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The major textbook publisher became private. What does this mean for his transition to digital?

 The major textbook publisher became private.  What does this mean for his transition to digital?

The transition to digital format has been difficult for publishers of traditional textbooks. One of the largest of these companies will try to continue the transition as a private company, hoping that additional capital and institutional knowledge will help.

Houghton Mifflin Harcourt, a Boston-based provider of educational content and technology for K-12, has completed the sale of Veritas Capital, an investment firm that advertises itself as committed to improving education.

According to publicly available documents, the deal gave the publishing giant an estimate of $ 2.8 billion based on a price of $ 21 per share.

Company executives say the deal positions them upcoming extensions. Its executives say the company will focus in particular on student capital, though they declined to offer details.

The textbook publisher announced the sale back in February. But this was controversial because some shareholders felt the offer was underestimated by Houghton Mifflin Harcourt. Some of these shareholders, including Engine Capital Management, publicly condemned the sale and even reportedly hired a law firm to find out whether the transaction is a breach of trust.

Eventually, the company reported that about 57 percent of its shares had been sold.

Fragmented and competitive

According to experts, the world of textbooks is much more fragmented and competitive than in the mid-2000s.

Where once traditional textbook publishers stayed in the market, they are now struggling to catch up with companies that are native to the digital ecosystem, such as Cengage, which had failed merger with one of the traditional publishers McGraw Hill at the very beginning of the pandemic in 2019.

The transition to digital mode has been a long one, much longer than the companies had predictedand traditional publishers have had to tackle painful questions about how to create and deliver compelling content in the digital age, which has led experts to describe as mixed results.

Like other giant textbooks, HMH has struggled to move to digital. In recent years, the publishing house ranks mid-place, with more performance than McGraw Hill, but not as good as companies like Pearson, says James Wiley, chief analyst at research and consulting firm Eduventures. HMH, for its part, has historically humiliated the transitionand CEO Jack Lynch said they acted from a “sea of ​​peace”.

A smart first step

Wiley says this is the perfect time for Houghton Mifflin to reconsider his model.

“When it comes to developing and delivering digital content, [the business model used by traditional publishing] was not meant for us in this modern world, ”Wiley says.

He also believes that Veritas was a good choice.

Clearly, the Veritas deal gives HMH access to capital, which is good for them, Wiley says. But the key will be whether Veritas can provide expertise to help companies move to a digital ecosystem.

He says the publisher should play catch-up.

One question is whether HMH will understand how to use adaptive learning tools to make its products more than just a textbook, Wiley says.

Another area of ​​innovation, Wiley says, is developing content and services to help develop digital skills.

“I think they have a way, but I think it’s a good first step,” concludes Wiley.

Daniel Molenkamp is an EdSurge business reporter. He can be contacted at daniel@edsurge.com.

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