Thanks, Andy, and welcome to the q and a part of the presentation. As a quick reminder, if you have a question, please use the chat function on the platform. And with that, let's kick off with the first question. It comes from Tom Singlehurst from Citigroup. Andy, there's two for you, and then I'll come back and one for Andy and one for Sally.
First question, in the past, you have highlighted issues with an all you can eat approach with respect to safeguarding author's interest. Can you outline how your model resolves these issues? And secondly, can you give some additional color on premium functionality in the Pearson plus app? What study tools work with the app from the get go, and what pricing premium are you charging for these? Should we think about Pearson plus being a more direct competitor to Chegg over time?
Hi, Tom. Thanks for your questions. I'm not, familiar with myself highlighting any issues with an all your eat can eat approach, I think what's happened in the pandemic has accelerated a shift in consumer behavior from an ownership model to an access model. And very much with Pearson plus it's that ability to provide access at a very affordable price, which is really driving our strategy forward. You saw in the video the involvement of the the students.
And by the way, you know, we didn't kind of script them. They we sort of showed them and then recorded what they said. So what you saw is kind of their reactions to seeing the app for the first time. It was kind of interesting to hear them talk about some of the things, functionality they'd like to see introduced in the future and we are listening. The other cohort that we've been very engaged with is actually the author community.
We didn't have time to show some interviews we've had. They'll be posted on the website with authors. Again, we've involved them in the creation of this app, very involved in them and believe this is very beneficial to that community as well. As for your second question, you saw some of the functionality just outlined there by Mike. All of that is included in the the very simple pricing tiers.
You know, one textbook, $9.99 a month. Minimum commitment is only four months. And if you want, the entire library, it's $14.99, a month. Again, minimum commitment is, just, $14.99, dollars for for a four month commitment. You can hopefully maybe get a sense as we engage closely with the student population.
We start to understand what they're studying, what tools and functionality they want to introduce. As as Mike referenced, we actually have a three year road map, laid out in terms of how this app works not only within the higher ed, business, but then can extend into workforce. We can bring in our English language learning businesses. There's a very interesting, synergy with our assessments and qualifications business where you could imagine you you could, read a text and then take an assessment and achieve a qualification all very seamlessly. There'll be potential to integrate Mastering MyLab, Rebel, other types of products already from the start.
As as Mike mentioned, if you are a subscriber and there's some 8,000,000 subscribers to those products in the in The US, your e text version of that subscription is already embedded into Pearson plus. So there's a lot of functionality from launch, but you can be assured that we'll be coming back to you and constantly updating the features and functionality within the app as we as we as we move forward in the coming months and years.
Thanks, Mandy. Just another couple of questions from Tom as well. So does an aggressive push into a subscription model accelerate the downward pressure on pricing and therefore revenues in US higher education courseware in the short term? Sally, I think that's one for you. And then, Andy, one for you.
To what extent does the Pearson plus proposition feel inclusive access as a concept?
I'll take the, pricing one first. Obviously, we've done a huge amount of research, as we've looked to the pricing for this product. If you look at the the two ways that a student can buy the product, this is something that we heard back from students was important for them having the flexibility of either the $9.99 version for just one eText. So over the four months, that does equate to about the $40 that they would pay for an eText at the moment, but Pearson plus gives them more. Then the multi version, which is $14.99, We estimate that a student has about 1.3 books, so it gives us a sort of $70.30 split on that.
So, this is all designed to maximize revenues for us over time and, you know, provide something that's really affordable for the student at the same time.
And to the second question, Pearson plus is a complementary to other distribution channels. What we're really looking at is the supply side of the equation in terms of, for the first time, allowing students to come directly to us at a very, very, as Sally was just saying, an easy, accessible, and affordable price, and and with a with an app that has an amazing amount of functionality, which will only increase over time. So, it is complementary to other offerings that are out there.
Thank you both. Next question comes from two questions from Adam Berlin from UBS. Sally, probably first one for you. Do you expect the near Pearson Courseware app to be incremental to revenues in the first twelve months or cannibalistic? And then, Andy, how does the Pearson plus app integrate with Mastering and MyLab separate subscriptions?
So on the revenue side, as I said, in this year, we expect it to be relatively neutral as we, you know, get access to those consumers. But going forward, this is going to help us to accelerate recapture of the secondary market. And over time, we also think it's going to increase market share, not just because of the pricing that we've just talked about, but also because of the functionality that it brings to students as well. And I think we also need to remember this isn't just about US Higher Ed. That's where we're starting, but we will also be looking to, move this internationally, and then it will become a customer acquisition tool for us for things like English and workforce as well.
Andy, second question for you.
Yes. As I I mentioned, the from the get go, the eText part of that is included within Pearson plus and I think you can get a sense of how down the road it will be possible to integrate our other learning solutions into Pearson plus and then also move beyond higher education and look as a bridge into the career really start to create a digital ecosystem, a digital learning ecosystem that involves the other areas of the company so that, you know, I want Pearson to become the trusted home for digital learning solutions at key moments in an individual's life. And so we really start to lean into this notion of a lifetime of learning. And and that becomes, I think, a very, very powerful concept, particularly when we start to expand Pearson plus internationally and start to think about the different products and services that we can offer within that lifetime of learning journey.
Thanks, Bo. Next few questions. Nick Dempsey from Barclays. He's got quite a few, so I think we'll take them in stages. First question, Andy, is the Pearson plus app will not be on the Apple Store or Google Play Store.
How will students access it? Will they download it from your website, and will faculty members be incentivized to direct students to this, or will you need a major marketing campaign? And second question, can you give us any indications for your plan to generate new revenue in workforce skills and English language learning?
Okay. Paul pause there. Thanks very much for your question, Nick. You will be able to download the Pearson plus app from the Apple and the Google Store. They were approved.
Both of them approved the app earlier this week. So you will register for the app just as you do for Spotify, for example, via the website. But you will access the app through either the the Apple App Store or the Google Play Store, and that that will be available when when the product comes to market. The and and you will have the functionality of being able to sync seamlessly go from laptop to tablet to phone, and the app syncs up. So you can go from a large screen experience to something in the palm of your hand seamlessly because everything is synced up into the cloud.
And your your your question around faculty members being incentivized to direct students to this, we're we're not directly incentivizing faculty members, although there is a a a large incentive educational plan underway with faculty, so they understand the benefits to a student. We believe faculty will see this as a very positive sign, particularly around the area of accessibility and affordability. We do have the option to introduce promotions into the app, and that's something that we're able to test very rapidly for the first time. You know, we can test concepts, test pricing concepts, AB test, a lot of things. And we're very confident that faculty, as I said, along with authors, will find this as a really interesting tool.
As we develop the tool develop the app, there will be opportunities for faculty to actually be involved within the app itself. That I think is a opens up a whole host of, you know, new ways of teaching and new ways of delivering content beyond just the e text, but that's something for a little further down the down the road. And finally, the s, there will be a a major marketing campaign to at first, what we have to do is really increase awareness for Pearson plus amongst the student population. So as students go back to college, there is a a a a full funnel marketing campaign that is gonna break out. The creative we were reviewing yesterday is is really, really beautiful, really engaging.
So, if you are in the target demographic and if you are in The United States, then you will be made aware of, the availability of Pearson plus.
Thanks, Andy. Questions about workforce and English there, Andy, as well.
Oh, yes. So I don't don't don't want to get into too much details above and beyond what I, mentioned in my my remarks. I'm really, enthused about the progress we'll be making in in both areas. Within English language learning, you know, my thinking back in March was really to create a dedicated team to really focus on the opportunities that we have and bring together the existing assets, the global scale of English, obviously Pearson Test of English and other English language learning products that we already had within the company, bring them together and start to build. And the team have done an enormous amount of work over the last few weeks in terms of coalescing that and looking at a number of very compelling strategies.
We're we're really gonna be focused on the committed English language learner and there we have some very interesting plans. You're gonna have to stay tuned perhaps to for the for the next quarterly update when we may give you some more information in that regard. And as I said, with with workforce skills, we've we've assembled over a 100 employers employees from across the company, and they've created a a a series of very, very groundbreaking innovative products. And we've been doing a lot of time spending a lot of time talking to some very large and significant corporations about their needs and the ability for Pearson to apply what it has done so successfully in the educational space, in the institutional space, to apply some of those same principles into the corporate world and and everything from our assessments and qualifications businesses through to the ability to create courseware and provide learning platforms. So very, very encouraged by the progress they're may they're making.
And, again, I I I expect you should have, more news on that as we, get into the latter part of this year.
Thanks, Andy. And just staying with Nick. Andy, another quick one for you. Would it make sense to bundle MyLabs with Pearson plus sometime in the future? And then secondly, Sally, one for you changing gears to well, pointing professional certification declining in h two twenty one versus a tough comp, could that flow into H one twenty two or should you be back to growth by then?
Well, as I indicated, Pearson plus opens a world possibilities for us. Whether that is bundling a MyLabs mastering Revel products within it, creating new products, creating new content that that sits alongside the e text is something that we're we're very much focused on. You should think of Pearson plus as a digital learning ecosystem, as a digital learning platform that is going to transform the way that we deliver and interact with initially US higher education students, but potentially a much bigger and broader audience.
And then on professional certification, as you said, H2 this year has got that tough comp because we had pent up demand that we delivered in the back part of last year. I'll tell you more about 2022 when we get nearer the time, but broadly speaking across next year, we'll see professional certification, so view return to the growth that we expect of what is a great business.
Thanks, Sally. And, I've answered questions from Nick. So, Andy, one for you. Is the slower opening up in international making it difficult to find potential buyers for your school courseware businesses? And Sally, it has always been difficult to raise awareness of new products in higher ed and get faculty interested in these.
Can you give an idea of how you expect this to ramp as a percentage of your US higher ed revenues over the next few years?
Wow, Nick's getting his money's worth this morning. The international courseware businesses are really attractive businesses in of themselves, and as the team have been working on the perimeter and and other aspects of that business, we've been very, very encouraged by the number of unsolicited inbound inquiries. And as we continue to conclude that process, we're optimistic that, given the the the assets themselves, that there will there would be a great deal of interest if we, decide to to go down that route.
And then in terms of Higher Ed and Pearson plus from a product point of view, I think that this, you know, this isn't a new product in the way introduction of I know in MyLabs might have been, back in the day. This is extra functionality for the consumer for an eText product. So I don't think it's that we've got to then go in and adopt this with professors for the first time. So I don't think you see the same dynamics as the new products in the past. I think you'll see that consumers will see the extra functionality, will download Pearson plus and will, you know, enjoy it, and that will help drive market share over time because that will then lead professors to being more interested in the product and and adopting our product over time as well.
Thanks, both. And
moving to semi cassava exam. Sally, you've
got three
questions. Firstly, can you please comment on retention trends of the COVID cohort in virtual schools? Secondly, other OPM vendors have and continue to report stronger revenue growth rates. Why is Pearson underperforming? And I'll come back to the third.
Okay. Thank you. So virtual schools, as I said, enrollments for the 2122 school year are, we're expecting to be flat, as I said earlier in the year. Obviously, we've got more data at this point in the year and what we had expected is what is coming through. So application rates are down.
We expected that because of the huge surge we had in applications last year given COVID, but retention rates are up and those retention rates are on a much bigger base, obviously, that we had last year as well. And those two things cancel each other out. As we look to the future for virtual schools, we'll see that return to that great growth rate that we we used to in the past as well. And then the second question was on OPM, wasn't it, Jo? Yes.
OPM underlying growth rate of 11%, is good. Obviously, we have these discontinued programs. That drag finishes this year. We're really focused in OPM on operational performance and in driving profitability, and that's what we'll see going forward in OPM. So good, you know, good high single digits growth rate and improving profitability.
Brilliant. Thanks, Sally. And the third question from Sammy is, how many Pearson e techs are students required to procure each semester? Will Pearson plus result in deflation?
So from a Pearson eText perspective, I mean, that they're required to get the product if their professor adopts the product. I think I said earlier that we estimate about 1.3, of those. So that that equates to about, seventy thirty. So 70 people 70% of people, looking for one eText, 30% of people looking for more. So for the 70%, that equates to about 40, dollars they'd be paying for an eText at the moment.
And then if you average that out for the multi, subscription, that means that that very slightly lower than that $40. But what we've done in terms of this pricing is to look at how we recapture the secondary market and balancing volume and price to make sure that we maximize the revenues that we gain from this fantastic new product.
Thanks.
And it may be worth Joe, it may be worth reminding, you know, in a given year, we we reach about 50% of, the US Higher College student cohort around 10,000,000 individuals. And each year there's about 2,000,000 new individuals come in and over the course of a full year US College period, a student is likely to interact with a Pearson textbook about so the 90% of students are likely to use Pearson textbook over that time to give you a sense of the size and scale of that opportunity both on an annual basis and then over a longer period of time.
Thanks, Andy. And then moving to Matthew Walker from Credit Suisse. Four questions, so let's take them in twos. Sally, one for you. As well as recapturing from the secondary market, will Pearson plus cannibalize any of the other higher ed revenue stream?
And can you explain thinking behind the economics? And then, Andy, for acquisitions, which of the business lines are you looking at, and why did you not consider buying Stride?
So in terms of recapture of the secondary market with Pearson plus, it absolutely will. There will be people who move from some of our products into this, particularly print, but we'd already anticipated that pricing pricing mix, impact in the past. And, of course, we want people to move to our digital products because that's all part of recapturing the secondary market. If people choose to go, to Pearson plus rather than IA, that doesn't really have a price differential for eText. And, people won't move from our platform products to eText because they are a completely different product.
Obviously, the platform product has the homework, quizzes, and that sort of thing in it, but they will also have access to Pearson plus as well so that we can build that direct relationship with them. Andy, acquisitions.
Yeah. So on our acquisitions, as you know, we we have a a healthy balance sheet. So if we feel the need to find and and the right opportunity comes along, we have the capability to acquire. I'm only interested in in acquiring entities that will accelerate our growth and fit into the strategy that that we've we've laid out. Above and beyond that, I'm not gonna get into any more details or comment about any any form of potential targets that that are out there.
Both. And two more questions from Matt Sallie. Are you being too conservative with your flat view assumption in h two? And then secondly, in a four month subscription just for the first time then after, can a student just subscribe subscribe for one month?
So no. Given that pent up demand from last year, I think that flat review in the second half of the year is sensible as for clinical, as I said, and then school assessment, there is a there is a phasing difference.
Then in terms of the four months, after you've described the four months, can you then subscribe for once a month in Pearson plus? Absolutely.
Yes. And what we're seeing, by the way, which is interesting, we've seen this, is students are being flexible in terms of how they are learning. I was talking to a group of students who have decided they want to continue studying during this summer recess because, you know, a couple of them said, I want to try and finish my degree by December. And so you'll you'll you'll seeing a a somewhat of a disruption to the traditional pattern. And so, you know, Pearson plus and the pricing of that also plays into those students who want to continue to have access to books outside of the core semester.
And yes, once you've after your minimum commitment, it's on a month by month basis.
Thanks, Booth. Next two questions come from Sarah Simon from Berenberg. Andy, think both for you. Is the recent news about crackdown education in China likely to have any impact on your business? And secondly, colleges typically share in the revenues of a college bookstore.
By going direct to students like this, do you end up alienating colleges or will you be paying a share to the college's bookstores?
On the China question, Sarah, you'll be aware that we disposed of our that legislation is focused primarily on K through 12 and around tutoring. We're not significantly have a significant presence in K-twelve. We dispose of those assets the past, so we see very minimal impact on those reported changes within China. On the bookstore side, our intention is not to alienate colleges. In fact, we believe that Pearson plus is a great tool for colleges and the faculty themselves, as I mentioned before.
And so we're providing an alternative distribution channel for access from students, through Pearson plus. And so, yeah, we we have no, plans to, be paying a share to either the colleges or to bookstores. Thanks,
Andy.
And we've got time for one more question. The last two questions come from Patrick Wellington at Morgan Stanley. Sally, US higher education coursework declined by 12% in the last two years. How much better than that is the 2021 performance likely to be? And Andy, why is Pearson plus an innovative method of collecting content when Cengage has been doing something similar for two to three years?
Shall I take the higher ed question, Andy? Because I can be quite quick. As I said, we expect US higher ed to be down, but by less than we've seen in previous years, which was minus 12. I'm not going to be drawn on the specifics. I'll share more on that in Q3.
And as we mentioned in the video, Patrick, both from the pricing itself and the pay as you go model, they are very distinct as to other offerings, in the market. Plus, I think, you've maybe got a sense of the, user experience and feature set and the opportunity for us to develop and enhance this product going forward and really utilize the breadth and strength of Pearson as a whole. When we start to bring all of that, we and we are uniquely the only company that can can do that and do that at scale and start to roll this product out globally. I think you'll see that it's a very, very distinct differentiator and a very, very innovative and very unique product in the market. What you're seeing today with Pearson plus is very much the start of a a well thought out journey.
And the product that you will be seeing in the coming months and years will be very different from the one that you see today, that will be unique within the world of learning.
Thanks, Andy. That's all the time for questions. So with that, I will hand back over to you.
Well, thank you all very much for your interest, this morning, and, I know Sally, Joe, and myself will be speaking to many of you in the coming days. If you have any specific questions, please reach out to Joe and the team. Thanks for your interest as always in in in Pearson, and I wish you a happy Friday and a great weekend.