Apple Bites Into Core of School Textbook Monopoly: Byron Brown

When students in my online course in intermediate microeconomic theory head for the bookstores they will feel the pain of the marketplace.

The required text for the course, Jeffrey Perloff’s sixth edition of “Microeconomics,” will lighten their wallets by a hefty $206.67 retail. Or $147.52 from Amazon. The book is a 20-chapter behemoth that tips the scales at over three pounds, more than the weight of two iPads. The best deal for the students is to buy a used copy in a local bookstore and resell it at the end of the course. That option will end up costing a student about $50 -- one-fourth of the publisher’s suggested retail price. It’s the choice of about 75 percent of my students.

Why didn’t most of the students choose the electronic version of the text? When publishers began producing e-texts they sold them for about one-half the suggested retail price of a new paper version. But students have shown a stiff resistance to buying them, mostly because they are 65-plus percent more expensive ($82.99 versus about $50 for the Perloff book) than the used paper option.

Current e-texts are also a markedly inferior product. They are static PDF knockoffs of vertically oriented print pages. That means they don’t display well on most computer screens, and they resist printing an easy-to-read copy by inexplicably downsizing the fonts for home printing.

Put this together with the 180-day licensing period and it’s no surprise that fewer than 15 percent of students choose e-texts. (About half the students in my intermediate microeconomics course are or will become economics majors. The material in the text needs to be available for reference in future courses in the major, and possibly in graduate school.)

Digital Delays

So far the mainstream publishing companies have shown an inability or unwillingness to produce electronic versions of K-12 or university-level textbooks that break the link with a corresponding print mode. That might be an understandable concession to navigating the book in a classroom for students operating with different versions, but it has had the important side effect of retarding the production of stand-alone texts that would exist only in digital form, and with no paper counterpart whatsoever.

E-texts that started as a way to kill, or at least maim, the market in used paper texts actually retarded the development of new digital texts with innovative features such as audio, video and animated content under the control of the reader. Over the past five years I have sat in my office many times with publishers’ sales reps who completely understood that their clay-footed bosses were wedded to the mentality of print.

It is not an uncommon story in economics to find industries with monopoly or oligopoly power using that power to slow or prevent innovation. In most cases the innovation is only delayed.

Students and parents who are outraged by the high prices of textbooks should be cheering monopoly-breaking innovations in this hidebound market.

Last week Apple introduced new software and marketing platforms that should, within a few years, totally reshape the old ways of producing and distributing learning content. The software is called iBooks Author, and the marketing plan consists of an iBooks Store to sell e-texts for the iPad and a new version of iTunes U for delivering content directly to students.

Inefficient Navigation

I have created a large body of content for my students on my own, but viewing videos and other media in traditional course management systems means following internal links that open videos in separate windows, interrupting the smooth flow of logic and making efficient navigation impossible. We see the possible alternatives to this every time we see an iPod commercial or view news content on an iPad. We know that current paper and electronic texts are static. All of this is about to change.

Consider first the software part of Apple’s package, because this is where a revolution would probably take place. What is lacking in traditional e-texts is the seamless integration of text and other media -- both video and audio -- and the flow and manipulation of content that the iPad and its imitators provide. But that’s only part of it. The old iPad apps, as well as the newsreaders we saw in the commercials, depended on a staff of professionals who produce the digital copy that consumers eventually download.

The revolution is that ordinary users -- on the order of folks who can create a PowerPoint slide deck -- can now produce copy that will run on the iPad. This is revolutionary. It will unleash the creative powers of thousands of authors and artists, to say nothing of us mere mortals. Just as important, it will spawn imitators. Expect to see a Google app that will allow users to create content for Android devices.

IBooks Author allows the creation of smoothly flowing iPad “pages” of content in a mashup of text, videos, illustrations and animations that can be manipulated by the students to suit their learning needs. The software is free to everyone. Teachers can use it to produce their own content for students, customized to course objectives, but allowing the pedagogy to exploit the free-flowing navigation of an iPad. In a demonstration at Apple’s news conference, we saw that an author could drag and drop an existing Word file into iBooks Author for distribution on the iPad.

These new texts -- a term that undervalues their potential importance -- can be the basis for a new art form. The crime novel of the future will include not only text but also videos and interactive illustrations. With iBooks Author, Apple is hoping to do what TechSmith and Camtasia Studio did for the production of videos for instruction: Put easy-to-use but powerful creative tools in the hands of ordinary people.

Camtasia Studio, by putting the tools for video creation and editing in to the hands of anyone with a computer, is now the world leader in screen-capture software. We’ll see if Apple can do the same for digital books.

Potential Barriers

What are the barriers to the best-case scenario playing out for Apple? Foremost, of course, is that the plan for schools and colleges would require a near universal ownership of iPads. Colleges have achieved universal computer ownership for students, but in most cases there is no requirement for a specific brand.

Why would the major publishing companies agree to collaborate with Apple? Why would they consent to a maximum price per copy of $14.99 for K-12 texts and give Apple 30 percent of the gross? I suspect that when Apple came to them they knew the jig was up.

On the bright side, textbook authors not affiliated with the mainstream publishing companies may see the remaining 70 percent payout from publishing in the iBook Store as a handsome payoff. It is true that the publishing companies can provide marketing advantages in textbook markets, but these should be valued conservatively. A principal benefit from the iBook Store is that it is a very efficient way for prospective buyers to scan the offerings of not just one publisher, but of many.

What I would like to see is a vast increase in the quantity and diversity of instructional content in all fields. The traditional publishing companies will be hard pressed in such an open-content world to maintain their current pricing models, and they will also be forced to compete with innovative authors who now will have drastically reduced entry barriers into the market for learning materials. Easy entry into a market sounds the death knell of monopoly, as any student of intermediate microeconomics can tell you.

(Byron W. Brown is a professor of economics at Michigan State University. His position includes university-wide duties helping faculty use instructional technology effectively. The opinions expressed here are his own.)

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

    To contact the author of this story:
    Byron W Brown at BROWNB@MSU.EDU

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