Chegg made more than $200 million last year by renting out printed textbooks to college students but the company’s CEO wants to abandon this clearly lucrative business in favor of a digital model. Inspired by companies like Adobe and Netflix, CEO Dan Rosensweig wants to vastly improve the company’s margins by dropping the use of physical books in favor of digital ones which are infinitely more affordable to deal with. It’s a bold move, dropping a working model for a completely new one, but only time will tell if it was the right decision.
Print textbook rentals to college students generated more than $213 million in revenues for Chegg last year—but CEO Dan Rosensweig would like for that number to be closer to zero. Since joining Chegg from Yahoo in 2010, Rosensweig has been studying up on companies like Netflix and Adobe—he calls them his “role models”—while maneuvering for ways to set the education technology company on a digital-only trajectory. His dream is finally coming true: Chegg announced yesterday that it had reached a deal with Ingram Content Group, a book distributor, that will allow the company to hand over its print textbooks and dramatically improve its margins. “We control the student relationship, we control the catalog, and Ingram controls the capital that it spends on it,” Rosensweig tells Fast Company. Over the next 18 months Chegg will liquidate its print inventory and refocus on its digital products, including self-guided homework help and on-demand tutoring. Students will continue to rent through Chegg’s platform, with the company taking a 20% take on the print textbooks and relying on Ingram to manage operations.