Campus Store Weights In on Rental Debate

In an opinion piece earlier this month in Inside Higher Ed, a University of North Dakota professor claimed that rental textbooks limited student access to course materials and stifled critical thinking and conversation. Jason Katzman, CCR, assistant director for academic resource support, CU Book Store, University of Colorado Boulder, says he understands the prof’s points but argues rentals are a symptom rather than a cause.

“Twenty years ago, a student bought a book, sold it back at the end of the semester, and maybe received something close to half (although probably not) of what they had paid if the book was being used again the next semester,” Katzman wrote in his Inside Higher Ed rebuttal. “Of course, professors complained then that the buyback process devalued the educational experience by encouraging students to part with important materials they might need for another class or later in life as a reference. Then, along came the Internet and Amazon, and the model that traditional collegiate textbook retailers had been using for years was upended. For many stores, renting textbooks is a way to compete while remaining financially viable.”

Market forces determine where students decide to get their course materials. Selling a textbook for $400 has become unthinkable, so rental has become a way for bookstores to remain relevant and viable. The current trend of providing students low-cost digital course materials as part of tuition or course fees is another solution that helps publishers and bookstores stay in business while driving prices down for students.

“If the higher-education community wants to spend large amounts of energy working on the high cost of course materials, they should. It’s important,” Katzman wrote. “However, we’re being shortsighted. In addition to course materials delivery, another model that’s broken is higher education itself. What happens when Amazon or somebody else finds a way to offer a bachelor’s degree for 75% of its current cost?”

Pros and Cons of Inclusive Access

More colleges and universities are offering inclusive-access programs for course materials because they see the model as ensuring wins for many involved.

Students get their course materials at discounted prices on the first day of class, making instructors happy. Publishers are guaranteed 100% sell-through for offering significant discounts on the content, which provides institutions with a way to show they are keeping costs in check. There’s also a role for the campus store because they have established relationships with all the parties involved—faculty, publishers, and students—and have the means to handle the transactions.

However, not everyone sees it as the best or only option.

Proponents of open educational resources view inclusive access as a model that just replicates the same publishing structures that led to rising textbook prices in the first place. Some faculty members also see inclusive access as an academic-freedom issue, limiting their choices on content to just one publisher.

“I do think it is likely that traditionally published content will continue to be used at colleges and universities, although whether or not it is through inclusive access remains to be seen,” said Nicole Allen, director of open education for the Scholarly Publishing and Academic Resources Coalition. “Textbook publishers have been through many iterations of models for proprietary digital content—it is hard to know how long any one will last.”

The 2017 Textbook Affordability Conference is Nov. 10-12 at Georgia Tech. Updates from the conference will be posted on Twitter using the hashtag #TAC2017Ignite.

Lulu Dives into Academic Publishing

Self-publishing, print-on-demand, and distribution company Lulu Press Inc. recently entered the educational market with its launch of Glasstree, an online publishing platform for academic and scholarly works.

Characterizing current commercial academic publishing as a broken model, Lulu hopes Glasstree will address “critical pain points” in the market by fostering more transparent pricing, speeding up product time to market, and allowing authors to see up to 70% of the profit from sales of their works.

Glasstree offers a menu of services and tools for authors, including traditional peer review and support for open access to works through a partnership with Creative Commons.

Scanner Could Be a Problem for Publishers

Relatively cheap digital scanning technology could soon be available at your neighborhood office-supply store. The funding platform IndieGoGo.com is trying to raise money for a mass-market device that, if successful, will make it much easier to copy and share printed files and will retail for less than $400.

The Czur, pronounced “Caesar,” is able to digitize printed pages in less than a second and an entire book in a matter of minutes. The device even has software that corrects for the curves of bound pages, fingerprints, and page-to-text contrast.

The problem for Keith Darnay, online manager of The Bismarck Tribune, Bismarck, ND, is that making the copying process easier also makes it easier to illegally copy and share any type of publication, including college textbooks.

“I have no doubt the developers of this technology have nothing but good intentions. They see their device as a way to empower everyone with something that allows them to digitize personal documents or commercial publications they have purchased and owned,” Darnay wrote in a column. “But you can almost guarantee there will be those few who will take advantage of the scanner to illegally copy and distribute material that doesn’t belong to them.”

E-Book Readership May Be Hard to Track

Are e-books gaining on print books, or losing steam? It appears to depend on who you ask.

Not long ago The New York Times kicked off the debate with an article based on sales data from the Association of American Publishers (AAP), which purported to show that e-book sales drooped by 10% in the first five months of 2015. “E-books’ declining popularity may signal that publishing, while not immune to technological upheaval, will weather the tidal wave of digital technology better than other forms of media, like music and television,” The Times claimed.

But wait, said The Digital Reader. Its piece noted the AAP’s sales figures failed to take into account some $1.79 billion worth of e-book transactions. “While the majority of the AAP monthly data about e-book revenues comes from the Big Five U.S. trade publishers, the majority of the non-AAP e-book revenues goes to self-published e-books and indie-published e-books,” The Digital Reader said.

For its part, The Wall Street Journal did report that the Big Five saw dwindling e-book sales after they negotiated new agency contracts to set higher retail prices.

A new Pew Research Center report indicated more readers are borrowing e-books from their local libraries. In a survey of library patrons aged 16 and up, 27% had downloaded or borrowed at least one digital book in the previous year, compared to 22% in 2012.

The Bookseller cited a YouthSight survey of 1,000 respondents aged 16-24, which found 64% preferred to read print books over digital ones. Surveys of college students, conducted by NACS’ OnCampus Research, also indicate they’d rather be reading on paper, but they’ll buy e-textbooks if the price is substantially cheaper or to fill an immediate need.

E-book subscription services, often touted as a NetFlix for e-book readers, have had trouble getting off the ground and a couple of high-profile companies recently closed, as chronicled by Mashable. The problem there, though, wasn’t a lack of readers; it boiled down to publishers not agreeing to terms that left enough margin to sustain the services.

Imagining a New College Store

Albert Greco, professor of marketing at Fordham University, has predicted the market for printed textbooks will tumble about 95% by 2017. While that certainly paints a bleak picture for bricks-and-mortar booksellers, it doesn’t necessarily mean college stores should transition completely to being clothing outlets, according to Tony Sanfilippo in his Content Storage Unit blog.

Sanfilippo imagines a new campus store that partners with the library to offer students the option to either purchase or borrow their course materials. Librarians would be in charge of distributing the books and would help faculty find lower-cost or free alternatives.

He sees a store that utilizes a patron-driven acquisition business model where publishers find campuses with the most interest in their new text and make it available essentially on consignment basis for a fixed number of months. Stores would also become a dedicated place on campus where students and faculty go to locate alternatives to commercial publishing.

“Perhaps there’s nothing wrong with textbook prices, perhaps all faculty already see all the new scholarship in their respective fields at conferences, and maybe writing and publishing centers aren’t something campus communities need. Maybe,” Sanfilippo wrote. “But it seems much more likely that what most folks on campuses don’t need is another opportunity to purchase a tee shirt.”

Supreme Court Rules Against Publisher in Copyright Suit

The U.S. Supreme Court delivered a blow to publishers Tuesday, ruling that purchasing books and goods legally abroad and then reselling them in the United States doesn’t violate U.S. copyright laws. In a 6-3 decision, the court threw out a lower-court ruling against a graduate student who sold bought cheap textbooks created for foreign markets by a U.S. publisher at below-market prices.

The court ruled that once goods are lawfully sold, publishers and manufacturers lose the protection of U.S. copyright laws.

The case started when John Wiley & Sons successfully sued Thai grad student Supap Kirtsaeng for selling $900,000 worth of international textbooks to other students in the U.S. A New York court ruled Kirtsaeng sold the titles without permission and awarded Wiley $600,000.

Advocates against the lower-court ruling claimed that if allowed to stand, it would hamper the sale of many goods sold online and in discount stores. Retailers estimated that most of the more than $2.3 trillion worth of foreign goods imported in 2011 were bought after they were first purchased abroad.

Dissenting justices argued the court ignored Congress’s intent to protect companies against low-priced foreign copies of copyrighted works.

“We are disappointed that the U.S. Supreme court has decided in favor of supap Kirtsaeng and overturned the Second Circuit’s ruling,” said Stephen M Smith, president and CEO of Wiley, in a statement about the decision. “It is a loss for the U.S. economy, and students and authors in the U.S. and around the world.”

Apollo Global Acquires McGraw-Hill Education

Apollo Global Management is making a $2.5 billion investment in education technology with its purchase of McGraw-Hill Education. The private-equity firm, which specializes in leveraged buyouts, sees the acquisition as its entry into a growth industry.

“We look forward to leveraging the company’s leading portfolio of trusted brands and innovative digital learning solutions to drive growth through the ongoing convergence of education and technology on a global basis,” said Larry Berg, senior partner at Apollo, in announcing the deal, which is expected to be finalized early next year.

Education technology has proved attractive to investors over the last few years because of the rise in education costs, innovations in electronic devices, and an increasing demand for digital content for those devices. In fact, investment in education technology companies reached $930 million in 2011, according to a report in the Financial Post.

“I think the future trend is beginning to build a relationship with the individual student,” Eric Bassett, vice president at Eduventures, told eCampus News. “Students are not linear; therefore, institutions cannot have accountability unless you can begin to define impact on individual students. Everything that I’ve seen suggests that Apollo understands these trends.”

However, at least one New York banker said the deal could be a risky one for Apollo.

“Think about textbooks and government budgets getting crushed,” the banker told the New York Post. The unnamed banker added that the John Paulson and Guggenheim Partners’ 2010 investment in Houghton Mifflin ended badly when the publisher went bankrupt. In addition, McGraw-Hill Education reported its third-quarter revenues dropped 11% and its operating profits fell 20%.

The rest of McGraw-Hill, which announced its intention to split into two companies in 2011, will be renamed McGraw-Hill Financial with a focus on finance and global markets. The new company plans to use the estimated $1.9 million in profits from the deal to make acquisitions, pay back previous debt, and fund its stock buyback program.

Could Watermark Provide DRM Solution?

Publishers can’t be blamed for trying to safeguard their assets with digital rights management protection on their e-titles, particularly against large-scale file sharing.

The problem is DRM does not really deter anyone determined to share files, which led Dana Robinson, a adjunct professor of law at the University of San Diego School of Law and partner with Techlaw LLP, to propose a solution in an article for Digital Book World. His solution would be to create e-books with a watermark place throughout the book.

The e-book’s buyer would have to provide personal information for the watermark by agreeing to terms and conditions that would prohibit the resale or distribution of the title.

“The point of making a watermark that shows the user’s personal information is to create a disincentive for the user to pass the book along to unknown third parties, deputizing the user to act as a gatekeeper, protecting the book from wrongful distribution,” Robinson wrote, adding that removing the watermark could then be a violation of the Digital Millennium Copyright Act.

Robinson points out that his watermark solution would not prevent people from sharing their book with family or close friends, but that they’ve always done that with printed books. His watermark is aimed at individuals trying to gain financially from someone else’s work.

“What e-book publishers need is a way to distribute e-books with as little hassle as possible, while ensuring that the publisher can sue pirates and stop e-book sales, rental, and large-scale sharing,” he said.

Change is coming to E-Book Market

The Department of Justice recently filed a motion asking that its settlement with Hachette, HarperCollins, and Simon & Schuster in its e-book pricing lawsuit be approved in federal court. No surprise there.

If accepted, sometime around the middle of September, retailers will be able to set their own prices for e-books, at least from the three publishers in the settlement.  The settlement allows the agency-pricing model that came under DOJ scrutiny to remain, but the provisions of the settlement make anything resembling the current agency model highly unlikely.

While the settlement allows retailers to set the sales prices, publishers can prohibit discounts on their books. That provision comes into play when the total sales of a year exceed the margin the retailer has earned, according to an analysis of the agreement in The Shatzkin Files.

However, the article also points out how easily that discount prohibition may be sidestepped. For instance, a retailer such as Amazon may choose to cut e-book prices way below its costs during a specific time frame, such as the upcoming holiday season, figuring to make up the margin over the next nine months. In the meantime, other publishers who may still be clinging to the agency-pricing model may have to lower its prices just to stay competitive.

Which is exactly what many in the bookselling industry feared all along.

Cengage Places Bid to Buy McGraw-Hill Education

Last month, Standard & Poor’s reported that Cengage Learning’s cash flow was “less than adequate” to cover its needs over the next 12 to 18 months. Last week, reports surfaced that Cengage made a bid to purchase McGraw-Hill Education (MHE). So what gives?

As it turns out, buying MHE could be a way for Cengage to increase its revenue, according to the report. The S&P report about Cengage’s cash flow was based on an assumption that future refinancing costs would be too high, with the Reuters article adding that “may be driving Cengage and its private equity owners to consider acquisitions that would boost its cash flow.”

“It wouldn’t be appropriate for us to comment on what McGraw-Hill might or might not do with respect to a sale or spin-off of its education business,” said Cengage CEO Ron Dunn in the Reuters story. “With regards to Cengage Learning, we continue to generate strong cash flows from operations and we are very confident that we can service our debt while continuing to fund our business at appropriate levels as we lead the migration to digital solutions in all our markets.”

Cengage isn’t alone in its interest in MHE. Reuters reports that Bain Capital, Thomas H. Lee Partners, and Apollo Global Management have also placed bids for the firm that could be valued at around $3 billion, according to The Bookseller. Reuters also reports Cengage is looking to make a bid for EmbanetCompass, an online education services company.

McGraw-Hill decided last September to split into two publicly traded companies by the end of 2012 after calls from minority shareholders to restructure the business. MHE earned $2.3 billion in revenues and had an operating income of $260 million last year. Digital-related solutions accounted for more than 20% of its 2011 revenue

As in any business venture, there are risks for Cengage, particularly if its cash flow declines. Consolidating that much debt into one company could also be a concern for the industry, but the potential for reduced store-channel leverage and more direct-to-customer and institutional sales models are also long-term concerns stemming from more consolidated content.

Or the bid could provide Cengage with some breathing room.

Bad E-Book News or Just a Quiet News Day?

News from the e-book industry hasn’t been all that rosy of late. Profits are down at Harlequin, the Association of American Publishers announced numbers for e-book growth in February that were less than expected, Simon & Schuster digital sales continue to decline, and even sales of the Kindle Fire from mighty Amazon fell off in the first quarter of 2012.

Is this a harbinger of things to come, or just evidence of a slow news period in the digital market?

“I’m not hearing alarm bells from publishers yet, so I can’t say whether there is an overall softening or just unevenness in the data or just that each of these things is potentially explainable as due to circumstances specific to the players involved,” said James McQuivey, principal analyst at Forrester who covers the book industry, in this article from Digital Book World.

In the first place, those huge increases the e-book market was seeing could not last forever, said Kelly Gallagher, vice president of publishing services at Bowker Market Research. He also opined that the new group of e-book consumers may not be as devoted to e-reading as early adopters.

“The early-adopter, heavy book buyers who make up over 60% of volume of all e-book sales have continued to slow in their migration to digital,” said Gallagher. “Without the ongoing influx of these key buyers, the market is more reliant on a greater increase of casual to moderate buyers to move the needle.”

In addition, a recent study by the Book Industry Study Group suggests consumers are buying more tablets than e-readers, but are not buying e-books at the same pace as those who read on dedicated e-readers. Over the last six months, consumer preference for e-readers has slipped from 72% to 58%.

“Tablets will adversely affect the e-book business in that the tablet is a multifunction device and will therefore draw the reader into nonbook activities and therefore cause them to consume books slower and therefore buy fewer books vs. a single-function e-reading device,” said Gallagher.

5 Things a Consumer Wants

A recent Chronicle article suggests that with the mainstreaming of e-books there should be more reader-friendly services such as the following:

1. Let me subscribe to my favorite authors. 
2. Keep books updated for one price.
3. Buy a print copy, get an electronic copy too. 
4. Give more of my money to authors.
5. Indie bookstores should sell e-books. 

If I could pick one of the 5 myself, I would go with #3.  And if I were to add one to the list -- it would be, let me more easily lend or share my digital books.  My wife and I like to share books, but too often we are unable to do so with our ebooks -- unless we were to trade our devices.

Small bookstores in a digital era

One of our members, Roger DeLarco at East Stroudsberg University forwarded this USA Today article to me a couple weeks ago and I have been meaning to post it. The piece provides advice and suggestions to small booksellers in an increasingly competitive landscape that includes digital, such as knowing your niche, creating community, and thinking about the experience. The piece highlights a small independent bookseller in Rhinebeck, NY -- just a very short distance from where I live. The general theme of an independent store creating a sense of community should resonate with many small retailers.

One other paragraph of interest is the following one, which highlights some of the risk in partnering with just anyone, and the importance for stores to have a digital strategy. Stores must think about partnering for sure, but recognize that not all partners are there for mutual benefit.

Borders, which has had three CEOs in the past three years, was slow to develop a digital strategy. It sells reading devices and has an e-bookstore powered by Kobo, a Toronto-based e-retailer. But from 2001 to 2008, it outsourced its online sales to Amazon. "It was utterly stupid for Borders to borrow their future from a company that didn't want them to even have a future," says Michael Norris, an analyst with Simba Information, a market researcher.

Thanks, Roger.

“Bits of Destruction Hit the Book Publishing Business”

Last week, The New York Times published an interesting series of articles entitled, “Bits of Destruction Hit the Book Publishing Business.” Part 1 of the article, discusses the “three big new waves” affecting the book publishing industry – Google Book Search and the digitization of millions of books, increasing consumer acceptance of e-books largely due to the Kindle, and print on demand. Then, Part 2 takes a look at the how these waves will affect all of the players in the industry including: readers, authors, printers, publishers, retailers, and e-book device vendors. One particularly interesting portion of the article is the discussion about retailers. The article notes, “Here is a bookstore owner’s nightmare. Customer walks in; browses around; has grand old time in this temple of knowledge; peruses a book that costs $27; takes out Kindle and orders it for $17, right there in front of your nose, using your wi-fi connection. Aaagh! You wake up sweating at 3:00 in the morning.” While the scenario is a nightmare for retailers, it is also becoming reality. The article points out that the industry can no longer operate on the “sale or return” model and with digital books and print-on-demand it does not have to. In the future, bookstores may be even more like coffee shops and become “community hang-out spots” that offer, a few best selling books and DVDs, pricey coffee and snacks, free wi-fi, and a way for consumers to place an order for any book.

The article has a lot of interesting thoughts and information and is worth a read.

Seth Godin's Textbook Rant

Well known and widely respected marketing guru Seth Godin published an entry on his blog this week entitled “Textbook Rant." He notes that he received more comments on this post than any other he has ever made. Since he got such a reaction, we can probably expect him to start publishing more on the topic, or being more vocal on it elsewhere. Here are a few of the “quotable quotes” from the piece:

• This industry deserves to die. It has extracted too much time and too much money and wasted too much potential. We can do better. A lot better.
• As far as I can tell, assigning a textbook to your college class is academic malpractice.
• Any professor of intro marketing who is assigning a basic old-school textbook is guilty of theft or laziness.
• The solution seems simple to me. Professors should be spending their time devising pages or chapterettes or even entire chapters on topics that matter to them, then publishing them for free online. (it's part of their job, remember?) When you have a class to teach, assemble 100 of the best pieces, put them in a pdf or on a kindle or a website (or even in a looseleaf notebook) and there, you're done. You just saved your intro marketing class about $15,000. Every semester.

Among the responses, I thought this comment related to stores was interesting: The textbook industry does need to die. Especially the privatization of textbook and textbook resale stores...

Rants like these are not uncommon. It would be pretty difficult for anyone involved with the textbook industry to deny that as an industry we have problems. Like health care, autos, or banking. As a colleague of mine observed in response to Seth's "simple solution":

While in theory this all sounds great, but do all professors (or adjunct professors) really have the expertise, time, desire, etc... to "devise" pages or chaperettes and for that matter, who ensures the validity and accuracy of the content? While technology will certainly allow for "anything goes" it would seem like there still needs to be some "control and validation" of content to be taught and that a college or university would not want to create an environment of the "wild wild west".

My opinion is similar to this articulation. I believe Seth's comment is a fairly over-simplified interpretation of what faculty are “paid to do” as part of their jobs. Many faculty do not have the expertise to write a textbook in the style he is asking for – or even if they do, there is little or no reward for most faculty to spend their time in the way he asks. The example of the faculty member who made over $20M – I am pretty sure that is the very rare exception. If they want tenure or promotion, or recognition within their field, that time is better spent on research related publication, or grant work, or even working directly with students in the class.

I always viewed the textbook more as a reference supplement. I typically made it optional. I then usually picked a set of more up-to-date articles or a professional book (depending on the course) which were the required readings. Some students really like having the reference textbook – and it can often cover topics I do not have time to cover in class, or provide additional examples or an alternative perspective. If I did have time to work on improving a course, I much preferred to spend that time finding better ways to use in-class time to maximum benefit, such as creating new active-learning approaches and exercises that would reinforce core concepts.

Writing chapterettes or entire chapters well takes time and research and is a very different skill set that many of us do not have. And frankly, that is not part of the faculty member’s job per se (and certainly not before one is tenured). The accrediting process also typically looks at what books or readings faculty assign in different courses as one means of ensuring that the curriculum is delivering on what is expected. If 20 of us are teaching different sections of the same course, it also helps to ensure some standardization among courses. Or, if I am teaching a course that builds on a prior course, or have to approve a course a student took at another institution, knowing what textbook was used in the prior course gives me some understanding of the approach and content the faculty member in the course was likely to have followed.

I also share the concern about the control and validation process. Faculty already get in trouble for inserting their biases into classes. Without the editorial checks and balances, or review process, how are standards of quality monitored? “Free” does not necessarily mean “equal” or “better.” I think there are some good approaches emerging out there, but worry that we might “throw the baby out with the bathwater” in an over-fixation on price.

As a former student (with 11 years of college education), a former faculty member, a former administrator, and now as someone in the textbook industry more directly, I think we would all agree that the textbook industry has some significant problems when it comes to price, and perhaps some additional issues related to value. It is a tough challenge. Yes, many textbooks are out of date because fields are developing far more rapidly today and the old processes do not work so well. Yes, there are faculty who do not do their job, or their students, justice when it comes to selecting course materials. Yes, the industry needs to change – die? I don’t think so. But change? Yes. There are a number of creative ways in which educational publishing could reinvent itself to continue to produce relevant and current texts, and perhaps at lower cost – but such change will not come quickly or easily. It may be outside organizations and influencers who drive a new generation of course material content. That will likely start with open educational resources (OER), and eventually evolve into new revenue-based models as products mature and the value of having enterprises to assist with the process resurfaces – since there are limitations to true OER as well. Organizations like Flat World Knowledge, Connexions, MERLOT, and others are examples of how such organizations are needed if OER is to be successful. As such organizations emerge there is an eventual need to support the organization, which means revenue. That could come directly or indirectly, but eventually it must come or the organizations are unlikely to be sustainable for the long term.

Okay – I will stop my textbook rebuttal rant there.
-M

Book Industry Environmental Council announces goals for reducing greenhouse gas emissions

For the first time, the book industry has set goals for reducing greenhouse gas emissions. This week the Book Industry Environmental Council announced that they are aiming for a 20% reduction by 2020 and an 80% reduction by 2050. A posting from Publishers Weekly reports that paper accounts for 65% of the U.S. book industry’s carbon footprint and returns are another significant factor. If the industry can reduce emissions by 20%, it would save up to 2.5 million metric tons a year which is the equivalent of the annual emissions of roughly 450,000 cars. Pete Datos, chair of the Council’s climate subcommittee commented, “I have confidence we can reduce returns dramatically. We have to work together to do that in a way that is equitable for the whole industry. We have better methods to forecast, we can get books printed and shipped faster than ever before.” The announcement did not discuss e-books but we can expect that digital options will also play an important role in the industry’s effort to reduce greenhouse gas emissions.