Cengage Learning Files Chapter 11 Bankruptcy

Posted on 7/23/2013 by Jim Pickerell | Printable Version | Comments (0)

Earlier this month Cengage Learning Inc., the second biggest publisher of college-course material in the U.S., filed for Chapter 11 bankruptcy protection as it tries to restructure its debt of about $5.8 billion. Under a deal with some of its senior lenders, the company will try to use the bankruptcy case to eliminate $4 billion in debt,

In fiscal 2012, ending on June 30, 2012 the company reported $1,992.8 million in revenue up from $1,875.9 in 2011. In the first 9 months of 2013 their revenue was $1,298.6 million compared to $1,485.3 the previous year. Domestic revenues for the first three quarters of fiscal 2013 were $1.1 billion, down 14.3%, or $184.6 million, from the prior year.

In his investor call remarks on May 10, 2013 Cengage Learning’s Michael Hansen, who joined the publisher as CEO last September said, “currently, our industry is in the midst of a shift to digital education and study materials. This is being accompanied by significant pressure on sales of traditional print materials.”

The good news for stock photographers is that the company is still generating significant revenue and your current bills will be paid. Long range, however, significant changes can be expected.
  • The industry is in a process of a dramatic and rather sudden shift from print to digital products and subscription licensing of their use rather than a one-time fee.  In a CEO understatement Hansen said, “The whole industry by and large has been a little bit guilty to not change quickly enough to the new paradigm. There was an underlying belief that the print model would hold up better than it actually did, particularly recently.”
  • There has been declining enrollments in both not-for-profit and career schools.
  • College bookstores and online retailers are purchasing fewer new books for their inventory, probably because more students are turning to cheaper used books.
  • Due to budget cuts libraries are unable to purchase as many books as they once did.
  • State and local government cuts of education budgets have reduced sales in the K-12 market.
  • The recent U.S. Supreme Court decision in Wiley v. Kirtsaeng makes it legal to import and resell textbooks purchased abroad. Prices for the same product are often significantly lower in other countries than in the U.S..
  • While more images may be needed for digital products, budgets have been reduced. Thus, editors must rely much more on free imagery, imagery on CD-Roms that they have purchased over the years or imagery they can obtain at much lower prices than they have paid in the past.
  • Cengage (and other publishers) will want increased flexibility to use images they license in any way whatsoever (even still unidentified types of uses) for one fixed price. (See Ken Carson’s comments at the PACA conference.)
Hansen says, “In the past, too much investment was directed to print at the expense of digital, Now, “Cengage is focused ‘squarely on digital’ and faculty and student users.”

Copyright © 2013 Jim Pickerell. The above article may not be copied, reproduced, excerpted or distributed in any manner without written permission from the author. All requests should be submitted to Selling Stock at 10319 Westlake Drive, Suite 162, Bethesda, MD 20817, phone 301-461-7627, e-mail: wvz@fpcubgbf.pbz

Jim Pickerell is founder of www.selling-stock.com, an online newsletter that publishes daily. He is also available for personal telephone consultations on pricing and other matters related to stock photography. He occasionally acts as an expert witness on matters related to stock photography. For his current curriculum vitae go to: http://www.jimpickerell.com/Curriculum-Vitae.aspx.  


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