Opinion: Free Market Minute

Studying the possibilities

To text, or e-text?

The influence of technology on the information-dissemination business has been remarkable. Technology has dramatically improved access to information, and lowered the cost of obtaining it, in virtually every information marketplace. Higher education is no exception, with print-based books facing tough competition from convenient, portable, and relatively inexpensive alternative formats. So why has the traditional textbook market been seemingly resistant to the lower prices that competition, lower-cost technologies, and Internet resources now make accessible?

The matter of textbook prices—and here we are mainly speaking of college textbook prices—has become a bone of contention for families and the federal government over a period of recent years for several reasons. Textbook prices, like the prices of college tuitions and other higher education costs, have generally risen faster than inflation. And while families and students certainly feel the pain of that sticker price at the bookstore checkout counter, the feds are more attentive than previously due to the number of students and families receiving various forms of federal aid. About half of families with college-age students are receiving subsidized loans or grants to help cover the bill. Recently the Government Accounting Office (GAO) found that textbook prices have increased at more than twice the rate of inflation, launching further investigation and issuing an official report on the subject.

As further analysis of the higher education marketplace reveals, at least some part of price increases in higher education can be traced to a tremendous increase in demand for seats and degrees. In our current educational environment virtually everyone is expected, encouraged, or subsidized to go to college. The logic of demand and supply tells us that whatever is (at least temporarily) more scarce will be more expensive.

But that doesn’t fully explain textbook prices, just the increased scarcity of college resources in general. After all, the technology component of information delivery systems now makes it possible to deliver all kinds of college education products to large numbers of individuals, at what should be a very low marginal cost. Why aren’t prices falling, then, for courses, degrees, textbooks, and the other elements needed to accomplish the task through cheap electronic and distance delivery methods?

Increasingly, universities that discover that students can’t or won’t shell out the full price for assigned texts are looking for ways to keep students enrolled in classes without penalizing them unduly. For professors, this may mean reducing reading assignments, using reserve books (which not infrequently go missing), or providing alternative sources for required reading materials. Enter the electronic and rental marketplaces.

With increasing force and urgency, resource-strapped consumers and market entrepreneurs are finding cheaper editions of traditional college textbooks. Scores of vendors now offer alternatives: single-term (article under subscription) rentals of physical texts, purchases of e-books that can be downloaded after purchase, rentals of e-books (which typically require an ‘unsealer’ program that controls the period of allowed access), device-specific versions of e-texts (Kindle or iPod, for example), and possibly even Audiobook editions—particularly as supplementary resources.

Critics as well as careful shoppers are quick to point out that e- and other alternatives may not be perfect substitutes for the traditional text. Important considerations for students include availability of the right edition, ancillary materials, cost, familiarity with the technology (if any), ease of use, and duration of access to the materials. The traditional textbook market in the U.S., still dominated by campus bookstore sales, has shrunken over time from a 73 percent market share to about 54 percent of the present market.

Citing consumer concerns, legislators in several states are also poised to intervene. In that event, the pricing of electronic substitutes and possibly of used materials are likely to be scrutinized at least as critically, if not more so, than that of their brand-new pulp-based counterparts.

With all the alternatives, why continue to shop the campus bookstore? Campus bookstores have enjoyed a virtual monopoly in the past due to convenience, guaranteed (usually) availability of the required texts, assurance that text editions, page numbers, and ancillary materials like study guides and CD-ROMs will be included and match the specifications in course syllabi, and the possibility of recouping some part of the initial cost (even if a small fraction) at buy-back. And the prospect of continued use throughout two or more semesters of coursework continues to make an expensive textbook purchase somewhat more appealing. Now, however, independent specialists in college textbook sales, as well as the mega-online vendors get access to the texts at virtually the same time as do campus bookstores.

So what is the source of campus bookstores’ monopoly power? Interestingly, it may rest more with the discretionary decisions of some college professors than with campus bookstores themselves. What college profs often know, online sellers (and students) do not necessarily possess: the knowledge of which texts and editions are required for specific courses and sections. Some profs are willing and able to divulge this information in advance, freeing students to shop—literally—a worldwide marketplace for materials. If not, a short time frame may make finding alternatives to the campus bookstore less feasible or attractive. And students, to be fair, frequently shift courses and schedules, requiring last-minute purchases and returns of texts.

Campus bookstores have enjoyed some monopoly power over time because they continue to offer convenience—as well as other attributes—to both professors and students on their respective campuses. Still, they are losing share to the electronic marketplace and to other sources in ways that generally benefit students through lower prices. Academic presses and universities know this, and are moving to capture market share for academic books and texts.

‘Real’ books aren’t dead, but e-books and other alternatives are definitely here to stay.