Intel acquires eTextbook distributor Kno, co-founder departs

TechCrunch reports that Kno, a higher-education eTextbook distributor, has been acquired by Intel. It will become part of Intel's global education program run by John Galvin, a Vice President of Sales and Marketing at Intel. The acquisition terms weren't released. (Update, November 11: On GigaOm, Om Malik wrote that according to his sources, Intel acquired Kno for $15 million plus some retention bonuses for employees. Kno's equity investors put $73.4 million into the company, and Kno also took on $20.3 million in debt, so Malik believes it's likely that the investors will see little or no return.)

Kno's initial plan in 2009 was to develop and launch its own higher-education oriented tablet, for which the company would sell eTextbooks. The tablet had dual 14.1" touchscreens and used both touch and stylus input. However, less than a year after the company was founded, Apple introduced its original iPad, which dramatically changed customer expectations for how big tablets should be and how they should work. Kno reportedly only shipped a handful of its tablets to customers in late 2010 before giving up on its proprietary design and selling it to Intel in April 2011 for $20 million (which was structured as an equity investment.) Kno subsequently focused on software, and developed eReaders for the iPad and Android tablets, Windows 7 and 8, and in-browser use. According to Wikipedia, Kno began selling content for the K-12 market in April 2012, but the company isn't a significant player in that market.

Once Kno dropped its proprietary hardware, it became just another eTextbook vendor, and had to compete with far more established players including Follett, Barnes & Noble, Amazon, CourseSmart and Chegg, which was co-founded by Kno co-founder Osman Rashid. To date, eTextbooks have been poorly accepted by college students, and unlike its competitors, Kno doesn't also offer print textbooks, which put it into an even worse competitive situation.

TechCrunch reports that Kno's investors, led by Andreessen Horowitz, have been pushing the company for several months to find a buyer or some other way to exit. One interesting fact is that a difference of opinion between Kno CEO Rashid and Intel VP Galvin led to Rashid's departure when the acquisition was announced; Rashid wanted to continue focusing on the North American market, while Galvin wants to focus on international markets. Given how competitive the U.S. and Canadian markets are, an international focus for Kno makes a lot of sense. However, it's not clear to me what Intel brings to the party, other than money. The company has never sold content successfully and pulled the plug a week ago on its biggest investment in content to date, its OnCue over-the-top video content service. It also appears that Intel did nothing with the tablet designs that it acquired from Kno in 2011. Intel wrote that "The acquisition of Kno boosts (our) global digital content library to more than 225,000 higher education and K-12 titles through existing partnerships with 75 educational publishers." Kno claims on its own website that it has more than 200,000 titles, so its collection is responsible for all or nearly all of Intel's "global digital content library."

My bet is that within a couple of years, Intel will shut down or sell off Kno, just as it's rumored to be selling off its OnCue business to Verizon for a small fraction of what it invested. Intel isn't a content company, its management doesn't understand content, and in my opinion, it should make investments in content companies but leave content production and distribution to others.

Kno moves into K-12 market: Expansion or act of desperation?

AllThingsD reports that Kno, a college eTextbook rental company, has struck a deal with Houghton Mifflin Harcourt to distribute its eTextbooks to the K-12 market. The titles will be rented for a one-year period for $9.99 or less, and will work on iPads and the web. Kno plans to release eReaders for Android and Microsoft Windows 7 (and presumably 8) later this year. The company is negotiating with McGraw-Hill and Pearson to distribute their K-12 eTextbooks.

The obvious hole in this strategy is that most K-12 schools directly supply textbooks to students (either at no cost or in exchange for a small activity fee,) so convincing parents to rent eTextbooks, and school districts to switch to renting eTextbooks instead of buying print, is going to take a lot of work. In addition, moving into the K-12 market indicates some desperation on Kno's part. It suggests that Kno isn't meeting its sales objectives, and needs to find new sources of revenue.

Update, August 8, 2012: Kno has launched its K-12 eTextbook rental program on its website. The biggest reason why parents should rent eTextbooks when they get them for free from their school is...wait for it...print textbooks are too heavy! Why, did you know that carrying a 12-pound backpack during a school year puts a cumulative load of over 20,000 pounds on your child's body--the equivalent of six mid-sized cars? And, given the epidemic of obese children and Type 2 diabetes starting in childhood, along with cutbacks in physical education programs, there's absolutely no reason for children to get exercise. Let's protect their delicate backs.

Print textbooks are too heavy? Seriously? 

Reviews of six eTextbook platforms

On The Textbook Guru blog, Jeff Cohen has reviewed six eTextbook platforms: Chegg, CourseSmart, iBooks, Inkling, Kindle and Kno. Cohen doesn't pick a "winner," but he does a good job of reviewing the pros and cons of each platform as they relate to eTextbooks. Here's a brief summary:

• Chegg: Based on HTML5, has a built-in "Ask a Question" feature for getting more information from experts, and its purchase and usage models are based on how students actually use textbooks. It's biggest downside is that it's online only and requires an Internet connection at all times. 
• CourseSmart: It allows both online and offline access to eTextbooks. Individual pages, along with highlights and notes, can be shared with classmates and instructors. Up to ten pages from any title can be printed. However, CourseSmart only rents eTextbooks, and they're disabled at the end of the rental period. It only has one level of zoom and no multimedia features.
• iBooks: It brings Apple's ease-of-use and user interface design to eBooks. eTextbooks can include 3D models, embedded video and interactive quizzes. There are also virtual study cards that contain chapter-specific glossary terms. iBooks eTextbooks work both online and offline. The biggest downside is the still-limited number of eTextbooks available for the platform. 
• Inkling: Works on the iPad and in some HTML5-compatible browsers. Allows students to purchase eTextbooks by the chapter or by the entire book. Supports online and offline reading. Video, audio, interactive and 3D content can be incorporated into the eTextbooks. Notes can be shared with other students. The biggest drawback is a strict returns policy. 
• Kindle: Has the most flexible rental and returns policy--eTextbooks can be rented for 30 days and extended as needed, or returned within the first seven days for a full refund. The "X-Ray" feature gives the definitions of important words, phrases and names, and visual diagrams of where they're used in the text. The biggest drawback is that most eTextbooks don't use Kindle Format 8, so they're black & white only, with no 3D, animations or video, and very limited audio support. 
• Kno: Supports iPads and HTML5 browsers, but not all titles work in both eReaders.  eTextbooks can be returned within 15 days, so long as the user hasn't gone past the first 20% of the book. Notes, bookmarks and annotations can't be transferred between platforms--for example, notes made in the HTML5 version can't be accessed when the eTextbook is opened in the iPad eReader. Cohen found that Kno's beta "Quiz Me" feature, which turns sections of the eTextbook into fill-in-the-blanks quizzes, didn't work properly. Some images were left out due to copyright restrictions. 

The problem(s) with eTextbooks

The eBook market is growing dramatically, especially in the U.S., but eTextbook usage in colleges and universities is growing at a much slower pace. There are no good statistics on eTextbooks' share of overall textbook usage, so surveys and anecdotal reports are taking the place of hard facts. Kno, a distributor of eTextbooks, released a survey last week that said that, of 400 students at four California community colleges who used the Kno eTextbook application with an open source textbook, 95% found it very useful and plan to use it again. However, an article yesterday in the University of Rochester's Campus Times quoted the manager of the school's bookstore as saying that in most cases, students rent or purchase eTextbooks only when the bookstore is sold out of the print versions. (The bookstore has sold eTextbooks since 2004.)

The Kno study focused on a pilot program that used a free textbook, so as much as they may like Kno's app, it's impossible to draw any conclusions as to whether or not students would be willing to purchase eTextbooks from Kno. The Campus Times article says nothing about students who use and like eTextbooks--and there have to be some out there. There have been other stories and surveys, with equally conflicting results.

Given what I've seen in the market, I believe that there are two fundamental reasons why eTextbooks haven't taken off: Price and selection. In general, eTextbooks are priced much less than new print textbooks when purchased, but they're more expensive than used textbooks. What's more, eTextbooks can't be resold, so the student can't recover any of the purchase price. eTextbooks are also more expensive to rent than used print textbooks. Students are very price-conscious, and any usability advantages of eTextbooks (such as the ability to keep an entire semester's worth on a single tablet) are outweighed by their increased cost.

Selection is the other issue. The number of available eTextbooks is increasing all the time, but many print textbooks are still unavailable in eTextbook versions. If the textbooks required for a course aren't available in digital versions, students have no choice but to buy or rent them in print.

The Campus Times article also points out another potential roadblock: Some vendors only make their eTextbooks available for use on personal computers, while many students prefer to use them on tablets. For example, Barnes & Noble's Nook Study eReader software, which is designed specifically for eTextbooks, only works on PCs and Macs. Since most vendors either use proprietary formats or attach DRM that makes it impossible to use their eTextbooks in other eReaders, students are limited to the capabilities provided by the vendor's software.

Apple's eTextbook initiative addresses the price issue, with all textbooks priced at $14.99, but as of this writing there are only ten titles available, and they're all for K-12 students, not college students. No one has managed to address both the price and selection problems, but it's not clear that the publishers, which control both price and availability, really care. Publishers are primarily interested in using eTextbooks to kill the used textbook business, which has been a thorn in their sides for decades. However, they're not willing to accept lower profit margins over the course of several years in order to do so. eTextbook resellers don't want to take the margin hit either, so it's likely that eTextbooks will remain a niche business for the indefinite future.

Kno-t Again: Intel invests $20 million and takes over Kno's tablet designs

According to The Wall Street Journal's All Things D, Intel Capital and Advance Publications (parent company of Condé Nast) led a new investment round of $30 million in Kno, the Silicon Valley-based startup that planned to ship tablets for the educational market starting late last year. $20 million of the total is coming from Intel. Kno claims that none of the tablets were actually ever shipped to customers, but several hundred were manufactured for Kno by Foxconn. As part of the deal, Intel will acquire ownership of the designs for Kno's tablets and will license them to other manufacturers, so Kno is officially out of the hardware business.

Kno will continue to develop its tablet software and pursue eTextbook licensing deals, but will target existing tablet platforms such as Apple's iPad. It's a smart move by Kno, and probably the only viable option that it had. I wouldn't be surprised if some of the $30 million goes to buy out one or more of Kno's earlier investors who had come on board because they believed in the potential of their tablet.

I still have a hard time believing in Kno's long-term prospects: It can no longer take advantage of the unique capabilities that it had designed into its tablets (for example, the 15" dual touch/stylus displays) to differentiate its offerings, and it has to compete with a variety of eTextbook distributors and publishers, including Chegg, the company co-founded by Kno co-founder Osman Rashid.

Kno more? Kno in talks to sell off its tablet business

All Things Digital is reporting that Kno, the Silicon Valley-based educational eBook reseller startup, is in negotiations to sell off its hardware tablet business and focus solely on renting eBooks. The company had announced plans to start selling its tablets in several configurations, both single- and dual-screen, between $599 and $999, at the end of last year. Kno apparently did deliver several hundred tablets before halting shipments.

Kno's original dual-screen tablet was conceptualized before Apple released its iPad. Kno's idea was to develop a tablet that could display 99% of college textbooks at full size, so its tablet was purpose-built for that application. The problem was that the resulting tablet was much too big and heavy--equal to two full-size college textbooks. After the iPad was released and defined consumer expectations about tablets, Kno responded with a single-screen version of its tablet, but it was still too big and heavy.

Now, according to All Things Digital, Kno wants to support tablets like the iPad and Motorola's Xoom, and get out of the hardware business. That, however, will impact Kno's "99%" strategy. There's no standard size for tablets, and they generally range from 7" to 10.1". None of them are big enough to support Kno's page size requirements, so users will have to pan and zoom documents, which Kno originally wanted to avoid.

Kno is apparently attempting to get some financial return on the time and money that it spent developing its own tablet, but it's unlikely that any hardware manufacturer will acquire its tablet designs. The Kno reader runs on Linux, not Android, so it will require significant additional software development. Whoever buys the hardware design will be coming into the market well behind Apple, Motorola, LG, RIM and HP. They'd be better off going with an ODM design from a Taiwanese or Chinese manufacturer.

Kno's tablet was the centerpiece of its business strategy; without it, it has no particular advantage over CourseSmart, Follett, Barnes & Noble, Chegg or any number of other, better-funded college eTextbook vendors.

Episode 3 of The Feldman File Videoblog

Episode 3 of The Feldman File videoblog has been posted below--if you can't view it here, you can watch it on YouTube. This week's episode covers:

• Sony U.K.'s announcement of the PMW-F3 "budget" professional camcorder with Super 35mm sensor
• Boxee's introduction of the Boxee Box, the forthcoming version of Boxee's software and new content partnerships
• Kno's announcement of prices and an availability date for its single- and dual-screen eBook readers for the higher education market

Kno announces prices for its eBook readers

Kno, the Chegg spinoff that plans to rent college eTextbooks, has announced prices for its two eBook readers. The single-screen model will be priced at $599, and the dual-screen model will be $899. A limited number of readers, manufactured for Kno by Foxconn, will be available by the end of the year. Kno plans to test its readers and rental program at ten unnamed U.S. colleges and universities.

Kno's single-tablet pricing isn't too far from the price of the equivalent iPad, which has become the de facto industry benchmark. However, the Kno readers have a very different set of use cases than the iPad. Kno's devices are designed to provide as close of an electronic substitute as possible for the experience of using printed textbooks, so they have big screens that can fit most textbooks in current use on the screen at full scale. Students can take notes and highlight with a stylus, or use their fingers. They're not general-purpose devices like the iPad or notebook computers.

Kno claims that their rental program will cover the cost of their single-screen tablet in three semesters. However, the question is whether students want an expensive dedicated eBook reader at all, or if they can live with the smaller screen of the iPad and similar devices. I think that most students will go with the iPad. They'll get a ligher, easier-to-carry device, an enormous selection of apps and a choice of eBook vendors, rather than being locked into Kno.

Kno started developing their eBook reader well before the iPad was announced. If they had waited until the iPad was available, I suspect that they would have chosen to support the iPad and other tablets rather than building their own. If Kno's eBook readers don't get market traction quickly, they may be forced to alter their strategy and support other devices.

Inkling and Kno: Two very different takes on how college eTextbooks should work

Earlier today, Kno, a Silicon Valley-based startup, announced that it has raised $46 million in its most recent round of funding, to add to the $10 million it previously raised. Kno and San Francisco-based Inkling, which recently announced its eTextbook application for the iPad, compete directly with each other, but the two companies have dramatically different approaches to how eTextbooks should look and work.

Kno began with the concept of reproducing print textbooks as closely as possible in an electronic form. For the Kno team, that meant preserving the look and feel of individual pages, right down to the page numbers. A professor who tells students to read "Chapter 6, pages 137 through 149" in a textbook can be confident that the chapters and page numbers will be identical in the print and Kno eTextbook versions. To make the Kno approach work, the company designed its own eTextbook reader (Kno refers to it as a "tablet", but it's really two tablets stitched together.) The Kno reader's dual displays are designed to show 99% of all college textbooks in use today at 100% magnification. In other words, no panning, scrolling or zooming are needed. It's just like reading a paper textbook. In addition, the Kno displays can be controlled by touch or with a stylus, so students can write notes in the margins of their eTextbooks and highlight text, just as they can with print textbooks.

The downside of the Kno approach is that the Kno reader that's needed to make everything work is heavy (the weight of two average textbooks), big (the size of a large notebook computer, except turned vertically) and expensive (the company says that it will be "under $1,000.") If the reader isn't accepted by students, the rest of the Kno approach will fall by the wayside. Kno took the "path of least resistance" approach: Make the eTextbooks just like print books so that students won't have to relearn how to use them. Use the same page format as existing print so that publishers don't have to pay to reformat their books for Kno.

Inkling, on the other hand, started with the content of textbooks and went from there. Inkling recognized that tablets like the iPad would likely become the preferred devices for reading eBooks (even though the iPad didn't exist when Inkling began development.) Since they didn't know what screen sizes their eTextbooks would have to work on, they designed Inkling to support a variety of screen sizes. Their system starts with Adobe InDesign (and possibly Quark) files, integrates audio, video, animations and hyperlinks, and outputs eTextbooks that dynamically reflow to fit the screen size of whatever device is used to read them.

There are a number of downsides to the Inkling approach: For example, page number references are no longer valid between print books and eTextbooks, so professors will have to refer to chapters and sections, not page numbers. (Update: A commenter says that Inkling maps the print version's original page numbers to the eTextbook version and allows users to navigate using the print page numbers.) Disiplay of eTextbooks on devices with screens smaller than 7" will be marginal at best. Inkling requires much more redesign and reformatting of content than does Kno, so it costs more and takes more time to create Inkling eTextbooks, and publishers have to be much more involved in the conversion process. On the other hand, Inkling eTextbooks work with the iPad, and will likely work on Android tablets in the future. Inkling doesn't have to build, sell and support its own tablets, and it's already supporting a wildly popular platform.

Kno's approach may be the path of least resistance in the short run, but it's hard to believe that we'll see millions of college students carrying heavy, bulky, expensive Kno eTextbook readers instead of cheaper, lightweight iOS and Android tablets that can do much more. Inkling's approach is better suited to where the industry is going. Making eTextbooks that look and work like their paper counterparts is an interim strategy at best. The value of a textbook is the information it contains, not its packaging, and that's why my money's on Inkling for the long run.

Kno thanks?

An eBook company targeting the college textbook business called Kno (formerly Kakai) went out of stealth mode today at the D8 Conference. Kno is a Silicon Valley startup that spun off from Chegg (one of Kno's co-founders was a co-founder of Chegg.). The company has been funded by Andreessen Horowitz, First Round Capital, Maples and Ron Conway, and it's looking for another round of funding this summer. Kno's idea is to rent textbooks to college students, and let them use them on a purpose-built, dual-screen tablet that's designed to be 100% the size of most common college textbooks. The result is a a big (dual 14.1" screens) and heavy (5.5 pounds) device that runs Linux. Everything works inside a web browser on the device. People at the conference who got to see the demo and play with the device said that it's slow and buggy, but the Kno team acknowledges the problems and says that it's working on them.

Kno hasn't set a formal price for the device, but it's saying that it will be less than $1,000. It has book rental distribution agreements with Cengage Learning, McGraw-Hill, Pearson and Wiley for a beta program to start this fall, but it didn't provide any details as to what titles or percentages of the companies' collections will be included.

It's too early to say how students will react to a big, heavy, expensive eBook reader that looks, to be honest, dorky. It's also too early to tell whether Kno will be able to retain its beta test publishing partners when it begins charging for readers and eBooks. Frankly, the Kno reader sounds much better in conception than in execution.