Education & Distance Learning Enthusiasts- 2003 Trends Will Shape Dynamics in a Challenging 2004 for Electronic Media

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2003 Trends Will Shape Dynamics in a Challenging 2004 for Electronic Media

Electronic Education Report - January 9, 2004

In 2003, tight money collided with increased demands that K-12 electronic instructional media demonstrate effectiveness in helping students achieve. The nation's schools have turned a keener eye on electronic instructional materials in search for the most relevant bang for their scarce bucks.

Among the forward strides made in the industry were the ascendance of virtual schools and a focused interest in instructional management systems and diagnostic and prescriptive assessments. These trends look to continue their momentum in 2004.

The K-12 electronic media market inched up 1.5% to $1.63 billion in 2003, according to Simba Information, which publishes EER. The factors at work in 2003 portend another challenging year for publishers in which the canniest sales strategy and pinpoint marketing will be deciding factors in success. Simba projects the market will decline in 2004 - down 1.4% to $1.60 billion - before picking up steam in 2005.

The following are the top 10 stories of 2003 that EER projects will shape the dynamics of the industry in 2004:

#1. Federal Funds Begin Flowing to Schools: In summer of 2003, 18 months after the enactment of No Child Left Behind, the bottleneck in federally funded programs like Title I and Reading First began to loosen, and federal funds began reaching schools, spurring increased spending, though not enough to offset cuts in state allocations and local school budgets. Federal funding will be a crucial element in the industry in 2004. Between 2002 and 2004, federal allocations for Title I will have increased 19% to $12.4 billion. (EER, June 20, 2003).

#2. Federal Ed. Tech Study Launched: The U.S. Education Department in the spring launched a $15 million, five-year research project to examine the impact educational technology has on student achievement. The NCLB-mandated study is expected to provide long-awaited answers to questions about the effectiveness of technology and instructional software on the learning process. (EER, Feb. 14, 2003).

#3. Product Studies Bloom: By requiring that federal funds be spent on programs that incorporate research-proven techniques and teaching methodologies, the U.S. Department of Education has fueled a boom in studies and product evaluations. These studies, now a cost of doing business for publishers, are most important in reading, but are expected to affect materials in other core disciplines as well. (EER, March 28, 2003).

#4. Plato Learning Acquires Lightspan: In a drive for scalability, Plato Learning in November completed the $56.5 million stock acquisition of Lightspan, enhancing its assessment and elementary offerings, as well as boosting its remedial offerings to community colleges. The deal transforms two middleweight contenders into a single powerhouse with combined 2003 revenue of about $136 million. (EER, Sept. 12, 2003).

#5. Riverdeep Management Buyout: Also reacting to the climate for educational publishers, Riverdeep management led by CEO Barry O'Callaghan in the spring took the company private. The move was viewed as an effort to focus on building momentum in the K-12 and retail markets, after several years of growth chiefly attributable to acquisitions. (EER, April 25, 2003).

#6. Houghton Mifflin Shifts Technology Strategy: With the sale of software and video unit, Sunburst Technology in October 2002, textbook publisher Houghton Mifflin began a shift in its approach to technology to use it to augment its textbook programs. During 2003, the company also sold K-12 software network Classworks (in March) and tapped Classwell as a platform for e-textbooks. Further transformation occurred in October, when Houghton acquired Cognitive Concepts and its flagship Earobics Literacy Launch reading-improvement product and, in December, with the acquisition of Web-based assessment platform Edusoft, giving Houghton strongholds in two crucial areas - reading and assessment. (EER, April 11, 2003).

#7. Targeting Urban Districts: Among companies that successfully increased revenue in 2003, a primary contributor was the strategy of targeting large urban districts, as well as marketing to the key areas of assessment and reading improvement. Princeton Review won an $8 million contract to provide low-stakes assessments for New York City schools. LeapFrog made inroads in Chicago, while Scientific Learning scored in Philadelphia. (EER, Aug. 15, 2003).

#8. Instructional Management Gains Traction: The data reporting requirements of NCLB drove districts to bite the bullet and seek big-ticket instructional management system software. Some 38% of U.S. districts planned to purchase an IMS in the 2003-04 school year, according to Quality Education Data, decisions that are expected to benefit Renaissance Learning, Plato Learning, Pearson Digital Learning and CompassLearning. (EER, Oct. 10, 2003).

#9. NASTA Weighs Electronic Materials for Adoptions: Standardizing the process for including electronic instructional programs in state adoptions was the hot topic at the annual summer meeting of the National Association of State Textbook Administrators in July. Adoption states vary in whether and how they include electronic materials in their statewide adoptions. Florida, Georgia, Kentucky, Tennessee and Texas each have processes in place for electronic materials. (EER, July 11, 2003).

#10. Virtual Schools Build Momentum: A Peak Group study commissioned by the Software & Information Industry Association and released in January projected that online distance learning will pick up and reach as many as 1 million K-12 students by 2005. Unlike the higher education sector, K-12 virtual schools tend to remain supplemental in nature. Cyber schools are popular for Advanced Placement courses and for providing depth to the educational experience for small and rural schools. (EER, Feb. 28, 2003.)

The following are the top 10 stories of 2003 that EER projects will shape the dynamics of the industry in 2004:

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