2010-03-06

Why Students Still Prefer Paper Textbooks

Over at Wharton's blog there's an article called "E-textbooks: The New Best-sellers". The title's a bit misleading, since at this time e-textbooks are not at all bestsellers:
Indeed, approximately 88% of college students own laptops, according to a study by EDUCAUSE Center for Applied Research, a Boulder, Co., think tank. But so far, few of them download electronic textbooks, even though they could save money. The National Association of College Stores estimates that less than 3% of textbook sales today are digital versions....
Looking at the pricing example they give next, it's easy to see why.
Students get a 180-day license for the book rather than permanent ownership -- which means there is no used-book market for CourseSmart titles.

CourseSmart prices are typically half the list price of a textbook. For example, Harvard professor Gregory Mankiw's introductory Principles of Economics, which has a list price of $220.95, costs $110.49 for the electronic version at CourseSmart. Amazon.com sells the paper version for $168.01 and an electronic Kindle version for $141.56
What they don't mention here is that Amazon sells used copies of the book for anywhere between $100 and $140. That means that there's a market for used copies, and this needs to be factored into the total price. If a student can sell a used copy for 25% of the suggested retail price of the new book (and I suspect he could get more than this), that brings the total cost of a paper copy for one semester to $168.01 - ($220.95 * 0.25) = $112.77, or $2.28 more than the electronic version. It's quite possible, depending on the price a student can get for the used textbook, that this "rental" of the paper version could come out to be less than the cost of the electronic version.

Additionally, when you buy a 180-day rental of the electronic version of the book you lose the option to keep the book if you like it. It's hard to price this option, since there's no real market available for it alone, but it probably has some value. Even if that value to a student is only a few dollars, that again brings the cost of one semester's use of the paper edition down below that of the e-textbook.

It's clear that the publisher's made a mistake in the pricing of the e-textbook here, which is why it's not selling. Looking narrowly at just this particular instance, the publisher would be better off with a price lower than the common discounted retail price minus the typical resale price of a once-used copy. This would encourage more students to rent the electronic edition, and thus reduce the number of used copies available over time.

Publishers are certainly aware of the used book market and how it affects them. So the open question here is, why did they chose to make this pricing decision?

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