News Corp.'s $1 Billion Plan to Overhaul Education Is Riddled With Failures
Seventh-grader Kevin Warren hunched over his desk, struggling to log on to a new tablet computer that News Corp. leased to his school. It replaced an earlier gadget, which had overheated, generating a red warning bar across the screen.
A few desks away at their Greensboro, North Carolina, middle school, Krista Sturdivant wasn’t impressed with the tablet. “Sometimes it works, sometimes it doesn’t,” she said as her desk mate, Ayana Munoz, wearing sky-blue lipstick, nodded in agreement. “Sometimes it doesn’t connect to the Wi-Fi, and I can’t get my work done,” Ayana said.
The tablets were supposed to help revolutionize schools and upend a sector that News Corp.’s Executive Chairman Rupert Murdoch said in 2010 was “waiting desperately to be transformed.” That hasn’t happened.
By the end of June, Murdoch’s News Corp. will have invested more than $1 billion in Amplify, its division that makes the tablets, sells an online curriculum and offers testing services. Amplify, which never set a timetable for turning a profit, has yet to do so. It reported a $193 million loss last year, and its annual revenue represented only about 1 percent of News Corp.’s sales of $8.6 billion.
The education effort has been riddled with technology failures, fragile equipment, a disconnect between tablet marketers and content developers, and an underestimation of how difficult it would be to win market share from entrenched rivals such as Houghton Mifflin Harcourt Co. in the kindergarten to high school education market.
“After all of these years of investment, it would really behoove them to show some wins,” said Tim Nollen, an analyst at Macquarie Capital USA in New York who has a “neutral” rating on News Corp. shares. “So far, I haven’t seen any.”
Joel Klein, Amplify’s chief executive officer, said he always considered the company a long-term bet. “I wish that things would move more quickly,” said Klein, the former New York City schools chancellor under Mayor Michael Bloomberg. “But when these things move quickly, sometimes you wind up creating a lot more problems.” (Bloomberg is the founder and majority owner of Bloomberg LP, which competes with News Corp. in delivering financial news.)
In what is by far Amplify’s largest contract to date, the Greensboro schools will pay the company $14.6 million over four years for about 19,000 tablets. Math teacher Leah Hampton said the tablet helps her tailor lessons to each child in her seventh grade class. “It shows me what each kid is working on, and allows me to identify what apps they are working on,” Hampton said.
Yet, even though teachers like Hampton found the technology useful, Amplify had such a rocky rollout in Greensboro in the fall of 2013 that the district scrapped the devices and went back to pencil and paper. The system started over again this past fall with a redesigned tablet — though only after Amplify offered financial incentives.
Amplify’s experience shows how even the most deep-pocketed new players find it challenging to change the way children are taught. Billionaires such as Microsoft Corp. founder Bill Gates and real estate and insurance investor Eli Broad have expressed frustration their philanthropy hasn’t done more to improve student achievement. Murdoch is discovering his own challenges as he seeks to make a profit from overhauling education — as have other education entrepreneurs before him.
In February, Robert Thomson, News Corp.’s CEO, said the company would “review the situation at Amplify” after school districts have decided whether or not to purchase its products for the next school year. In an e-mailed statement, he said the company is still committed to the venture: “A digital revolution in education is coming, and Amplify is well-positioned to meet the demand for a world-class curriculum.”
Amplify faces plenty of competition. It is taking on a host of textbook publishers, such as Houghton Mifflin. Millions of U.S. students use Houghton Mifflin’s curriculum — and more than half of its sales are in digital format. As of early 2015, about 30,000 students in 20 schools used Amplify’s. While Amplify views its all-online offerings as an advantage, textbook publishers can achieve economies of scale by adapting printed material to the Web, according to Linda Zecher, CEO of Boston-based Houghton.
“There’s a pretty big moat around what you need to be competitive in this business,” Zecher said.
Murdoch began moving into education with the November 2010 purchase of Wireless Generation, a News Corp.'s $1 Billion Plan to Overhaul Education Is Riddled With Failures - Yahoo Finance:
