Flatworld Knowledge, an “open source” textbook publisher that offers its texts for free online while selling ancillary digital supplements and guides, announced an unusual digital licensing agreement with Virgina State University that they claim will radically reduce the high cost of textbooks. Through a digital site license, Virginia State will levy a $20 fee on students in eight core business courses that will give them access to all the digital formats Flatworld Knowledge offers in support of its print textbooks.

Flatworld Knowledge CEO and cofounder, Eric Frank compared the site license agreement to a “software license” and said while the company has about eight such agreements with for-profit private colleges, it’s a first for the publisher with a traditional college. Frank called the agrement a “phenomenal deal” for students, for the university and for Flatworld Knowledge.

Dr. Keith T. Miller, VSU president, said, “We must seek innovative ways to ensure the success of our students, especially during these times of severe budget cuts and economic uncertainty. The licensing agreement with Flatworld Knowledge meets the needs of our business students and faculty for high-quality, affordable textbooks, and serves as a model for how academic institutions and innovative publishers can partner to solve critical higher education issues."

Founded in 2007, Flatworld Knowledge offers a business model for textbook publishing that attempts to reduce the high cost of textbooks, provide higher royalties to authors and eliminate the constant pressure for new editions. Frank said, in effect, Virginia State University has purchased a software license that will enable the students in the eight core classes of the business school to use the digital formats of its textbooks for a flat student fee of $20. Textbooks used in the university’s business school typically run from $160 to $250, Frank said.

Students enrolled in the business classes receive an authorization code that will unlock individual Flatworld Knowledge accounts loaded with their digital content. In some classes the student accounts provide access to the digital formats for one title, in other classes students receive digital formats for multiple titles or even customized content professors have selected from different Flatworld texts. All of this is covered by the $20 fee.

Frank called it a “winning agreement” for everyone. Typically Flatworld Knowledge texts are used by about 50% of the students in classes and schools where they are offered. The average student purchase is about $30 of which Flatworld gets about $17. Under the VSU digital site license, 100% of the students in the classes use Flatworld digital texts at a fraction of the cost of print; the publisher’s revenue per student goes up and they get a higher profit margin on digital content.

Flatworld Knowledge typically offers an online textbook that is accessible for free while providing students a menu of digital formats they can purchase that includes chapter by chapter PDFs, audiobook downloads and digital study guides for all e-reader devices—in addition to the option of buying low-cost black &white print texts as well as list price full-color traditional textbooks. Its titles are offered under a creative commons copyright license that allows professor to add and “remix’ Flatworld content to customize books for their classes.

The Virginia State agreement is latest effort in an industry-wide effort to address the high cost of textbooks. In fact, VSU, a historically black college where 90% of its students receive financial aid, has found many students simply cannot afford to buy the textbooks they need for class—sometimes forcing them to drop out of school. The school had been approaching a number of textbook publishers looking for a solution when they were introduced to the Flatworld Knowledge model.

The Flatworld Knowledge business model is looking more attractive to schools. Since 2009, the company has increased its faculty adoptions from around 400 to 1300 to date and more than 800 schools now use Flatworld texts, up from 350 in 2009. The company now has about 100 authors and after offering 11 titles in 2009, Flatworld will offer 24 texts this semester with 50 titles in production that will expand their course offerings into psychology, chemistry, biology, statistics, American government and English composition. Frank said that this year more than 150,000 students will be using Flatworld Knowledge textbooks.

While the VSU agreement covers only its business school, Frank said savings for the school (and profits for Flatworld) would increase exponentially if the licenses were to cover entire colleges or even state university systems. The company is looking to aggressively push the model and has hired David Littlehale, formerly a sales executive at McGraw-Hill, as its v-p of institutional sales.

“We’re always looking for ways to provide exceptional value, so we’re pushing the model and we need an experienced executive, “ said Frank, who used to work for Prentice Hall, where he said he had more than 170 sales reps selling texts. “At Flatworld we’ve got 5 telephone reps and one guy in the field. We think this model could drive us to a tipping point really fast.”