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Digital Textbook Startup Kno Was Sold For $15 Million

Unknown Lamer posted about 9 months ago | from the knowledge-is-not-profit dept.

Books 39

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."

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39 comments

Once bitten, twice shy (5, Insightful)

water-and-sewer (612923) | about 9 months ago | (#45399017)

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 (5, Informative)

Anonymous Coward | about 9 months ago | (#45399091)

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

Re:Actually the DRM part (2)

fuzzyfuzzyfungus (1223518) | about 9 months ago | (#45399171)

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 them all to remember it!' For your convenience, they might deign to accept a specially formatted .xls file (Not xlsx, at least this decade...) for bulk account creation, and if class rosters change later, you can make the teachers sort it out manually...

Re:Once bitten, twice shy (0)

Anonymous Coward | about 8 months ago | (#45399607)

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

Bad business fails, goes out of business and you call it a failure of the free market. I call that a success of the free market, now a different idea can be tried.

Perhaps you would prefer the government spend $400 million on a website for your e-book and not have it work and no one take responsibility for it. Then the solution is not a different method, but another $100 million to the same failure.

No, its not the "free market" that shows failure daily, it is government intrusion that is failing at an alarming rate, but they can just print money and raise taxes to keep it going. As long as they can raise taxes once again, you call it a success because more money is going into the black hole without end.

Re:Once bitten, twice shy (0)

Anonymous Coward | about 8 months ago | (#45400075)

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,

That's funny. I remember taking an organic chemistry course about 15 years ago.

The professor said that any organic chemistry textbook that weighs at least 10 pounds would be fine, since it would include all the necessary material.

And he was right - organic chemistry at that level hasn't changed much in the last few decades.

Re:Once bitten, twice shy (2)

SteveFoerster (136027) | about 8 months ago | (#45400545)

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!

Re:Once bitten, twice shy (1)

Jeff Flanagan (2981883) | about 8 months ago | (#45400745)

>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.

Boooring (0, Troll)

Anonymous Coward | about 9 months ago | (#45399049)

Too long, didn't read. Should've gone with shorter texts. What did Twitter sell for again?

Chinese Bitcoin Exchange DISAPPEARS With $30 M !! (-1)

Anonymous Coward | about 9 months ago | (#45399075)

Now that is news for nerds !!

http://www.theregister.co.uk/2013/11/12/bitcoin_gbl_hong_kong_collapse/ [theregister.co.uk]

Bitcoin !! Yeah baby !! It has Kevin Bacon all over it so you KNOW it is good !! After all who can say NO to bacon !!

bigger losses ahead (1)

jsepeta (412566) | about 9 months ago | (#45399089)

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 who fail to adapt to the new reality of digital gadgets used for reading and studying.

As much as I enjoy my Apple iPad, the popularity of 16gb devices which cannot hold many reading resources is troubling. Apple traditionally packs in the least amount of storage possible in consumer devices, with incredibly ridiculous markups to reach 64gb or 128gb of storage. If Intel pushes their own tablets with more storage at a reasonable cost, then Kno has a real future.

Back in my past, I was furious at how much college textbooks cost, and how little trade-in value I'd get -- if any, since from semester to semester the reading materials for a given course might change. The market changes of the past 20 years have had little influence on the current trajectory: digital data and high-speed distribution changes everything. While I recognize the need of publishers to employ DRM control in order to generate profits, maybe expensive university systems should change their models to remunerate professors who research and publish -- while the learning materials decrease in price. There's little use for the existing publishing and distribution system if higher education can publish and distribute at will.

I don't believe that MOOC will make much sense until there are big changes to how multibillion dollar universities position themselves at the forefront of sharing knowledge with those who need it the most.

Re:bigger losses ahead (0)

Anonymous Coward | about 9 months ago | (#45399103)

While I recognize the need of publishers to employ DRM control in order to generate profits

Then you are a fool.

There's really no reason that we need these greedy companies to produce books, or at least not to this extent. Hell, we'd be better served by just getting the government to hire experts to produce many of these books and then releasing them into the public domain.

Re:bigger losses ahead (1)

Joce640k (829181) | about 9 months ago | (#45399119)

Yep.

Also: Poor people could read them as well.

Re:bigger losses ahead (0)

Anonymous Coward | about 9 months ago | (#45399151)

Thanks for pointing out the flaw.

Re:bigger losses ahead (1)

Hognoxious (631665) | about 8 months ago | (#45399491)

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

Speaking as someone in the industry (5, Interesting)

Malfuros the Wizard (3429185) | about 9 months ago | (#45399165)

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.

Re:Speaking as someone in the industry (0)

Anonymous Coward | about 9 months ago | (#45399371)

Personally, I avoid pirated copies of books, movies, music, and software. I willingly pay for the books, for example, usually buying both the printed copy and electronic copy. However, I deplore DRM in any form for the simple reason I want to read the ebook on any of my devices without needing to "unlock" it via some proprietary software.

In my experience the worst offenders, that is those most likely to pirate material, are today's children and people of Indian, not First Nations / Native Americans, ancestry. If that sounds racist so be it; the truth is rarely pretty. If I had children pirating copyrighted materials they'd become persons without access to any computer at home and at school...and I would let their principal and teachers know.

Re:Speaking as someone in the industry (1)

Registered Coward v2 (447531) | about 8 months ago | (#45399573)

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 internet" so I guess it's free to use as well.

I've given up on trying to DRM my material. I make sure my copyright and contact information is on it and send people who ask for it a simple pdf. I figure the real value is in my experience and skills in how I do it not how to do it. Or, as I put it, you're not paying me to hit the machine with a hammer, you pay me to know where to hit the machine with the hammer.

Re:Speaking as someone in the industry (0)

Anonymous Coward | about 8 months ago | (#45399777)

I think the problem is that people think they absolutely deserve millions of dollars from a book of knowledge when that's complete nonsense. Most of the work in these books is recycled and there's plenty of people willing to contribute for minimal costs. DRM is broken and your comment speaks volumes about: information is meant to be free.

Even if you sold only books, I have a scanner that can do a full book and OCR it in a half hour. You're clearly missing the point, sharing has always been normal and our technology reflects that. Just because you put a sign up in a library saying you can only photocopy 10 pages of certain works doesn't stop anyone from photocopying the entire book. Some of the texts I used in university were only available in the library with anywhere from 1-3 copies... of course everyone photocopied them, it was necessary.

Re:Speaking as someone in the industry (1)

Anonymous Coward | about 8 months ago | (#45402389)

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.

Re:Speaking as someone in the industry (1)

ScottCooperDotNet (929575) | about 8 months ago | (#45399895)

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

Re:Speaking as someone in the industry (1)

fulldecent (598482) | about 8 months ago | (#45400123)

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.

Re:Speaking as someone in the industry (1)

DogDude (805747) | about 8 months ago | (#45401055)

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

Re:Speaking as someone in the industry (2)

LordLucless (582312) | about 8 months ago | (#45404643)

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 a more workable model than the current one, which relies on unenforceable laws.

Re:Speaking as someone in the industry (1)

nazsco (695026) | about 8 months ago | (#45405037)

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... (1)

fuzzyfuzzyfungus (1223518) | about 9 months ago | (#45399229)

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 into direct conflict with bigger fish who have no interest in your success. Entirely unsurprisingly, the Kno hardware lineup, with bespoke linux-based OS and compatibility only with themselves, was first to die. Was it superior for books, at 14 inches? Very possibly. Was that going to save it in a world where e-ink readers are damn cheap, full android tablets are moderately cheap and widely available, and iPads are the software-ecosystem juggernaught? Hahaha, you make funny joke, yes?

On the content side, they faced the prospect of either DIYing it (doable, if massive, for K-12 sausage-text-to-Standards stuff, nearly impossible against any more specialized area, where they actually want specific books) or cutting licensing agreements with publishers, most of which have their own dreams of digital domination, instant content expiration, and eternal rents, and don't feel like sharing. Kno might have been more competent than those competing options (it would be hard to be less competent, in many cases); but the publishers have the copyrights to the texts Kno needs, so how does that help them?

On the software side, while epub is moderately different from HTML, it's not as though epub readers are expensive or thin on the ground, so what do they have? Yet another epub mangler with some integrated web features nearly indistinguishable from any free blogging site with far too small an audience to attract an idiot with a fat wallet?

Re:I'm surprised they got that much... (0)

Anonymous Coward | about 8 months ago | (#45399675)

It's a token payment meant to signify that Intel are purchasing an asset, not taking on a burden. Intel have already invested $20M, they don't want to lose all their money and look incompetent.

They will probably just take whatever IP they have (particularly patents) and any good employees, then liquidate the company quietly under the guise of "restructuring".

Re:I'm surprised they got that much... (1)

fuzzyfuzzyfungus (1223518) | about 8 months ago | (#45400031)

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, like the iPad, and the whole exercise is pretty much 100% dependent on existing TV rightsholders, who have no incentive to do anything except stonewall and then buy the corpse for peanuts.) You'd think that they'd learn from their mistakes, at least occasionally.

Re:I'm surprised they got that much... (1)

Anonymous Coward | about 8 months ago | (#45400421)

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.

Why did they pay $15M? (0)

Anonymous Coward | about 9 months ago | (#45399331)

Why did they pay $15M?

Kno-one Knos.

Money (1)

shimul1990 (3413815) | about 9 months ago | (#45399359)

Money is the most essential & powerful elements of the world. Everyone wants money & i also want it.

Re:Money (0)

Anonymous Coward | about 8 months ago | (#45399721)

I'll give you a dollar if you suck my dick.

Pop goes the world. (0)

Anonymous Coward | about 8 months ago | (#45399437)

That sound you hear is the new bubble popping. Sell now, folks.

paper, re-sold (2)

Joining Yet Again (2992179) | about 8 months ago | (#45399501)

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.

Re:paper, re-sold (1)

SteveFoerster (136027) | about 8 months ago | (#45400913)

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.

Re:paper, re-sold (1)

madro (221107) | about 8 months ago | (#45401699)

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.

Re:paper, re-sold (1)

Joining Yet Again (2992179) | about 8 months ago | (#45401757)

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

Re:paper, re-sold (2)

minstrelmike (1602771) | about 8 months ago | (#45403357)

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 the map in pieces thru a magnifying glass in the style of an app on a smartphone.
Same with the way we present a lot of material.

Nig!,ga (-1)

Anonymous Coward | about 8 months ago | (#45400589)

would you like to area. it is the

No surprise there (1)

Krigl (1025293) | about 8 months ago | (#45411535)

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.
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