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Will the CafeScribe Acquisition Give a Boost to Electronic Textbooks?

An interview with CafeScribe CEO Bryce Johnson

The digital textbook is one of those technologies that seem obvious but can take a long time to gain traction. In March, the concept got a boost when long-time textbook distributor and retailer Follet Corp. acquired Salt Lake City-based Fourteen40, and, along with it, CafeScribe, a Web site in its beta phase of offering electronic textbooks. At the CafeScribe site, students can browse, purchase and download e-textbooks, which can then be read and annotated using CafeScribe's digital content reader. CafeScribe also offers an unusual twist on e-books: A social networking element that allows students to find each other and study collaboratively by sharing their notes, even across different institutions.

We talked recently with CafeScribe's CEO, Bryce Johnson. He co-founded Fourteen40 in 2004, after lugging around a huge backpack of books while working on his masters at UC Berkeley and Columbia. That inspired him to do a research paper on why e-textbooks hadn't caught on--something he aims to turn around with CafeScribe.

Campus Technology: Textbook publisher Follet Corp. has just acquired your company, Fourteen40, along with CafeScribe. Can you discuss the acquisition?

Bryce Johnson: We've been working with Follett for quite a while. We've done a number of pilots with them ...  just taking a look at what was going on in the space. As you're probably seeing, things are changing rapidly in terms of how people are consuming music, videos, movies--everything has changed in the last five years.

Follet is one of the largest, if not the largest, retailer of textbooks in the higher education market. They've got a number of stores across the U.S. that they're integrated with, [including] a point of sales system and distribution of the textbooks themselves.

It's a very good marriage. We bring a creative approach to the [e-textbook space], and they have a very strong distribution model and long-term relationship with many major publishers, which own the content itself. That's where it evolved. Personally, I'm very excited about it. I think this gives more opportunity for students, as well as professors and universities.

CT: It's an interesting move. Follet is huge--a $2.3 billion company. Does this portend a sudden understanding on the part of established companies regarding what e-books are all about?

Johnson: Well, I think that they've been watching us for a while. There are executives at Follet that have been [keeping an eye on] e-books for some time.

CT: How did you get started in e-textbooks?

Johnson: I [went] back to take my masters in business at UC Berkeley and at Columbia, and while I was there--this was in early 2002--I kept thinking to myself, "It's odd that the enterprise has changed so much and is so dynamic, and here I'm logging around a 35-pound bag of textbooks. I can't look anything up, I can't search anything. I can highlight it, but I can't remember where I highlighted that or what I wrote at the margins."

As a student, I was frustrated. I ended up doing a project on e-textbooks. I wanted to try to figure out what in the world happened to the idea. I remembered all these major analyst agencies out there predicting that e-books were going to be a $5 billion market in the U.S. alone. Considering that the entire worldwide book market is a $25 billion market, e-books was going to take a pretty big chunk.

But when I did my research, in the first week I found that total revenue globally for e-books sales was around $9 million.

CT: This was around 2002, and sales were at just $9 million?

Johnson: Yes. Not even a drop in the bucket.

I started looking into e-textbooks and trying to figure out whether anybody had really taken a run at them. I found that publishers, indeed, had tried to [do] something in Adobe format, and a couple startups in Chicago tried to create a piece of hardware. I decided, "There's something missing here. Someone has not sat down with a student to figure out what would help break the [barriers]."

I'll be the first to tell you that the textbook, as much as it has its deficiencies, is also a comfortable medium. It's easy to flip through pages, and it's been around for 500-plus years, since Gutenberg.

So I sat down in multiple informal focus groups. I went from college campus to college campus.... I got resounding feedback: "Yes. We would love to have all our textbooks on our laptops. We could search them, I work in study groups, it would be great if I could network with other students. Can you create an automatic summary?" and so forth.

CT: So that's why your business model at CafeScribe incorporates that social networking component? Because student feedback told you that it's important?

Johnson: Exactly.

CT: Are we at the tipping point with e-books because of hardware like the Amazon Kindle?

Johnson: [In my study] ... I looked at hardware as well. In fact, [we] had a piece of hardware that was identical to the Kindle. For the first eight months [of launching Fourteen40], that's what I was pursuing. We rolled it out at Stanford as a pilot and students said, "How much is this? $400? No way. I just want [content] on my laptop."

CT: So what's different now, as opposed to when you first looked at why e-textbooks hadn't caught on?

Johnson: Here's what I see as the changing dynamics of the marketplace. We have 70 percent of students at the university level required to have laptops. That's growing 15 percent year over year.... So many more students have laptops--that's a big change.

The second thing is digital rights management. Publishers have been very hesitant to send out a file [without some copyright protection].... This is their bread and butter, after all. So we're doing some digital rights management. [Basically], we fingerprint that file so only a [subscriber's] laptop can un-encrypt the file and the student can read it...

CT: So a part of what your company is offering to publishers is a formula that you've devised for keeping control of the copyright?

Johnson: That's correct. Basically, we take a fingerprint of each machine and use your username and password, and that's what is used to decrypt and encrypt the file.

CT: Cost savings have to be a reason driving e-textbooks as well, I would think. What's the average amount students spend on textbooks a year, according to your figures, and how do you base your pricing at CafeScribe?

Johnson: The average student spends around $1,000 per year. Typically, the publishers are providing content to us so that we can price [e-books] around 30 [percent] to 50 percent off [for now].

CT: So half-off on textbooks, essentially. And if I'm a subscriber to CafeScribe, what can I do with any available book? Can I print out the entire book?

Johnson: Right now, it's set up so that you have an account, and you can download a book to up to three different computers. You have a 30 percent print, copying and paste limit. I don't think any student has ever reached that amount. Let's say you want to print four or five chapters--in a thousand-page textbook, that's a big chunk. Copy and paste is the same--30 percent of the book.

CT: How many textbooks do you have available now? Do you know what percentage of the total textbooks available you now offer?

I don't know that figure. We have agreements in places like MIT and Stanford ... and with some of the big publishers. That's part of [the deal with] Follett--they have relationships with all of them, and they have content in electronic form for many [textbooks]. I believe that we'll see a lot more content coming online over the next year.

CT: Based on what you've seen from your beta testing, are students using the social networking component of CafeScribe?

Johnson: Absolutely. I would say probably around 60 percent are....  What we found in some of our surveys is that many students didn't realize it was available, so we've made changes. That's why we're in beta. We've made changes so that they're more aware that there's this network of other users using the textbooks, and they can subscribe to those notes.

It's a new concept that fundamentally changes the way you interact with a textbook. Formerly, students would sit together in a study group of three to five others. They weren't able to see each other's notes in each other's textbooks.

There are a number of students in some junior colleges that have said, "Hey, can I subscribe to students' notes from Stanford?" I said, "Sure, as long as they're out there and they haven't blacklisted you." You can cut each other off, by the way. Let's say you're in a competing class and I just don't want you to be able to subscribe to my notes. I can go in and say, "So-and-so can't subscribe to my notes."

CT: What if my school hasn't adopted CafeScribe yet, and I'm a professor who says, "I'd really like to have my students be able to download this textbook electronically instead of buying it?"

Johnson: Start by contacting us. We get many, many book requests every day from professors saying, "I'd like to use this in the classroom." Our main goal right now is just content acquisition. I also have professors come to me and say, "I have my own book. I have my own copyright to it. I want to publish this on CafeScribe." We're working individually with professors to make that available, so they can publish their own materials and essentially work directly with us...

CT: CafeScribe released a figure that a college student uses about three trees per year in textbooks. Numbers like that, and the cost, seem to point to students as an obvious audience for this technology, but that's been said for a while now. What still needs to happen?

Johnson: Well, the sooner the publishers open up all their content, the sooner we'll get a peak there. The biggest thing I've seen more than anything is get this book for me and I'll use it. We get that constantly and it's just getting the publishers move more quickly.

I think that within the next three to four years, you'll see a huge shift in how many textbooks are on a student's backpack. Price is the No. 1 thing for a student. Second to that is, "I am so tired of carrying around a 35-pound backpack."

CT: Where do you see things in a year or so regarding e-books? How quickly is this going to move once it tips?

Johnson: I think it's going to take another year or so before we get all the content, a year to a year and a half. Then, I would think closely after that, you're going to start seeing 20 percent or 30 percent of students [adopting e-textbooks]. It could go faster than that, depending on the content. What we have seen is, one student adopts this and says, "Hey, I just get this for 50 percent off, and look, we can share our notes." That encourages other students.

CT: At one point last fall, you offered scratch-and-sniff stickers with a musty smell to them. Where did that idea come from?

Johnson: We're brainstorming one day. In a survey, we asked students ... what they [would] miss in a normal textbook or book. I think 60 percent of them responded that they missed the smell. We thought, "They like the smell. We'll ship you a scratch and sniff you can stick in your laptops." That's where that came from.

CT: And does it really smell like an old book?

Johnson: It really does.
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