K 12 education market survey report for publishers
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Overview of the education market dynamics with publishers and content owners as the intended audience. Also of interest to private equity and other investors.
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K 12 education market survey report for publishers
- 1. Michael Cairns Managing Partner Information Media Partners K-12 Education Market Survey Report for Publishers Market Overview: June 2018
- 2. Introduction Michael Cairns is a publishing and media executive with over 25 years experience in business strategy, operations and technology implementation. As a business executive, Mr. Cairns has successfully managed several troubled and under- performing businesses, creating new business opportunities, developing new funding sources and enhancing shareholder value for investors. His years spent as an operating executive have largely been with brand-name publishing companies such as Macmillan, Inc., Berlitz International, Wolters Kluwer Health, Reed Elsevier and R.R. Bowker. As a consultant, Mr. Cairns has worked with clients as diverse as AARP, Hewlett Packard, InterPublic Companies and Reed Elsevier with an emphasis on business strategy, market development and corporate development. His skills and experience include: âȘ Business and corporate strategy development and implementation âȘ Operations management and business transformation âȘ Traditional and digital publishing and operations âȘ Print-to-digital transformation and adoption of new business models âȘ Software development and software services Mr. Cairns holds an MBA (Finance) from Georgetown University and a BA from Boston University. He has served on several boards and advisory groups including the Association of American Publishers, Book Industry Study Group and the International ISBN organization. Additionally, he has public and private company board experience. 2 Michael Cairns Information Media Partners Strategy Consulting New York, London, Melbourne Tel: 908 938 4889 Michael.cairns@infomediapartners.com Find me: LinkedIn
- 3. Information Media Partners Michael Cairns established Information Media Partners in 2006 as a boutique strategy consulting firm focused on the information and education publishing segment. The work conducted by the firm includes product development, corporate development, sales management and corporate reorganizations. We work with established businesses, private equity owners and potential acquirers. Examples of our work include: âȘ Reorganized and re-focused a $25 million software publishing company by aligning business operations with client priorities; implementing internal collaboration tools and project management standards; re-building executive team to focus on effective and efficient management âȘ Defined a new business strategy for a large non-profit association and advocacy group, expanding their business model into global markets to exploit their core knowledge and expertise across a broader market âȘ Led an information technology capabilities review at a large international advertising holding company. Completed over 200 interviews in 15 international offices and multiple group focus sessions to define the operational âgapsâ between existing agency capabilities and those necessary and important for client delivery by region âȘ Completed a sales management effectiveness review for a global software company and defined six key project initiatives to improve sales effectiveness, market development and account management We approach our client engagements in a standardized, logical manner which creates the best environment to identify key business drivers, administrative and logistical road blocks and/or product or market definition issues. Our investigative approach leads to better insights into your businesses and supports the development of workable solutions and recommendations for success. Visit the Information Media Partners website for more information. Sample Client List
- 5. K-12 market overview âȘ Historically a large industry exhibiting attractive and stable growth âȘ English language instructional market is highly concentrated âȘ US market influenced by periodic significant changes in government policies âȘ Growth shown minimal impact of periodic economic recessions over time except during 2008-2013 5 An Immense Market Over $600million spending power 14,000 Public School Districts 5.7M Personnel $13B Spent on instructional Materials $60B Spent on computer Equipment in 10 years $607B Spending 2008-2009 $618B Spending 2012-2013 $679B Spending 2015-16 $691B Spending 2016-17 Based on National Center for Education Statistics (âNCESâ) projections growth will 1-2% each of the next three years
- 6. K-12 market overview âȘ US market spending on education surpassed $1.3T in 2014 (7.4% of GDP) âȘ Renewed focus on outcomes and improvements. Legislative programs include: â No Child Left Behind (NCLB) â Race to the Top (RTTT) â Focus on outcomes will transform education through the convergence of content, technology and delivery âȘ Movement towards integrated educational approaches combining content, assessment and services aligned to standards and student performance â Schools will become more data driven supporting performance and assessment âȘ Education providers must demonstrate capabilities in instructional design, curriculum development, alignment to standards and delivery at scale to drive efficiency â Only companies with financial strength will be able to invest sufficiently to provide integrated solutions âȘ As the US economy continues to improve this will enable growth in budget spending 6
- 7. K-12 education conferences 2018 7 Source: EdSurge: https://go.edsurge.com/rs/590-LFO-179/images/EdSurge-2018-Ed-tech-Events-Calendar-K-12_v3.pdf
- 8. Macro issues impacting k-12 education âȘ Education in flux due to fed government change âȘ Expect states to drive assessment and standards âȘ More students will fall behind âȘ Digital share of supplemental and core textbooks rising 4-5% per year âȘ Buying decisions for digital often originate with teachers 8
- 9. Core K-12 standards are in flux âȘ States struggled to meet NCLB requirements â Department of Education granted formal state waivers to common core state standards â Defined knowledge and skills students need to succeed in college â More than 43 of 50 states have adopted these standards: spending on instructional materials, assessment technologies, and professional development initiatives to comply with the regulations â Some states saw significant declines in student performance requiring intervention âȘ Current administration are revising/not enforcing education standards â Unclear direction and/or long term impacts 9
- 10. Societal issues impacting K-12 education âȘ High level of research by schools/districts into instructional integrity â Continuation of quality creation and delivery of educational materials âȘ Curriculum and lesson plans â Wave of start-ups moving to help education professionals map and design new types of curriculum â Peer to peer marketplaces; teachers pay teachers 10
- 11. English language education highly concentrated
- 12. Education âpublishingâ is expanding Source: Elm City Consulting (Pat Sabosik)
- 13. Course material development is complex Development increasingly driven by: âȘ Products that are proven effective by scientifically based research (SBR): no child left behind âȘ Demonstrate causal relationship between a specific educational treatment and a specific learning outcome
- 14. Annual Horizon Report 2017 - Themes Themes and Ideas âȘ Progressive learning requires culture change âȘ Learners are creators: marker places, collaborative rooms, coding/robotics âȘ Inter + multi discipline learning breaking silos âȘ Wide spread use/access of technology doesnât create equal learning environment âȘ Continually measuring learning is essential to performance improvement âȘ Fluency in technology is not the same as understanding it âȘ Authentic learning is necessity â hands on learning and teaching required âȘ Schools incorporating data analytics and critical thinking âȘ Learning spaces must reflect new approaches 14 Key Trends Larger trends âȘ Coding as the ânewâ literacy âȘ Rise of STEM learning âȘ Growing focus on measuring learning âȘ Redesigned learning spaces âȘ Creating cultures of innovation âȘ Deeper learning approaches Challenges âȘ Authentic learning environments âȘ Improved digital literacy âȘ Rethinking the roles of teachers âȘ Teaching computational thinking âȘ The (societal) achievement gap âȘ Sustaining innovation through leadership change Important developments âȘ Makerspaces âȘ Robotics âȘ Analytics technologies âȘ Virtual reality âȘ A/R âȘ The IOT Source: 2018 Horizon Education Report
- 15. Student outcomes are substandard âȘ Student preparation for education success differs markedly by family circumstances and race âȘ Student success at elementary/ secondary school is distributed unevenly by economics, income, geography and race
- 16. The economic influence of education âȘ 77 Million Students in US â 19% of students canât read â 1.2M drop out of school every year â 80% of low income students are behind one grade level â 13% of students have disabilities âȘ US Test rankings versus rest of the world â 20th in Reading â 30th in Math â 24th in Science behind Latvia and Slovakia 16 âȘ Estimated that each drop out costs the US economy $200K in lost lifetime tax revenue âȘ Over the next decade the U.S. will fall 3 million workers short of the 22 million students with a college degree needed to meet the demands of the workforce âȘ Many drop outs show signs of dropping out in 6th and 7th grade.
- 17. K-12 school districts 17 14,000 Public School Districts 90,000 Public Schools 7,000 Charter Schools 30,000 Private & Parochial Schools Growth drivers: birthrate and migration West & South growing NE, Midwest Flat/no growth 215,000 District Personnel 3.5M School Personnel 120,000 School Personnel 500,000 School Personnel 14,000 Public School Districts: 70% educate less than 2,500 students 25 largest educate 10% of total students
- 18. K-12 Enrollment âȘ Increased 3% between 2001 and 2004 âȘ Projected to increase 2% 2014-2026 âȘ 3.4M student graduations in 2018 rising to 3.6M in 2025 but falls to 3.2M in 2032 18
- 19. Total public and private high school graduates by race/ethnicity 19 Source: Inside Higher Ed.
- 20. Funding sources for K-12 Federal sources of funding: âȘ Title 1 Grants âȘ IDEA special education state grants Expenditures per pupil âȘ $11,984 in 2016-17 âȘ Rise 1% per year through 2024-25 âȘ 2018 Federal funding bills increased grants School construction budgets expected to grow from $50B in 2016 to $65B in 2019 âȘ 56% of schools completed construction projects in 2016 âȘ 53% plan for construct in 2017 âȘ 53% of all schools require updating and investment for repairs and modernization
- 21. Funding sources for K-12 Public education funding comes from three main sources: âȘ State funds: 46% âȘ Local funds: 45% âȘ Federal funds: 9% Allocations to schools generally made student population Property tax and local tax revenues drive budgets Source: National Association of State Budget Directors
- 22. K-12 spending shifts away from textbooks
- 23. Adoption States âȘ 19 states have education budgets administered and implemented by the state board of education and the state department of education âȘ Indiana (2011) and Arkansas (2013) recently repealed their state adoption statutes âȘ Some states require publishers of state-adopted materials to use a central in-state depository or to ship state-adopted materials from within the state âȘ Depositories charge publishers a commission, typically about 8 percent of sales âȘ In other states publishers may ship directly to schools from their own in-state warehouse, without going through a central depository 23
- 24. Adoption state criteria âȘ 19 states use adoption for review and approval of K-12 textbooks, other core materials, related ancillary tools and resources âȘ Core curriculum materials align with state academic standards and meet various state regulators (binding materials and paper) âȘ Some states allow a percent of funds (30%) to be used to purchase materials not on the list âȘ Complex set of policies, procedures, rules and timelines that have been optimized for textbooks âȘ After civil war, southern states pressured northern publishers to product textbooks customized to meet their requirements in the south âȘ Distributor agreements â old days everything was slow âȘ $7B spent annually on textbooks - $2.2B in adoption states 24
- 25. The importance of adoption states âȘ Large state adoptions in BASAL courses will materially impact textbook profitability âȘ Most large scale BASAL adoptions cycle every 3-7 years
- 26. Print to Digital Transformation
- 27. Growth and development of e-Content âȘ Digital platforms and white boards enabling schools to modernize delivery âȘ Single platform preferred âȘ Federal & State digital initiatives are driving adoption âȘ Escalating growth in Fed/state legislation funding digital âȘ Parents, teachers and students are demanding more hybrid solutions: supplemental content with BASAL fundamentals âȘ Shift to digital platforms and performance based learning is creating data needs, requirements and capabilities from vendors âȘ Vendors are required to prove efficacy of their digital products 27
- 28. Changing dynamics for text materials âȘ Why print still dominant? â School readiness, infrastructure requires modernization â Require equality of access for all students â creates lowest common denominator â Teachers uncomfortable with technology â Changing business models will erode textbook market further âȘ SaaS model for content sales developing as a business model âȘ State reviewers may not be expert in reviewing technology based content â impediment to adoption âȘ Many unique forms of technology are not bound by current policy, form, procedures â process is optimized for print formats 28 Source: Experts Guide to K-12 published by SIIA Source: Simba Information E-textbooks in Education
- 29. Digital change is forecast âȘ Alignment to education standards sometimes difficult with technology based products âȘ Content/additions/substitutions â some states donât allow replacement or upgrades and linking to additional materials or make requirements to do so is very difficult âȘ Some states reconsidering the requirement for state depositories: May become hard to justify given growing costs âȘ Some states offer exemptions for e-products Source: Curriculum for School Networking Source: Experts Guide to K-12 published by SIIA
- 30. K-12 open education resources âȘ Peer to Peer âmarketplacesâ for teachers and administrators âȘ Bridge gap between âofficialâ content and more up-to-date, innovative solutions âȘ Business opportunity for teachers 30
- 31. Personal learning and performance âȘ Innovation â Adaptive software â Collaborative learning spaces and ability to use/incorporate MM into work â Diversity of content â Credible reliable databases to advance learning â Simulations/animations/virtual worlds â Flexible teachers and methods âȘ K-12 â Closing the achievement gap requires differentiated learning â Tools allow for individual learning plans â Teachers provide progress monitoring and intervention as needed â Personal online work spaces â Learning management systems delivery course materials in real time and asynchronously to students âȘ Assessment â Real time data â track projects, achievement â Personal portfolios â Adaptive and diagnostic assessment tools 31
- 32. Example of learning activities âȘ Supplemental publishing market includes: â Instructional workbooks, study aids, digital video products, e-learning, online, and other computer-based systems that enhance traditional in-school learning. âȘ Drivers: â Product ease of use â High levels of technical infrastructure â Common core standards â Federal sponsored internet connectivity programs 32
- 33. 33
- 34. K-12 Supplemental content âȘ Materials in addition to core textbook maintains stability âȘ Importance to teachers and administrators 34
- 35. K-12 For profit spending âȘ Technology spending anticipated to grow significantly âȘ Technology seen to enable outcomes âȘ Instructional materials flat 35
- 38. Class assessments are bigger than state tests 38
- 39. Digital assessment tools in class âȘ Digital tools face credibility test âȘ Trends point to more use and more acceptance of assessment tools âȘ Education âcommunityâ seeking more effective outcomes
- 40. Assessment market growth âȘ Assessment market will outpace other segments of the k-12 content market âȘ Ed-tech investment is chasing new companies in this space
- 41. Growing need for more teachers âȘ Demographic movements âȘ Teachers less than 3yrs experience are dropping out âȘ Poor pay, poor materials, other opportunities âȘ Rural vs metro divide
- 43. What is âEd-techâ? âȘ The intersection of technology tools and education content â Data analytics platforms â Content and other marketplaces â User generated tools and applications âȘ To provide access to information and learning to obtain skills and knowledge âȘ In other words â the application of technology to support learning 43
- 44. E-Tech products and markets âȘ Emerging K-12 Ed-tech markets are frequently ill defined and highly fragmented âȘ Product offerings are relatively undifferentiated (and sometimes difficult to understand) âȘ Few companies have sales forces of any size âȘ District purchasing processes evolve slowly and sporadically âȘ Technology at point of delivery remains uneven 44
- 45. Big picture trends â 2017 Horizon Report One Year or Less âȘ Bring your own device âȘ Learning analytics âȘ Adaptive learning Two â Three Years âȘ Augmented and virtual reality âȘ Makerspaces Four to Five Years âą Affective computing âą Robotics Investment money has accelerated in the past five years chasing start-up opportunities but may have reached saturation. 45
- 46. 46
- 47. Historic increasing investment â recent slowdown 47
- 49. Ed-tech investment expected to continue growth trend
- 50. Product segments in Ed-tech âȘ Learning management systems âȘ Early childhood education âȘ Broad online learning programs âȘ Enterprise learning âȘ Next gen schools âȘ Tech schools âȘ Online to offline âȘ Testing & remediation âȘ Digital course materials and courseware âȘ Test prep âȘ Curriculum production âȘ Search âȘ School administration âȘ Next gen study tools âȘ Language learning 50
- 51. Select Ed-tech market map 51
- 52. Ed-tech/education business drivers âȘ The internet ânetwork effect:â enables accessibility to vast collections of education materials âȘ Technology has facilitated ânew learning modelsâ which had redefined how students integrate learning into work and personal development âȘ Expanding life-time earning âgapâ of those educated at higher levels supports the value of education âȘ Broader workflow automation is eliminating old-line employment paths causing acceleration in worker âre- educationâ needs and requirements âȘ Rapid growth of non-English markets for education content âtechnology leapâ embedding technology 52
- 53. Implications for educational content producers The results of the Edweek Market Brief suggest that more than 70 percent of administrators expect their investments in educational technology to grow over the next year. Google will almost certainly continue to soak up the largest share of those additional dollars. Edweek Market brief special report â May 8, 2017 53
- 54. Thoughts on trends impacting Ed-tech âȘ Traditional content âȘ Access models âȘ Platforms âȘ Accreditation âȘ New technology 54
- 55. End of traditional content? âȘ Open educational course materials âȘ Textbook form factor eroding âȘ Battle for attention âȘ âentrepreneur cultureâ forcing a rethinking of the entire educational experience âȘ Online vs offline â generational shift 55
- 56. Access models âȘ Flattening of supply chain â enabling direct relationships âȘ But, complicated with more platforms, distributors, outlets, etc. âȘ Business model transition from âone offâ sale to varieties of subscription models is difficult âȘ Publishers need to rely on direct relationships wherever they can âȘ Subscriptions/memberships assume higher engagement with customer âȘ âOn the verge of learning about your consumers intimately. Need to wake up to this and learn from thisâ âȘ Institutional sales (B2B and B2B2C) more predictable 56
- 57. Platform wars âȘ xml first workflows âȘ Mobile: Apple vs Android âȘ Bring your own device âȘ Functionality âȘ International markets âȘ Acquisitions and roll- ups: beach heads are valuable âȘ Dependence on hardware and/or good connectivity is likely to fail â lowest common denominator may be very low 57 Edweek Market brief special report â May 8, 2017
- 58. Changing accreditation and degrees âȘ Work experience âȘ Badges and certifications âȘ Changing test and assessment requirements âȘ On demand, in situ learning needs for career advance âȘ Life long learning 58
- 59. New technology âȘ Virtual reality â Interesting for distance and/or remote users â In class headset is potentially a distraction âȘ Augmented reality â Significant opportunity in education and career development â Turning 2D drawings into 3D models which can be played with â Non-headset on the way? âȘ Makerspaces 59
- 60. Google retains significant advantage âȘ âImage you have been asked to hire one of the following companies to improve student achievementâ Edweek Market brief special report â May 8, 2017
- 61. How do you expect your spending to change? Edweek Market brief special report â May 8, 2017
- 62. And spending over the next five years? Edweek Market brief special report â May 8, 2017
- 64. Education (K-12 schools, colleges and universities, technical and vocational, distance learning) â Student Information System, Learning Management, Fund Accounting System, Higher Education Administration, Financials, HR, Procurement. Cloud Top 500 Research Software application market share
- 65. K-12 management systems software
- 66. Management systems industry players
- 69. Learning management for education and corporations
- 70. The transformation of learning management
- 71. The evolution of the learning management system market
- 72. The bulk of this material was created as part of an âenvisioningâ session with a client to foster a further discussion about business strategy. Michael Cairns Managing Partner Michael.Cairns@InfoMediaPartners.com 908 938 4889 LinkedIn 72