Posted on 08/19/2003 8:13:44 AM PDT by NativeNewYorker
WASHINGTON, Aug. 19 (UPI) -- Textbook purchases will be one of the first victims in anticipated education cutbacks due to widespread state budget woes, insiders say, leaving the $9 billion textbook industry prospects weak in the coming years.
Moreover, the selection method used by more than half the states to choose books is a high-stakes, winner-take-all process in which publishers invest millions of dollars developing products they're not sure will sell, adding unpredictable demand to an already bleak market outlook.
Nationwide, states are slashing budgets in the face of some of the deepest shortfalls in 40 years. Thirty-seven states have cut $14.5 billion dollars of spending from already enacted budgets for fiscal 2003, according to a June report by the National Association of State Budget Officers, while state spending is expected to grow 0.3 percent in 2003 and then contract by 0.1 percent in 2004.
In education funding, spending increased by 1.3 percent in 2002 and is expected to increase by no more than that in 2003, said Steve Smith, senior policy analyst in education finance at the National Conference of State Legislatures. Although these numbers may not sound bad, Smith said, they mark a dramatic shift from even two years ago when education spending increased by 8.3 percent. California and Texas, two of the country's largest textbook markets, have cut state spending 25 percent and 10 percent, respectively. And when states face slashed education budgets, textbook purchases -- with their accompanying high costs -- often seem an obvious and easy place to cut as states can recycle used textbooks.
According to Mike Griffith, a policy analyst at the non-profit Education Commission of the States, textbook purchases are "a cost you can put off and make up for in later years."
With the current budget crisis, "Do you want to purchase new textbooks or do you want to lay off a teacher?" Griffith asked. Robert Baensch, director of New York University's Center for Publishing and board member of the Book Industry Study Group, said he was "concerned that due to the economic state of not just one, two or five but almost all the states there will be a 2-year delay in making major new purchases." Indeed, textbook orders have been delayed in Kansas, Kentucky, Missouri, Nebraska and Texas, according to a monthly nationwide survey by National Education Association researcher Daniel Kaufman.
And the industry is feeling the pinch. Market growth has been modest -- 4.1 percent in the elementary-to-high school publishing market, in the year to date, according to the most recent figures from the Association of American Publishers. Going out, projections don't get much higher, as the budget crunch is not a problem that can be solved quickly.
Leo Kivijarv, director of publications for investment bank Veronis Suhler Stevenson, said the 8.5-percent growth rate his company forecast 13 months ago for the textbook industry in 2003 has been downgraded to the "lower single digits," due in large part to the major spending cuts in California and Texas. Both states are among the 20 that use the "adoption method" to select textbooks -- California for grades kindergarten through eight -- in which publishers compete to be certified by the state, as schools in adoption states can only use state and federal funds to buy certified textbooks. However, once a publisher is certified the process is not over, says ThinkEquity Partners analyst Neil Godsey, as they then have to compete in "hand-to-hand combat" to get local schools to select their products from the general list.
The prizes are not small. The textbook industry is estimated to be worth between $4 billion for textbooks to $9 billion when supplemental materials are included. But developing textbook series involves enormous sunk costs for publishers. On average, Baensch said, companies invest between $25 million and $30 million developing new three-grade subject series -- including textbooks, workbooks, teacher guides and supplemental materials -- in a two-year development process with no idea if their product will get certified and in how many markets.
The balance of the states is "open," allowing schools to use government dollars to purchase whatever books they would like. These costs have led to major consolidations in the industry in the past decade, leaving four major companies handling 80 percent of textbook sales, says Stephen Driesler, executive director of the school division at the Association of American Publishers.
For these companies -- privately held Houghton Mifflin, McGraw-Hill, Harcourt, owned by the Dutch Reed Elsevier Group, and the British company Pearson Education -- the consolidations generally have been beneficial, according to Godsey, giving them economies of scale to deal with the costs involved in the selection process, while advances in technology have lowered production costs to help their profit margins.
Moreover, the ongoing movement toward e-learning is a major boon for the industry. Seventy-two percent of elementary to high schools have access to computers and the Internet, according to Baensch, and although the country's schools systems are a long way from each child having access to his or her own electronic device, the trend is irresistible for publishers who could do away with a large portion of their production costs.
Also on the horizon is an expected teacher shortage, which could act in the industry's favor, Baensch said. Forty percent of those currently teaching are expected to retire or leave by 2004, he said, citing NEA figures, and incoming teachers -- some 2.2 million will be needed in the next decade -- are going to demand new materials. This influx also could generate the need for materials to educate the teachers, he added.
Two additional factors are working in publishers' favor: the growth rate among the K-12 population, and additional federal funding coming out of President Bush's education reform initiative, the No Child Left Behind Act.
None of these factors, however, are enough to offset the precipitous declines in state spending, analysts say. Publishers remain open to the whims of an uncertain and diminishing market.
Moreover, some analysts say, while NCLB will provide a funding boost, in several subjects Washington has not yet finalized the guidelines and standards publishers will have to follow to develop their next subject sets, leaving them suspended above the fray.
I'm please to announce that Penguin Publishers has accepted my new book (co-authored with Mike Allen) called "The Beacon of Liberty: A Patriot's History of the United States" for publication next year!
Originally, we wrote this as a "text," but upon review, we decided that a "trade" book can always be used as a "text," but a "text" will NOT be carried in major bookstores such as Borders, B&N, and on Amazon.
Our book is better than Paul Johnson's because it is written by Americans and is going to be billed as the conservative answer to Howard Zinn. This is a tremendous breakthrough for conservatives to latch on with a major publisher for a project of this type.
Congrats!
It's a better choice. Those who write texts are often not those who are on the leading edge of research, and those in research are not often willing to take the time to write texts. Most texts are deficient, do not show the student how to think, and are not current, not up with the latest trends, and are beholden to the sanctioned viewpoints of well and thoroughly tenured professors--that is to say, mired in the failed past.
Skip over Oppenheimer unless you live way out in the country.
Not one of those texts over the years has remained in my library. But I keep books written by various people who try to explain something they have found interesting if it is at a good academic level.
The local library here rotates out its collection and disposes of the culls for 50 cents each. Most of the books on the tables are the usual mudbricks you find on the NYT bestseller list, but once in a while there is a piece of gold sitting in there, and strangely enough the gold may sit unnoticed for a few days before somebody notices. Fermi's thermo book was there one time.
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