Sunday, January 25, 2009

Textbook Value Chains

In the very near future I intend to offer a new Electronic Marketing textbook using Lulu's print-on-demand service. The activities surrounding that effort got me thinking about textbooks. In this posting my goals are to put some of these thoughts in essay form and thereby encourage dialog on textbooks, textbook pricing, and the textbook value chain.


Textbook Market Analysis


I have been personally concerned about the rising prices of textbooks even before the current economic climate. Now, I wonder how difficult it is for aspiring students in Asia, South America, Africa and elsewhere to acquire new, quality textbooks. Even in my country every 10% rise in textbook prices removes a layer of students from the set of those who can afford college It has been reported that textbook prices have nearly tripled since the 1980's (New York Times 2008). This leads me to an informal market investigation of college textbooks.


Industry structure - Recent decades have seen a world-wide consolidation in the textbook publishing industry with resulting increases in market power for the small number of firms still standing. What's more, like prescription drugs, in the textbook market the decision maker does not internalize prices. The decision maker who chooses the textbook for a course and the purchaser who buys it are two distinct individuals.


Fixed costs - Analagously once more to prescription drugs, there are high fixed costs associated with creating a new textbook. The market must be researched. The author must write the book. Reviewers must review the book. Slides, test banks, cases, instructors' guides and answer keys must be developed and refined. The book needs to be edited, copyedited, formatted, typeset and indexed. Artists must draw the art work and lawyers must arrange to purchase the rights to glossy photographs. The sales force has to be sent marching into instructors' offices. A strong resale market makes it even more imperative that the above fixed costs be recouped through high prices. Publishers have also astutely employed price bundling. We can note from the above that while the core value is provided by academics, important supplemental value is added by the publisher.


Variable costs - Variable costs are not trivial, especially where color is used rather than black and white. Cloth covers and binding are not inexpensive. There are also physical distribution costs. Numerous parties may take title to book shipments adding associated transaction costs. Accounting and financial settlement must be arranged and monitored.


Textbook Competition Opportunities


There is some good news in this analysis. Since the incumbents' prices are so high, there is a lot of room for price competition.


A second piece of good news is that all of the expensive resources that the incumbents bring to bear on the textbook production process slow them down, making them less than nimble. A smaller entity could produce new versions more frequently. This versioning strategy would be consistent with service-dominant logic (Vargo and Lusch 2004) and would also help combat the resale problem.


A third good news factor lies in the evolution of information technology. If service-dominant logic suggests that one might translate the textbook product into a set of services, some of these services could be e-services. Authors might create blog entries to update the text or shared annotated bookmarks to provide current news stories. Social network software could be used to facilitate a community of adopters who share materials or stories and who co-create value through their interactions. Cross-university student interaction is feasible. Distribution might be purely electronic or one could utilize a commodity e-tail delivery strategy.


So in summary, a challenger to industry incumbents might create a product where:


  • The core content and thereby the core benefits are roughly comparable to a branded textbook.
  • The physical book is generic, produced in softcover in black and white and lacking expensive artwork.
  • The textbook value proposition is more virtual and service-like than current offerings.
  • Virtual community processes might provide supplemental services and enhance learning.


Alternative Textbook Models


Open Source - One could write a textbook and just put it on the Internet for free download. I have tried this with a PhD text for quantitative courses (see http://www.openaccesstexts.org/). The license was designed to encourage the contribution of supplementary materials and updates, with a goal to create a community of adopters who would improve the book. It is being downloaded but there have not been very many improvements suggested or donated.


Self-Publishing - There is a long and somewhat stigmatized history of authors publishing their own work. This option has become cheaper due to desktop publishing and print-on-demand utilities like Lulu. I have an Electronic Marketing text (http://myweb.fsu.edu/chofacker/books.html) currently being tested in my own classes using Lulu.


Crowd-Sourcing - Management Professor Charles Wankel is producing a highly modularized management textbook in cooperation with Routledge (http://globally-collaborating.com/). As of this week, there were 924 authors collaborating to write this book.


Author Cooperative - In addition to the extent models described above, there is one more possibility that I have never seen that might lie in between self-publishing and crowd-sourcing. For example, a Basic Marketing book might employ a couple of dozen authors who each write a single chapter or module and review three chapters. In addition to the writers, you might add a few team members such as an editor. The members of the co-op could agree to make two "electronic" contributions each, per year, thus creating a weekly service. From this base, an updated version of the text might be created each semester. The book could be offered via Amazon or through another print-on-demand provider with the goal being a payment of approximately $1 per co-op member per copy sold and a sale price of under $40.


In summary, the current textbook situation is not an unavoidable fact of academic life but an accident due to the invention of paper having preceeded the invention of electronic media. I am quite interested in opening a dialog with others on this topic, either on or off ELMAR. I believe the right combination of people could make a reasonable amount of money, gain some notoriety in our field, and help students afford higher education.


References


New York Times, "That Book Costs How Much?," 25 April 2008, http://www.nytimes.com/2008/04/25/opinion/25fri4.html, Last Accessed 25 January 2009

Vargo, Stephen L. and Robert F. Lusch (2004), "Evolving to a New Dominant Logic for Marketing," Journal of Marketing, 68 (1), 1-17.



Friday, January 2, 2009

It's a Lulu

I have created and published a textbook using the electronic service available at Lulu.  Lulu's model is to allow writers to upload their books, and it lets each writer choose her or his price point.  Lulu takes a fixed percentage for each print copy purchased, binds and ships the book to buyers, and generally handles all of the e-merchant fulfillment tasks.  I am trying Lulu with a textbook I have written, entitled Electronic Marketing. The URL is: 

 
I see some drawbacks of the Lulu model in comparison to using a traditional publisher: 
  1. The quality of the printed product is not up to the usual book standards.
  2. No salespeople are pushing the book across the country and around the world.
  3. Publishers frequently arrange for reviewers to read and correct texts. 
  4. Publishers' sales forces can gather feedback useful in content creation. 
  5. Publishers offer technical help including indexing, formatting, art work, etc.
I am thinking through ways of overcoming these drawbacks, while enjoying the benefits of the Lulu model.  These are: 
  1. The author can keep the price low for the book, thus benefiting students.
  2. In spite of the above point, the author can earn more per sale than is traditional.
  3. The author can revise the text on any schedule, thus adding to flexibility.
I am not sure how this will come out, but so far I am quite impressed with Lulu.