global sales of seg products: acquiring world rights core issues understanding the global market...

Global Sales of SEG Products:Acquiring World Rights

• Core Issues

• Understanding the Global Market

• Global Market Size

• Pub Process for World Rights

• SEG Benefits

On the Call:

• Krystyna Hue

• Diane Schnell

• Rick Kaller

• Rich Brommer

• Nina Meindl

• Andy Socha

• Ruth Cochrane

• Nathan Olson

• Art Block

• Lynn Bruton

• Steve Mico

• Kevin Bretzinger

Not Joining:

• Pat McKee

2.

Draft – Not for Distribution

Core Issues

Background:

• International Product Group (IPG) has historically had strong sales of domestic products

• Many domestic products being sold globally were not licensed for such distribution → non-compliant

• Without access to domestic products, IPG sales – an area of growth identified by MHE – will drop off quickly

GOAL:

To create an effective working arrangement with IPG thatprovides access to a growing, profitable, and compliantsales channel

3.


Understanding the Global Market

The Global School Market using English as the medium of instruction for U.S. school curriculum subjects can be divided into two types:

• Schools teaching in a first-language environment – defined as international schools, attended by expatriates’ kids

• Schools teaching in a second-language environment – defined as bilingual schools, attended by local kids of parents of higher spending power on education

Content Standards and Assessment

• Both environments desire following the U.S. educational experience, only with an international perspective

• Parents pay high tuition fees to ensure their children are exposed to the U.S. curriculum

4.


Estimated Global Market Size (by region)

Regions US$

Asia $77,000,000

Middle East 31,000,000

UK/Africa 2,000,000

Latin America 70,000,000

Canada 22,000,000

Australia 18,000,000

Global Total $220,000,000

Latin America32%

Asia35%

Australia8% Middle East

14%

UK / Africa1%

Canada10%

5.


Estimated Global Market Size (by segment)

Middle/High Schools Level

$66,450,000

Elementary Schools Level

$153,550,000

Tremendous influx of growth in bilingual schools education in the elementary level as students strive to learn English through mainstream subjects like mathematics and science

Reduction in enrollment in middle/high school levels as students return to public school system in order to compete in the entrance examinations that lead to local colleges

6.


Estimated Global Market Size (by discipline)

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000Elementary

Secondary

Elementary $92,130 $27,639 $18,246 $7,677 $7,677

Secondary $39,870 $11,961 $7,974 $3,322 $3,322

Reading Science Math Social Studies Others

$132,000 $39,600 $26,220 $11,000 $11,000Total

7.


Step 1: Build awareness in the product line

• International Sales attends annual SEG Pub Plan Meetings

Shares global update

Reviews product offerings particularly in Reading, Math, Science, and Social Studies

Identifies high-potential products for global market

• Krystyna Hue (IPG Business Manager) follows-up with Publisher/Editorial Director to discuss possible International interest in a new program

• Group Editorial Directors inform Krys about new plans, notify her of any changes to the Pub Plan

DistributionAuthorizationiPubBusiness

JustificationAwareness Forecasting Budgeting

8.


Step 2: Forecast the global opportunity

• International Sales…

Develops regional sales forecast for each component of the program of interest

Sends request to the appropriate Editorial Director for estimate of all costs associated with acquiring world rights

Primary Contact for SEG: Krystyna Hue



9.


Step 3: Budget the cost of global rights

• Editorial sends budget request, including International inventory needs (unit sales estimates) to Photo and Text Permissions

• Editorial identifies PU/New selections, derivative usage, and any possible licensing problems (example in appendix, page 17) up-front



10.


Step 4: Create the Business Justification

• Permissions teams estimate cost of World Rights and send to Editorial (example in appendix,

page 16)

Estimate … World Rights cost = X

Estimate … North American Rights cost = Y

Incremental World Rights cost = X-Y

• Incremental world rights cost is the additional plant investment for this sales channel and must

meet basic criteria (example in appendix, page 18):

can not exceed 5% of the program’s total plant investment

must be 1/8th (or less) of International gross revenue commitment

• World rights will be part of the program narrative



11.


Step 5: Enter in iPub

• Editorial compiles World Rights budget, including all license and ‘coordination’ labor costs, and

shares with International.

• International formally commits to the sales forecast which is sent to Marketing for entry into

iPub. (A sales commitment from International is required … see example on page 19)

Latin America sales commitment – David Swail

EMEA, Asia, Australia sales commitment – Simon Allen

• Editorial uses iPub to indicate:

World Rights licensing on applicable products

Applicable International sales channels in units/revenue

International quantities in total units calculation

International pricing by sales channel (with Finance)



12.


Step 6: Proposal authorization in iPub

• Once a proposal has been authorized through iPub…

Permissions begin acquiring World Rights.

Any licensing problems are shared with Editorial.

Applicable problems are discussed with International.



13.


Step 7: Sales and distribution can commence

• Once all World Rights have been secured…

Editorial notifies Inventory that rights have been acquired

Inventory manager updates Oracle restrictions to reflect World Rights*

Editorial Director notifies International that sales / distribution can commence

* Permissions System project will automate this activity in the future



14.


SEG Benefits

• When IPG sells a domestic product, SEG receives a payment of 60% off of Net

• After Cost of Goods Sold is subtracted, this payment is booked as OIF (Other Income, Foreign)

• On average, $1.00 of IPG sales delivers ~$0.25 in OIF

EXAMPLE:

• World Rights cost: $10K

• IS sales forecast: $130K

• Expected SEG OIF: $30K

15.


Appendix

• Examples of the process in practice

16.


• (1) Oracle/MSS data, (2) permissions team analysis and marketing validation of future units (3) International unit

forecast

• Biology © 2009, 2012 should be monitored as domestic is on track to exceed 1 million; 40% of images are capped at

1M, balance not limited

Tiers should be analyzed and need to be addressed in the event that international volume is high enough to drive tiers higher or (in the case of some rights holders) when International distribution exceeds a contracted percentage of total distribution.

Permissions team determines Intn’l demand “OK” in context of domestic use

Permissions team notes potential concerns to be addressed by Editorial and Finance

1. Permissions teams review the International unit forecasts to ensure demand doesn’t exceed rights tier parameters

17.


2. Photo and Text permissions teams provide estimates of the cost to clear global rights.

Photo rights estimated by Rachel Norton and Heather Bowman using 1Step, PCT, and manual review of vendor contract terms.

Text rights estimated by Mark Schaffer (Bonnie Beacher for Treasures).

Photo costs, for vendors not extending global rights, are estimated at 25% of domestic costs; text rights estimated at 100% of domestic costs.

Accurate assessment for product lines already published can require use of 3 formal business systems, spreadsheets, paper files and archived data. Assessment can be time-consuming so should be coordinated early. The permissions system project should speed such analyses in the future.

18.


3. Editorial and Photo/Text Permissions teams should consider any potential licensing concerns that may need to be addressed.

• Algebra 1, 2 & Geometry

Photo: Team considered recent issues with another product line, Math Connects, where licensing challenges arose

around ‘redux’ covers of literature selections in the TWE. No similar issues foreseen in Algebra and Geometry;

permissions team, Rich Brommer believe risk of rights not being granted is minimal.

Text: n/a

• Biology

Photo: Permissions team, Rich Brommer see no risk of photo rights not being granted.

Text: n/a

• Timelinks, Exploring Our World

Photo: Permissions team, Rich Brommer see no risk of photo rights not being granted.

Text: Mark Schaffer, Karen Limbacher and Sue Martin see no text selections that raise concern for global

permissions. Some rights may not be managed by the same holder internationally, but minimal global availability

risk.

• Treasures

Text: Valery Levy cautions critical selections may not be available and not discovered until well into permissions

acquisition process.

Mitigation: pre-qualify permissions availability for key assets before commitment to acquire global rights.

Particularly important in the case of a basal reading program that will cost $2.8 million for photo / text rights.

19.


4. How it all comes together

“Green Light” criteria …• International revenue commitment at least 8X the cost of global rights• Cost of global rights not to exceed 5% of the program plant investment

Guidelines are a test allowing pursuit of strong opportunities. Test should not exclude significant / strategic opportunities; shows where additional business case development & approval is needed.

© 2013 opportunities

to acquire rights

simultaneously

20.


Sales commitment from International

• A written sales commitment

from International is required

to include international

revenue in the proposal

global sales of seg products: acquiring world rights core issues understanding the global market...

Documents

global total

global sales of seg

ipg sales

international schools

elementary schools level

bilingual schools education

compliant sales channel

school curriculum subjects