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Thursday, April 22, 2010

New digital textbook projections...

Xplana – the company recently acquired by MBS has put out a very interesting 5-year digital textbook sales projection report based on their research. Some NACS data is cited in the briefing. They estimate the current total market share of digital textbooks in the US to be at 0.5%, which appears accurate if accounting for all titles across all institutions and assuming print-equivalent substitutes (e.g., “pdf versions” of the textbooks and not other digital products that might be substitutes). They estimate that this market will grow to 18.8% of total US textbook sales in 5 years, and exceed 50% by the end of the decade.

I believe this estimate to be a little conservative, but certainly within the boundaries we have estimated. I think where our estimates diverge is that they expect the growth of digital sales over the next five years respectively to be 100%, 150%, 120%, 90% and 80%. We expect that the curve will peak at a higher growth rate and that the growth decay will take longer to set in – in part by using conversion/growth trajectories of trade books and music transitions as examples. However, they provide reasonable factors to explain growth and some rationale for the growth decay that are certainly plausible. The growth factors they identify are ones we are also tracking.

I believe our current best estimates project digital textbooks comprising between 10 to 50 percent of textbook sales in 5 years, with 10% being a most conservative estimate and 50% being a ‘most favorable conditions’ estimate. Something in the range of 20 to 40% might be more accurate, based on an assumption of more consistent 100 to 150% growth over the time period. However, there are many, many factors at play here, some of which are exceptionally difficult to predict. Reality could hit anywhere within the spectrum, or either below or above. Data from the 2010-2011 academic year should be particularly enlightening in this regard.

In 2007 we predicted that by 2012 digital textbook sales would begin to have an effect within the industry, with pickup beginning around 2010 to 2011. Follett has previously made projections that are comparable to ours regarding the projected timeline for transition from predominantly print to more predominantly digital. This projection by Xplana is also consistent with our range of projections and timeline. If we take a conservative stance, it appears increasingly reasonable to expect that we might see at least 15% of the textbook business move to digital formats over the next five years. If college stores hope to retain or capture that business and continue to provide students with the choices and products that meet their expectations, they have a narrowing window of opportunity to engage in their future.

The Xplana report identifies some very reasonable outcomes that might result from their projections, although those implications are focused more on publishers than retailers. That said, the Xplana report is well-written (if brief) and worth a read, as the implications of the collegiate retail industry losing up to 18.8% market share for textbooks in five years if it has failed to prepare properly for digital should be obvious.

Just some food for thought.


Stacy Waymire said...

I share your evaluation that the Xplana projections are conservative with regard to e-books replacing hard copy texts.
Also the evaluation does not take into full account the transition from hard copy to no copy in the form of free, and pay-for-access web sites that support courses in place of hard copy texts or downloadable e-books. These are already having direct inpact on sales of traditional textbooks. Also the increasing market penetration of intergrated learning platforms that are designed as tools for managing the student learning experience. Interesting, since Xplana's go-to-market at the institutional level is as an "enhancement" to the learning "experience".

Chris said...

Fascinating and not unreasonable numbers which will affect every line item on every income statement for every store- everywhere. All occurring within five short years.

"Chance favors the prepared mind."
— Louis Pasteur