6. Channel Impact of Text Rental
“Post-Rental”
Competitiveness in a world with rental
Market Share
• Ability to spread inventory risk and systems investments across
FHEG 900+ stores
• Market intelligence allows optimized title selection
(incl. eFollett)
• On campus presence provides convenience advantage
Off-Campus • High inventory risk (local)
Store • Systems investments are substantial
Online Trad. • Without acquisition, difficult to enter rental due to lack of “title
intelligence” and organizational considerations; “point of
(Amazon, Half)
presence” sales tax concerns
• Rental options available to students keep P2P prices low
Peer-to-Peer • Rental books returned to store not available for P2P
(& “didn’t buy”)
• Number of students not buying should also decrease (?)
• High cost to administer B2C rental program
Pub Direct • (Has advantage on titles with pass codes, custom and
supplementary online materials)
Online Rental • Low cost, centralized model with ability to spread inventory risk
(Chegg. Book Renter) • Agility to re-price quickly, focused marketing

7. Stakeholders Have Diverging Interests
Students Institutions Publishers
 Very price focused  Concerned about affordability  Rental, Marketplaces,
 Tech savvy  Interested in digital OpenSource impacting
 Engaged with alternatives; market sales
social networks differentiation  Driving digital, custom,
 Beginning to  Changes in financial aid direct-to-student sales
accept digital distribution and institutional
course materials  Need commission income relationships
content  Faculty requiring fewer titles;  Want more control over
using Web-based content terms/conditions
Environmental Factors
 Poor economic climate
 Enrollment changes/declines (“For Profit” Institutions; Community Colleges)
 Competitive bidding for clients
 Startups/venture investments leading to significant noise; sales impact
 OpenSource endorsed by PIRGs, legislators
 Investment(s) needed to compete 6

8. Positioning to Win Against Local and Online
Competition
Rental Publisher
Stores Marketplaces Sites Direct
All text formats available
(Used / New / Rental / Digital)  X Limited X
Accepts all tender types
(Cash, check, credit card, campus card,
financial aid)
 X X X
Offers in-store pickup  X X X
Assurance of right materials from
one place  X X X
Integrated with campus systems
(LMS, SIS, registration system)  X X X
Growth in financial aid as tender – a strategic
advantage (% of tenders using financial aid)
35%
30%  booknow allows students to purchase all new
and used textbooks and course materials at
25% time of class registration
 First and only registration integration system
20% in the industry
 Allows Follett to maintain and gain share in
15%
an increasingly competitive environment
FY08 FY09 FY10 FY11
7

9. The Majority of Sales Are From Traditional Texts
0%
Traditional texts
The majority of  6 major publishers
dollars of sales are  One text per course
traditional texts
% of New Equivalent Retail $’s Transacted
20%  Significant pedagogy
 2 page spreads; graphics,
color; chapter exercises
40%
 Highlighting and underlining;
memorization
50% of retail = 3,585 titles (2.51%)
 Publisher support
60%
 Average Price: Over $75
80%
80% of retail = 15,066 titles (10.55%) Trade books and monographs
 8,000 publishers / distributors
The majority of titles are trade
books and monographs  Original materials
100%
 Multiple books per course
0% 10% 20% 30% 40% 50% 60%  Linear reading
% of Titles
 Average Price: Under $50
100% of retail = 142,762 titles (100%)
Source: Internal FHEG data 8

10. Product Evolution Will Differ Based on Discipline
The discipline will determine how technology
will change course materials and how fast
they will evolve – significant differences in
Textbooks product types leads to different impact from
digital
Evolving into
Evolving into
native digital
enhanced
(adaptive
print
learning)
products
products
Other digital components
Supplementary content
Homework management
tools
Assessment products
9

11. Product Evolution Will Differ Based on Discipline
The discipline will determine how technology
will change course materials and how fast
they will evolve – significant differences in
Textbooks product types leads to different impact from
digital
Evolving into Evolving into
native digital enhanced
(adaptive print
learning) products
products
• Problem-based disciplines Other digital components • Theory based disciplines
• Digital = Interactive • Digital = Digital replica;
• Technology replaces print Supplementary content enhanced print
• Solo learning • Technology enhances print
• Digitization leads to better Homework management
• Social learning
student performance, tools • Digitization = lower cost,
engagement, retention convenient access, search
• Driven by publisher investment
Assessment products
capability, note sharing
• Format = faculty decision • Format = Student Decision or
Campus Requirement
10

12. Devices and applications will differ by
category
Native Digital/Adaptive Learning Enhanced print course materials
APPLICATIONS APPLICATIONS
• Interactive • Highlighting, note taking and sharing
• More like traditional software or web- • Links to other resources
accessible content Device requirements
PLATFORM 
PLATFORM
Large / quality display
• Student uses on publisher servers (Cloud) • Cloud, download
 Good connection, significant memory
DEVICE REQUIREMENTS DEVICE REQUIREMENTS
• Fast connection Optimal devices
• Quality (larger) screen
• Speedy Input (Keyboard)  Multimedia-optimized tablets
OPTIMAL DEVICES • Good connection; significant memory
Applications
• Laptops, desktops, netbooks. OPTIMAL DEVICES
 Highlighting, Laptops, desktops, netbooks
• note-taking and sharing
• Possibly larger format tablets
 • Sophisticated tablets
Links to other resources
Monographs
PLATFORMS
Download, Cloud
DEVICE REQUIREMENTS
Books on reading devices
Quality screen (eInk)
OPTIMAL DEVICE SOLUTIONS
Tablets and Readers, Smartphones, eink devices
Key questions:
• Does it support the unique content critical to teaching and learning?
• Will students use a dedicated reading device or want a multipurpose device?
• Is the device affordable for students; esp. with the additional cost of the content?
11
• Does the primary content provider support all platforms and devices?

13. Digital “Tailwinds” in Higher Ed
 Rise in availability and use of quality homework
management, assessment tools
 Standards are making it easier to integrate econtent with
LMS
 Declining print sales challenging publishers to create new
models
 Rapid rise in tablets & smartphones
 Availability of digital content (& favorable pricing)
 Growth in distance learning/use of digital
 Rapid growth of ebooks in trade and professional markets
February 17, 2012
Page 12

14. Digital “Headwinds” in Higher Ed
 Tablets not affordable option for many students
 Most digital content unexciting replica of printed text;
extended reading on desktop/laptop is difficult for most
 Premium digital content selling for premium price
 Digital, while cheaper than new print, is more expensive
than traditional (buy used/sell back) model; rental countering
cost savings of digital
 Student access to quality bandwidth not ubiquitous
 Some faculty still resistant to technology
 The number of classes taught by adjuncts
 ADA concerns
February 17, 2012
Page 13

15. Channel Impact of Digital
“Post-Digital”
Competitiveness in a world with digital
Market Share
• Access to the customer becomes even more critical as publishers
FHEG move toward agency pricing reducing price competition
• Customer-centric systems which provide convenience (virtual), easy
(incl. efollett) purchase and access are key
Off-Campus • Unlikely to survive as course materials outlets due to
investments required to support digital
Store
• May have significant position depending on ability to be
Online Trad. customer access point of choice
(Amazon, Half) • However, will lose share to institutional decisions (licenses)
and one-fee-like programs
Peer-to-Peer • Not a legal option
(& “didn’t buy”)
• Potential for publishers to disintermediate all other channels,
Pub Direct IF they remain the primary content providers
Online Rental • Would have to fundamentally revise business model to play in this
(Chegg. Book Renter) space, and even at that unlikely to have significant customer access
required for success

16. New/Digital Course Materials by Product Type
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Traditional Print Custom Text (Print) Bundles (Print + ebooks Native Digital
Digital)
Today 5-7 Years
15

17. FHEG is Encouraging Institutions to Think
Strategically About Course Materials
Mitigate risks
 Managing number of platforms and applications adopted and used
 Assuring productivity increases, not decreases
 Faculty can teach, not provide technical support and/or have to learn to effectively
use multiple technologies (from LMS to publisher platforms)
 Students focus on learning the material, not different but similar technologies
 Managing demand for bandwidth and infrastructure
Minimize costs
 Potential new administrative and legal costs (i.e., managing licenses)
 Integration with technology infrastructure and support
Selling the need for strategy
 Choosing among options (both by students and faculty) becoming complicated
 Good strategy leads to improving student success while:
 Optimizing their investment in course materials
 Ensuring quality of instructional content
 Sustaining faculty's role in selecting course materials and instructional resources
 Student success leads to better engagement and retention
 Ability to capitalize on technology investments
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18. The “Endless Aisle”

19. The “Endless Aisle”
Objective:
 Increase revenue and wallet–share through implementation of
broader inventory visibility and order management functionality
– leveraging the entire enterprise
How?
 Fulfill any order, any channel, from any location
 Centralized customer service support
 Increased assortment through 3rd Party Vendors
 Full tender availability from original store
 Inventory visibility across the network
 Centralized distribution support

20. Order Management – Product Sourcing
Online Order Order
Placed at Boston Management
College System
Proximity to
Destination
FHEG
Distribution Center
Nationwide
Proximity
3rd Party Drop Ship
Vendors

21. New Distribution Center
New, 550,000 sq. ft. Distribution
Center adds needed capacity
to expedite “click & mortar”
strategy
Featuring state-of-the-art Kiva
Robotics
Increased order put-through
capability to respond to
increasing demand:
Further mission of driving
sustainable practices

22. Not Just a Bookstore
Follett’s Hammes Notre
Dame Store at Eddy
Commons
Page 21

23. Thank you!
Questions?
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