Digital Textbook Startup Kno Was Sold For $15 Million

Nate the greatest writes "Intel didn't mention how much they paid for digital textbook startup Kno when they announced the acquisition last week but inside sources are now saying that the digital textbook startup was picked up for a song. GigaOm reported earlier today that their sources told them that Kno sold effectively for pennies on the dollar: 'Well placed sources who were in the know told us that the company sold for $15 million with some retention bonuses for the employees. Intel bought the company mostly for its hardware-related intellectual property and the employees. Intel also was one of the largest investors in the company — having pumped in $20 million via its Intel Capital arm.' Kno had raised $73 million in venture capital since it was founded 4 years ago, and it picked up another $20 million in debt. This deal was nothing less than a fire sale, and that does not bode well for the digital textbook market or other startups in this niche. Inkling, for example, just raised $20 million dollars this summer in order to compete in a market that where one of their competitors failed."

Once bitten, twice shy

[water-and-sewer]

This doesn't bode well for the electronic textbook industry, and it's their own damned fault.

In theory, I'd personally love digital textbooks. Searchable, I could carry them all with my on an appropriate gadget or gadgets the way I can access my Barnes&Noble books either on my Nook or my Nexus 7 on a Nook app, etc. I didn't think I'd like ebooks since I like the paper versions so much, but over the past two years I've actually come around to the idea and now like it very much.

But look at the history of textbook selling. Over the past twenty years they've gone to desperate measures to destroy the resale value of books that are otherwise perfectly resellable, via once-only mandatory digital downloads, problem sets that are only on line and that expire, and tricks like that. That is an unholy annoyance to any person with a sense of dignity, and it's all to inflate profits for publishers that want to sell a physics 101 textbook for $100, and then sell it again a year later regardless of how little the content has changed.

So if this is the "company" you're doing business with, why would any rational consumer be stupid enough to accept going to a digital format? If that's the way you do business you can guarantee it will be DRMed out the whazoo, be untransferrable to other devices, expire/disappear if they can make it happen, and all that other funny business. And that industry would LOVE to sell you the digital version for the same $100 they sold the paper version.

I'm glad to see the digital textbook business die at the moment, but every failed attempt is another nail in the coffin for these rapacious publishers intent on surviving by screwing over the consumer. Once they've crashed and burned, the market will be ripe for a more honest textbook seller interested in a different business model. The sharks on the market now? They can all go piss off.

Never under estimate the power of "a free an unfettered marketplace" to encourage rapacious companies to live well by screwing the consumer.

Actually the DRM part

[Anonymous Coward]

Isn't just for textbooks. I work for a public school system. I had my media person ask questions about ebooks for kids. When he told me the various forms of licensing from big distributors they've basically tried to recreate an even worse version of physical books with their restrictions at the same or higher pricing that often also requires extra "subscription" or "maintenance" fees on top of already having to lease books STEAM style but with limits on numbers of downloads and time limits on auto-selfdestructing titles. That's on top of having to buy a device to read them on (Kindle or Nook are the only thing anyone has ever heard of unfortunately). It's fucking ridiculous and driven by unbridled avarice. I told him not to buy anything for the time being.

CAPTCHA: tedious

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[fuzzyfuzzyfungus]

It's also worth noting that, at least for the textbooks with some online-readable (often via Flash, not exactly god's gift to accessible text rendering, may it rot in hell) component, the deal often includes some sort of login system that's a moderate size nightmare to administer. In addition to getting the shaft on the EULA, as the above AC notes, the process may include delightful fun like 'create an new set of credentials, entirely distinct from whatever the kiddies use to log in on campus, and then get

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[SteveFoerster]

Never under estimate the power of "a free an unfettered marketplace" to encourage rapacious companies to live well by screwing the consumer.

One of the many ways that higher education is not a free market is that most students pay for books with easily borrowed money. The distorting effect that guaranteed federal grants and loans have on the prices of everything in academia can scarcely be overstated, and the ludicrous cost of textbooks is one of these ways.

Otherwise I thought your analysis was great. And I'm with you, existing commercial publishers can all go die in a fire. Open educational resources [oercommons.org] for the win!

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[Jeff Flanagan]

>I didn't think I'd like ebooks since I like the paper versions so much, but over the past two years I've actually come around to the idea and now like it very much.

I believe that many of us went through this. We started with an emotional attachment to physical books, then realized that being able to carry 50 backpacks full of books in our pocket makes more sense now that portable devices have very nice screens.

bigger losses ahead

[jsepeta]

It's difficult to build up a large selection of publications ready for the higher education market, where one can't push out CRAP instead of high-quality education materials. Texas has little control over higher education publishing, and far too much nonsensical control over K-12, where revisionism and unadorned religious swaggery holds sway over intellectual honesty and these troubling things called "facts". Still, the bloodletting to come in the educational industry will be from the traditional publishers

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[Joce640k]

Yep.

Also: Poor people could read them as well.

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[Hognoxious]

Exactly, it'd be comyanizzerm, and we hates comyanizzerm almost as much as we hates terrusts.

Speaking as someone in the industry

[Malfuros the Wizard]

I create ebooks - specifically law ebooks, they are authored by a barrister who is very good at what he does. I run the technical side of things, we tried to make it easy for people to access the material, either via a website or on platforms like the Kindle, no DRM involved because as we all know DRM is useless anyway. After trying to do this for a few years my opinion is that its almost impossible to make money from it, mainly due to piracy. People wanted a cheaper alternative to textbooks that were tens if not hundreds of dollars to buy so we started creating ebook versions, all that happens is people rip us off, even if we are selling the books for $3 a piece. They also rip material off from our website, someone subscribes, pays for one account, then copies everything and distributes it via email. We at one point had Amazon remove some of our books from their store because they accused us of ripping someone else off, that only got rectified when we proved we were the original authors. I would love for there to be a DRM system that allowed people to use the ebook on any device of their choosing as long as it was their device, I dont care if people have several devices so long as they have paid me for their book. But it needs to be a DRM system that works, that is really locked down but that also allows people to sell or gift their books to others. But not to copy them freely and rip off small micro publishers like us. Sadly piracy is accepted as the norm, even when publishers are practically giving stuff away for free. People just share stuff, they dont think about what goes into creating the stuff they are sharing, they dont think that people need to make money from what they create in order to pay bills and mortgages. The original paper book is a fantastic device, you buy a copy, its yours to do with as you please, if you decide to give it to someone else or lend it to them then you can do so easily however you are giving away your copy, you cant create a copy of a physical book, at least not easily, thats is the inbuilt protection for the author and the publisher, the fact that is is a single item. Until the same principle exists in electronic publishing then it will be impossible to make money from it.

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[Registered Coward v2]

Sadly piracy is accepted as the norm, even when publishers are practically giving stuff away for free. People just share stuff, they dont think about what goes into creating the stuff they are sharing, they dont think that people need to make money from what they create in order to pay bills and mortgages.

Oddly enough some of the worst offenders also create their own electronic material. I did work for a company who used other's material without permission and when I asked was told "it's on the internet so it's free to use." Right. I remember that from business law class, the doctrine of free to steal; well established in case and common law. Of course, *there* material was heavily DRM'd to the point all it did was upset the paying customers. In a fit of karmic brilliance their material is also "on the inter

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[Anonymous Coward]

You aren't paying me for the information, but rather you are paying me for organizing the information into a more cohesive product. You are paying for someone's time, not the information being presented.

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[ScottCooperDotNet]

I wonder what would happen to a lawyer who quotes a slightly-edited pirate edition in a filing? Disbarment?

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[fulldecent]

SUMMARY OF PARENT:
1. End users would rather not spend money on the product
2. End users want the product

I can easily think of ways to make money with these rules. Hint, it's same way Microsoft makes money and the same rules they work under.

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[DogDude]

This just in: Most people are selfish assholes! News at 11!

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[LordLucless]

Sadly, you're reaping what others have sown. The mainstream content industry fought so hard against electronic distribution, that it normalised piracy. I'd bet if iTunes had predated Napster, you wouldn't have half the problem you do.

On the other hand, I do know companies that have made money from electronic content; they ran Kickstarters, and by the time their product was available to pirate, they'd already been paid for their time developing it. Not a model that will work for everyone, but it seems to be

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[nazsco]

That is interesting. I'd guess they do not like your book because it is a dreaded school assignment to them. Maybe you should go for the schools and allow them to distribute for free after a small fee? that way it would be easier to enforce...

And I am curious if you add a plea against piracy on the book?

I'm surprised they got that much...

[fuzzyfuzzyfungus]

Honestly, I'm more than a bit surprised that they were picked up for more than the value of their office furniture, plus whatever it would have cost Intel to just hire their more promising employees piecemeal.

The notion of a 'digital textbook startup' is simultaneously seriously limiting (so, you've developed a hardware and/or software platform that can distribute book-length text documents; but you won't sell it to me unless I'm a student or slinging educational materials?) and guaranteed to bring you i

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[fuzzyfuzzyfungus]

It's a somewhat ironically timed purchase given that Intel is, even now, trying to shed their IP-TV project, which shares a very similar set of challenges (eg. the core technology behind spitting MPEG4 streams at people is either banal, or done earlier and done better, or patented, by the CDN guys, devices capable of pulling a picture out of an MPEG4 stream and shoving it onto a TV, or displaying it on the tablet, are either selling for peanuts, like the Chromecast, or way ahead of Intel on other factors, l

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[Anonymous Coward]

Intel have $20 Billion in the bank, and has probably maxed out its R&D already. They are worried about mobile chips becoming more important than laptops and desktops, leaving Intel in the dust.

So they are investing money in "diversifying" - they don't seem to be very good at it, though, like most companies who have faced this type of situation in the past.

paper, re-sold

[Joining Yet Again]

I went to a £30,000/year school (on scholarship, so it actually cost my parents £0/year).

Yet all our textbooks were hand-me-downs from the previous year.

This was brilliant, really. The best books were bought exactly once, kept as long as they are relevant (which at high school level for e.g. mathematics and physics is for decades, as the fundamentals of the subjects don't change) and everyone scrawled lightly in them, meaning you had previous students' thoughts to guide you (it's way easier to annotate real paper than an e-book). It was rather a good lesson in the value of tried-and-tested over fashion, but then you can't really get more conservative than an English public school.

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[SteveFoerster]

I but then you can't really get more conservative than an English public school.

There's a madrassah joke in there somewhere. But I take your point.

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[madro]

In the 80's, I learned calculus in a US public high school with a textbook from the 1960's. Well, that, *and* a great math teacher. Making an e-book that presents the material is easy ... making an e-book that actually helps students gain understanding is pretty darn hard.

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[Joining Yet Again]

Indeed. Most people assume that knowing stuff is sufficient for being able to teach it. Utterly wrong, unfortunately.

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[minstrelmike]

Actually, I think making an e-book that presents the material in an understandable way _is_ difficult.
I like being able to look back and forth at a chart while reading the text that describes it.I think it aids in my understanding.
I had a lot of text books that were pure print, like novels. Those are fine as e-books.
I also had a lot of science books full of charts that I'd refer to often.
Those don't work out so well as e-books.
A wall map conveys an entirely different view of information than looking at

No surprise there

[Krigl]

Who would buy textbooks from a company, which makes it painfully obvious, that they themselves never bothered to open an English textbook or to find some other means of learning to spell.