 Okay, just maybe for context, how many of you were at the earlier presentation that Eric Frank did, where he drilled in on the history of bottle roll? Okay. So maybe a third of you. We'll talk just a little bit about what bottle roll is, but then we'll kind of dive into some financial sustainability issues that Dave and I have been working on over the past couple of years. And I should just state up front that a lot of what we'll see is relatively old data considering that bottle roll's history has been three years, we'll be looking at years one and two of their financial history. So there's 33% of its current life that hasn't been studied yet. But let's just kind of dive in. For those of you who don't know, bottle roll knowledge is a for-profit company. It's received some significant venture capital funds, and their basic business model is that they will give away their textbooks for free. You can go to their website and read them online. But they also have a variety of other formats that you could purchase. So if you want to buy a paper or a copy, you can do that. If you want, there's a mp3, if you want to listen, you can do that. If you want just a little part, maybe you only want one chapter, you can do that. So they have lots of different auxiliaries. So the first thing that we did was in 2009, and at this point in time, bottle roll was doing some beta testing. So they wait, and this is going to be the winter of 2009. They had six texts, they were used in 27 classrooms, about 750 students participated. And kind of the radical idea here is we're putting our textbook online for free. It's licensed openly so that professors can make whatever modifications they want to it. And if there's a free textbook available, can you make money? And one of the interesting questions I think that came up in the earlier presentation is is it even right? Is it even in the sphere of openness for a company to be trying to make money? And I think one of the neat things about bottle roll is because they're trying to make money, they have some initiative to go out and get people to actually use their textbook. Because if there's no money involved in creating a nice textbook, someone's got to be beating down the door of the professor saying, please use this textbook. And they've got an incentive to do that, whereas maybe in other places there's not that same incentive. But if everyone uses the free textbook, there's probably no money in it, and bottle roll is not going to last. So this is kind of the whole question, as bottle is modeled, sustainable. So in the beta version of the 720 students, 59% placed in order with bottle roll knowledge, not all of those were for textbooks, because kind of as we mentioned, there are lots of different accelerates that you can buy. The average student spent $20.20. So a total of 294 textbooks were purchased, so about 40% of the students bought a textbook. Considering what your paradigm is on electronic textbooks that could be a surprisingly low or a surprisingly high number, to me I think it's interesting that when there's a free version available, still you have 40% of people this time who wanted to buy the textbook at any minute, the value you have in that printed material. And then these are some of the ancillary products. You can see that flashcards, digital flashcards, were the most popular item. And these are only including those that students bought outside of a bundle. At the time, Flat World had a product you could buy where you could get the textbook plus bundled with lots of other resources. So a lot of students bought that, kind of all you can eat package. But several people, as you can see, went out and bought these other products. So this was the beta test, and now what I'm really focused on is what happened in the 2009, 2010 academic year. So as you can see, their growth was enormous. So instead of a couple of hundred students, they now had about 58,000 students during this academic year. Kind of the question that we wanted to pursue was, did the trans and the beta test hold, and is that enough students to buy a product to support the company? So some of these numbers are kind of tedious, but if you don't mind, we'll just review them just to, I'll be on the same page. So going back here, we've got about 58,000 students and a total of 16,461 print textbooks were purchased for close to half a million dollars in revenue. By the way, I think special kudos is deserved to flat-willed knowledge for being very open and transparent with some of this information. And one interesting findings was how many of the print copies were purchased through a campus bookstore. Originally during the beta period, you had to go into the flat rural website to order the book. But once they rolled out, you could just go and from the student's perspective, there's nothing special about this textbook. It's not, there may not even be aware that it's an open textbook. They go to the bookstore, get their list of the side books, got it. Wow, this is kind of cheap and I'm out of here. So in total, and this is one of maybe one of the key numbers. This is lower than the beta period, 29% of students enrolled in a course purchased a print copy of the textbook. Again, 100% of the students had access online to the textbook. Now, here's another little kind of interesting table. And these are the other ancillary products that they sold. Because, for example, if you don't want to buy the book, but you want to print out a chapter, maybe chapter seven is really tough. And so you think, I need this chapter and I need it on the go. I'm not going to be able to be online, I'm going to be on the train or whatever when I'm studying this chapter. So you can just print out a chapter here. And you can see they sold 40,690 of those and here's the revenue figures. It's kind of interesting to see which ones are the most popular, which ones are the least. So at least at this point in time, the ePub book represented a very low revenue stream. Although it's projected at a time, that may change as students become more and more maybe out of the using tablet devices. So maybe a key takeaway is here. So Flatworld, if you look at their business model, part of it is they're selling the textbook, and part of it is they're selling ancillary products. These digital products made about one-fifth of Flatworld's income in the 2009-2010 academic year. So before we kind of shift onto the cost side, because all the revenue is great, but what did it cost to put this all together, but just kind of summarize. So all the students who were taking a class that used Flatworld materials, you had about two-thirds register on the website. And one out of four of those two-thirds, or in other words, 60% of total students, made a purchase through the Flatworld site. Now again, most of the students who are buying the print textbook are just buying it at the campus bookstore. But you still have a substantial number of students who are buying these other products through the Flatworld site. Average buyer makes 1.3 purchases, and the average purchase price is about $31. And some of these purchases, they could buy a collection of resources, which is why you have a large skew between number of purchases and the amount of total units purchased. We do that in Flatworld together. David, do you have anything that you want to add in on the revenue side so far? OK. So revenue is great. We all love it. But it's also expensive to run a business. So what is this costing? Let's look first at how much does it cost to publish a textbook? Hopefully you've noticed here, several of their textbooks are running a lot. $150,000 for the first 10 textbooks was the average cost. Since then, I think they've learned some things and implemented the last figure I heard here correct, and it's about $120,000 per book. So let's take a look at now these $120,000. How does that spread out? There's six or seven kind of key things here. So we're paying someone upfront money to write the textbook, and that's separate from royalties that they'll receive on sales. Then we pay people to review the book, make sure that we've written a good textbook. Design, illustrations, art, production, creating these different digital versions, audio, EPA version, instructor ancillaries, and then student ancillaries. My understanding is that this is kind of the traditional textbook model. This is what a textbook publisher would be doing. They're going to peer review their book. They're going to pay someone to write it. So it costs between $120,000, or at least in this case $150,000 to get a textbook up and running. But now the challenge is, how do we get this textbook into your classroom? So for those of you in the room who are creators of OER out of the goodness of your heart, and so to you, and this is kind of, I think, maybe where I fall into with migration, I create this OER as a gift to the world, and I'm so excited for someone to use it. And my hope is that I could put it out there, and thousands, if not tens, and hundreds of thousands of people will review it and enjoy it, and humanity will be blessed. But the discouraging part is, I built this great house, and no one comes. And again, this is where a flat world has kind of an interesting dynamic that I think there's important lessons that can be learned. Because they're in it for profit, they have an additional motive to get more people using their textbook. So how do they do this? Well, there's lots of things that go into giving a faculty member to adopt their textbook. And for the time period that we studied, 2009 to 2010, they reported that the average cost of the faculty acquisition was about $900. And the gross profit per class who adopts a book was above $300. So in other words, they have to get a professor to use their textbook for three semesters in a row in order to make up the money of just getting the professor to say, OK, we'll use your textbook. And for me, this was a pretty astounding number. Because you'd think people would be beating down their doors and say, wow, a free textbook for my students, I'm so happy, not the case. This should be a really sobering number for those who are just hoping to freely share information. You're like, well, this is really tough to get information into the hands of people who will use it. Now, I think they've made a few tweaks and changes in how they're getting faculty referrals and trying to do less on their side. Because this word of mouse spreads makes it easier. I think the projections for this next year will only take one semester of the faculty acquisition to pay them back. So let's kind of take a look at the bottom line. Textbooks in current enrollment equal, you can see, what I've done is I've taken the numbers and just to keep it simple, we're just going to have one textbook. So let's say instead of all the textbooks, they just have one current number, so when I say current, I'm referring to the 2009, 2010 school year. They made $61,000 off the one textbook, or $48,000 of that came from the book, and then $13,000 came from these other products. So let me help you here. So when you say $48,000 from the book, you mean from sales and printed versions of the book? Correct. Whereas ancillaries could be digital versions of the book, too, like the audio book or the e-book. Exactly. Or flashcards to help you prepare for quizzes and text. So that's good. And remember that this one textbook cost $150,000 to do. So at least in theory, and in this little equation we've taken out the heavy costs of getting a faculty member to adopt the book, we're in a little bit of trouble, because it's going to take two and a half years to pay off the costs of getting the book written. But this doesn't cover all of the other overhead and other costs that flat-wheel knowledge would face. So if this were the end of the story, we would conclude maybe this is not a sustainable business model. But here's the other piece of the equation. In the beta version, we had 900 people enrolled. And then in the next year, the folks of our study, we're up to 58,000. That's a pretty good growth curve. And then my understanding is, as of right now, we have about 270,000 enrolled students. So that's obviously a very steep and continuing curve. And in this study, 30% of students thought text books, so my understanding is that the current number has increased. So what? All of this is to say that it's very possible that this is a financial sustainable model. And so the question then is, well, who cares? Why does this matter? Because I think where there's something that's financially sustainable, there'll be increased growth and competition. If there's no sustainability, it makes it much harder for the process to continue. Anything else you want to chip in here? No, although I think, is Eric in the back of the room somewhere? Yes. So it's kind of fun to give this talk and have Eric in the room. I mean, you know the current numbers obviously better than we do, because we only look at them year over year at the end. Do you want to chip in anything here? Yeah, I think as a baseline, we were actually pretty happy with what you presented, we were able to analyze at that moment in time. But clearly, we were on a path at some point that were run out of venture capital and not profit. And so, you know, but as a foundation, it gave us a place to start to say, all right, where are the places in the formula we have to tweak? So we've gotten that cost of customer acquisition down from $900 to about $500, and we think it'll be about $350 in the next selling season. So that's going to get us to that one semester payback on cost of sales and marketing. And we've gotten those conversions up from 30% total to just about 50% total. And we've gotten those conversions. We're going to have a conversion of students buying the products instead of a free reader to become a paid member of something. And four of those conversions are on digital products versus print products, which have a much better gross margin. So more of the dollars we're making are actually profit versus going towards cost of making print books. And, of course, we're growing user base. So when we look at all that today, we look at our financial statement versus a year ago today, we're now on profitability by fall 2013 as opposed to running out of money. And so in theory, we should never need to raise any more venture capital unless we so choose to do so based on its growth opportunities. And that's a very different place to be and a good place to be. So we'll see. That's still some speculative numbers in there. But all the trends are in the right direction. Yeah. Great. Thank you. Can I just go back a little to the $900 figure of the cost to the faculty without the textbook? I don't understand what that cost represents. Is that your marketing cost? Is that somehow the cost for the school? What is that $900? So I'll give an answer, but feel free to chime in. So part of that are indirect costs. So sending out flyers, brochures. This is FOT World. I don't work for FOT World. Oh. David and I, that was fine. FOT World's cost. Yeah. It would be FOT World's cost. Maybe they're going to send someone out of sales rep to go and make a face-to-face call so there's going to be airfare and malls, hotels, all the sales costs. Yeah. Those are basically, you could think of them as programming costs with sales and marketing. But they don't involve people. So all the people, the sales marketing people, are costs that are different. Lines, the pure cost of acquisition is the cost of releasing data to email faculty, running email marketing campaigns, running PR campaigns, running direct mail campaigns, sending out peer-review copies for inspection and review, et cetera. So it's all the program costs of sales and marketing. Do you see that cost of the militia models? It's coming down quite a bit. And it's coming down based on, A, us learning what works and what doesn't work and stopping the things that don't work and doing more of the things that do. So just as we learn, we get much more efficient. But it also, we've seen the greatest timeline in our business that I think is critical is the first semester when we asked you, a doctor, how did you first learn about a platform of 12% sent from a peer? The second semester was 27%. And this past one just went through it was just over 40%. So that is the single biggest driver down of the cost of acquiring a customer. It's going to be exponential. It's the base growths, the world of model growths, and more marketing costs coming down. Thank you. Please. The 270,000 students you have are flat work knowledge. Are they all US-based students? That's a good question. And I think this is a cool note to figure. This means that in total throughout the three years of public history, there have been 270,000 students. Because you know that there are some countries that are making a national push to digital textbooks. India just came out with a $35 tablet for their students. Now, they're not making a national push like South Korea to go totally digital. But has flat world knowledge thought about heading up countries with large populations where the language used in higher education is English, Singapore, Hong Kong, India, all these other countries where they're making a push toward digital textbooks because of those countries, the cost of print textbooks have always been obscenely high. That's a question for Eric. Yes. And so that 270 represents almost exclusively US students enrolled in formal adoption. So we had about almost 3x that number in traffic of people coming to consume pre-textbooks, but those are students enrolled in classes where there's been a formal adoption. And almost all of them are in the US. And I think we're looking to operationalize a lot of that global activity we see. And we are looking first to those kinds of places that you mentioned where it's English language instruction and primarily where they're building tremendous educational infrastructure without a lot of legacy and can therefore engage in very different kinds of content relationships. They're tricky because everybody wants to sort of do that stuff on their own. And you'll always have that challenge. But we're definitely interested in having those and starting out some of those discussions. Thank you. We just have a couple more minutes left. I want to conclude with a quote from the Thought World site. I think this is pretty interesting what they say. And this is, I think, a good word to those who are saying, look, you're probably skeptical of our business model, and here's our response. We'll make less money for students than the big guys, but that's OK. We'll be selling to a lot more of them, and we'll be doing it for a lot less money. Like we said, this is just a smarter way to do business for all of us. And while, kind of as we've discussed today, the ultimate jury is still out. There are some very positive trends in the Thought World model being a sustainable business model over the textbooks. Any other questions just in our last couple of minutes? Please. I have a question, and maybe Eric would be best to address this. How can you get an existing author of a textbook to get their textbook to be an open textbook? I don't think it's possible to be in today's success. So I'm proposing any force for the scope of the Bible and psychology. I found a great textbook. It's not open. It's not too extensive, and there's not many people that offer books on this subject. How can you convince, or is England had success with convincing someone to switch to their current publisher to use someone for the Thought World? Yeah, I think by and large, the answer is you can't. The most publishing agreements are such that the author is transferring copyright to the publisher mail owns the copyright and their perpetual. Even when they go out of print, it's not that frequent that the publisher returns the copyright back to that author unless they adamantly and persistently request it. So generally speaking, if the author isn't interested in having that material become published somewhere else, they don't transfer the rights. An easy way to check is if you go to Amazon and see if there's a kindled version of that textbook. Because if there is, then that means that somewhere in the publisher author agreement, they agreed on creating a e-version of that textbook. So if there is some kind of e-version and some kind of stipulation in their contract out there. But even there, it doesn't be. So for example, in places where I work, we always have the right to publish e-books. And so even those e-books that are kindled versions are still publisher-owned intellectual property that they've given Amazon the right to distribute for a percent-digital total sale. So it doesn't necessarily mean they're free to go somewhere else with that digital book. It depends on the contract one. I mean, honestly, I wouldn't say flat out no. No, I agree. Because a lot of authors have republished their work. Even if they were published at a different edition, they would have been the publishers. So there's nothing that would really prevent them from making a flat-world copy. It would be the flat-world knowledge edition. I think what they're saying and what is true is that oftentimes you will be locked into all subsequent editions or closely related. But it depends on the publisher. And it depends on the discipline. I mean, there's, I would say maybe for some of the large, the really large academic publishers maybe, but there were some people who were using textbooks that are not from Springer or Elsevier or something. They're using something a little more esoteric for a textbook. And those publishers may have a bit more flexibility in their contract language than the bigger publishers. So this is why it's dangerous to say flat out no. Thank you. There's no such thing as no. Yes? So did that cost you mentioned earlier about producing a textbook involved maintenance and updates? It doesn't, actually, one of the great things about having a sort of publishing engine that is hosted in the cloud is that our cost of revision is almost nothing now because there's a couple of factors. So that the authors can actually go into a web platform and make updates in real time, sort of as they go, and just store it as a draft version. And there's no sort of new formatting costs. There's very few new costs associated with that other than the cost of reviewing again. And even that comes way down because at that point we're getting lots of behavioral data from users about how they're using it. And so we have a lot more information. And so we even minimize the number of academic peer reviews we do on subsequent versions. We're only reviewing sort of new content in very surgical ways. So the cost of revisions are really low. Thank you. We may have one last question for you in your hand now. Yeah, we have a faculty member in our college who publishes a standard textbook. And I asked him what the markup was. He gets 15% publisher, I don't know if that means the publisher gets 85% or perhaps the seller gets part of that also. But usually the seller gets like 60%. Like so the book store, Canvas book series takes 40% and the total rise goes to the book store and 60% would go to the store. But this is where the five world story is the best. So Eric, what's the world to you? Yes, the typical relationship is that publisher sets a net price. So let's say the publisher owns this book, they set a net price to a book store for around $100. They'll pay the author 15% of that $100, so 15%. The book store then sets a retailer or a list price. They mark it up 30% to 35% on top of their markup. The author gets none of that. In our end, there's different royalty rates for different versions. So global versions are usually at a 10% or up-to-date, digital editions are at a 5% to 10% or up-to-date, so there's all these things. When we did it, we set a 20% world-to-date no matter where it gets sold, anywhere in the world through any channel. Just trying to be simple about it, but also to say, over time, you actually have a chance as an author to earn more income in the open model than you would in a traditional model. Especially if you sell more. Correct. So yeah, this is basically the pathological model is by making it available for free. We'll be back to you all to see more. We're out of time. Thanks so much. Have a great day. Thank you. Thank you.