The Move to Digital: Digital Product Sales and Format / Model Competition

Move to Digital

For our Move to Digital series, we are  featuring a few articles from Katherine Molina, the first of which was published last week. Katherine is a recent M.B.A. graduate from the MIT Sloan School of Management, where she studied the business of innovation, education and entrepreneurship. She lives in New York City.  

In order to understand the textbook’s transition to digital formats, we should understand what digital options are available today and how they interact with print alternatives. Focusing on U.S. college markets and setting aside the digital “extras” (websites, datasets, extra tutorials and case studies, etc.) that come with or supplement textbooks right now, the typical options for full-length textbooks right now fall into one of the following buckets:
Option Typical price Where to buy
Purchase a new print textbook High, typically between 80-100% of SRP Brick-and-mortar stores, publisher websites, retail websites
Purchase a used print textbook Low to moderate, depending on age and condition. 15-75% of SRP. Brick-and-mortar stores, retail websites, exchange websites, student listservs and personal connections
Rent a print textbook (new or used, no guarantee) Low, usually hovering at 40-45% of SRP for one term use. Price varies with length of rental. Online rental and textbook-specific websites (Chegg, BookRenter, etc.), and a growing number of on-campus college bookstores
Purchase an eTextbook Mid-high range, varies by site. Online retailers, publisher websites, and some in-store pilot programs at Barnes & Noble-operated campus bookstores through the NookStudy program.
“Rent” an eTextbook Lower range, varies by site and by length of rental term (most often 140-180 days, ranges from 60-540 days)

In the wild, other options include purchasing an older or international edition of an assigned book, or not purchasing anything at all (relying on friends, library copies, or simply hoping the book is not integral to passing the course).

Among the “traditional” options above, right now the numbers still favor print versions, with the most significant areas of growth in eTextbooks and print rentals. (For context, MBS recently reported that print textbook rentals now represent around 8.4% of the overall higher education textbook market). According to the responses in a recent survey of college students (see below for more information on this survey), print rentals and eTextbooks generally are the most competitive options with each other in terms of sheer price; among those, competition between print rentals and temporary-access eTextbooks was particularly vicious. Between the two types of eTextbook access models, competition was not as obvious, although that was a built-in constraint of the survey (bowing to current reality, the range between prices of these two formats was never greater than 20% of SRP, so when one went higher, the other tended to go with it.)
Still, from this information, we can get a little glimpse into what the consumer market for eTextbooks might be in the near future, and the strategic implications for publishers and retailers down the line:
  • Students who opt for permanent-access eTextbooks are not necessarily going to be the same kind of students who take advantage of digital “rental” options. Access and license terms for eTextbooks has been a hot topic among textbook publishers, the debate exacerbated by the fact that unlike trade books, many textbooks do “expire” or become outdated after a certain number of years and the fact that students tend to only need these products for a fixed amount of time (typically a semester or a year at best). Publishers are grappling with access, updating and particularly price conundrums related to “permanent” eTextbook access—should they include “updates” as revisions are published? For how long, and how can they build this into the price? As mentioned here at TBG earlier, Nature recently offered an elegant and particularly consumer-friendly solution for a particular Biology textbook, but this does not seem to be a one-size-fits-all dilemma. With this in mind, it’s worthwhile for publishers to remember that “permanent access” buyers are out there, and may have different requirements and desires from students only looking at temporary options.
  • Temporary-access options are highly competitive – and may become more so as both print and digital “rentals” gain popularity. Both options are, for the moment, hovering in the same price range between 40-60% of SRP and both cater to a group of price-sensitive consumers who are willing to make certain trade-offs in terms of access and resale options in exchange for lower up-front prices. Right now, both options suffer from a lack of truly broad availability (not all textbooks can be found with rental options, the same goes for digital versions in any form) – although both are expanding their base of titles rapidly. Temporary-access eTextbooks have some immediate advantages over print rentals (instant access and the possibility of access codes to other digital resources, which print purchases also offer but print rentals often lack). There is no evidence that this will become a winner-takes-all situation for either format; that seems unlikely for at least the next 5-7 years. But if one format does turn out to choke out the other, other parts of the industry will feel it. Print rentals feed inventory into the used book market and the rental industry will help keep that market on life support even as it squeezes the overall number of used book sales. Digital eTextbook rentals offer no such consolation to the used market, and a big change in the used market means an equally important shift in product and pricing strategy for publishers and retailers alike.

The survey described here was written with support from Pearson Education, as a part of a 2011 Master’s thesis at MIT Sloan School of Management on “Digital Asset Pricing in the Textbook Industry.” A PDF copy of the survey methodology and results can be found online here. The full thesis is here.

Comments (2)

  1. Pingback: The Move to Digital: eTextbooks and Price Experimentation «

  2. Pingback: The Move to Digital: Why Publishers Want It to Succeed (and what we’ve learned) «

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