Classroom Technology

Big Hype, Hard Fall for News Corp.'s $1 Billion Ed-Tech Venture

By Benjamin Herold — August 25, 2015 8 min read
Joel Klein, executive vice president of New Corp., left, along with Rupert Murdoch and Murdoch's wife, Wendi Deng, during the height of News Corp.'s 2011 phone-hacking scandal.
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The global media giant News Corp. sought to push its way into the K-12 marketplace five years ago by betting big on technology.

Now, despite a $1 billion investment and a steady stream of brash promises to radically disrupt the way public schools do business, the company’s education division, known as Amplify, is deeply in the red and on the auction block.

Veteran observers of the fickle K-12 ed-tech market say they aren’t surprised.

“There’s a long history of education entrepreneurs who have crashed on the rocks because the market was not what they thought it would be,” said Douglas A. Levin, a consultant on the ed-tech market and the recent head of the State Educational Technology Directors Association.

Earlier this month, it became clear that the highly publicized venture had become a financial albatross. When News Corp. announced that it would write off the education division’s $371 million in losses over the past year and look to sell off Amplify, investors cheered, sending the parent company’s share price up 7.5 percent, to $14.89.

Inside schools, meanwhile, the ripple effects of Amplify’s striking demise promised to be minimal. A majority of the 30,000 or so tablet computers sold by the company went to a single district, and Amplify fell far short of its modest goal of getting its no-expense-spared digital curriculum into the hands of 30,000 students by the 2015-16 school year.

Experts attributed the company’s lack of impact on the K-12 market to a series of miscalculations.

First, News Corp. wagered that it would be able to leverage the established assessment and analytics business of Wireless Generation, the nonprofit company that it acquired for $360 million, as a vehicle for selling whole new product lines to schools. (Wireless Generation co-founder Larry Berger, who moved into a top post with Amplify, was a board member of Education Week‘s nonprofit parent company until last month.)

Then, News Corp. gambled that a digital device designed specifically for classrooms could compete for market share inside schools with popular consumer electronics, such as Apple’s iPad.

And ultimately, Amplify staked its future on the mistaken belief that it could dramatically disrupt the K-12 instructional-materials market—a notoriously slow-to-change field long dominated by a few major players.

The irony of Amplify’s rapid rise and fall, Levin said, is that the company was correct in asserting that public schools in the United States are finally ready to shed the status quo and embrace the digital revolution.

But the company miscalculated, he said, in thinking that schools would shift their dollars and loyalties overnight from the large companies they knew to a large company they didn’t.

“Schools weren’t looking for a substitute,” Levin said. “They were looking for more choice.”

Grand Vision Collapses

When asked for comment about Amplify’s troubles, a spokesman for the company said only that it was “focused on the growth and success of our digital curriculum and assessment products,” and that it looked forward to “partnering with those who share our commitment to reimagining the way teachers teach and students learn.”

Amplify’s tablet business has been discontinued.

That new reality is a far cry from the vision that Joel A. Klein—the hard-charging former New York City chancellor hired in 2010 by News Corp. Chairman Rupert Murdoch to run the company’s new education division—laid out to investors at a June 2013 conference.

Then, Klein described Amplify’s strategy as a “three-part play” that would “radically transform the system.”

Amplify Insight, Klein said, was “all about analytics, data, and assessment.” That was the work of Wireless Generation, which had already established a strong presence in the K-12 market, with tens of millions of dollars’ worth of contracts from districts, states, and federally funded consortia developing tests aligned with the new Common Core State Standards.

Amplify Access was to be the company’s “platform play,” through a “tablet that we’ve optimized for K-12,” Klein said.

And Amplify Learning, a core curriculum originally intended to cover math, science, and English/language arts for grades K-12, was to be the company’s “leapfrog play” that would allow Amplify to surpass its competitors.

Klein boasted that Amplify would be able to quickly outmaneuver such established education publishers as Houghton Mifflin Harcourt, McGraw-Hill, and Pearson because it would not be tethered to “legacy” print products already in circulation.

By designing its materials to be digital-first and tailoring them to the common-core standards, Klein told potential investors, Amplify was going to “attack” what he described as K-12 education’s $17 billion instructional materials and technology markets.

From the very beginning, that vision ran smack into messy realities.

In September 2011, before News Corp. had even rechristened its prize acquisition, Wireless Generation lost a $27 million no-bid contract with the New York state education department. The state comptroller raised concerns about the scandal over illegal phone-hacking then engulfing a British newspaper owned by News Corp. and, perhaps, bowed to pressure from New York teachers’ unions long-hostile to Klein.

Then, in October 2013, Amplify’s first—and, as it turned out, only—significant digital-tablet client suspended use of the devices after reporting high breakage rates and related hardware problems.

The 73,000-student Guilford County, N.C., district eventually got its tablet-computing initiative back on track, thanks in large part to Amplify’s willingness to absorb millions of dollars in losses to keep the project alive.

By that point, however, the Amplify brand had been tarnished, and the landscape had shifted. Tablets of all sorts had begun to lose K-12 market share to Google’s Chromebook.

In retrospect, said John Richards, the president of Consulting Services for Education Inc., which advises education companies, attempting to create its own hardware to compete with consumer products was Amplify’s first big mistake.

“There has never been a successful ‘education machine,’ in part because of the speed of improvements in consumer electronics,” Richards said.

“It’s best to leave the hardware to the professionals.”

Curriculum Falls Flat

Amplify’s biggest bet, though, was on its curriculum.

During that same 2013 talk to investors, Klein referred to the company’s $180 million investment that year, which had shown up as operating losses on News Corp.'s books. Klein said to expect more of the same the following year.

See Also

Timeline: Amplify’s Big Flop

“While it’s obviously significant, I think it’s absolutely essential,” he said of the gobs of money the company was pouring into product development. “This is not a market you’re going to disrupt … unless you’re willing to put in the resources.”

At the South by Southwest education conference in March 2014, Amplify unveiled its middle-grades English/language arts curriculum—replete with dramatic readings by famous actors, graphic-novel-style animations, and heavy use of educational games.

During an earnings call shortly before the launch, News Corp. CEO Robert J. Thompson expressed confidence that the new product, which he described as “the most important part of the Amplify suite,” would take off.

“We’ll be more than competitive come the time for [contract] tenders,” Thompson told analysts, specifically mentioning upcoming statewide materials adoptions in California, Idaho, Oklahoma, and West Virginia.

But that year’s instructional-materials selling season was already well underway, putting Amplify at a huge disadvantage. Poor sales left the company under pressure to win contracts for its curriculum during the winter and spring of 2015.

During the most recent instructional-materials sales cycle, the curriculum flopped again.

News Corp. Chief Financial Officer Bedi Singh was left to break the news during the company’s Aug. 12 earnings call.

“The recent selling season for the new school year for our digital ELA curriculum overall has been disappointing, and the marketplace for digital curriculum has been much slower to develop than we initially expected,” Singh said. “We are in the advanced stages of reviewing strategic alternatives for Amplify.”

Disruption Lessons

It’s not unusual for large companies with limited experience in the education market to make such big missteps, said Karen Billings, the vice president of the education division of the Software & Information Industry Association, a Washington-based trade group.

Selling to schools is difficult because the process is so decentralized and bureaucratic, Billings said. And because districts’ central offices are often divided into distinct silos, there are no guarantees that success selling one line of products and services will translate to other offerings. Companies also often underestimate just how big a deal it is for a school district to shift from one product line to another.

The result, Billings said, is that supplanting the big educational publishers is easier said than done.

“To disrupt them, you have to really understand what they do,” she said. “And what they do well is take care of [school] customers and transition them on a time frame that they are accustomed to.”

That reality, combined with the rapid proliferation of smaller ed-tech companies selling niche instructional materials targeted to specific grade spans, subject areas, and even skills, left Amplify out in the cold.

Perhaps a buyer for the company will soon be found, as News Corp. officials suggested this month. The obvious candidates would include the big publishers Amplify failed to displace, or possibly a large technology company hoping it can succeed in the education market where News Corp. did not.

Whoever it may be, Billings said, the biggest lesson to be gleaned from Amplify’s failures is the importance of patience.

“With such a huge number of companies coming into the education market, it’s really going to be difficult to be successful quickly,” she said.

“I think Amplify’s expectation was that it could sell a lot more products a lot more quickly than it did.”

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Staff Writer Michele Molnar and research library intern Maya Riser-Kositsky contributed to this article.
A version of this article appeared in the August 26, 2015 edition of Education Week as Big Hype, Hard Fall for News Corp.'s $1 Billion Ed-Tech Venture


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