The prospects for Andy Bird, Pearson’s new boss
FEW BIG British companies have tested investors like Pearson. Over the past seven years the world’s largest educational publisher has issued seven profit warnings. During that time its share price has fallen by more than half. On October 19th it gets a new boss: Andy Bird, a British businessman who spent 14 years running Disney’s international outfit. Mr Bird will have to shore up confidence in the firm even as the pandemic turns education markets upside down.
In the 1990s Pearson was a bloated conglomerate that owned theme parks, TV production houses and a chunk of The Economist. It has since flogged these fripperies to focus on learning. But it has been hammered by a collapse in sales of university textbooks in America. In 2010 it sold 21m physical books to American students; that had fallen to fewer than 4m by 2019.
Students still use printed textbooks, and Pearson’s are still popular. But many learners now get hold of second-hand ones through rental services, which need not give Pearson a cut. Campus bookshops have always peddled dog-eared hand-me-downs, but the ease of trading them online has made the secondary market massive. Pearson’s beancounters have repeatedly underestimated the speed at which this would cause its sales to tank.
The pandemic has made things worse. On October 14th the company announced that sales in the first nine months of the year were down by 14%. Lockdowns have hit bits of the company that had been growing. Pearson had to close thousands of buildings it uses to provide assessments to adults, such as those taking driving-theory tests. Schools in Britain and America cancelled exams which Pearson is normally paid to supply. Few people are moving across borders, cutting demand for Pearson’s languages tests.
But Pearson hopes to benefit from trends set off by covid-19. Recession should encourage more youngsters to stay in education and push career-changers to seek new qualifications. More online learning should benefit an arm of the group that helps universities put courses on the web. It is also boosting a wing of Pearson that helps trusts in America run fully virtual public schools. Enrolment in its 43 such institutions is up by 41% this year.
As for its textbooks, Pearson has long promised that it will resurrect sales by getting students to subscribe to digital course materials served up over the internet—which, unlike paper books, cannot be resold. The plan is that these products will increasingly include interactive features such as online tests that help learners keep track of their progress. Skinflints using pirated copies would struggle to gain access to that extra stuff. Lecturers have not always welcomed the shift from books to “courseware”, notes Thomas Singlehurst, an analyst at Citigroup; they fear that it will bring new costs and risks. Yet being forced to teach remotely during the pandemic is probably helping to make them keener.
The outgoing boss, John Fallon, is leaving after nearly eight years in charge. He has slashed costs and paid down debts. But Mr Bird’s arrival has been soured by a row over pay. In September a third of shareholders voted against the deal Pearson has struck with him; it includes a basic salary of $1.25m and a scheme under which Mr Bird will buy $3.75m of shares but could receive an additional $9.38m of them over three years. The episode has left some shareholders questioning the position of Sidney Taurel, the firm’s chairman since 2016. After years of disappointment, Pearson’s owners are a tetchy bunch. ■
This article appeared in the Britain section of the print edition under the headline "Marks for effort"
Author: | Post link: https://www.economist.com/britain/2020/10/17/the-prospects-for-andy-bird-pearsons-new-boss
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