PackBack Books on Shark Tank
Kasey Gandham and Mike Shannon have just stepped into the Shark Tank. They have traveled from Chicago, Illinois, all the way to the Shark Tank, and are seeking $200,000 in exchange for a 10% equity in their company.
Kasey asks the Sharks if they remember what it was like to be a college student, then explains that there is a serious epidemic on the rise since the Shark’s college days – college textbook prices are on the rise. And they are. Since the time Mark was in college (the two from PackBack signal out Mark specifically), books have risen 800% in price. In fact, students are even dropping out of their courses in order to avoid the book costs. They are compromising their education, and that’s not even the worst that could happen – the price of books could cause students to drop out of college and move home with their parents again, negating the purpose of college anyways.
Kasey and Mike finally elaborate more on what PackBack Books is – PackBack is a website that provides a student with textbooks that are paid for on a pay-per-access basis. The student pays for access, logs in, selects the book they need, and have immediate, affordable access to their books. The e-textbooks of PackBack are fully equipped with highlighting and note-taking features that are generally found in other e-textbook softwares, making the software more or less identical to other similar services. They have partnered with major textbook publishers to bring the PackBack services to students across the nation, even, and they need the Shark’s help to expand the service.
Kevin speaks first, telling the two that they have walked immediately into his space – Kevin has recently entered into a deal with a publisher to do marketing books for the New York market. He already offers the books in a digital format, and wants to know if PackBack would simply just lease the books in a digital market and supply Kevin with the money. Kasey elaborates on how the service works, giving the example of Daymond as a sophomore in college – Daymond can use the service and rent a textbook at a rate of $5 a day, or less, as he needs to do so. Robert asks if the two have a deal with the large publishers for internet distribution, and they reply that they only have a direct deal with one major publisher so far. Barb replies that the one deal would cover anywhere from 25 to 30% of all college textbooks just under this one deal alone. Daymond asks how the deal works, since the two are relying on others’ intellectual property to make their money – Mike explains that they also offer links to textbooks, which also allows them to receive a kickback when a student has both used the PackBack service and then also purchases the textbook through the referral. The books are being rented at a rate of approximately $100 to $150 per book. Barb clarifies that they are selling books, but simply doing it at a smaller scale – Kasey agrees, using the term “microtransaction.”
Robert asks the typical price of a textbook, which Kasey says could be anywhere from $150 to $180 depending on the class or semester. Robert asks how much the same book would cost under PackBack’s structure, and Kasey says that they rent books out for $5 a day. Robert then asks what is the average amount of time that a student downloads a book for; Kasey says that although PackBack is in a closed beta stage with 337 students at one campus, they are using their books only on four main occasions – the revenue on an average student that participates in PackBack is $34 per semester. Robert then asks about the cost of the publisher, and Mike says that the publisher receives 75% of all revenue. Kasey elaborates that 75% is the industry standard for all e-books, so they might eventually be able to claim up to 30% on their end of the bargain. However, Kevin points out that the two have no exclusivity with any of the publishers, so the publishers most likely will not budge on their margins. Kevin explains that he has worked with publishers with over a decade, and he has never known publishers to give exclusive rights.
Mike speaks up, saying that they know that there is indeed a first-mover advantage to the marketplace (the first person to introduce a product typically has an advantage over the competitors that come later – see Apple and the advent of the iPod.) The major players in the space are all selling used books, and the textbook industry is an $8 billion industry – $6 billion of that is used books. Robert asks if the used textbook industry is so heavy, how could Packback possibly attract customers; Kasey says that Amazon or Chegg don’t offer daily used textbook rentals because if they were to do so, they would be cannibalizing their used textbook stock – the market is such a disaster for their revenue.
Barb asks what percentage of students are renting their books instead of straight-out purchasing them, which Kasey elaborates by saying that the average student will spend about $500 in the average semester without giving the publisher a single dime. Now the students will rent directly from the PackBack service, and Barb asks how much that should come out to per semester – Mike gives the number that each student should spend about $280 on the PackBack service per semester, which give the students great savings. However, Robert disagrees – his son will use his textbook a lot more than four times in an entire semester, but Kasey and Mike say that they have done the research and the reason that Robert’s children might be using their books more is because professors usually have a wealth of additional resources available, thus making the book a little more redundant due to being just an additional resource. Robert clarifies, asking if the goal for them is to team up with publishers to bring in kids who otherwise would not be giving publishers any money by incentivizing a cheap rental straight from the source – Mike says that yes, that has been the point they have been trying to make the whole time.
Daymond says that the beauty of the Shark Tank is that each Shark has so much knowledge in many different spaces – Daymond made it to the Shark Tank by having drive and common sense, and he even admits that he is dyslexic so he can barely read and did not go to college. He says that he likes to invest in businesses he has some expertise in, but since he did not attend college, he cannot help the two with their college-based business. Daymond is the first Shark out.
Barb speaks next, saying that she thinks the two are having a harder time selling the PackBack service than they are letting on. She says she also cannot imagine every single publisher coming along for the ride, and is also out of the deal.
Kevin says that he likes what the two are doing since he knows the industry inside and out, and he has worked on deals with publishers for over a decade. He offers one small piece of advice; it will take the two a lot longer than they think to get the deals through. Kasey says that in their experience, they have taken two years to get one publishing deal because the publishers take so long. Kevin then says that while the thought of giving back to education sends a tingle up his spine, he simply cannot move forward to creating a deal with the publishers of the textbook and says that he would rip the rest of his hair out. Kevin says that despite the two investing in a noble pursuit, they are going to invest thousands of hours per year in making the deal, and by the time they manage the deal, they will be very old. Kevin is the next Shark out of the deal.
Mike insists that if the pair can find the right individual within the publishing organization, things click between organizations and the ball gets rolling – progress starts being made. Robert speaks next, telling the two how he has a gut feel; he just does not share the vision for the product, and is also out of the deal.
The last Shark remaining is Mark. Mark takes a moment to gather his thoughts, and says that he likes the concept and understands the idea behind it – Mark is somewhat of a tech expert, so he understands the need for such a product and is somewhat hip to the digital textbook market. But 10% equity isn’t enough for Mark to get interested in the deal, and he wants the two of them to come back with an answer on how much equity Mark could acquire and for what cost. The two step out into the hallway (with permission, no shenanigans this time), and discuss their deal; they return inside and give a counter-offer of 17.5% for a $200,000 investment. Mark asks about $250,000 for 20%, and Kasey asks about $200,000 for 20%, but Mike disagrees with Kasey and this startles the Sharks – however, Mike renegs on the deal and the pair from PackBack Books eventually find Mark as their partner with an investment of $250,000 for 20%.
PackBack Books Now in 2018 – After Shark Tank Update
PackBack is still around and doing quite successful. They have a website which is quite sleek and modern – however, I do not believe that they have an application yet for iOS or Android. PackBack appears to be doing quite well in its search for additional publishers for more content for the website.