Education Pays Dividends for the Publishing Giants

Sunday Business (London, England), June 10, 2001 | Go to article overview

Education Pays Dividends for the Publishing Giants


T

ONY Blair used his victory speech in Downing Street to stress the importance of education for Britain, but his words have already been taken to heart by the world's leading media companies.

A British election which began and ended in a school was part of a worldwide trend. The British government is promising to boost education spending , while in the US the proposed federal budget for 2002 puts forward an 11.5% increase in education expenditure - the highest of any federal department.

Education is top of the agenda for politicians and societies all over the world, from Europe to the US to Asia.

French company Vivendi Universal, the world's second largest media business, is the latest to try to benefit from this trend. It has just bought the US publisher, Houghton Mifflin, for $2.2bn, making it the number two education company in the world behind UK giant Pearson, publisher of the Financial Times and joint owner of the Economist.

Pearson now gets about 60% of its revenues from education after its purchase last year of National Computer Systems for $2.5bn and its previous acquisition, Simon & Schuster, for $4.6bn.

"We believe the number of years children and adults spend in education will rise and in the US we see increasing numbers of adults returning to education," says Peter Jovanovich, chief executive of Pearson Education. "Governments across the world - both liberal and conservative - have been increasing spending on education."

Meanwhile, Reed Elsevier, the Anglo-Dutch publisher, is already the biggest educational publisher in the UK and has also gone back to school in the US with its acquisition of Harcourt General for $4.5bn. Harcourt, like Pearson's National Computer Systems, includes a substantial schools education and testing business.

Crispin Davis, chief executive of Reed Elsevier, says education, particularly in the US, is a good growth business, with margins of 15% to 20%. "It is a sustainable business, too, because education is not going to disappear and it is cash-generative. Across the world it is receiving more funding rather than less," he says.

He notes, too, that the "adoption" system, whereby half the states adopt new textbooks every four or five years or so, is almost the equivalent of an annual subscription for the firm which wins the process.

"It is close to the rest of our business, too, because we are targeting users - teachers - with value-added, proprietary, must-have products, just as we serve scientists and lawyers."

Education is a growth industry worldwide, driven by rising enrolments and increased government spending, as Vivendi Universal's chief executive, Agnes Touraine, noted after the Houghton Mifflin acquisition. "After a decade of consolidation, the education market has now become global and the US is the largest and most dynamic market in the world," she said.

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