Campus Technology / 08-06-08 / Dian Schaffhauser
According to the National Association of College Stores in a 2007 survey, the average cost of a new college textbook was $53. The founders of Flat World Knowledge, which launches with its first run of college textbooks this fall, consider that too high--so high, in fact, that they'll be offering textbooks for free, at least in versions that can be read online.
In this interview, Co-founder and CMO Eric Frank explains how he and Co-founder and CEO Jeff Shelstad expect to make money following an open source model of publishing ... .
Dian Schaffhauser: What do the economics of the Flat World textbook look like?
Eric Frank: There are two major factors that play in our economics. We build our model on the average student spending $35. That means some will spend zero; some will spend $50 or $60. Most of that revenue is renewable. [snip].
... Our model is saying, we're going to make less the first time, but we're going to get more students in that class to buy things, and they are going to buy them more consistently over that same timeframe. Our revenue flows over a two-year adoption are very similar to a traditional publisher.
That is secret sauce No. 1. Secret sauce No. 2 is we're also able to significantly reduce our cost of doing business. There is lots of process innovation that doesn't happen in big publishing companies.... I just fundamentally do not believe that we need 350 sales reps to sell, given that our model is so dramatically different. [snip].
Schaffhauser: What's open source about Flat World's scheme?
Frank: There are two major drivers of what makes us open source. No. 1, there's a legal foundation. Our books are still copyrighted, although one difference is that our authors retain their copyright. We do not. They simply license it to us to be able to market and sell under our model. Nonetheless, when we make it available to a customer, we do so under a variation of a Creative Commons license, [which says] some of our rights are reserved and many rights are not reserved. [snip].
There's also a technological foundation. You've got to give people a platform in which it is easy for them to make the kinds of changes they want to make. [snip].
We fundamentally believe that most customers who come to Flat World, they're going to be most interested in the original version of the book that is being authored and maintained by experts in the field that are highly recognized. But when somebody makes a copy of that and modifies it, they are really doing it because they believe there's value for their teaching and for their student's learning in their class. We give them the option of either keeping that as a private version or adding it back into our catalog as a derivative of the original and explaining to their peers what it is that they have done. [snip].
Schaffhauser: How does the author get compensated?
Frank: Students have made it very clear to us that at the right price point, they would pay for convenience. [snip].
The other thing we do is create sales study aides around our books--things like podcast study guides for each chapter, Web-based practice quizzes for every chapter, animated solutions of complex problems with video instruction, mobile flashcards, all the key concepts for chapters that you can use digital flashcards for. [snip].
Schaffhauser: Is the fundamental product, the textbook itself, going to be same as what we're accustomed to right now?
Frank: I think the answer to that is more yes than no. We actually think that, over time, there are interesting ways to enhance the product like embedded tutorials and more and more things that really enrich the learning experience. But initially, by and large ... we're actually trying to create a product experience that feels familiar but with a radically different usage and distribution pricing model. [snip].
Schaffhauser: Will Flat World be launching with first edition content?
Frank: Yes, they will all be published initially as first edition. And then we will, like publishers do, publish new editions. Our office will publish and maintain new editions over the life of that book. [snip].
Schaffhauser: When you make the statement that market pressures would not drive the decision to put out a new edition, is that the standard practice?
Frank: Yes, I think that the practice of publishing new editions has largely become an exercise in flushing used books and international gray market books and pirated editions out of the marketplace and refreshing revenue for the publisher. [snip].
Schaffhauser: Are there curriculum categories or subjects where this model seems to resonate more closely with the potential authors, the faculty, and the students?
Frank: Initially, we're focusing on business and economics. Internally, we just have a lot of expertise in that area, a lot of author relationships that we can bring to the table. It is also a great curriculum globally, so a lot of times, a course taught in this country looks a lot like the business course taught in Singapore. [snip].
Once we establish a beachhead of success, we'll likely begin to identify and publish in other fruitful areas. I think engineering is another one--very expensive books, very global curricula....
There are some markets like science that might be challenging on the cost side for us. The expense of rendering really sophisticated anatomy and physiology images, it might be prohibitive for me in the early years of the business, whereas the cost of typesetting mathematical equations in engineering isn't.
Schaffhauser: What haven't I asked you?
Frank: I do not think about this as a traditional print book versus an e-book. I actually think of [us] not as a digital publisher, although, of course, at the heart of this thing is a digital workflow, but at the end of the day, we're a publisher. We publish books, and when we do, instead of publishing them in one format, which is print, we publish them in multiple formats, which is black and white print, color print, audio, digital. I think that is really the key difference .[snip].
I think the fundamental problem that Flat World is fixing ... is that there has always been this imbalance in this marketplace. A faculty member chooses the book, but he or she doesn't pay for it; so they do not think a lot about the price. As a result, as prices continue to go up, the students are going to be paying. What we're fundamentally saying is, "Listen, professor, you can do your job, take a great book, get a great author, get a great book, but when you make a decision to use a Flat World book, what you are doing is taking great learning material, but now giving your students the choice about how they want to consume it and if and how much they want to pay. Once you have done that, you're fixing this imbalance that exists."