68. _org_Cengage Learning Australia
Full name: David A O'Brien

If you are making this submission on behalf of an organisation, please provide the name: 
Cengage Learning Australia Pty Ltd

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Question 29: 
TO:            Australian Law Reform Commission
RE:            ‘Copyright and the Digital Economy (IP42)’ submission 
Cengage Learning Australia Pty Ltd (CLA) has a long history of publishing textbooks and student and teacher resource materials for the Australian educational market, with strong annual front lists for the primary, secondary and tertiary market segments. Importantly and for the current context, CLA develops and publishes all major materials in digital format and makes these available in a variety of digital platforms for users. In particular, all resources produced for the Australian Curriculum are published in both print and fully interactive eBook formats.
CLA directly employs more than 200 full-time staff, generates annual revenues between $50 and $100 million, and has over 1000 current independent authors and illustrators who are contracted on a licence fee or royalty split of revenue basis – for both print and digital format sales.
CLA is a member of the Australian Publishers Association (APA), and the undersigned currently serves on the Schools Committee of the APA.
In my capacity as Vice President – Schools at CLA, I make this submission to provide some understanding of how the current school educational publishing market (primary and secondary sectors) operates in Australia, with particular focus on digital content and digital delivery. In addition, I explore both the growing role of, and issues involved in, creating and delivering digital content to teachers and students and the role of Copyright Agency Limited (CAL) and the application of the current Schools Statutory Licence. 
Context
The two questions of the ALRC Issues paper for which this submission seeks to directly respond to are:
Q29.  Is the statutory licensing scheme concerning the reproduction and communication of works and periodical articles by educational and other institutions in pt VB of the Copyright Act 1968 (Cth) adequate and appropriate in the digital environment? If not, how should it be changed? 
Q30.  Should any uses of copyright material now covered by the statutory licensing schemes in pts VA and VB of the Copyright Act 1968 (Cth) be instead covered by a free-use exception? For example, should a wider range of uses of internet material by educational institutions be covered by a free-use exception? Alternatively, should these schemes be extended, so that educational institutions pay licence fees for a wider range of uses of copyright material?
In relation to Question 29, the simple response on behalf of CLA is Yes – the statutory licence is adequate and appropriate in its current form and application. I list below some key issues for CLA as a specialist educational publisher that develops Australian Curriculum-matched teaching and learning resources. 
1               Digital content for schools in various formats has been available for a few years now; however, the breadth of photocopying teaching and learning resources at schools has remained undiminished and, according to recent CAL sampling records, is now over 900 000 000 pages per annum. This figure represents more than 250 pages for every school student in Australia. Clearly, there remains a massive requirement to continue the statutory licence for the benefit of schools, even as they move towards increasing their utilisation of digital content.
2               For the 900 million pages mentioned above, not a single permission request was required to be made to any publisher registered under CAL. The cost of administration is borne entirely in the first instance by CAL and ultimately by the IP owners as the administration costs are deducted from the statutory licence funds before distribution to copyright holders based on the sampling results. Accordingly, the statutory licence is administratively efficient, clear in its understanding, and an amazingly inexpensive method for schools to legitimately utilise a wide array of age-appropriate and curriculum-relevant content for student learning. 
3               The growing uptake in utilising digital materials in schools is unlikely to lead to an either/or situation – that is, either all print or all digital.  For example, primary schools focus heavily on literacy. To move from printed to digital readers, there would need to be both a significant change in the way teachers undertake guided reading and a massive investment in tablet devices and infrastructure support. This may all happen, but it is many years hence. Given the need for governments to apply equality of education across all schools – whether metropolitan, regional or remote – the logistics are substantial. At the other end of the school-year spectrum, most Year 12 students sit an end-of-year examination that counts significantly towards their tertiary entrance criteria.  I do not believe there are any plans by state and territory governments to assess students other than in ‘pen and paper’. This therefore pragmatically applies a brake on teaching Year 12 entirely in a digital world, when ‘pen and paper’ assessment is such a key focus of their final year.
4               There appears to be a presumption in the market from schools and governments that the statutory licence is a massive revenue and profit windfall for IP owners. It is definitely an important revenue source and gratefully acknowledged; however, for any mainstream title, CAL distributions do not adequately cover the level of product sales lost to photocopying.
5               Further, educational publishers do not receive either the same revenue from the statutory licence or the same share of CAL distributions compared with print sales. Industry-standard royalties paid to authors ranges from 10% to 15% of revenue received from product sales.  For distributions received from CAL, an average of 30–50% is commonly paid to authors from photocopy income from the same published titles. Yet the publisher incurs the same time and costs for sales and marketing whether their revenue is sourced from product sales or CAL photocopy distributions.
In regard to Question 30, CLA is hesitant to extend the existing free-use exceptions. For context and understanding of our position, I make the following points.
1             For a specialist educational publisher such as CLA, everything we publish – in both print and digital format – is core to our business. We neither publish nor ‘give away’ any content without a specific commercially focused reason. Thus every photocopy of our print products, every download of a page from our website, every display on an interactive whiteboard is a potential loss of a sale. We believe that the terms ‘free’ and ‘without charge’ are not the same or interchangeable. CLA does not invest to create materials for the sole purpose of being given away free of all obligations. Certainly, we provide elements of our textbooks and other resources for download and review without charge, but this is a normal marketing exercise to generate teacher review and to ultimately secure a purchase or school adoption. They are not for download and use in a classroom as an alternative to purchasing the product.
2             Cengage does not believe that providing material without charge somehow changes copyright ownership protection to determine how that IP can be dealt with; certainly, it should not absolve schools from coverage under the CAL statutory licence for use of the material. To further illustrate this point, CLA continually receives requests from schools for permission to copy some pages of our works, often pages from our websites, and to include these on their intranets for students to access at school or at home. We consider each request and usually provide permission if the school has purchased, or book-listed, the relevant title for student purchase – that is, we can demonstrate a commercial benefit to CLA has already been achieved.
3             Question 30 specifically refers to the example that suggests Internet material supplied by educational institutions be covered by a free-use exception. Let me state that our websites serve a number of functions. Fundamentally, they enable a wide access for interested parties – essentially teachers, students and educational institutions – to gain a comprehensive understanding of our portfolio of classroom, teacher and student resources that are matched to various state-based and Australian curriculums. Given that nearly half of all schools in Australia are physically located outside of metropolitan and main regional towns, the Internet is critical to providing regional and remote customers with full details of our products. Much of our portfolio are a complex series of reading titles that require a good deal of explanation and understanding and thus a few pages may be provided ‘without charge’ either to view on-screen only or, in some circumstances, to download to check or use as a sample activity in a classroom – that is, a ‘try before you buy’ concept.
4             We believe some of the free-use exemptions are no longer relevant and, with the changing approach to teaching and student learning, may operate unfairly for educational publishers.  Small-portion downloads of two pages, for example, are a free exception to the statutory licence administrated by CAL; however, two pages is often the exact extent (often one page is) of a relevant classroom exercise or lesson plan that we create and seek to sell in a ‘bundle’ of classroom and homework exercises, tests and lesson plans. A two-page portion from our work can represent 100% of value of that portion downloaded. It is much less likely to be similar to two pages from a trade novel.
5             CLA does not currently, or would contemplate, advertising revenue from its websites through any form of ‘click though’ by teachers and students to other websites for commercial gain.  Frankly, our Physical Education eBook series ‘brought to you by Hungry Jacks’ is not going to happen. Any third-party advertising is unlikely to gain support from teachers, parents or students. I state this as reinforcement that, for educational publishers, the types of revenue sources we chase are quite limited – sales of product (print and digital), and CAL statutory licences that partially compensate for lost sales – and that’s about it. So widening the exceptions for free-use prima facie dilutes our overall revenue opportunity.
6             From a pragmatic perspective, teachers’ ability to influence, control, monitor and enforce students’ respect for copyright is critically important to educational publishers. Generally, the industry incurs very similar costs to develop, release and market content in digital and print formats, without certainty of being able to receive a fair return from all students who use only the digital-format content.
A common misconception by teachers and students is that textbooks and other printed learning resources are very expensive to produce and that digital content is not; therefore, if the same content is provided in digital form, the unit cost should be substantially lower than the textbook-only price. In my experience, the combined costs for physical printing, storage and distribution of a printed secondary school textbook is around 15–20% of the net sales price received by publishers and around 12–15% of the purchase price paid by teachers and students. Digital content delivery still incurs costs – to provide in CD format and/or pay for Internet hosting fees, file conversion costs and maintenance for download access. The net cost difference between print and digital delivery is minor to the publisher. The risk of illegal copying and lower unit sales, however, are substantial.
 
I do hope this submission enables the ALRC to form a better and balanced understanding of school educational publishing and the key copyright issues that we focus on, particularly in relation to digital content development and digital delivery to our customers and end users.
 Yours sincerely,
 David O’Brien                                                  
Vice President – Schools
Cengage Learning Australia
Question 30: 
TO:            Australian Law Reform Commission
RE:            ‘Copyright and the Digital Economy (IP42)’ submission
Cengage Learning Australia Pty Ltd (CLA) has a long history of publishing textbooks and student and teacher resource materials for the Australian educational market, with strong annual front lists for the primary, secondary and tertiary market segments. Importantly and for the current context, CLA develops and publishes all major materials in digital format and makes these available in a variety of digital platforms for users. In particular, all resources produced for the Australian Curriculum are published in both print and fully interactive eBook formats. 
CLA directly employs more than 200 full-time staff, generates annual revenues between $50 and $100 million, and has over 1000 current independent authors and illustrators who are contracted on a licence fee or royalty split of revenue basis – for both print and digital format sales. 
CLA is a member of the Australian Publishers Association (APA), and the undersigned currently serves on the Schools Committee of the APA. 
In my capacity as Vice President – Schools at CLA, I make this submission to provide some understanding of how the current school educational publishing market (primary and secondary sectors) operates in Australia, with particular focus on digital content and digital delivery. In addition, I explore both the growing role of, and issues involved in, creating and delivering digital content to teachers and students and the role of Copyright Agency Limited (CAL) and the application of the current Schools Statutory Licence.
Context
The two questions of the ALRC Issues paper for which this submission seeks to directly respond to are:
Q29.  Is the statutory licensing scheme concerning the reproduction and communication of works and periodical articles by educational and other institutions in pt VB of the Copyright Act 1968 (Cth) adequate and appropriate in the digital environment? If not, how should it be changed? 
Q30.  Should any uses of copyright material now covered by the statutory licensing schemes in pts VA and VB of the Copyright Act 1968 (Cth) be instead covered by a free-use exception? For example, should a wider range of uses of internet material by educational institutions be covered by a free-use exception? Alternatively, should these schemes be extended, so that educational institutions pay licence fees for a wider range of uses of copyright material?
In relation to Question 29, the simple response on behalf of CLA is Yes – the statutory licence is adequate and appropriate in its current form and application. I list below some key issues for CLA as a specialist educational publisher that develops Australian Curriculum-matched teaching and learning resources.
1               Digital content for schools in various formats has been available for a few years now; however, the breadth of photocopying teaching and learning resources at schools has remained undiminished and, according to recent CAL sampling records, is now over 900 000 000 pages per annum. This figure represents more than 250 pages for every school student in Australia. Clearly, there remains a massive requirement to continue the statutory licence for the benefit of schools, even as they move towards increasing their utilisation of digital content.
2               For the 900 million pages mentioned above, not a single permission request was required to be made to any publisher registered under CAL. The cost of administration is borne entirely in the first instance by CAL and ultimately by the IP owners as the administration costs are deducted from the statutory licence funds before distribution to copyright holders based on the sampling results. Accordingly, the statutory licence is administratively efficient, clear in its understanding, and an amazingly inexpensive method for schools to legitimately utilise a wide array of age-appropriate and curriculum-relevant content for student learning. 
3               The growing uptake in utilising digital materials in schools is unlikely to lead to an either/or situation – that is, either all print or all digital.  For example, primary schools focus heavily on literacy. To move from printed to digital readers, there would need to be both a significant change in the way teachers undertake guided reading and a massive investment in tablet devices and infrastructure support. This may all happen, but it is many years hence. Given the need for governments to apply equality of education across all schools – whether metropolitan, regional or remote – the logistics are substantial. At the other end of the school-year spectrum, most Year 12 students sit an end-of-year examination that counts significantly towards their tertiary entrance criteria.  I do not believe there are any plans by state and territory governments to assess students other than in ‘pen and paper’. This therefore pragmatically applies a brake on teaching Year 12 entirely in a digital world, when ‘pen and paper’ assessment is such a key focus of their final year.
4               There appears to be a presumption in the market from schools and governments that the statutory licence is a massive revenue and profit windfall for IP owners. It is definitely an important revenue source and gratefully acknowledged; however, for any mainstream title, CAL distributions do not adequately cover the level of product sales lost to photocopying.
5               Further, educational publishers do not receive either the same revenue from the statutory licence or the same share of CAL distributions compared with print sales. Industry-standard royalties paid to authors ranges from 10% to 15% of revenue received from product sales.  For distributions received from CAL, an average of 30–50% is commonly paid to authors from photocopy income from the same published titles. Yet the publisher incurs the same time and costs for sales and marketing whether their revenue is sourced from product sales or CAL photocopy distributions.
In regard to Question 30, CLA is hesitant to extend the existing free-use exceptions. For context and understanding of our position, I make the following points. 
1             For a specialist educational publisher such as CLA, everything we publish – in both print and digital format – is core to our business. We neither publish nor ‘give away’ any content without a specific commercially focused reason. Thus every photocopy of our print products, every download of a page from our website, every display on an interactive whiteboard is a potential loss of a sale. We believe that the terms ‘free’ and ‘without charge’ are not the same or interchangeable. CLA does not invest to create materials for the sole purpose of being given away free of all obligations. Certainly, we provide elements of our textbooks and other resources for download and review without charge, but this is a normal marketing exercise to generate teacher review and to ultimately secure a purchase or school adoption. They are not for download and use in a classroom as an alternative to purchasing the product.
2             Cengage does not believe that providing material without charge somehow changes copyright ownership protection to determine how that IP can be dealt with; certainly, it should not absolve schools from coverage under the CAL statutory licence for use of the material. To further illustrate this point, CLA continually receives requests from schools for permission to copy some pages of our works, often pages from our websites, and to include these on their intranets for students to access at school or at home. We consider each request and usually provide permission if the school has purchased, or book-listed, the relevant title for student purchase – that is, we can demonstrate a commercial benefit to CLA has already been achieved.
3             Question 30 specifically refers to the example that suggests Internet material supplied by educational institutions be covered by a free-use exception. Let me state that our websites serve a number of functions. Fundamentally, they enable a wide access for interested parties – essentially teachers, students and educational institutions – to gain a comprehensive understanding of our portfolio of classroom, teacher and student resources that are matched to various state-based and Australian curriculums. Given that nearly half of all schools in Australia are physically located outside of metropolitan and main regional towns, the Internet is critical to providing regional and remote customers with full details of our products. Much of our portfolio are a complex series of reading titles that require a good deal of explanation and understanding and thus a few pages may be provided ‘without charge’ either to view on-screen only or, in some circumstances, to download to check or use as a sample activity in a classroom – that is, a ‘try before you buy’ concept.
4             We believe some of the free-use exemptions are no longer relevant and, with the changing approach to teaching and student learning, may operate unfairly for educational publishers.  Small-portion downloads of two pages, for example, are a free exception to the statutory licence administrated by CAL; however, two pages is often the exact extent (often one page is) of a relevant classroom exercise or lesson plan that we create and seek to sell in a ‘bundle’ of classroom and homework exercises, tests and lesson plans. A two-page portion from our work can represent 100% of value of that portion downloaded. It is much less likely to be similar to two pages from a trade novel.
5             CLA does not currently, or would contemplate, advertising revenue from its websites through any form of ‘click though’ by teachers and students to other websites for commercial gain.  Frankly, our Physical Education eBook series ‘brought to you by Hungry Jacks’ is not going to happen. Any third-party advertising is unlikely to gain support from teachers, parents or students. I state this as reinforcement that, for educational publishers, the types of revenue sources we chase are quite limited – sales of product (print and digital), and CAL statutory licences that partially compensate for lost sales – and that’s about it. So widening the exceptions for free-use prima facie dilutes our overall revenue opportunity.
6             From a pragmatic perspective, teachers’ ability to influence, control, monitor and enforce students’ respect for copyright is critically important to educational publishers. Generally, the industry incurs very similar costs to develop, release and market content in digital and print formats, without certainty of being able to receive a fair return from all students who use only the digital-format content.
A common misconception by teachers and students is that textbooks and other printed learning resources are very expensive to produce and that digital content is not; therefore, if the same content is provided in digital form, the unit cost should be substantially lower than the textbook-only price. In my experience, the combined costs for physical printing, storage and distribution of a printed secondary school textbook is around 15–20% of the net sales price received by publishers and around 12–15% of the purchase price paid by teachers and students. Digital content delivery still incurs costs – to provide in CD format and/or pay for Internet hosting fees, file conversion costs and maintenance for download access. The net cost difference between print and digital delivery is minor to the publisher. The risk of illegal copying and lower unit sales, however, are substantial. 
I do hope this submission enables the ALRC to form a better and balanced understanding of school educational publishing and the key copyright issues that we focus on, particularly in relation to digital content development and digital delivery to our customers and end users.
Yours sincerely,
David O’Brien                                                  
Vice President – Schools
Cengage Learning Australia
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