Articles Tagged with economy

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Foot on nailsLast December I penned (keyed?) a relatively optimistic piece about education spending, with the conclusion that the textbook adoption market was in a crash but supplemental materials were in a short-term stall. I had it right on the first point and wrong on the second – we have seen a full blown market crash across the board this year. There are still sound reasons for long term optimism, but the near term remains grim.

After the election I decided to read Nate Silver’s book “The Signal and the Noise: Why So Many Predictions Fail – But Some Don’t”. I was hoping to find insights on why I’d gotten it wrong, and so far I’ve not been disappointed.

Early on he outlines the distinction between risk and uncertainty in a way that is highly relevant to how we understand where we are in education publishing.

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hope streetThese are grim days for the world of education. Funding cuts past, present, and future loom over schools and districts. Class sizes are swelling, essential services are being trimmed, and any spending decision that can be delayed is sitting in limbo.

The companies that serve schools are feeling the pinch even deeper – while school budgets are down roughly 10%-15% scuttlebutt around the industry has most education companies down 20%-40% from 2011. Data systems, some technology niches, and companies with strong international presence are doing better, but those are the exceptions not the rule.

Relatively speaking schools have bad colds, we have pneumonia.

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500px-Train_wreck_at_Montparnasse_1895Is the instructional materials market in the tank? I’ve spoken with people at a dozen companies who are all seeing the same thing – since November 1st a moderately down market has dropped like a stone. A senior executive at one of the big 4 publishers flatly stated that this was the worst he’d seen it in 35 years. I’m inclined to agree.

Since this appears to be an industry wide phenomena how should companies react? That depends on whether you think this is a temporary stall or a permanent realignment of funding for materials. How you see that depends on whether you focus on the supplemental or basal market.

For the supplemental market the evidence points towards a stall – at least so far. Low sales numbers don’t match the funding availability, there is no evidence that a huge amount of funding has been pulled from the market all of a sudden, What we do have is an abundance of uncertainty which is prompting districts to sit on the funds they have.

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Distilling the range of policy positions on our current economic malaise is a huge challenge, but fortunately Rortybomb is up to the task. I recommend his post – A Topological Mapping of Explanations and Policy Solutions to Our Weak Economy.

Not only does he provide spiffy venn diagrams that distill people’s positions he also provides extremely useful links to articles that lay out those positions.

As a business leader I recommend this post for those wanting to dig deeper on what the road ahead might look like for our organizations.

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500px-Train_wreck_at_Montparnasse_1895Yesterday the minority in the Senate ended the chances that the Extender’s Bill would pass the Senate. While 57 Senators – a clear majority – wanted to do the right thing a determined minority used procedural votes to force mass layoffs of teachers, firefighters, and police across the country (300,000-500,000).

There are rumors that the two sides are still talking – but most analysts say that any action will likely take place after the Summer Recess in mid-Fall.

It isn’t just education that is affected. Over a million people will be dropped from unemployment rolls. As a side benefit Hedge Fund Managers get to keep paying taxes on their multi-million dollar bonuses at a rate (15%) lower than most of the formerly employed teachers and cops (25%).

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IMG_6382.jpgEducation jobs fell for the first time since 1959 while enrollments were increasing. There were only three other years in the past 50 years where education employment shrank – and all of them were during periods of declining enrollment as the baby boom petered out.

Business Week has the details.

The decline was -0.9%, or 121,000 jobs lost. It is also the biggest drop by a wide margin in both percentage and actual jobs (the previous record was 1981 where it was down -0.4% or 29,000 jobs).

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Doug Stein of Memespark responded in comments to my last post and as usual his insights add a lot to the conversation and make the connection to education publishing more relevant and real. For that reason I’ve bumped this comment to its own post.

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let-the-stress-begin.jpgBy Doug Stein

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125x125This article is based on notes from a panel at the Ed Tech Industry Forum in New York that took place in December. The insights the panelists shared are no less relevant now that we are into the new administration and sorting out the economic stimulus.

The panel consisted of:

The panel members are operators which stood in contrast to most of the investor oriented agenda at the ETBF.

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865433_money_mattersWhat impact will the economic stimulus have on educational materials and technology? A front page New York Times article yesterday left no doubt that education will be a significant part of the legislation. The Times reports that the total education allocation could be as much as $75-$95* billion a year over current allocations for the next two years. In sector that accounts for about $530 billion in total expenditures, 92% of which has traditionally come from state and local taxes, this represents a seismic shift in the Federal Government’s influence on the market.

The questions executives in the industry have to wrestle with are how much of the total will be spent on instructional materials, when will funds flow, and what products will schools buy? The answers to these questions will drive investments, hiring, and M&A for the next couple of years.

I’ve talked to a few folks around the industry to see what people are thinking and the notes below represent a collective set of insights. It is still early days, the legislation probably won’t be in a final format until mid to late February, but many companies are making decisions now about their ’09 plans.

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