School Tools: Lesson in Survival of the Fittest

I think there is also an investment opportunity here as the writing on the wall has scripted the fate of the traditional textbook -- particularly as Houghton Mifflin recently filed for bankruptcy. I have started to wonder, what does it mean for traditional rivals such as McGraw-Hill(MHP) and Pearson(PSO) ?

One prominent publisher, Thomson Reuters is starting to take notice by having recently exited its publishing division when earlier this year Apple announced the availability of its popular iBook to a wide range of authors and to students - one that includes the U bookshelf from its iTunes store.

The idea is that schools will be able to purchase books in similar fashion to how music is sold. So in essence, with the use of a couple of apps, Apple has (somewhat) addressed the concerns surrounding the digital divide while introducing several advantages in cost, interaction, size, as well as functionality.

Education is always going to present some challenges. But as with anything else a challenge is always one good idea away from being met. No industry has been able to come up with more good ideas than technology, so it makes for the perfect partnership.

Technology giants like Apple, Microsoft and Google realize that in order to further their own corporate mission, they will need to make important early investments in education; they are training the next generation of talent needed to compete effectively within emerging markets.

The Bottom Line

The dark side of technological evolution is the business aspect, what is effectively known as survival of the fittest -- hence, the pending demise of some of the most prominent publishers. From an investment perspective it is hard to be bullish on names such as McGraw-Hill or Pearson and say with any degree of certainly that they have a future -- particularly for McGraw-Hill which has traded flat on the year and is down 40% over the past five years.

The industry has to contend with budget-conscious school committees who find it hard to justify buying more print books while introducing tools such as Moodle, FlexBook and Blackboard that help trim costs for paper and toner and are more eco-friendly.

For publishers, I suppose it is fair to say that the environment is no longer suitable.