Chapter 31Why College Textbooks

Cost So Much

Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

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CHAPTER OUTLINE

• The Process• Market Forms• Technology and the Impact of Used

Books• When Price Does and Does Not

Matter

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You Are Here

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The Process• Marketing the Idea

– Identifying the Niche– Pushing it to the Publisher– Sample Chapters– Reviews

• Signing the Contract– Advance The amount of money paid to authors

typically counted against future royalties.– Royalties The amount of money paid to authors.

Typically paid on a percentage basis.• Drafting

– Complete Draft– More Reviews– Finished Draft– Editting

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Marketing and Adoption• Marketing

– Mailed free to many (sometimes thousands) of faculty.

– Sales force on campuses • February and March for Fall• September and October for Spring

• Adoption– Faculty decide the book in the vast majority

of cases. – Sometimes a committee will decide on a

common book for a multi-section class– Neither typically know the book’s price

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Who Gets the GreenBookstoreMarkup,$31.25

Ink, paper,printing cost,$5-$10

Authorroyalty$14.06

$125

Publisherfixed expensesand profit,$69.69-$74.69

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New vs Used

• Used books are typically price 25% to 33% less than new ones.

• A book only makes money for the publisher and author on its first sale.

• Bookstores make (about the same) profit selling new as used.

• Publishers will (usually) not ship old editions even if faculty request them.

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Are New Editions a Scam?

• Economic Issues Change– New to the 2nd Ed

• Economics of Terrorism• Economics of War

– New to the 3rd Ed• Wal-Mart• Casinos• This chapter

– New to the 4th Ed• You Are Here• Economics and the Law• Economic Growth

– New to the 5th Ed• The Recession of 2007-2009• The Housing Bubble• International Finance

• Calculus Hasn’t Changed• Very little has changed in many new editions. • Publishers have to change editions to make money…and the used

book market has made this worse.

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Other Reasons Textbooks Cost So Much

• Ancillaries – Cost Money

• Powerpoints ($5,000)• Testbanks ($5,000)• Instructors Manuals ($5,000)• Websites ($3,000)• Podcasts ($5,000)

– Faculty demand them • Faculty sales to used book dealers

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When Prices Do Not Matter

• Faculty Decisions– Faculty get the book for free.– Faculty do not typically inquire about

the price of books they assign.

• Student Decisions– There is little to no ability for students

to substitute one book for another. – Not having the book is a signal to

faculty.

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Where Will This Lead?

• Fewer Book Choices?• Textbookless classes?• Electronic books?

– Limited printing– Limited Access (IP specific; number

of accesses, etc.)

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Making Money=Selling

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The Market Form

• Monopolistic Competition– Entry level books in most areas– Intermediate level books in many

areas• Oligopoly

– In a few upper division areas– Many graduate school areas

• Monopoly– Very narrow areas with small markets

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Used Books and the Impact of the Internet

• The “May-August” Problem– Without the internet nearly all books had to

travel through a central clearinghouse like Columbia, Mo’s Missouri Book Services. (high markup)

– With the internet, books can travel from one bookstore to another without the middleman.

• The “December-January” Problem– Without the internet used books only circulated

in a single school. – With the internet a book can make it across the

country in 12 hours.

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Rising Tuition and Textbook Costs