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.

College bookstores claim that the price of course materials is dropping

The National Association of College Stores, which represents college bookstore operators, has just released a study saying that by students' estimates, the average annual cost of required course materials is $655, down from $667 two years ago and $702 four years ago. The Student Watch study published by the NACS seems, at least in part, to be a response to the press release sent out last week by CourseSmart that said that almost 35% of students don't think that it's worth their effort to sell their textbooks back to college bookstores.

The NACS study says that 74% of college students prefer to rent hard copy textbooks; the organization claims that rental can save students between 45% and 66% off the price of a new print textbook. (CourseSmart claims similar savings from rental of its eTextbooks.) The NACS claims that purchasing used textbooks can save 25% off the price of new textbooks for students, and that renting or purchasing eTextbooks is also an option for saving money.

NACS' members are facing many challenges: Competition from Internet-based textbook suppliers such as Chegg, Amazon, BookRenter and others; publisher groups like CourseSmart that compete against bookstores; colleges and universities that cut direct deals with publishers such as McGraw-Hill and provide textbooks and course materials through activity fees; and schools that adopt open textbooks at low or no cost. Students, colleges and universities are exploring more options than ever before, and college bookstores are no longer most students' de facto source for textbooks, eTextbooks and other materials.