Eric Frank on Flat World Knowledge

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Eric Frank on Flat World Knowledge JANUARY–MARCH, 2010 VIRGINIA LIBRARIES PAGE 5 Building a Better Model: Eric Frank on Flat World Knowledge by Edward Lener and Cy Dillon ike everyone interested in Why did you start Flat World become more prevalent; gray mar- books, librarians are chal- VL Knowledge? kets have emerged for reimporting lenged by an era of upheaval After spending more than thirty low-priced international editions Lin the publishing industry, and no EF combined years in the college back into the United States; online part of that industry has been more textbook industry at market leaders piracy is growing; and textbook controversial recently than textbook McGraw-Hill, Pearson, and Thom- rental models are sprouting. Pub- publishing. Faced with dramatic price son (now Cengage), my cofounder lishers generally do not compen- increases, frequently revised editions, Jeff Shelstad and I reached the con- sate authors for any of these. and new options in content delivery, clusion that almost nobody was It was into this environment students, parents of students, fac- happy with the textbook indus- that we set out to build a text- ulty, and librarians alike have sought book publishing company — one lower-cost solutions for acquiring that would dramatically reduce texts and other class resources. In [We] reached the textbook costs, provide students response to this potential market, a with more choice of formats and wide variety of alternatives, includ- conclusion that almost price points, give faculty control ing rental books, online versions of to modify and integrate content print texts, cooperatively written and nobody was happy with into their courses, give customers updated online texts, books available the textbook industry control over timing of changes to from sites supported by advertising new editions, and provide authors revenue, print-on-demand books, anymore. with a steady royalty stream for used-book cooperatives, and a variety their intellectual property. Our of combinations of these approaches, model is better because it addresses have come into being, in most cases try anymore. Students, who are the main concerns of all parties as Internet commerce initiatives. At often on the edge financially and involved and is consistent with the this point the most innovative of these struggling to stay in school, are way people will consume content alternatives is a company called Flat outraged at the cost of many text- in an Internet age. World Knowledge. Cofounder Eric books. Unable to afford textbooks Frank responds here to our questions, for all their classes, they may have Tell us a little bit more about describing in detail how the company no choice but to go without, which VL your open textbook model. came to be and the methods it hopes puts them at a learning disadvan- Flat World Knowledge is the to use to acquire a substantial share tage. Educators are often frustrated EF leading publisher of commercial of a market currently dominated by at the difficulty of adapting text- open-source textbooks for higher a few traditional publishers. Flat book content into their courses. education. Well-respected subject World’s innovations and concern for Both of these groups are exhausted matter experts write our textbooks. both customers and authors suggest by the pace of new editions, which The books are peer-reviewed, pro- that publishing as a whole has the often seem to be published solely fessionally edited, illustrated, and potential to emerge from the current to drive used books and other designed, and made available free state of confusion into a new order of lower-cost alternatives from the online under a Creative Commons flexibility and responsiveness to read- market. For their part, authors have license to educators and students. ers’ needs. watched with growing alarm as the Educators have the freedom to use textbook publishers, like music the books as they are or to reor- studios, seem to have lost control ganize and edit them to suit their of their content. Used books have unique requirements. Students PAGE 6 VIRGINIA LIBRARIES JANUARY–MARCH, 2010 can access the books free online or of a complete, free online book, to three things. First, even in bad purchase alternatives ranging from students did purchase alternative times, an innovation-oriented mar- print-on-demand versions of the formats (print, audio, etc.) and ket always has capital investments books, to audio versions, to down- study aids (online practice quizzes, for good ideas that can work. A loadable versions (by the book or digital flashcards, etc.) in sufficient poor economy may decrease the by the chapter) at a fraction of the volume to build a sustainable, prof- total amount of capital available cost of traditional textbooks. Our itable business around an open and make the holders of that capi- approach is device agnostic, so textbook model. As for the quality tal more stringent about how and students can use our digital books of our books and related teaching where they invest, but in the end on their laptops, favorite e-reading resources, the faculty who used good ideas and execution will, I devices, or web-enabled mobile them rated them as comparable believe, get funded. The textbook phones. Students can choose to or, in some cases, better than the market is ripe for innovation, and purchase from a range of digital traditional textbooks they had I think funders saw that. Second, study aids that we create to support used previously. Beyond validation our backgrounds helped us raise each book. These include audio of those two important elements, money. A lot of venture capital was study guides, online interactive we learned that while the mantra burned up in the 1990s in educa- quizzes, and digital flashcards of tion without many positive results key terms and concepts. Flat World for investors (or consumers). Many Knowledge backs our textbooks of those ventures were led by tech- with an online social learning … the mantra of building nologists who did not understand platform that also allows students online real estate education. That is clearly not the to learn from one another through case with us. Our team brought a things such as the ability to take needs to be “usability, lot of experience in the higher edu- and share notes. cation space, with over thirty years It seems to be working. In spring usability, usability.” of experience at the big textbook 2009, we had twenty-seven classes publishers. Investors knew we had with 750 students using our books. a good idea, but more important, By fall 2009, we had expanded to of physical real estate is “location, they believed that we understood 480 classes and approximately location, location,” the mantra of the nuances and potential hazards 40,000 students. We are grow- building online real estate needs in the textbook market and could ing through word-of-mouth more to be “usability, usability, usabil- successfully navigate those to build than anything at this point, which ity.” It was really eye-opening to a business. Third, the higher edu- is gratifying to see so early in our observe how people used our site. cation market generally behaves launch. Things that we thought were obvi- counter-cyclically to the overall ous were not, and people often economy. As the economy con- You conducted beta testing at tried to do things that we never tracts, enrollments expand. Those VL several colleges and universi- intended or considered. Therefore, new enrollees are often economic ties. What were some of the most we essentially engaged in a com- refugees, and they are acutely important lessons you learned plete redesign of the site, and con- price-sensitive when they arrive at from this real-world testing in stant redesign is now a dynamic a college or university. Such stu- classrooms? process going forward. dents embrace solutions that can In the fall semester of 2008, reduce their cost of education. As EF we ran in-classroom tests in Publishers Weekly reported a result, in many ways, the overall twenty university classes with VL that you acquired additional timing for us to launch our busi- around 500 students enrolled, fol- financing in 2009. To what do you ness was ideal. lowed by a larger test in spring attribute your success in such tight 2009 with twenty-seven universi- economic times? Why would an author initially ties and 750 students. In doing We raised $700,000 in private, VL be drawn to your publishing so, we learned a number of valu- EF angel investments in the fall of model? able lessons. Most important, we 2008 as things began to implode As of this writing, over half of validated two critical components around us in the economy. Next, EF our authors (and we have over of our model — first, that “free” we raised over $8,000,000 in ven- seventy under contract) are success- can work as a business model, and ture capital in February 2009, right ful textbook authors at the major second, that quality matters. We in the heart of the “Great Reces- publishers. The others are all rec- found that despite the presence sion.” We attribute our success ognized scholars or leading teach- JANUARY–MARCH, 2010 VIRGINIA LIBRARIES PAGE 7 ers in their fields who have never customers to make changes to the of the new venture. They get stock written textbooks previously. Our book and then capturing all of options in the business when they model attracts authors for some those changes in a reportable for- successfully deliver a manuscript clear and compelling reasons. mat, we are able to provide authors for publication. We also offer First is a potential for higher with real-world information about options for authors who bring us royalties.
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