November 21, 2017

The Advocate's Toolbox

Scholastic Sells Ed Tech Business to Focus on Publishing

ScholasticlogoWith the sale of its ed tech arm to Houghton Mifflin Harcourt (HMH) for $575 million in cash, Scholastic will shed its popular Read 180 reading intervention program, among other properties, to focus on its core publishing businesses, part of which delivered a 33 percent revenue surge in 2014.

Scholastic will also reinvest in library publishing, print and digital classroom magazines, classroom book collections, and other print and digital supplemental instructional resources for schools and teachers, according to company spokesperson Anne Sparkman.

The impact of the sale on the library field will be minimal, she says, “other than what may come from reinvestments in [Scholastic’s] book and reading programs, such as the Flix line of products.” Part of Scholastic’s Library Publishing division, Flix is a family of digital literacy resources for pre-K−12 students, which includes the popular TrueFlix and BookFlix products.

houghton-mifflin-harcourt-co-logoThe sale to HMH has been positioned by Scholastic as a move to narrow the company’s focus and reinvest in its children’s book publishing arm, which distributes through book clubs, book fairs, and e-tailers, according to a prepared statement. The company intends on investing the cash proceeds of the sale in its core publishing business, in addition to expanding its classrooms and supplemental materials—which includes classroom book collections, magazines, guided reading, and other instructional programs—and international sales areas.

Talks for the deal had been underway for the past four months, and proceeds of the sale, after taxes and other costs, are expected to net the company approximately $360−$370 million.

Overall, the ed tech industry is booming—CB Insights says investment in the field grew 55 percent to $1.87 billion in 2014. And Scholastic was no exception to that expansion: sales in the company’s ed tech division rose nine percent in the fiscal year ending in May 2014. However, the more established children’s book publishing and distribution business—which covers book clubs and book fairs—far exceeded that success, delivering a 33 percent revenue surge in book clubs and reaching $490 million in book fairs, respectively, in the last four quarters.

Kyle Good, senior VP of Scholastic’s Corporate Communications, told SLJ in an email, that she was seeing a “renewed interest across all business—book clubs, book fairs, and classroom and supplemental materials publishing.” She especially credited “new marketing strategies” for producing significant results in book clubs this year.

Harry Potter and the Sorcerer's StoneAlso part of the children’s book publishing division are top performers, including the “Harry Potter” and “Minecraft Handbook” series, and Raina Telgemeier’s graphic novels Sisters (2014), Drama (2012), and Smile (2010). According to Reuters, these titles also helped chart profit gains of 7 percent last quarter.

These products—plus a lump sum of cash—may make it easier for Scholastic to wave farewell to popular ed tech services, such as READ 180, MATH 180, and System 44, intervention programs that target struggling students, as well as early childhood education product, iREAD. These services require greater investments in product development and have a longer sales cycle than Scholastic’s core print and digital publishing businesses, said Scholastic’s Richard Robinson, chairman, president, and CEO, in a press release.

The deal is expected to be completed by this summer.

Carolyn Sun About Carolyn Sun

Carolyn Sun was a news editor at School Library Journal. Find her on Twitter @CarolynSSun.

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Comments

  1. As I read this article, it saddens me to see yet another “supposedly leader in literacy” and “company focused on our youth” buckle under the powerful greed of money. Sell the programs that have proven to help disadvantaged children, put the cash in your pocket and keep on going–and STEP on the children who thought Scholastic was different from all the rest and would be there to help them! Well, this doesn’t affect your kids, so why care…….

    • NotABadIdea says:

      Houghton Mifflin is in a better place to do better work with local technology management in their Boston offices, who have and a deeper investment in scalable, modern technologies. It’s a definite win for the actual projects if Houghton-Mifflin is interested in supporting them.