Supporting Canada's Educational Publishing Sector In A Digital Economy

Summary

Canada's cultural and information industries have changed dramatically over the past decade, driven by a variety of economic, technological and competitive factors. Book publishing, and most specifically the educational textbook sector, has been materially impacted by profoundly important technological influences, including the adoption of web–based tools, products and services, which are rapidly changing the face of the industry and user expectations.

As Canada's leading educational publisher, Nelson Education has played an important role in providing learning resources for Canadian students and educators since 1914. The educational publishing sector has been subject to great consolidation, and for many years most major competitors have been controlled by foreign–owned operations. In competition with these foreign–owned competitors Nelson Education has navigated many industry currents and trends, including: shifts in provincial curriculum requirements, significant decreases in school text book budgets, and the growth in demand for educational supplementary material rather than traditional textbooks. Most significantly, however, the emergence of classroom–based and other learning technologies are providing a new level of threat and challenge for educational publishers. The business model for traditional educational book publishing is especially vulnerable to such innovations as digital books, e–readers and other portable devices, in–class smart boards, and print–on–demand publishing.

The changing landscape of the educational publishing sector is having a demonstrable impact on Nelson Education and a combination of factors represent significant strategic concern:

• Dramatic industry spending declines within K–12 school markets
• Increasing use of digital solutions as educators and students embrace the Web
• Consolidation within domestic educational publishing industry as Canadian–owned publishers deal with:
• Inferior economies of scale compared to internationally–based competitors serving multiple markets
• Daunting levels of technology investment required to maintain competitiveness in a "digitized world" (unsustainable ROI for Canadian educational publishers)
• Foreign–controlled competitors (Pearson Canada, McGraw–Hill Canada, etc.) are gaining share in Canada, leveraging insights, technology and economies of scale gained through global operations and international exposure
• Canadian educational publishers are not competing on a "level playing field."

Changes and accommodations must be made within the Canadian educational publishing sector, especially in light of the emerging digital economy, or Canadian stakeholders (i.e. students, educators, text book publishing employees) will be put at risk as they seek to remain current and competitive in a global context.

Submission

Introduction

Nelson Education Ltd. is Canada's leading educational publisher providing innovative products and solutions for learners of all ages. Nelson values and respects the life long learning continuum and dedicates its business efforts to the diverse learning needs of students and educators alike. In addition to its English language publishing, Nelson also supports French language learning markets through Groupe Modulo, its Quebec–based publishing business.

Nelson Education Ltd. is active in Canada's K–12, Higher Education, Professional Learning and Business, Industry & Government markets. Our success now and in the future is based on our strong partnerships and ongoing relationships with educators across the country. Together, we are making a positive difference in the lives of Canadians, by producing the highest quality educational products and services.

Nelson Education Ltd. is indirectly owned by OMERS Administration Corporation and funds managed by APAX Partners and enjoys a strong relationship with Cengage Learning, our US affiliate company. Cengage Learning is a highly respected US academic and professional publisher.

Discussion — Consultation Themes

1. Innovation Using Digital Technologies

Should Canada focus on increasing innovation in some key sectors or focus on providing the foundation for innovation across the economy?

• Innovation is clearly essential for global competitiveness in a digital world, so Canada must be strategic in its allocation of funding. ICT infrastructure (wireless everywhere, "unconstrained" bandwidth) is core to any national strategy and must be developed and maintained to world class standards. Failure to provide a wireless environment for Canadians on a national basis would be a barrier to Canada's global competitiveness and ability to thrive internationally.
• However, beyond the issues of infrastructure, focusing on key sectors where Canada can compete on a global basis is a preferred approach. Not every sector is equal in providing Canada with advantage (e.g. labour costs will be at a distinct advantage when compared to other emerging economies). A focus on knowledge–based industries, or within sectors where Canada currently enjoys a strong competitive position, is a recommended course of action.

What would a successful digital strategy look like for your firm or sector?

• As the only major Canadian–owned educational publisher, Nelson's desired digital strategy would incorporate accelerated investment in new e–based content and learning technologies. Nelson's future success is dependent on providing leading edge learning solutions that leverage digital capabilities for media and technologically savvy students, who are growing up in a wired, digital world. Nelson must thrive as a publisher for direct and indirect consumers of educational content who have increasingly embedded digital devices and influences into their daily lives.
• The strategy envisioned by Nelson Education would include dedicated resources for digital solutions development which would ensure Canadian students and educators are at the forefront of the digital revolution taking place in classrooms throughout the developed world, by leveraging technology to drive better student outcomes. The strategy would also include the creation of e–content specific to local curriculum, customization of materials and anthologies that reflect unique Canadian perspectives, and the efficient aggregation of relevant web–based resources to provide global context in support of more regionally–based learning objectives. The content and the medium must seamlessly integrate with open source learning platforms. Finally, the strategy assumes high speed wireless transmission capabilities for learners in classrooms, or in their individual residences.

What are the barriers to implementation?

• The primary barrier to implementing our strategy as envisioned above is the level of investment required. Canada is a small market in a wired world; the scale of the educational publishing industry in Canada does not support the required levels of investment in technology development. Foreign–controlled competitors, who already control the majority of the Canadian educational publishing market, can leverage investments in content and platforms across multiple countries internationally. The return on investment available on a global scale cannot be matched by Canadian–owned publishers like Nelson Education.
• Simply put, on a standalone basis, educational publishers serving "Canada only" are not positioned to win as the investment hurdles are too severe. As pointed out in previous government reviews (e.g. "The Wilson Report") the demands of the digital world require that Canada change regulations to provide greater foreign investment opportunities. Without access to new, foreign capital, Canadian educational publishers like Nelson Education will continue to operate on an unlevel playing field and are thus at a distinct competitive disadvantage.

Once copyright, anti–spam and data breach/privacy amendments are in place, are their other legislative or policy changes needed to deal with emerging issues?

• The Investment Canada Act must be amended to provide greater foreign investment in cultural industries. Educational book publishing is a unique niche in the cultural milieu and the technology trends within the industry are clear: failure to open access for foreign investment to level the playing field will greatly diminish the capacity of Canadian educational publishers to compete.
• The majority of Canadian spending on educational text books, in both print and digital media, goes to foreign–controlled entities. Canadian–only publishers like Nelson Education, and its stakeholders, are at clear risk in the digital world unless the Investment Canada Act is amended, or exceptions are provided in recognition of our distinct industry niche attributes.

How can Canada use its regulatory and policy regime to promote Canada as a favourable environment for e–commerce?

• As noted, amend the Investment Canada Act or provide regulatory exceptions for niche providers in the educational publishing space, including Nelson Education.
• Intellectual property protections for content creators must be strengthened.

2. Digital Infrastructure

What speeds and other service characteristics are needed by users (e.g.,consumers, businesses, public sector bodies) and how should Canada set goals for next generation networks?

• Nelson Education is focused on Canadian classrooms and providing learning solutions to drive better student outcomes. High speed wireless service with unconstrained bandwidth is essential to support envisioned developments in e–learning systems and services. Distance learning, collaboration among student participants spread across a wide geography and the provision of low cost professional development opportunities for educators are but a few examples of today's needs that are less feasible today than they must be in the digital economy of tomorrow, due to unsatisfactory network limitations.
• A key feature of Canada's culture is the equal educational opportunity afforded to students of diverse economic means or in remote corners of the country. Access to suitable hardware devices (i.e. handheld e–readers, notebooks, lap tops, etc.), is a critical consideration for policy makers and educational administrators as they evaluate next generation network requirements. Investment models and funding mechanisms that provide equal access to networks capacity, regardless of student means or location, must be developed to ensure students and educators are equipped for the emerging digital world.

What steps must be taken to meet these goals? Are the current regulatory and legislative frameworks conducive to incenting investment and competition? What are the appropriate roles of stakeholders in the public and private sectors?

• Educational funding is a major issue in today's classroom, where there has been a shrinking learning resource budget since 2006. Deficiencies in the learning resource budget will be exacerbated if current trends and funding models do not evolve to support the acquisition of next generation e–readers and devices. Establishing networks and bandwidth capacity will not be relevant in the educational world if the student of tomorrow cannot avail themselves to educational opportunities due to inadequate funding for hardware and learning devices necessary to access digital learning systems.

How best can we ensure that rural and remote communities are not left behind in terms of access to advanced networks and what are the priority areas for attention in these regions?

• Funding for classroom and student acquisition of hardware and learning devices in remote areas must be contemplated in creating a strategy that will prepare students to thrive in a digital economy.

3. Growing the ICT Industry

Do our current investments in R&D effectively lead to innovation, and the creation of new businesses, products and services? Should we promote investments in small start–ups to expand our innovation capacity?

• Investment in start–ups or small businesses is an admirable goal to expand innovation capacity but the risk is that limited investment dollars will be spread across too many highrisk ventures. Not all innovative ideas are of equal potential; caution must be taken to ensure effective investment levels are provided to the highest return options. Dollars must be prudently rationed or the risk of under–funding the most competitive ideas is self–evident.

What would best position Canada as a destination of choice for venture capital and investments in global research and development mandates?

• Foreign–ownership restrictions are a major barrier to investment and job creation in Canada, particularly in the context of a digital economy. Canada does not necessarily have the population scale to invest effectively in key technologies that will allow us to compete internationally. We run the risk of diminished competitive capacity if foreign ownership investment rules are not opened up to allow for more capital to enter the country.

4. Canada's Digital Content

What does creating Canada's digital content advantage mean to you?

• Canada has a diverse population, unique perspectives, a highly educated work force and a rich social fabric. However, it will be impossible to leverage this content advantage in a digital economy if copyright law, and other protections for content creators and innovators are not firmly entrenched in legislation. Diminishing protection for authors, publishers and creators of content will undermine Canada's content advantage, and represents a "clear and present danger" to Canadian publishers in the context of proposed changes to copyright law.
• Copyright law is the cornerstone of protection for content creation, digital or otherwise. Proposals to amend the copyright law, to incorporate educational materials as part of expanded fair–dealing provisions would, if enacted, be devastating to publishers like Nelson Education, and would rapidly eliminate any Canadian advantage in content for students and educators. Another alarming example of risk to Canadian content advantage in a digital world is the repeated suggestion to legislatively prohibit the use of "digital locks" as a means to protect copyright! The digital economy and its implications are profound for creators of content and any weakening of protections for publishers and authors would be devastating to the health of the industry and our culture.

What elements do you want to see in Canada's marketplace framework for digital media and content?

• Canada's marketplace framework for digital media and content needs to respect intellectual property (IP) while accommodating consumers' requirements for easy access. In particular, Canada needs an IP framework that by default rewards and incents individuals to create; this means enhanced protections for content creators.
• A framework that increasingly relies on enlarging the type of uses that are uncompensated does not address key issues for creators, publishers or users of intellectual property, and in fact present a significant threat to the creation of original Canadian content.
• The framework should consider the unique niche occupied by the educational book publishing sector. Nelson Education supports over 1,700 Canadian authors who receive $7.0 million in royalties annually. Diminished protection for educational authors would be devastating for this stakeholder group as well as their intended consumers.

How do you see digital content contributing to Canada's prosperity?

• To remain competitive and relevant on an international scale demands that Canadian content creators provide their materials through digital media, virtually concurrent with its creation. The ubiquitous presence of portable devices for consumers will make accessing information and content real time an essential ingredient for decision making in business, academia and as a tool for improving national prosperity. The pace of planning and decision making in the world of commerce will accelerate in keeping with more immediate access to content.

What kinds of infrastructure investments do you foresee making in the future? What kinds of infrastructure will you need in the future to be successful at home and abroad?

• Wireless everywhere and unconstrained bandwidth are minimal requirements for competitiveness in the digital economy.

5. Building Digital Skills

How will the digital economy impact the learning system in Canada? How we teach? How we learn?

• The classroom must transform to a more digital environment to drive better outcomes for students, requiring greater investment in technology platforms and e–learning solutions
• Indigenous content can be preserved through the existing policies that drive curriculum development, but we must provide a more realistic opportunity for foreign investment to allow Canadian publishers of educational content to "scale up" to the level of internationally based competition who invest in technology based on global scale.
• Teachers must develop new competencies and skills that allow them to use digital tools in a classroom environment, and evolve from traditional methodologies developed prior to the advent of new classroom technologies and e–learning solutions.

What strategies could be employed to address the digital divide?

• Improve protection of intellectual property through strengthened copyright legislation, which is more critical than it has ever been in view of the greater threat presented by digital media (vs. print) for piracy and illicit use of proprietary materials.
• Allow for more foreign investment in publishing and e–content creation to create jobs in Canada and to support the needs of Canada's emerging generation of e–learners.