Harry Lindsol’s Textbook Decision: An Ebook or a Traditional College Textbook

1. A) Traditional textbooks: a. Acquisition editors – recruited professors to write textbooks for their publishing company; ID prospective authors write books with broad market appeal and signing them to contracts; editors paid based on authors and textbooks brought in and paid based on success of books b. Professors normally chose rep appealed to them most; someone dealt with normally c. Other occasions, professor choose less expensive book (proven professor less happy with these books due to quality) d. Representative business model – heavily cost intensive for publishing companies since they had to pay for salaries of sales reps as well as travel expenses plus cost of entertaining professors e. Majority success publisher depended on which company had better authors and titles, along with professors’ personal preferences for certain reps f. Need growth to keep up in market so added platforms
B) etextbooks * Kindle and iPad * Kindle popular b/c convenience and books’ cheap price * Ebooks < expensive traditional books * Publishing company didn’t have to pay for materials actual books * Publisher passed savings to Amazon who could still have a significant markup and yet offer books for a cheaper price than those in bookstores * Kindle weighs < 1 lb and fits easily a lot of places * Download bks wirelessly from Amazon at click of button * Read description, summary, user reviews for book, blick buy and have book in minutes * Read anywhere, even in sunlight * iPad selling iBooks * App allowed readers to download digital copies book from online store (iBookstore) * Consumers prefer iPad b/c also tablet but also way more expensive than Kindle * Publishers offer bks online in interactive format on website or as downloadable pdf * Students didn’t like b/c 1) inability to take notes/highlight; 2) need for Internet and a computer to access book; 3) inability to have a copy of book in their library * Kindle/iPad can * Highlight * Take notes that pop up when user clicks on them * Search keywords * Devices themselves contain books, so student doesn’t have to carry them like a heavy textbook * High quality screens for graphics * Apple introduced iTextbooks * Offers a few txt in iBookstore * Interactive and convenient for students to purchase * Studycards – flashcards * Offers 5 books from McGraw Hill and 2 from Pearson * Customer value proposition of traditional text format – traditional texts valued more amongst students (highlight; notes; sell back; rent; etc) * Customer valuation etext – less expensive; convenience access anywhere * Profit formulas * Traditional: Retailer accounting for 50% sell price, author royalties for 15%; printing costs for 10% of sellig price and publisher profits for an additional 10% sell price * Major value chain cost difference b/t traditional and extect was printing cost made up only 10% final price * eText: e-retailers received 30% of price of lower priced etexts; publisher received other 70% of sell price but paid 25% of rev to authors as royalties; authors received 17.5% of sell price of etext compared to 15% sell price of traditional text 2. Platforms g. Way for publishers to make virtual texts more appealing to both professors and students h. Interactive online software encourage professor to use their product instead of a competitor’s i. Generally included: interactive online homework “lab”, tutorials, quizzes j. McGraw Hill’s version – Connect i. Allowed professors to pick and choose from options such as online homework, notes, progress reports, and quizzes ii. Appealed to professors b/c they could assign online homework from a bank of end-of-chapter questions, choosing online grading, or receive progress reports for each individual student, etc iii. *Claimed could interactively teach students through component called LearnSmart (adaptive quiz) k. Flexibility of platforms allowed professors to see which students were struggling, excelling, and not reaching their potential l. MH also offered ConnectPlus ebooks – interactive ebook program that integrated with the Connect platform; Pearson’s version – MyLab m. Reps began to promote superiority of their company’s platform iv. Professors want to help students understand better; enhance learning experience by choosing book with platform n. How affects profit formula? 3. Competitors o. Used books v. Severely cutting profits and market shares traditional publishers vi. Gaining profits of subsequent sales (traditional publishers only gaining 17-25% potential revenue leaving 75-83% more revenue potential) vii. New textbooks come out every 2-3 yrs to combat this viii. Most students sell books at end of each term to on-campus or off-campus bookstores ix. Blossoming market online for repurchasing used textbooks x. Sold at big discount to new books p. Rentals xi. Brand new, students expected to keep in excellent condition, pay reduced price and use as if owns; couldn’t write or damage in any other way (normal wear and tear acceptable); return to bookstore at end of semester xii. Attractive to students b/c difference in price of purchased text and profit would gain from reselling at end of semester was often less than the rental price (cheaper in long run for student to rent book and give back at end of semester) xiii. Attractive b/c cyclical nature of textbooks q. Internet xiv. Deep price discounting books internationally r. eBooks xv. Kindle xvi. iPad s. 5 economic forces: strengths/weaknesses 4. Factors driving changes in textbook industry t. Internet u. On-Campus bookstores selling traditional books/rental books v. Tablets (iPads, Kindles) w. Convenience x. Cost y. Cyclical nature (need for updating; frequency new editions) z. Platforms {. Revenues from initial sales to subsequent year sales |. Sell back textbooks end of semester }. Online market for used textbooks ~. Renting textbooks . eBooks . It still comes down to the fact that students want to hold their text books; take notes; highlight. I even printed out my case so I could do the same thing. But the industry is taking off with these tablets (over a million Kindle Fires a week plus iPads). Students also like not having to lug around the heavy text; they would much rather have the book available on the tablet. 5. Success in Textbook Industry . Good author, rep . Online platform . Books need to be cheap . Offer to buy them back . Offer to rent . Get in market of rapidly evolving subjects so students have to buy new versions of book every year . Get in market of ebooks for college texts 6. Competitive advantage/disadvantage Ebooks only text publishers have relative to McGraw-Hill, Pearson, or others? . Ebook: . Convenience xvii. If on tablet, easily fits into backpacks/briefcases xviii. Download books wirelessly at push of button from Amazon . Cheap price (cost less than traditional books) xix. Publishing company doesn’t have to pay for materials of actual books xx. No cost for paper, binding materials, ink, other inputs . Customers can read description, summary, and user reviews of books, click buy and have books in minutes . Read in bright sunlight . Highlight/take notes . Search for keywords . Ideal for textbooks; high quality graphics and colorful screen; display color . StudyCards . Cheaper to produce with a higher profit margin; save 10% of printing costs . eBooks prices set by publishing company – publishers get 70% of selling price; give authors higher royalty % of 25% while overall authors getting less money . Disadvantages xxi. Students still preferred ability to take notes/highlight; don’t always have Internet or computer to access book; don’t have a copy in the library xxii. Scale and disadvantages that come with that xxiii. Building relationships takes time and could be challenging to get authoring professors on board if etext has prior record of success . In consumers’ minds, hardbacks are so expensive b/c of the printing materials; reality – printing materials are only a fraction of the cost; real markup comes from privilege of buying book first, before paperback edition comes out 7. Recommendations . Research into the model. Talk with prospective authors to see willingness to get into a deal with an untried publisher. But as first mover, opportunity to get lower priced offering to students. Spend money towards getting reps on board to promote etext (commission based pay, etc) . Big problem is support materials; need to take profits to put towards online support