Pearson $3.2 Billion in the Hole, Looks to Digital Transformation

With higher education transitioning to digital courseware and textbook sales in decline, Pearson Education has been facing some serious financial struggles. The company last month issued a profit warning announcing it would not reach its goals for 2018, prompting plans to sell major assets. Now, according to its 2016 earnings report released Friday, the British-owned publishing company has reported a pre-tax loss of nearly £2.6 billion ($3.2 billion) — the biggest loss in its almost 30-year history.

The company’s United States business accounts for two-thirds of its revenue and profits, and that segment has been taking a massive hit with students opting to rent textbooks instead of buying them. According to the earnings report, net revenues declined an unprecedented 18 percent during the year. Total college enrollments for courseware dropped 1.4 percent, with combined two-year and four-year for-profit enrollments falling 5 percent.

As a result, Pearson plans to continue to reshape its portfolio and capital structure, with plans to sell its 47 percent stake in the world’s largest publisher, Penguin Random House, “to maintain a strong balance sheet,” last month’s notice stated. Additionally, Pearson will continue to shift away from “large scale direct delivery services and focus more on scalable online, virtual and blended services.” For instance, the company is exploring a potential partnership with Wall Street English, which has a strong reputation in China.

Pearson will also accelerate its digital transformation in higher education. The earnings report stated that digital and services revenue now make up 68 percent of the company’s total revenue. It outlined plans to speed up its “shift to digital and maximize the value of stand-alone text offerings.” It will accomplish this through the following:

  • An additional £50 million investment ($62.2 million) to simplify its product technology platform and enhance its courseware service capabilities — accelerating its product roadmap by two years and driving faster adoption of institution-wide Digital Direct Access for Pearson courseware; and
  • Reducing e-book rental prices for 2,000 titles and piloting its own print rental program for 50 titles.

“2016 was a challenging year for Pearson, but we remain the global leader in education, with a strong market position,” CEO John Fallon commented in the earnings report. “Our priorities for 2017 are clear. We will continue to accelerate our digital transformation, simplify our portfolio, control our costs and focus our investment on the biggest growth opportunities in education.”

The 2016 earnings report is available here.

About the Author

Sri Ravipati is Web producer for THE Journal and Campus Technology. She can be reached at [email protected].

Featured

  • computer with a red warning icon on its screen, surrounded by digital grids, glowing neural network patterns, and a holographic brain

    Report Highlights Security Risks of Open Source AI

    In these days of rampant ransomware and other cybersecurity exploits, security is paramount to both proprietary and open source AI approaches — and here the open source movement might be susceptible to some inherent drawbacks, such as use of possibly insecure code from unknown sources.

  • The AI Show

    Register for Free to Attend the World's Greatest Show for All Things AI in EDU

    The AI Show @ ASU+GSV, held April 5–7, 2025, at the San Diego Convention Center, is a free event designed to help educators, students, and parents navigate AI's role in education. Featuring hands-on workshops, AI-powered networking, live demos from 125+ EdTech exhibitors, and keynote speakers like Colin Kaepernick and Stevie Van Zandt, the event offers practical insights into AI-driven teaching, learning, and career opportunities. Attendees will gain actionable strategies to integrate AI into classrooms while exploring innovations that promote equity, accessibility, and student success.

  • a professional worker in business casual attire interacting with a large screen displaying a generative AI interface in a modern office

    Study: Generative AI Could Inhibit Critical Thinking

    A new study on how knowledge workers engage in critical thinking found that workers with higher confidence in generative AI technology tend to employ less critical thinking to AI-generated outputs than workers with higher confidence in personal skills.

  • university building with classical columns and a triangular roof displayed on a computer screen, surrounded by minimalist tech elements like circuit lines and abstract digital shapes

    Pima Community College Launches New Portal for a Unified Digital Campus Experience

    Arizona's Pima Community College is elevating the digital campus experience for students, faculty, and staff with a new portal built on the Pathify digital engagement platform.