Niche E-Commerce in Textbooks: ClassBook CEO Tony Pfister (Part 7)

Sramana: A lot of the education space is moving toward educational apps. We are no longer in a domain where books alone suffice. How does that trend impact your business?

Tony Pfister: It depends on what your definition of what the app is. When you look at Inkling, you will see that each of their books is more interactive than a lot of individual apps. Their platform produces the same amount of interactivity as many applications will.

Sramana: How do the apps affect your business model? If the educational tool is sold as an e-book, then your business model is reasonably straightforward. If the product is sold as an app through an app store, how would that work for you?

Tony Pfister: We will still be managing the distribution of content. We will still manage the purchasing and distribution of that app at the school. Apple has agreements with schools that allows them to purchase volume discounted apps. Schools will then set up and push out the apps to the end users. We come into play by streamlining that problem. There will never be a single app that will solve all problems.

Sramana: If schools buy apps directly from Apple, how does that impact your business?

Tony Pfister: In the short term I don’t see schools all going to 100% apps. Right now we touch apps in a minimal fashion. When you look at our industry as a whole, we have more digital clients than anyone else in the country. Of the schools that have elected to go digital, the majority are working with us. As far as applications replacing books, I believe the industry will remain open.

Sramana: What is the competitive landscape for your business?

Tony Pfister: MBS and Follett are who we compete with head to head. They are very large companies because they deal in the higher education space. If you line up our businesses in the independent school market, then you will see we are all comparable in size.

Sramana: Why did you choose to not go into the higher education market?

Tony Pfister: A significant reason is because those colleges all operate brick-and-mortar bookstores. That is important to the schools. In the independent school space, they really wanted to streamline book distribution, and they never viewed the store as a way to do that.

Sramana: Where do you go from here?

Tony Pfister: We are going to go digital. We want to offer up the most open platform with the greatest amount of digital content available.

Sramana: If you fast forward to 2015, what do you estimate your business composition to be?

Tony Pfister: We will probably be 50/50 book and digital by then. There will still be a lot of holdouts who want to teach from print.

Sramana: What kind of margin impact does that have on your business?

Tony Pfister: The margin holds the same on each side. When you go digital, you lose a lot of expense that goes into holding books. We have fewer headaches with digital, which lowers the cost structure. The effective operating margin is the same.

Sramana: Good luck with your business. It sounds like a you have found a great niche. I look forward to following your continued success.

This segment is part 7 in the series : Niche E-Commerce in Textbooks: ClassBook CEO Tony Pfister
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