The model that higher education textbook publishers have been using for decades is just not working anymore—neither for publishers nor for students. As a result, higher education is the publishing
segment that’s undergoing the most disruptive changes today. Change is coming from everywhere, and it’s an exciting time for business model innovation.
The textbook publishing business has been under multiple threats for years. Publishers have increasingly been competing with used textbooks sales and third-party textbook rental services such as Chegg and Amazon. Textbook sales have also been suffering more and more from course instructors using open educational resources and other free online materials. Piracy of publishers’ titles has also eaten into sales.
Publishers’ primary strategy in coping with these forces has been merely to keep raising prices. For example, Paul Samuelson’s Economics (McGraw-Hill), one of the most enduring textbooks of all time, currently retails for $220 in hardcover—up from its $10 price 50 years ago. Even when adjusted for inflation, the price has more than tripled since 1969. But that strategy has stopped working: the AAP reported that sales of higher educational materials fell 7% in 2018 compared to 2017.
The first major publisher to rethink its textbook delivery model was Cengage, the number-two publisher in the U.S. market. Last year, it launched a subscription service called Cengage Unlimited, which offers students access to all e-textbooks in its catalogue for $120 per semester or $180 per year. It even provides a calculator so that students can determine whether they can save money by signing up for the plan vs. purchasing textbooks individually.
Cengage’s other response has been to plan to merge with McGraw-Hill Education—a move that would consolidate the market into four major publishers (with McGraw/Cengage alongside Macmillan, Pearson, and Wiley). The merger, announced in April, would likely lead to adding McGraw-Hill titles in Cengage Unlimited. This would mean that the plan could include almost half of U.S. college textbook titles, which would make it more attractive to students.
Pearson announced a different new strategy last month: it is going “digital first.” Pearson will move almost all of its 1,500 U.S. textbook titles to continuously updated digital content and make print textbooks available only on a rental basis. Students will be able to access e-textbooks for an average of $40 per semester each. This will mean that students will always be able to get the latest version of the content; it also means that textbook authors have to commit to continuously updating their material over several years instead of committing only to one edition at a time. The changes to editorial infrastructure and processes necessary to go digital first are profound; Pearson has been putting them in place for several years.
What Cengage’s and Pearson’s strategies have in common is that both include attempts to take control of distribution of textbook content away from third parties such as Amazon, Chegg, MBS Direct, VitalSource, and college bookstores. By bypassing these intermediaries, publishers can increase their margins, develop relationships directly with students, and get better data about content usage.
But now another force is vying to control those distribution channels: universities. The University of California at Davis is building a course material distribution scheme, called Equitable Access, that will guarantee publishers up to a fixed amount of money—currently envisioned as $20—for every student in any class that adopts one of the publisher’s books. This would replace the status quo, in which only a few students actually buy new textbooks, while the others buy used, obtain pirated copies, or do without. UC Davis argues that the vast majority of publishers will make more money—in some cases much more—this way.
UC Davis is doing this because course materials are the only student costs it can’t control. It charges the same fees to all students for health insurance, student activities, and so on, and it covers these fees for students who are on full financial aid packages. So, just as every student pays the same health insurance premiums whether they are healthy or sick, Equitable Access will make textbook costs for mechanical engineering majors roughly the same as for literature majors (where most books are available as trade titles).
UC Davis plans to launch the program in fall 2020, using VitalSource as its distribution platform. At least two other U.S. colleges are working on similar initiatives. If this type of program expands to a critical mass of schools, it will put the schools in control of distribution channels and thwart publishers’ plans to control them.
With these large forces competing to change pricing and distribution, it’s certain that the textbook market of 10 years from now will bear little resemblance to today’s market, even if we don’t know exactly what it will look like.
Bill Rosenblatt is president of GiantSteps Media Technology Strategies and is a founding partner of Publishing Technology Partners.