Common Core standards shake up the education business

New York State has become the epicenter of a major transformation in the $7 billion textbook industry that threatens the preeminence of publishing behemoths like Pearson.

A few large companies have monopolized the business for decades, although lately, districts have begun to move away from printed textbooks. Now, the new Common Core State Standards in math and English are accelerating the trend as schools overhaul curricula to meet tougher academic guidelines.

Small nonprofits, education technology startups, and companies that have never dabbled in producing educational content are stepping up to create learning apps and even full curricula that schools can use in addition to—or in place of—their old textbooks.

“If I owned stock in a big publishing firm, I would sell it because I don’t have faith in their nimbleness,” said Patrick Murphy, a political scientist at the University of San Francisco and co-author of a 2012 report estimating how much it could cost states to implement Common Core.

New York has been the most prominent state to toss aside the old business model of relying on textbooks printed by the publishing giants. When it sought proposals for companies to create a statewide curriculum that matched the new standards, a key requirement was that any bidder had to offer the materials free online.

The large publishing companies, including Pearson and Houghton Mifflin Harcourt, balked. Pearson spokesperson Kate Miller says the London-based company has been moving rapidly to create digital products, which she said last year were responsible for more than 50 percent of the company’s revenues. “We don’t even want to be called a textbook company anymore,” she said. (The company’s North American education revenues were $2.6 billion in 2012.)

But giving away materials online meant losing potentially lucrative funding streams from selling materials to other states and districts. And the big publishers would have required more money, says Peter Cohen, president of McGraw-Hill Education K-12, based in New York City. At least $80 million for an elementary reading curriculum, for instance, not the less than $8 million New York paid.

“What they got is not what we deliver,” Cohen said.

So instead, in 2012 the contracts went to a group of four smaller organizations, including three nonprofits.

“This is an open educational resource, so it’s a new breed of publisher,” said Scott Hartl, president and CEO of New York City-based Expeditionary Learning, which, prior to its curriculum contract with New York, focused mainly on running a growing network of schools in New York and other states.

The organization won a contract for $1.7 million from New York State to develop an English curriculum for grades three through five. A for-profit Boston-based company, Public Consulting Group (PCG), which provides schools with data services and advice on how to turn around struggling schools, won a $7.3 million New York contract to write an English curriculum for high school. (The company hired Expeditionary Learning to write the curriculum for grades six through eight.)

Core Knowledge, a Virginia-based nonprofit, won $5.1 million from the state to create an English curriculum for prekindergarten through second grade. And Common Core in Washington, D.C., another nonprofit, whose name predates the creation of the new standards, is writing the math curriculum for all the grades for $8 million.

The money came from a federal grant New York won in the Obama administration’s Race to the Top competition. Materials have been produced in fits and starts, with some of the units finished by last spring and others still to come later in the year.

In New York, districts aren’t required to adopt the state-sponsored materials. In New York City, for example, the Department of Education has recommended two different curriculum options in middle school English, the Expeditionary Learning curriculum and one produced by Scholastic, a large for-profit company.

The new models are supposed to provide cost savings for schools and districts since they rely heavily on online articles and materials that are downloadable from the Internet instead of pricier textbooks.

But adopting the state curricula won’t be free, as districts and schools are already finding. Schools still will have to buy sets of novels and math materials, such as individual dry-erase boards for students.

And teachers must also learn the new curriculum, which can take time and money. Although dollars spent on professional development can be hard to calculate, school districts have had to find hours over the summer or during the school year to train teachers, and in some cases pay them for the extra time or pay substitutes to replace them in class. The cost of sending educators to conferences or hiring outside trainers can also be steep.

As they roll out the new materials, the organizations have been selling their training services to schools (although under their contracts, they’ve offered a series of free in-person trainings to New York State teachers).

“This was a lever into professional development market,” said Cheryl Dobbertin, Expeditionary Learning’s professional development director.

New York schools aren’t the only ones that will make use of the materials the organizations have created. Expeditionary Learning, for example, has been hired by Teach for America, the KIPP charter school network, and the state of Delaware to train teachers. The groups and state officials say other states have also expressed interest in using New York’s curricula, meaning big publishers may find fewer buyers for their new Common Core products.

But major education companies say they’re adjusting to the new business environment. “I think it’s a mixed bag in terms of what it’s going to mean from a business point of view,” said Margery Mayer, president of Scholastic Education. “But I think it’s looking better, honestly.”

She said districts are still purchasing Scholastic’s nonfiction books for school libraries and guided readers for small-group lessons, for example. And Mary Cullinane, Houghton Mifflin Harcourt’s executive vice president of corporate affairs, said the Boston-based company was seeing “steady adoptions and purchases across the country” of its new Common Core products.

Testing will also likely remain a significant revenue source for the big companies under Common Core. CTB/McGraw-Hill has won multiple contracts to help develop questions for Common Core tests. In 2011, Pearson won a $32 million contract to develop New York’s standardized tests, a contract that runs through 2015.

“I’m not overly concerned about this,” said Cohen. “[You would be] hard pressed to find a school district that doesn’t have a Mcgraw-Hill program of some kind.”

Even so, education observers believe the new business models popping up to respond to the Common Core standards represent a turning point in the industry.

An important incentive driving the nonprofits to become curriculum publishers was not the money, but the chance to spread their ideas about education reform to more schools. Expeditionary Learning is a strong proponent of project-based learning, for example. And Core Knowledge promotes a back-to-the-classics philosophy of education based on the writings of its founder, E.D. Hirsch Jr.

“They’re just really focused on having that idea spread. I know that they loved the idea of having the program online for free,” said Lisa Hansel, a spokeswoman for Core Knowledge. “They were planning on putting it online for free anyway.”

The Hechinger Report provides in-depth, fact-based, unbiased reporting on education that is free to all readers. But that doesn't mean it's free to produce. Our work keeps educators and the public informed about pressing issues at schools and on campuses throughout the country. We tell the whole story, even when the details are inconvenient. Help us keep doing that.

Join us today.