Eric Frank Interview Notes - October 22, 2009

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Conducted with Erhardt Graeff via telephone on October 22, 2009, concerning Flat World Knowledge's business plans and approach to OER/textbook publishing.

Interviewee

Questions

  • Content Development Strategy
  • Partnerships w/ OER or Larger Publishers?
  • Major Successes to date
    • Sales rates
    • What part is educating profs/teachers? Is this marketing?
    • Where do the majority of your profits come from?
  • Do you see anyone else in this same space that you are competing with?
  • How are you getting the word out about Flat World Knowledge? Salesmen like trad. Pubs?
  • Why the specific CC license?
    Are all materials licensed as CC BY-NC-SA?

Notes

History of Flat World

  • 30 years of experience at big 3 publishers (left Pearson for FWK)
  • Not a open-source bone in their bodies
  • Hadn't felt an impact of openness on EM sectors
  • Believe the industry was broken and not address audiences adequately (practical pain points)
    • Students: paying too much for what they were getting in return; being treated as a captive audience (buy new or used, still expensive decision), not being treated like a consumer with real choices
    • Faculty: cost issue (out of empathy or self-interest--students are buying required books/versions); CONTROL ISSUE: no two faculty teach the same way: all rights reseved textbooks are black boxes; and publishers were trying to solve business issue on backs of faculty of students—new editions that change curriculum
    • Authors: working increasingly quickly (revisions come faster) and watching royalty statements erode
  • Bookstores and Universities concerns were less relevant to them
    OPINION: They need to re-do their business models to deal with disruptive internet technology, too

Business Plan

Creating an Open Access Business Plan

  • First Draft: Let's build lots of cool stuff to engage students in education more
  • Games, highly interactive learning modalities, JIT content, massive multiplayer problem-solving games
  • This wouldn't resolve pain people are currently feeling
  • After 30 years of seeing innovative product launches fails
  • Don't compete at the higher end of learning because its too disruptive (people see its value but don't adopt)

Final Draft: Resolve Immediate Pain Points

  • Embed assessment in rich content but don't pitch as assessment-based learning (change educators styles)
  • Build textbooks in same ways with additional efficiency
  • Add value to World-Class Authors
  • Make competitive w/ major publishers
  • How is it different than McGraw-Hill
    • open set of tools
    • open license
    • open source
  • Expect authorship and production + open license and open tools
  • Addresses Faculty Issues
  • Transferred control back to faculty members with adopting versions as needed and custom textbook creation
  • For Students
    • Device agnostic as possible
    • Simultaneous formats available
    • ePub files and iPhone applications planned for the future
    • Had long interviews with current students about what they wanted
      • Formats and Price points
      • Facebook free the textbook APP to test FWK's prototypes
      • 2000 students surveyed
      • 20 university courses adopted beta version of books
        Monitored in class use
  • SURVEY: Most students buy
    • 45% said would buy B & W book
    • Lower numbers are actually buying books
    • 60% are actually buying something

Success Rates

  • B & W print book is most popular (98% of all book sales)
  • Color books are almost never purchased (offering costs nothing additional to FWK)
  • PDF files very successful, but more purchasing at individual chapters
  • Audio is still an experimental offering
  • Base of students with eReaders is almost non-existant
    All file formats are important

Future Services/Ideas

  • Maintain flexibility
  • Not sure about future
  • Long-term strategy?
  • SIDE NOTE: Left in spring of 07, prototypes in spring of 08
  • After making open access commitment, you are in good position to be responsive to market

continue to build and offer new services

    • p2p tutoring service (fee-based)
    • Marketplace for user-generated study aids
    • Possible ad sales to job recruiters for leads in field-relevant textbooks
    • "Packaging" is a profit source currently
  • Focus has been on getting great authors, producing strong core content
  • Secondarily, website usability experience
  • Need to focus more on study aids
  • Consciously positioned themselves as a publisher (an open publisher)

Licensing IP

  • Core content is CC
  • All supplements are All Rights Reserved
    • Probably will be changed in the future to flexibility
    • Study aids will likely always be copyrights for students
    • Flat World is creating value-added
    • Access is for other creators
    • Core textbooks dominate profit margin
    • BW Books + Study Aids package = BW Books alone purchases

CC BY-NC-SA Rationale

  • Non-commercial
    • Financial model for authors: great royalties
    • Market share beyond normal book (open content)
    • NC is clause to protect that model
    • Some books cost hundreds of thousands to become marketable
    • Money should go back to FWK if its out there
    • Anybody could come along and turn around and sell it
    • Amazon will always be better distributed (could take “these excellent books” and republish them through their site)
    • Don't think they would have signed any authors without NC clause
    • This is important for both ideological and financially motivated authors
  • Share-Alike
    • Is a perpetuator of NC clause

Marketing Approach

  • Believed that you don't need sales rep army
  • Not true if your product is highly differentiated (other publishers compete for relationships with faculty members on similar products)
  • They 5 sales reps and direct marketing (a lot on the web, generating leads)
  • Message
    • Open Textbook is still equated largely with low quality
    • Name recognition of authors is important for uneducating and re-educating professors
    • Author Branding + Packaging (review books are color printed for professors)
  • 40,000 students using FWK books
    • Six books for Fall semester 2009
    • 30 university classes last spring testing books
    • 480 classes this fall

Profile of Adopting Universities

  • Problem for high-cost textbooks is ubiquitous
  • 1) four-year public colleges, 2) Community Colleges, 3) private universities
  • Each book has its own market for schools and classes though
  • Author and Title
    • Tax book: all community colleges
    • Micro-economics: ivy league school

FWK as Platform

  • FWK has been approached by some publishers to be a platform and distributor of their content
  • More likely than not that will go into that
  • They founding members in the Connexions Consortium
  • Linux/Red hat relationship would be interesting

Relation to Bookstores and Universities

  • FWK's attitude is that there is room for them to play together
  • But they are launching a new model and their pricing is at one cost
  • Need to retain value-added
  • If bookstores want to add value at local level
    • Not going to enforce list prices
    • BUT, Draconian return policy for bookstores (must cover cost of publishing because its on-demand)
  • Become print-on-demand solution (send them digital file and keep production costs and environment hit by transportation costs)
  • Bookstore has tried to convince Professors not to adopt FWK because of profit hit
  • Universities aren't excited about seeing revenues dry up from loss of bookstore sales
  • SIDE NOTES
    • McGraw-Hill is partnering with Chegg
    • Cengage has its own rental system

Perspective on OER Projects

  • They think of themselves as “Commercial” OER
  • Creating a lot of noise and atmosphere of change
  • Great initiatives that we can work alongside them (maybe long-term Red Hat / Linux)
  • Worry over excitement for peer-produced textbooks (Connexions doesn't display adoption in the marketplace)
  • If OER brand is tainted by disjointed products through interaction with sub-par Connexions material that hurts FWK's marketability
  • Participation is in usage not in creation (Wikipedia percentages)
    • Is the way content created an ends or a means?
    • We think its a means (pragmatic)
  • But if they could quickly created a Principles of Economics book through an open participation interface they would do it

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