Pearson (Pearson NCS, NCS Pearson) Reed Elsevier (Harcourt Assessment) and McGraw Hill dominate the US educational testing market. Pearson paid $2.5b (in 2000) for NCS and Reed paid $4.5b for Harcourt (also in 2000). Pearson’s NCS has not seen fantastic growth since the acquisition, however 2005 has seen a significant turnaround with sales up 20% (for the testing business) and 13% overall for Pearson Education. Testing is seen as a growth business because of President Bush’s No Child Left Behind policy that mandates schools wanting government funds must test their students.
Both Harcourt/Reed and McGraw Hill have lost ground to Pearson, which reflects the loss of a couple of large state-wide contracts. Right now NCLB testing applies mostly to primary (elementary) school and the start of secondary school, however President Bush has made no secret of the fact that he would like to see it expanded to cover all of secondary education. It looks increasingly unlikely that President Bush will be able to expand NCLB as he has far too many other policy problems to keep his administration busy for the remainder of his second term.
In the UK, the relevance of the growth at both Pearson and Reed is that they see the UK as a key target for growth. With exam marking being described by the Head of the QCA as, ‘a Victorian cottage industry’, these two giants plan to use their expertise in online assessment and marking to revolutionise the UK market. Pearson seems to have a huge local advantage because they effectively own one of the major exam boards Edexcel. Quite how Pearson managed to gain control of an organisation that was a statutory body and a trust is still a question of some debate in educational circles but it works as evidenced by two facts:
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It succeeded and the opposition within education (for example from commentators like the late Professor Ted Wragg) went almost unreported
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Pearson have just done the same thing with BBC Worldwide by establishing a similar joint venture (BBC Active) which will own all the educational IP of BBC Worldwide but in a structure where Pearson is the majority shareholder.
Reed and its management have until recently been one of the darlings of the UK market. Recent losses by their US testing division (to Pearson) have prompted Reed’s Chief Executive Sir Crispin Davis to issue a trading update (a profit warning by any other name) and this has seen the largest fall in the company’s share price in 24 months. Reed may see this as a blip but if President Bush’s expansion of NCLB is stymied then growth in the UK market will become more important and Reed are currently far off Pearson’s pace in this market.
