I’m at an education conference put on by CET in Tel Aviv. This is the second day of the conference. The opening session is on business models for supporting the webification of the educational system.

Eli Hurvitz (former deputy director of the Rothschild Foundation, the funder of CET) is the moderator. The speakers are Michael Jon Jensen (Dir of Strategic Web Communications, National Academies Press), Eric Frank (co-founder of Flat World Knowledge) and Sheizaf Rafaelli (Dir. of the Sagy Center for Internet Research at Haifa Univ.)

Michael Jensen says he began with computers in 1980, thinking that books would be online within 5 yrs. He spent three yearsat Project Muse (1995-8), but left because they were spending half their money on keeping people away from their content. He went to the National Academies Press (part of the National Academy of Science). The National Academies does about 200 reports a year, the result of studies by about 20 experts focused on some question. While there are many wonderful things about crowd-sourcing, he says, “I’m in favor of expertise. Facts and opinions on the Web are cheap…but expertise, expert perspective and sound analysis are costly.” E.g., that humans are responsible for climate change is not in doubt, should not be presented as if it were in doubt, and should not be crowd-sourced, he says.

The National Academy has 4,800 books online, all available to be read on line for free. (This includes an algorithmic skimmer that extacts the most important two-sentence chunk from every page.) [Now that should be crowd-sourced!] Since 2005, 65% are free for download in PDF. They get 1.4M visitors/month, each reading 7 page on average. But only 0.2% buy anything.

The National Academy Press’ goal is access and sustainability. In 2001, they did an experiment: When people were buying a book, they were offered a download of a PDF for 80% of the price, then 60%, then 40%, then for free. 42% took the free PDF. But it would have been too expensive to make all PDF’s free. The 65% that are now free PDFs are the “long tail” of books. “We are going to be in transition for the next 20 yrs.” Book sales have gone from 450,00/yr in 2002 to 175,000 in 2010. But, as they have given away more, they are disseminating about 850,000 units per year. “That means we’re fulfilling our publishing mission.” 260,000 people have opted in for getting notified of new books.

Michael goes through the available business options. NAP’s offerings are too broad for subscriptions. They will continue selling products. Authors fund some of the dissemination. And booksellers provide some revenue. There are different models for long-form content vs. articles vs. news vs. databases. Further, NAP has to provide multiple and new forms of content.

General lessons: Understand your mission. Make sure your strategy supports your mission. But digital strategies are a series of tactics. Design fot the future. and “The highest resolution is never enough…Never dumb down.” “The print-based mindset will work for the next few years, but is a long-term dead end.” “‘Free’ of some kind is required.” Understand your readers, and develop relationships with them. Go where the audiences are. “Continue experimenting.” There is no single best model. “We are living in content hyperabundance, and must compete with everything else in the world.”

Eric Frank of Flat World Knowledge (“the largest commercial publisher of” open source textbooks) says that old business models are holding us back from achieving what’s possible with the Net. He points to a “value gap” in the marketplace. Many college textbooks are $200. The pain is not evenly distributed. Half of college students are in 2 yr colleges, where the cost of textbooks can be close to their tuition costs. The Net is disrupting the text book market already, e.g.,through the online sale of used books, or text book rental models, or “piracy.” So, publishers are selling fewer units per year, and are raising pricves to protect their revenues. There’s a “vicious downward spiral,” making everyone more and more unhappy.

Flat World Knowledge has two business models. First, it puts textbooks through an editorial process, and publishes them under open licenses. They vet their authors, and peer review the books. They publish their books under a Creative Commons license (attribution, non-commercial, share-alike); they retain the copyright, but allow users to reuse, revise, remix, and redistribute them. They provide a customization platform that looks quite slick: re-order the table of content, add content, edit the content. It then generates multiple formats, including html, pdf, ePub, .mobi, digital Braille, .mp3. Students can choose the format that works best for them. The Web-based and versions for students with disabilities are free. They sell softwcover books ($35 fofr b&w, $70 for color) and the other formats. They also sell study guides, online quizzes, and flashcards. 44% read for free online. 66% purchase something: 33% print, 3% audiobooks, 17% print it yourself, 3% ebooks.

Second business model: They license all of their intellectual property to an institution that buys a site license at $20/student, who then get access to the material in every format. Paper publishers’ unit sales tend to zero out over just a few semesters as students turn to other ways of getting the book. Free World Knowledge’s unit sales tend to be steady. They pay authors 20% royalty (as opposed to a standard 13%), which results in higher cumulative revenues for the authors.

They currently have 112 authors (they launched in 2007 and published their first book in Spring 2009). 36 titles published; 42 in pipeline. Their costs are about a third of the industry and declining. Their time to market is about half of the traditionals (18 months vs. 40 months). 1,600 faculty have formally adopted their books, in 44 countries. Sales are growing at 320%. Their conversion rate of free to paid is currently at 61% and growing. They’ve raised $30M in venture capital. Bertelsmann has put in $15M. Random House today invested.

He ends by citing Kevin Kelly: The Net is a giant copy machine. When copies are super-abundant, and worthless. So, you need to seel stuff that can’t be copied. Kevin lists 8 things that can’t be copied: immediacy, personalization, interpretation (study aids), authenticity (what the prof wants you to read), accessibility, embodiment (print copy), patronage (people want to pay creators), findability. Future for FWK: p2p tutoring, user-generated marketplace, self-assessment embedded within the books, data sales. “Knowledge is the black gold of the 21st century.”

[Sheizaf Rafaelli’s talk was excellent — primarily about what happens when books lose bindings — but he spoke very quickly, and the talk itself did not lend itself to livebloggery, in part because I was hearing it in translation, which required more listening and less typing. Sorry. His slides are here. ]

Categories: business, education, experts, libraries, liveblog, open access, too big to know dw