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The Secondary Cost of Digital

The Secondary Cost of Digital
August 26, 2011

The idea that higher education is creeping toward an all-digital future has turned textbook season into a spectator sport. Will this be the year e-textbooks make their move?

In recent years, the focus on digital has been eclipsed by a surge in print textbook rentals. Companies such as Chegg.com and BookRenter.com — along with thousands of campus bookstores — have captured students who would prefer to consolidate the process of buying and then reselling textbooks into a single exchange at the outset of the semester. According to Student Monitor, 24 percent of students at four-year institutions rented at least one print textbook last spring — three times as many as purchased an e-textbook.

But recent search data from Google suggest that digital textbooks may prove to be a contender this year. According to the company, Web queries for “Kindle textbooks” are up 60 percent from this time last year. Same goes for “Nook textbooks.” Searches for “iPad textbooks” are up 40 percent. Whether or not students are buying e-textbooks this year, they seem to be shopping for them.

Google search data also suggest that more students are looking to curb costs by renting textbooks instead of buying them. Searches for "textbook rentals" are up 20 percent. Searches for "cheap textbook rentals" are up 40 percent.

So what happens when the digital and rental trends overlap?

One way of answering this question is to say that they already have. CourseSmart, a consortium that sells e-textbooks on behalf of the five major textbook publishers, has never sold permanent licenses for its digital textbooks. “Your use of the service does not give you any ownership rights in the e-textbooks; rather, you only have a limited right to access such e-textbooks,” CourseSmart asserts in its terms of service.

Another way of answering is to say that digital and rental will never overlap. That is because, unlike print, e-textbooks are never sold; they are licensed. Without the permissions conferred by the “First Sale Doctrine,” which bars publishers from dictating the terms of secondary sales (or rentals) of their books, Chegg and other vendors can only serve as alternative platforms through which students can buy or rent e-textbooks from publishers. They cannot set their own prices.

In other words: In a world of e-textbooks, the secondary market for used books and rentals, as we know it, may not exist.

“It’s a big problem,” says Nicole Allen, textbooks advocate for the nonprofit Student Public Interest Research Group. For all they promise in the way of embedded technology and digital add-ons, e-textbooks “add another layer to the publishers’ ability to rip students off,” she says.

Currently, renting books or buying them used is almost always cheaper than buying access to an e-textbook, according to CampusBooks.com. The website, which allows students to compare prices of textbooks from various vendors, recently surveyed the prices of the most popular 1,000 textbooks across various vendors. It found that 91.6 percent of the time, renting a book or buying a used copy was less expensive. The remaining 8.4 percent of the time, the e-textbook was less expensive.

Chegg, which built its business on the secondary market for textbooks, can read the fine print on the digital wall. Despite the current popularity of print rentals, the company has begun a strategic transformation from a textbook rental company to a “social educational platform,” says Tina Warner, the company’s vice president of communications.

In the last year, Chegg bought four other companies: CourseRank, which helps students pick courses and chart a course to graduation; Cramster, which allows students to tap a network of “experts” for homework help; Notehall, which lets students buy and sell lecture notes; and Student of Fortune, another homework-help site. The idea is to become a one-stop shop for students, says Warner — not just for when they are buying textbooks but also for when they are using them.

Kno, which focuses exclusively on e-textbooks, has taken a similar tack by building applications that seek to add value to the digital content they license. The company recently announced several new features it offers students who license the publishers’ content through Kno, including one that “instantly [turns] 2D figures into interactive 3D models that jump off the page,” and another that supplements the digital textbooks' content with explanatory videos from the popular Khan Academy, a nonprofit that produces virtual tutorials.

“Kno is really interested in extending beyond textbooks through software,” says Osman Rashid, the company’s CEO and co-founder (and former Chegg executive). “We see textbooks as the beginning.… We’re starting with the textbook and building layers and layers into what students need in academia.”

In the digital future, textbook publishers could wield their persistent rights over e-book content to exercise an “agency” pricing model over third-party vendors, says Rashid. That would make it harder for renters and used-book vendors to compete on price, so they would have to draw in students by giving them more bang for their buck. “This market is going to be driven by features in the future,” he says.

Keeping Price Flexible

The arrival of digital would not necessarily mean less variability on textbook prices. Several companies working outside the orbit of the major publishers are trying to hook professors by giving them, and their students, more control over how much their digital textbooks cost.

Flat World Knowledge — an open-content publisher that has made its name letting students who are shopping on a budget opt for less expensive, more austere versions of its print and digital textbooks — announced this week that 70 percent of students are opting for electronic versions of its texts. Flat World lets students choose to either download a basic HTML version of its e-textbooks for free or pay $30 for an e-textbook version that is compatible with various e-reading devices. Students get to keep their Flat World e-textbooks forever. (Flat World says it has no plans to add a “rental” option.)

Another publisher, AcademicPub, lets professors build "textbooks" by pulling content from the Web, clearing copyright in real time when necessary; from its own library, which includes pre-cleared content from a number of academic publishers; and from the professors' own files. As the professor builds the book, AcademicPub keeps a running tally of how much it will cost for students. If a professor thinks the price of the book is getting too high, she can ax certain parts or substitute in content from open sources.

Many textbook companies and third-party vendors say their digital add-ons stand to make students more successful that they would be with only the most basic version of a textbook. But the price of a textbook still plays an important role in student success, says Allen, of Student PIRGs — if only because it can determine whether a student actually buys the book at all. In an informal survey of about 2,000 students at 13 colleges last spring, Student PIRGs found that 70 percent of responding students had decided against buying a textbook for a class because the textbook was too expensive. Of those, 78 percent thought they would have performed better in the class if they'd had a copy of their own.

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