Open ed fwk sustainability

Open-Access Textbooks and Financial Sustainability: A Case Study on Flat World Knowledge John Hilton III David Wiley http://johnhiltoniii.org http://opencontent.org

What is Flat World Knowledge?

Beta Test – Winter 2009Six FWK books were used as theprimary textbook in 27 classes. Intotal, approximately 750 studentsenrolled in these classes. All of thesestudents had access to the freeonline version of the textbook andno purchase was required of thesestudents. Of these 750 students, 442students (59%) placed at least oneorder with FWK, with the averagestudent spending $28.20.

Beta Test – 2009In total 294 printed textbooks werepurchased by students. Thus,approximately 40% of studentschose to purchase a print copy ofthe textbook, even though the freeonline version was available. Someof these purchases included not onlythe textbook but other goods (e.g.audio chapters) that were bundledtogether with the textbook.

Beta Test Items Purchased by StudentsItem (all sold by Total Sold (excludingchapter) products bundled with textbook)Flashcards 608Audio book 144Audio study 80guidesPrintable PDFs Data not availableOnline Quizzes Data not available

FWK began allowing public adoptions of 10textbooks at the start of the 2009–2010 school year. We gathered data from this academic year from FWK’s internal systems.

RevenueA total of 16,461 printtextbooks were purchased overthe three semesters, generating$479,259 of revenue. Of theseprint copies, 10,970 (67%) werepurchased through a campusbookstore. In total,approximately 29% of enrolledstudents purchased a print copyof the textbook.

Revenue Digital Products Made up ~21% of FWK Revenue

Revenue – How Many Made Purchases?65.7% of students taking a class that usedFWK materials registered on the FWKwebsite. Approximately one in four ofthe students who registered (16% of totalstudents) made a purchase through theFWK website. The average buyer made1.3 purchases, with the average purchasetotaling $30.89. Because many of thesepurchases were collections of resourcesbundled together the number of totalunit purchases (181,563) is much higherthan the average number of purchases.

CostsFWK published its first 10textbooks at an average cost ofapproximately $150,000 perbook. Since these first 10 bookswere published, the average costof producing a book hasdecreased to $120,000 per bookdue to increases in operationalefficiencies.

Costs Authoring (writing) fees (average $15,000, which is the upfront fee paid to authors and does not include royalties paid on book sales); Peer reviewing (average $20,000); Design, illustrations, art (average $15,000);

Costs Production (XML, proofing, QA, etc.) (average $25,000); Alternate versions (audio, handheld, etc.) (average $15,000); Instructor ancillaries (average $15,000); and Student ancillaries (average $15,000).

Costs – Faculty Adoptions For the academic year 2009–2010, FWK reported that the average cost of faculty acquisition was approximately $900. Gross profit per adoption climbed above $300. It takes a faculty member using the textbook for three semesters in order to pay for the costs of acquiring that faculty member. The company hopes for full payback of a faculty acquisition in a single semester by the academic year 2011–2012.

So What Is the Bottom Line? 1 Textbook at current enrollment = ~ $61,000 annual revenue ($48,000 (book), $13,000 (ancillaries)). Many of the costs are fixed. Current fixed costs are such that at current enrollment FWK would not be sustainable. But, enrollments grew from 900 to 58,000 in one year. If large enrollment growth continues, FWK could be very profitable. 2011 update: Approximately 270,000 enrolled students, and more students buying textbooks.

So What Is the Bottom Line?From http://flatworldknowledge.com

Questions? John Hilton III David Wileyhttp://johnhiltoniii.org http://opencontent.org

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