Pearson Hopes To 'Widen the Definition Of Education'
British publisher Pearson PLC became an overnight force to be reckoned with in U.S. school publishing three years ago with its $4.6 billion purchase of Simon & Schuster's education assets, which included such venerable education imprints as Prentice Hall and Allyn & Bacon.
Last year, Pearson continued its spending spree by snapping up the popular Web site FamilyEducation Network and National Computer Systems Inc., the Eden Prairie, Minn., company best known as the nation's leading scorer of K-12 tests.
|2000 Revenues: $5.39 billion (Deutsche Bank estimate)|
|52-Week Stock Range: $22.10—$30.56 on New York Stock Exchange.|
|Feb. 14 Closing Stock Price: $22.38|
Now, London-based Pearson has integrated those assets and devised a strategy for using them to build on its already powerful position in the highly competitive educational publishing arena.
As envisioned by the company, students will use Pearson textbooks and take tests produced and scored by the company. Teachers and administrators will track student achievement on Pearson school software. And parents will check on their children's progress on a school Web site developed by Pearson.
"Pearson has all the ingredients for success in this environment," Marjorie Scardino, Pearson's chief executive officer, told a ballroom full of Wall Street analysts here late last month at the end of an exhaustive, three-hour presentation on the company's educational publishing plans. "If we do it right, we will widen the definition of education."
Later, in an interview in a suite at the Waldorf-Astoria, the Texas-born executive reflected on the growing consolidation and globalization in educational publishing.
"Consolidating just to get bigger is not the point," Ms. Scardino said. "We are in this business because we like it. This is something we care about."
Sitting next to Ms. Scardino was Peter Jovanovich, the chief executive of Pearson Education, which is based in Upper Saddle River, N.J., and is one of Pearson's four main divisions. The others include the Financial Times Group, which publishes the peach-colored business newspaper of the same name; Pearson Television; and the Penguin Group, whose book imprints publish such authors as Tom Clancy and Amy Tan.
"There were 20 [U.S.] school publishers 20 years ago," said Mr. Jovanovich, who, like his father, was the CEO of the educational publishing giant once known as Harcourt Brace Jovanovich. "Now, we're essentially down to four or five."
Those include Pearson, McGraw-Hill Inc., Houghton Mifflin Inc., and Reed Elsevier, the Anglo-Dutch company that last year bought the K-12 and educational testing business of Harcourt General Inc. Harcourt's college-textbook business went to the Toronto-based Thomson Corp.
All the major publishers are scrambling to stay ahead of the game by introducing online versions of textbooks and course materials, Web sites, and other innovations. While some observers have predicted the replacement of the traditional textbook in the near future with electronic versions, Pearson executives seem unconvinced.
"I think the book will be around for things that are well-told in a narrative form," Mr. Jovanovich said. "We have to ask what do books do well and what does the Web do well?"
Still, Pearson is moving ahead with a 21st-century approach on several fronts, and company officials showed off several programs here that will be piloted and rolled out in American schools later this year.
One of the most ambitious is a program called NCS 4 School, which is an outgrowth of Pearson's $2.5 billion purchase of National Computer Systems. While McGraw-Hill, Houghton- Mifflin, and Harcourt all have test-publishing divisions, Pearson had virtually nothing in that area before buying NCS.
Meanwhile, NCS had branched out into so-called enterprise applications for schools, with software to run student- data systems.
"The NCS acquisition has had an enormous impact on our company," Mr. Jovanovich said.
David Smith, the head of what is now called NCS Pearson, demonstrated the NCS 4 School software by showing a teacher's home page on a school district Web site. Using the site's tools, a teacher could maintain her schedule, gradebook, and attendance lists. She could click on a link for a short video lesson on math standards.
And parents could have their own home pages on the district site, where they could check test results and homework assignments.
"This is the digital student backpack," Mr. Smith said, adding that it won't be as easy for children to tell their parents that nothing happened at school that day. "This will change dinner conversation forever," he declared.
Participating schools will have to pay Pearson a licensing fee for the enterprise-application software, in addition to a $10 to $50 per-student subscription fee for NCS 4 School.
Separately, Pearson is enhancing the offerings on its Learning Network, the company's main consumer Web site, which was created following the purchase of FamilyEducation Network. The site includes Pearson educational content for schools, parents, and Web surfers looking for professional-development opportunities.
One new part of the network is a broadband video arm called Knowledge Box. The company has a library of 7,000 short video lessons available on demand to show on school or home computers. The segments were developed by Simon & Schuster before Pearson bought that publisher's educational properties. The demonstration segment shown here was an animated clip about bugs, aimed at the elementary grades.
Schools will pay a "a healthy license fee" to receive the content, a Pearson executive told the analysts here.
Pearson faces sharp competition on many fronts, from its core textbook business to newer school software applications and World Wide Web efforts. A number of Web businesses offer enterprise applications for schools, while publishers such as McGraw-Hill and Scholastic Corp. have redoubled their Web-content efforts in recent months.
Just last week, Vivendi Universal Publishing, a French book publisher, joined the crowded field of Web portals in education by launching Education.com, which will offer material in English, French, and German.
But some analysts view Pearson as one step ahead of the pack.
"It's pretty clear that Pearson is emerging as the 800-pound gorilla in this market space," said Peter Appert, an analyst with the San Francisco office of the investment firm Deutsche Bank Alex. Brown.
"So much attention has been lavished on the pipsqueaks in the e-learning market," Mr. Appert added. "But it is the large education publishers that have dynamic cash flow from their core businesses, significant distribution strengths, and content."
Wall Street also believes publishers such as Pearson stand to benefit under President Bush's emphasis on school accountability in the education agenda he unveiled last month.
Mr. Jovanovich made the same point at the recent New York City gathering, displaying for analysts a quote from the president that called for state testing and school-by-school report cards.
Said the Pearson executive: "This almost reads like our business plan."
Funding for the Business page was provided in part by the Ford Foundation.
Vol. 20, Issue 23, Page 8Published in Print: February 21, 2001, as Pearson Hopes To 'Widen the Definition Of Education'