Digital textbook startup moving to Indiana

November 29, 2010

A Florida-based maker of digital textbooks intends to move its headquarters to Indiana next year as it pursues partnerships with several universities in the state.

Encompass Media LLC, run by Indianapolis native Scott Watanabe, will bring fewer than five of its 15 employees to the Indianapolis area. However, Watanabe projects rapid growth going forward.

“Our concept is really revolutionary, and we think can transform the business,” said Watanabe, 39, who is the son of the late Dr. Gus Watanabe, the chief scientist at Eli Lilly and Co. until 2003.

Encompass has already been testing some of its software to help Ball State University make digital textbooks available to students. Watanabe said he is working now to finalize a memorandum of understanding with Muncie-based Ball State to launch six more textbooks in fall 2011.

A memorandum of understanding is also in the works with the Indiana University School of Medicine’s informatics department. Encompass would help IU create a digital informatics textbook, with content written by experts from around the country. That book, Watanabe said, would be ready by June 2012.

Conversations are also ongoing with Purdue, Notre Dame, Indiana Tech and Ivy Tech colleges, Watanabe said. The level of interest in Indiana made it make sense to move the company here, he added.

“We’ve got good connections in the state,” Watanabe said from his office in Orlando, adding, “Because of that, we’ve kind of focused our attention on that being the hub.”

Encompass has also applied to the Indiana 21st Century Research & Technology Fund for grant money, which would require the company to move. Watanabe said he hopes a state grant could then help him lure private investors to fund the company’s growth.

Textbooks are an $8.2 billion industry in the United States, with digital textbooks a paltry $54 million of that total, according to Xplana, a division of the textbook wholesaler MBS Textbook Exchange Inc.

But with the boom of digital reading devices, especially Apple’s iPad,  digital textbook sales could explode to more than $1 billion by 2014, according to Xplana.

Encompass got started in January 2008 publishing digital guides to video games, but Watanabe saw potential in the textbook market because publishers were struggling to break out of the print paradigm to fill their books with all the digital gadgets now available.

His vision is to fill textbooks with videos, interactive diagrams, analytical tools to determine if students are comprehending the material, and software that tailors content to each student’s learning styles and comprehension levels.

The reason universities are interested, however, is much simpler: money.

Digital textbooks, by ridding the need for ink on paper, can be made and distributed for as little as 20 percent of the cost of traditional textbooks. So Watanabe sees the potential for cheap materials and larger profit margins.

Universities and the professors they employ could grab a larger revenue stake from digital textbooks than they do from print textbooks, Watanabe contends.

“The universities right now don’t get any money from the creation of this content,” he said. “They’ve showed a tremendous amount of interest in trying to recapture a part of their intellectual property.”

Watanabe is not the only one noticing these things. Indianapolis-based startup Courseload LLC has signed up some significant clients—Indiana University, Marian University and Rose-Hulman Institute of Technology—by making digital textbooks available at low prices via software that can be downloaded or used over the Internet.

Other companies in the digital textbook space include California-based CourseSmart, a company formed by major textbook publishers; New York-based Flat World Knowledge Inc.; VitalSource, a product of Tennesee-based Ingram Digital; and CafeScribe, a service of Illinois-based bookstore operator Follett Higher Educaton.


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