Gale Expects Few Changes to Library Business Following Cengage, McGraw-Hill Merger

McGraw-Hill and Cengage on May 1 announced an all-stock merger. Paul Gazzollo, senior VP and global general manager of Gale Publishing, a Cengage company, told LJ that libraries can expect "business as usual at Gale"

Gale logoMcGraw-Hill and Cengage on May 1 announced an all-stock merger, which will create an education publisher rivaling Pearson in scale when the deal is finalized. This could happen as soon as the first quarter of 2020. The combined company will be named McGraw Hill, and will have an executive team comprised of members from both McGraw-Hill and Cengage, led by current Cengage CEO Michael E. Hansen, with a structure to be announced prior to close. McGraw-Hill president and CEO Nana Banerjee will continue to lead the company through the transition, according to an official announcement.

Paul Gazzollo, senior VP and global general manager of Gale Publishing, a Cengage company, told LJ that “this is the announcement of an engagement, but the marriage is a few steps off…. In terms of what our library customers can expect, it is business as usual at Gale.”

McGraw-Hill will be targeting “cost synergies estimated at $300 million over the next three years,” according to the announcement, which would seem to imply typical post-merger efforts such as cuts to redundant departments, office locations, and a streamlining of product offerings. These savings will “unlock additional resources to increase value for students and educators by investing in areas such as adaptive learning, artificial intelligence, gamification and model-based testing tools.”

Inside Higher Ed coverage noted, “as competitors, McGraw-Hill Education and Cengage have many products that overlap, and observers will be watching closely to see which products the company chooses to invest in going forward.”

The most significant areas of overlap are student-facing solutions such as e-textbooks and digital learning platforms. Gazzollo explained of the library business that, “we are unique now in Cengage, and will be unique in the broader company after the merger in being the one business [within the company] that is focused on learning through libraries…. We don’t expect any change in how we do business or how we support our customers.”

In addition, academic resources such as the McGraw-Hill Education eBook Library are focused on business, medical, and STEM content, while Gale’s databases and other electronic resources are primarily focused on humanities research.

“Besides having library content be closer to more learners…we also see the possibility of complementary content sets,” Gazzollo said. “McGraw is committed to the highest quality publishing with strengths in science, technology, engineering, medicine, and business, [and] that really rounds out Gale’s strengths in humanities and social sciences.”

Coverage skeptical of the deal has focused primarily on the potential impact that industry consolidation will have on pricing for textbooks and e-textbooks.

“Right now, five companies control about 80% of the textbook market and, if the merger is approved by regulators, that number could go down to four,” marketwatch.com reported last week. “Textbook costs have skyrocketed over the past several years—the average price increased 88% between 2006 and 2016, according to the Bureau of Labor Statistics—and some have worried that the relatively high concentration of the market is partly to blame for those price increases.”

As Inside Higher Ed reported, both publishers have been dealing with a rapidly changing textbook market during the past decade. Balking at rising prices, many students are not purchasing textbooks. In response, publishing companies are moving toward digital content platforms such as McGraw-Hill Inclusive Access and Cengage Unlimited, offering subscription-based access to course materials, often paid for through student fees.

Although subscription-based access also benefits publishers by depressing competition from the sale of used textbooks, both companies have touted near-term savings for students. McGraw-Hill claims that Inclusive Access saved U.S. students more than $55 million in 2018, while Cengage claims that Cengage Unlimited saved students more than $60 million during the 2018–19 academic year.

Officials say that the companies will continue to focus on affordability, with Hansen stating that “together, we will usher in an era in which all students can afford the quality learning materials needed to succeed—regardless of their socioeconomic status or the institution they attend. Additionally, the combined company will have robust financial strength to invest in next-generation products, technology and services that create superior experiences and value for millions of students.”

Libraries have been helping students and faculty mitigate the rising cost of textbooks and course materials for years, and those efforts are sure to continue, whatever the impact of the merger.

“Libraries are part of the learning ecosystem, and in many ways, present sort of a level playing field,” Gazzollo said. “We see that continuing, and we see Gale playing a key role in that. In terms of Gale’s alignment with curriculum, that’s been a consideration for a long time. Our partnerships with Google Classroom, Schoology, Canvas, and Blackboard, and all of the LTI [Learning Tools Interoperability] integration that we do, are also an area where we see library materials being at the fingertips of educators and students.”

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Matt Enis

Matt Enis (menis@mediasourceinc.com, @MatthewEnis on Twitter, matthewenis.com) is Senior Editor, Technology for Library Journal.

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