How the Internet of Things (IoT) affects content
Finding the optimal streaming content value proposition

Why Johnny doesn’t like e-textbooks

A recent article in The Washington Post explained why most students prefer print textbooks over their digital equivalent. There’s no disputing the fact that print still dominates the textbook sector. That article correctly identified the “what” but I’m not convinced they thoroughly uncovered the “why” behind this phenomenon.

Here are a few key points I don’t think the article explored:

Students grow up with print – Today’s college kids might be the most digitally active ever but they grew up using print textbooks. Print books have been a critical component of a millennial’s study life, so what makes anyone think a student will magically shift from print to digital when they get to college? Today’s college students simply aren’t digital natives when it comes to textbooks.

E- is just like p-, but with fewer benefits – Why would they want to switch to e-textbooks anyway? I know there are some exceptions but when you get right down to it the e-textbook has fewer benefits than the print version. Here’s one great example: Sharing. Plenty of college students (my own kids included) have managed to save a few bucks for beer/pizza by sharing print textbooks with friends taking the same class during the same semester. Good luck trying that with an e-textbook.

Prices – Speaking of fewer benefits, is there really a financial incentive to go with the e-textbook over the p-version? I’m not talking about e- being marginally less expensive than p-. Think about the huge impact the $9.99 price point had on the broader ebook market when the Kindle first arrived several years ago. Here’s a (pardon the pun) textbook example: This Calculus book is available as a new product in print from Amazon for $264. The Kindle edition is $230, a whopping savings of just under 13%. Really? And we expect student so go with the Kindle edition that they can’t share but still costs more than $200?

Debunking distractions – The Washington Post article notes that distractions are inevitable on the digital screen and how distractions are one of the reasons students prefer print editions. How many of those students reading print textbooks also have a smartphone right next to the book? They’re not distracted by the flashing and ringtones it puts out? Please. That said, if today’s college students are so easily distracted by Facebook and pop-ups I think it’s safe to say society is doomed.

User experience – Let’s also not overlook the device these e-textbooks are most likely to be read on. Pretty much every college student these days has a laptop and a phone; fewer have a tablet. So if they want to read their e-textbook most students are stuck reading it on their clunky laptop. The phone experience is awful for larger format, fixed-layout textbooks and probably not that effective for reflowable ones. I’d prefer print as well if my options were limited to the e-textbook on a laptop or a phone.

Dumb content on smart devices – This, I believe, is the most important point of all. Most of these e-textbooks are nothing more than a print-under-glass experience. They’re a digital replica of the print edition with no real digital features. The Kindle editions certainly don’t leverage the capabilities of the smart devices they’re read on, for example.

Until the market evolves from today’s mostly print replica model and offers compelling reasons for students to go digital, including a more attractive price point, we’re unlikely to see movement away from print textbooks. And let’s face it… The major players in this space love the fat margins they’ve always generated from print products. Those same players have enormous control over the ecosystem so what’s their incentive to offer a more compelling product and value proposition?

Comments

Michael W. Perry

Keep in mind one of the primary reasons textbooks are so expensive—Amazon's vile price-based royalty scheme. In most cases, it forces publishers to double the retail price.

The key factor is that most textbooks have a fixed and limited sales. They're only bought by students whose professor requires the book for a class. Unlike novels, cutting the price won't increase sales by any significant amount.

Now we need to look at Amazon's royalty scheme. Ebooks priced between $2.99 and $9.99 pay 70% of retail less a hefty download fee that reduces the real royalty rate to around 65% or even less if the book is heavily illustrated like many textbooks.

Digital books that are priced outside the $2.99 to $9.99 range don't have to pay download fees but only pay 35% royalties. Contrast that to Apple, which pays 70% at all prices.

Now consider a textbook that, given those limited sales. has to return $15 in royalties simply to pay back the costs.Here's how a publisher's royalties for that digital textbook modestly priced at $25 work out:

Amazon: $25.00x).35 = $8.75. The publisher would be, in effect, losing $6.25 on each sale.

Apple: $25x0.70 = $17.50. The publisher is making a modest $2.50 profit.

Nor is the problem solved by going for that 70% royalty by pricing the book at $9.99, as Amazon might claim in its sneers at over $10 pricing

Amazon: $7.00 or an $8.00 loss. So pricing cutting won't work because there won't be any additional sales.

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Now, to make up for some textbooks that do poorly, assume that the publisher must earn $20 in royalties on each sale. Here are the prices that the royalty plans of Amazon and Apple require:

Amazon: $20/0.35 = $57.14 or rounding up to a permitted price: $57.99. Yes, that does look like a textbook price doesn't it?

Apple: $20/0.70 = $28.57 or rounding up $28.99. That illustrates what textbook prices would be if Apple dominated the market.

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In summary, Amazon's royalty scheme forces this publisher to raise the price of this modestly priced textbook to $29 more than the publisher would be willing to accept if Amazon paid the same royalties as Apple. And keep in mind that every penny of that $29 extracted from students goes into Amazon's bank account. Amazon is the only one who benefits from these inflated prices.

And yes, the publisher could not publish it on Kindle devices, but that would mean a hardship for the many students who don't own Macs or iOS devices. In fact, if that were the case, most professors would not use the textbook. They'd find one available on both platforms.

And what if that publisher priced the book for $57.99 on Amazon and $28.99 on Apple? After all, the royalties in each case would be the same. Then, Amazon's lawyers would go after him for that most-favored clause in their contracts. Amazon, I am told, has some really nasty lawyers.

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I think you're seeing an excellent illustration of two important facts:

1. The Obama administration doesn't give a rip about students.

2. The Obama administration should have sued Amazon for price-fixing and not Apple or the Big Five publishers. Why? Just look at the figures above. Amazon's grossly submarket royalty rates force publishers to double the price they would otherwise be willing to accept with every bit of that inflated price going to Amazon. If that's not price-fixing, what is?

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That's why your third item, Prices, isn't strictly right. It's the high prices that Amazon is forcing on the textbook market that's turning off students. Note too that the lower prices that students would pay in an Apple-dominated market would save them enough money to buy themselves an iPad and display fixed-layout books. Looking around, they can find a iPad Mini 2 on sale for about $250. Merely paying Apple prices on 9 ebooks like that above would save them more than that iPad costs. Their payback time would probably be a single school year.

One final note. Apple's iBooks team seems far more interested in selling textbooks than Amazon's Kindle team, which seems obsessed over NYT bestsellers. Apple might seriously want to consider releasing iBooks apps for Windows and Android devices. That would mean publishers could release books for the iBookstore only. Publisher would look at that, compare the royalties, and conclude that they'll come out way ahead selling their textbooks only for the iBookstore.

For instance, in the example above, the publisher is making just over $15 by selling that textbook through Amazon for $58. If they go Apple only, they could sell it for substantially less, $35, and still make quite a bit more, $24.50 per sale. And priced lower, more professor might require the book, resulting in more sales and still more profit.

Were I Apple, I'd not only do that, I'd go out of my way to tell publishers about those substantially higher profits and greater sales coming at a lower price. It's not often that a company can make that kind of offer.


Michael W. Perry

I just thought of another benefit from porting iBooks to other platforms and persuading publishers that it is to their advantage to forgo Amazon sales. For each and every one of those textbooks—and indeed, given Amazon's dastardly royalty scheme, any book priced outside that $2.99 to $9.99 range—Apple might get the chance to post with the iBookstore description:

THIS BOOK IS NOT AVAILABLE FROM AMAZON

Keep in mind that Apple would NOT have to have any exclusivity agreement in place to have those books "not available from Amazon." That 200% increase in royalty payments would be enough to persuade many. Most would still publish their books through other retail outlets. The difference in many cases between Apple's 70% and B&N's 65% isn't that great. It's that 35% that Amazon demands for books over $9.99 that's killing publishers and driving prices up.

Chris Kafer

As someone who spent over 15 plus years working for educational publishers trying to help them/us move to a more digital experience, I so totally agree with your points Joe. The one that resonates most and was something I stressed and still do is that students begin with and spend a significant amount of their formative years learning with print. For us to expect them to now move to a digital learning experience is rather silly in my opinion. We have to start with K12 first and figure out how to be innovative across the spectrum of learners and also districts. The latter is often times the most difficult challenge due to the disparity of resources between the various school districts across the country. This is again a case of the technology being so far ahead of the practical adoption and implementation - we need to focus on the latter and then I believe we will see the change we have been talking about since the SGML days...or maybe not that far back.

Ted Demopoulos

I just had my first experience with students and ebooks.
Granted, my students are older, generally mid 20s to mid 50s, and this was a European audience.

Also, the ebook option was FREE, no additional cost.

Of a group of 25, only 2 used the ebooks in class. Others expressed enthusiasm about using them to study later, but still only half registered for the free ebook version.

Just another data point!

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