When Congress increased this year's budget for the Department of Education by
$11 billion, it set aside $400 million to help states develop and administer
the tests that the No Child Left Behind Act mandated for children in
grades 3 through 8. Among the likely benefactors of the extra funds were the
four companies that dominate the testing market -- three test publishers and one
Those four companies are Harcourt Educational Measurement, CTB McGraw-Hill,
Riverside Publishing (a Houghton Mifflin company), and NCS Pearson. According
to an October 2001 report in the industry newsletter Educational
Marketer, Harcourt, CTB McGraw-Hill, and Riverside Publishing write 96
percent of the exams administered at the state level. NCS Pearson, meanwhile,
is the leading scorer of standardized tests.
Even without the impetus of the No Child Left Behind Act, testing is a
burgeoning industry. The National Board on Educational Testing and Public
Policy at Boston College compiled data from The Bowker Annual, a
compendium of the dollar-volume in test sales each year, and reported that
while test sales in 1955 were $7 million (adjusted to 1998 dollars),
that figure was $263 million in 1997, an increase of more than 3,000 percent.
Today, press reports put the value of the testing market anywhere from $400
million to $700 million.
It's likely that other companies will enter the testing market. Educational Testing Service (ETS),
which until recently had little to do with high-stakes testing and was best
known for its administration of the SAT college-entrance exam, won a
three-year, $50 million contract in October 2001 to develop and score
California's high-school exit exam, beating out other bidders such as Harcourt
and NCS Pearson.
Alternatively, the states themselves could become major actors in the
test-making industry. Though some states now use commercial "off-the-shelf" tests, states are increasingly developing their own tests or are customizing the commercial tests to better "align" them with their curricula standards. Georgia, for instance, uses Harcourt's Stanford Achievement Test for
grades 3, 5, and 8, yet it uses its own state-developed tests in grades 4, 6,
8, 11, and 12. Many states now use such hybrid assessment systems. (See In
Your State for more.)
Media coverage of the testing movement tends to focus on testing flaws
and mishaps, and none of these companies has emerged unscathed from the intense
scrutiny. A May 2001 investigation conducted by The New York Times
documented each of the test flaws reported by the states since the
1997-1998 school year. In all, states reported more than two dozen incidents
in which the testing companies or their products disrupted the states' testing
systems or incorrectly scored or analyzed students' results. (For the complete breakdown, see the chart titled "Four Giants in Testing" in The New York Times' special report "None of the Above: The Test Industry's Failures.")
Here are profiles of the market leaders.
|Market share: 40 percent of test-design market|
|Signature test: Stanford Achievement Test (SAT-9)|
|Parent company: Harcourt Education, which is owned by London-based
publisher Reed Elsevier. Reed Elsevier also owns LexisNexis, the legal research
service, and Reed Business Information (formerly Cahners Business Information),
which publishes the entertainment-industry trade magazine, Variety. HEM is based in San Antonio, Texas, and is part of Harcourt Education, which operates the Holt, Rinehart and Winston imprint and is one of the leading K-12 educational publishers in the nation. |
Harcourt Educational Measurement (HEM) is best known for the Stanford
Achievement Test (SAT-9), which is taken by more
than 15 million students every year. Harcourt is involved in all of the tests discussed in "Testing Our Schools" -- the MCAS in Massachusetts and the TAAS in Texas, which students must pass in order to graduate from high school; the Standards of Learning tests, which Virginia uses to certify its
schools; and California's SAT-9. Standards-based tests now represent 70 percent of the company's overall business.
London's Reed Elsevier, one of the world's largest publishers, acquired
Harcourt for $4.5 billion in July 2001. In order to gain antitrust clearance
for the purchase of Harcourt, Reed Elsevier had to sell off some of Harcourt's
businesses: It retained the testing business and sold Harcourt's higher education and corporate training businesses instead. Before the acquisition, Reed Elsevier's education sales accounted
for only 5 percent of the company's total sales ($301 million out of $5.6
|Market share: 40 percent of test-design market|
|Signature test: TerraNova (CTBS)|
|Parent company: McGraw-Hill, based in New York, which also owns Standard & Poor's, Business Week magazine, and four TV stations.|
Industry estimates accord CTB McGraw-Hill nearly 40 percent of the test-design
market, slightly behind Harcourt Educational Measurement. In The New York
Times' May 2001 survey of state education departments, 19 states indicated
that they relied on CTB McGraw-Hill's tests to assess student progress. The
company's best-known test is the TerraNova, a norm-referenced achievement test.
McGraw-Hill, which acquired CTB in 1965, had $4.2 billion in sales in 2000. Its
education-related businesses generate 34 percent of its total operating income.
|Market share: 20 percent of test-design market|
|Signature test: Iowa Test of Basic Skills (ITBS)|
|Parent company: Houghton Mifflin, which is now owned by France's Vivendi Universal, the French publishing and film empire. Vivendi Universal also owns Motown Records (part of the Universal Music Group) and Universal Pictures. |
Riverside Publishing controls the remaining 20 percent of the test-design
market. Its Iowa Test of Basic Skills (ITBS), a norm-referenced achievement
test, is taken every year by 4 million to 5 million students. Eight states use
Riverside tests, according to a May 2001 survey of state education departments
conducted by The New York Times.
The company is based outside of Chicago in Itasca, Ill., and is a direct
subsidiary of Houghton Mifflin. After a century as an independent company,
Houghton Mifflin was acquired for $2.2 billion by Vivendi Universal in August 2001.
|Market position: Leading scorer of standardized tests|
|Parent company: Pearson Education, a subsidiary of London-based Pearson. Though Pearson once owned part of Madame Tussaud's wax museum, NCS Pearson now
finds itself stabled alongside businesses such as The Economist, The
Financial Times, the Penguin Book Company, and the Family Education
Each year, NCS Measurement Service scores tests from nearly 40 million
students, more than any other company in the U.S. It provides services to 15
states, including some of the largest markets (Texas, Florida, and New York).
Minnesota-based NCS was founded in 1962 (it was then known as National Computer
Systems) and went public six years later. The company was acquired by Pearson
in September 2000 for $2.5 billion and folded into the Pearson Education unit. Pearson
reported $629.5 million in sales in 2000, and assessments and testing services
accounted for $202.4 million of that, or 32 percent.
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