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Online learning is ‘here to stay’ and is going to grow: McGraw Hill CEO

Simon Allen, McGraw Hill CEO, joins Yahoo Finance to discuss the return to school and the future of learning post-pandemic.

Video Transcript

- Let's chat about the return to school and the future of learning. We're joined now by Simon Allen, McGraw Hill CEO, as well as Yahoo Finance's Julia La Roche. Great to have you both here with us. So, Simon, let's just start with you. Now, McGraw Hill over the last few years, I know, has increasingly pivoted more to the online learning and providing of online materials. I'm curious to know, especially as we are seeing students head back to the classroom in person, if you think, however, that online learning frankly might be here to stay, even after the pandemic is over.

SIMON ALLEN: Yeah, it's a great question. We're actually very sure that online learning is going to be here. And I think you're going to see a hybrid future long term. I think a lot of schools and universities have really appreciated the flexibility and the efficiency levels, quite frankly, of teaching remotely. They have really spiked in the last year. It was a tough beginning, you know, the emergency of COVID that then put everyone at home, that was tough.

I think then we worked with a lot of professors and school teachers around the world to get them onto our McGraw Hill Connect and our ALEKS platforms. And in doing that, it's really helped the education process at every level. And we're finding now that well over 3/4 actually of our teaching community are keen on using more digital material, not less. And that's why, for McGraw Hill, well over half of our business is digital. In fact, for the higher education group in the US, it's 82% is now digitally delivered. So it's here to stay and it's gonna grow.

JULIA LA ROCHE: And, Simon, as you were saying, more than half of your total billings come from digital materials. And as you were just referencing, that 82% figure here in the US, I do want to bring up digital and kind of the competition out there, if you will. And one of the things we were used to coming along was spending a lot of money on textbooks at the start of the semester. And now with these digital offerings, curious how you're thinking about pricing, but also, again, some of the competition out there. I'm thinking of Pearson recently rolling out a subscription service.

SIMON ALLEN: Yeah, good question. I would say, and you can see on screen, the average price now, the cost that students are spending on their higher education textbooks, has come down significantly over the last decade, particularly over the last four or five years. What we've been able to do, Julia, is make sure that we can look at the flexible delivery of our products. So, again, you think of our platform. You think of a plain, if you like e-book delivery, all the way through the courseware with our Connect platform and our ALEKS platforms, there are different price points for students to select.

And what we're finding is, in the higher ed space especially, there is a big move towards the inclusive access model, which is a great affordability program that the US Department of Education initiated back in 2015. And students are able to utilize that program. It guarantees the lowest price from McGraw Hill, and it gives the professor the key and the only-- they are the decision maker for the students, what the student wishes to purchase. That is critical, that that relationship with the professor is so strong.

Some of the other programs you've heard about recently on the subscription side, it's very much a B2C model. We have always believed in the power of the professor. She will determine the students that the students are going to buy, those particular products the students are going to buy. And we believe very strongly that through utilizing inclusive access, it keeps our price points down. We can afford to do that because it alleviates and removes what we call the gray space.

If you remember, when you were at school, Julia, the used books and some of the pirated products you may have seen, we were able to remove that segment from the market because we offer products at actually lower prices than used books would be. It means that our sell-through rates are growing significantly up into the 90 percentile-plus. And that's sometimes 60% more than we would have seen four or five years ago. So we're very bullish about being affordable, about making sure we capture the sell-through rate for all of the class, for the students, and to make sure we still focus on the professor because it's the professor that really guides and directs the students on what to purchase.

- Well, and then just taking a step back, I have to admit, I'm listening to this conversation, I'm a little bit on the outside-- I graduated college decades ago, I don't have any kids. But I'm wondering, how have the digital tools developed over the pandemic? I heard horror stories when things began, especially with the younger kids trying to get their attention. Have the tools advanced considerably, such that at least some kind of hybrid model where some students are at home, some students are at school, is that even viable, or are we just not there yet?

SIMON ALLEN: No, it is viable, and it's happening right now. We put, well, over $200 million a year into investments purely on our digital platforms. And it allows us to make sure that our platforms are very personalized. The word you may hear often is "adaptive." And the phrase "adaptive learning" is key. And it really means that we are providing material that are personalized for each student's learning journey. And it's that that drives the usability and the appreciation of our platforms.

They're very, very involved now-- the ability to track a student's performance, to correct them when they're going wrong before they go too wrong, and to make sure that we're able to give the teaching community. The teacher has the material. They can see when a student is perhaps going down the wrong path and make corrective measures. And the student can direct their own learning at their pace.

Everything we produce-- and you may remember us evolved as a textbook company-- we still have that great quality content. And that's critical when you think about our business. Then you marry that with the technology and the flexibility of our platforms. That's when you see the successes we're having. That's why our business is growing significantly this year. It's why we had a great 2020 and why we feel so good about the financial year ahead. It's all based upon our digital growth.

- All right, we're going to leave that there. Simon Allen, CEO at McGraw Hill, Yahoo Finance's Julia La Roche, thank you both for joining us today.