Gut Reactions to McGraw-Hill Acquiring Tegrity

Smart move: The big publishers, (McGraw-Hill, Pearson, Houghton Mifflin Harcourt, Reed Elsevier), all realize that unless they change they will suffer a similar fate as the music publishers. Textbooks will be disaggregated. Content has gone from scarce to abundant. The open education movement, combined with cheap but powerful authoring tools, will insure that quality learning materials are available and discoverable. E-books and tablets offer opportunities for new sales and new markets, but are also a major threat as non-incumbents may offer superior solutions unhampered by legacy business models and high fixed costs. Publishers need to transition from offering a product (the textbook and associated content) to an experience. Lecture capture platforms will be one source in which faculty (and later student!) created content can be seamlessly folded into professionally produced (publisher) content.

The Publishers: Will these moves of the big publishers to buy into the LMS and lecture capture market be enough to save them from the fate of the big music publishers? Probably not. The big publishers need to change their mindset faster than they change their product mix. They need to take costs out of their systems now. They need to quickly unbundle and disaggregate their own products. They need to try lots of new business models, and worry less about possibly devaluing their current core businesses. They need to offer alternatives to their own products today, or someone else will do that tomorrow. The Tegrity purchase is a good first step.

Consolidation: The open source OpenCast Matterhorn Project will drive some of this consolidation. Customer acquisition costs are high, sales cycles are long, and the technology across providers is not really all that different. A roll-up makes sense.

Media Management: The media management providers, Kaltura, Ensemble, ShareStream etc, will make attractive acquisition targets. Media management is the perfect complement to lecture capture, and both publishers and LMS providers should be giving these companies a good hard look. I expect Pearson to make a move in this space, as a robust media management platform would complement their LMS play vis-a-vis the eCollege purchase.

Acquisitions: This McGraw-Hill / Tegrity purchase may open some flood gates How long until Google, Microsoft, Adobe or even Oracle make a major purchase in the educational technology space? Blackboard may be expensive, but I've always thought would make sense for Microsoft. Education is the next worldwide growth business, the opportunities in Asia, South America and really everywhere else are huge. Blackboard would be an excellent base in which to build a worldwide brand for providing technology enabled education - and Microsoft has the scale and reach to do so. Adobe really needs to get in the lecture capture space. Google may finally realize that a free, Google hosted gMoodle would disrupt the market and make the Google Apps for Education a much more compelling (and integrated) proposition.

Tegrity Customers and Competitors: If I were a Tegrity customer I think I'd be pretty happy with this development. This acquisition insures that the Tegrity platform will be around for the long haul, and will evolve in some possibly interesting ways. If I worked for another lecture capture company I think I'd be pleased as well, as this deal validates (I think) the long-term upside of the industry. The only losers I see are lecture capture providers that are marginal in the marketplace, and Adobe which still does not have any lecture capture play.

What do you think?