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Digital Textbook Report 2014

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Digital Textbook Report 2014

The textbook industry is facing significant disruption. To help publishers and authors get a handle on upcoming challenges and opportunities, digital textbook pioneer, June Jamrich Parsons uses Michael Porter Five Forces model to analyze the competitive forces shaping today's multi-billion dollar textbook industry.

The textbook industry is facing significant disruption. To help publishers and authors get a handle on upcoming challenges and opportunities, digital textbook pioneer, June Jamrich Parsons uses Michael Porter Five Forces model to analyze the competitive forces shaping today's multi-billion dollar textbook industry.

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Digital Textbook Report 2014

  1. 1. THE DIGITAL TEXTBOOK REPORT 2014 JUNE JAMRICH PARSONS Presented at the Text and Academic Authors Association (TAA) Conference Baltimore, MD June 2014
  2. 2. $14 U.S. TEXTBOOK MARKET BILLION $5 U.S. COLLEGE TEXTBOOK MARKET BILLION 21.8 million COLLEGE STUDENTS DISRUPTORS TAKE AIM IS IT A BUBBLE? TEXTBOOK 9.5 TEXTBOOKS SOLD IN 2012MILLION THE TEXTBOOK MARKET IS HUGE
  3. 3. 0 10 20 30 40 50 Q2 2010 Q1 2011 Q2 2011 Q1 2012 Q2 2012 Q1 2013 Q2 2013 STUDENTS PURCHASED eTEXTBOOKS IN PAST 2 YEARS 0 10 20 30 2009 2010 2011 2012 2013 OVERALL eBOOK SALES Book Industry Study Group 2014 Report Association of American Publishers STUDENTS ARE BECOMING FAMILIAR WITH DIGITAL PercentPercent
  4. 4. STUDENTS PREFER PRINT 6 out of 10 Voxburner, 2014 U.K. ages 16-24 WHY? $$ FOR USED BOOKS BUT MANY STUDENTS STILL CLAIM TO PREFER PRINT
  5. 5. AVERAGE TEXTBOOK Price Print (Buy/Rent/ New/Used?) AVERAGE DIGITAL TEXTBOOK Price $61 2013 $56 2011 $64 2013 $64 2011 Source: Nielsen PubTrack Higher Ed THE PRICE OF DIGITAL IS APPROACHING THE PRICE OF PRINT
  6. 6. 0 25 50 75 100 2004 2006 2008 2010 2012 2014 Laptop Smartphone Desktop Tablet eReader UNDERGRADUATES OWN A VARIETY OF DEVICES
  7. 7. STUDENTS USE SEVERAL PLATFORMS iPad 57% Android device 25% Other 18% Tablets Kindle 59% Nook 24% Other 17% E-Readers iPhone 44% Android device 46% Other 10% Smartphones Windows 77%Mac 20% Other 3% Laptops
  8. 8. Image sources: Staples and Aquafadis FIXED LAYOUT OR FLOWING DIGITAL FORMATS ARE STILL DEVELOPING
  9. 9. INTERACTIVE OR NOT? DOES IT STORE STUDENT DATA? CAN IT SEND TO AN LMS?
  10. 10. j@ HTML + Javascript HTML iBook PDF Kindle POPULAR DIGITAL BOOK FORMATS OFFER VARIOUS EDUCATIONAL FEATURES Proprietary version of ePub3. iBook reader app for iOS and OS X Mavericks. Image, table, sound, interactivity, video. Flowing. Adds interactivity. Supports images, tables, sound, and video. Open standard. No DRM. Web browser. Several versions, but the most widely used supports tables and images, and is fixed format ePub 3.0 is HTML 5 and CSS 3. Kindle, Android, iOS, OS X, Nook, Kobo, Windows, DRM, images, tables, sound, interactivity, video. Flowing format is most common. 1.0 2.0 3.0 @ Adobe Acrobat, ePUB, and Kindle logos © their respective corporations
  11. 11. BARGAINING POWER OF SUPPLIERS THREAT OF SUBSTITUTE PRODUCTS OR SERVICES THREAT OF NEW ENTRANTS MOOCs Boundless Instructor-created PIRATE USED DON’T BUY BARGAINING POWER OF BUYERS THE TEXTBOOK PUBLISHING INDUSTRY IS CHANGING
  12. 12. IN THE PAST, THE PRIMARY COMPETITION FROM TEXTBOOK PUBLISHERS CAME FROM OTHER TEXTBOOK PUBLISHERS.
  13. 13. THREAT OF NEW ENTRANTS Boundless NEW ENTRANTS ARE CHALLENGING TRADITIONAL MARKET LEADERS.
  14. 14. 170KDOWNLOADS 300KDOWNLOADS 1MDOWNLOADS 42MDOWNLOADS Boundless NEW ENTRANTS ARE MAKING HEADWAY
  15. 15. “OPEN” AND FREE EDUCATIONAL CONTENT IS MOSTLY EXPERIMENTAL . . . FOR NOW. Educause Center for Analysis and Research Undergraduates and IT, 2013
  16. 16. PIRATE USED DON’T BUY BARGAINING POWER OF BUYERS A REVOLT SPURRED BY SOARING TEXTBOOK PRICES HAS MADE BUYERS A KEY FACTOR IN THE SHIFTING TEXTBOOK INDUSTRY
  17. 17. 800% TEXTBOOKS 575% HEALTH CARE 250% CPI 25% McGraw-Hill 15% WILEY 10% PEARSON PROFIT MARGINS 2010 Bureau of Labor and Statistics PRICES 1984-2014 THE PUBLIC PERCEPTION IS THAT TEXTBOOK PRICING AND PUBLISHER PROFITS ARE OBSCENE
  18. 18. $1200 TEXTBOOK COSTS/YR 20% RENT TEXTBOOKS 1.7:1 NEW:USED USED Source: College Board, Cash4Books 56% WANT TO RENT IN FUTURE BECAUSE OF THE HIGH COST OF NEW TEXTBOOKS, MORE AND MORE STUDENTS RENT THEM
  19. 19. Source: Nielsen PubTrack Higher Ed Academic Year New Rental Units New Rental Sales Used Rental Units Used Rental Sales 2011 1,482,881 $69 M 1,642,284 $63 M 2012 3,217,487 $146 M 4,076,895 $140 M 2013 4,276,910 $194 M 7,031,335 $266 M +188% +181% +328% +322% $45 AV. COST OF NEW RENTAL $37 AV. COST OF USED RENTAL INCREASE REVENUES FROM RENTALS ARE SOARING
  20. 20. Biological Psychology, 11th Edition James W. Kalat ©2013, 736 pages Hardcover retail price $279.95 CengageBrain $223.49 Cengage rental $44.49 eBook $55.49 SlugBooks STUDENTS SHOP FOR THE BEST PRICE
  21. 21. 0 5 10 15 20 25 30 35 40 45 2010 2011 2012 2013 PercentofStudents Academic Year Amazon eBay/Half.com Other ecommerce College bookstore STUDENTS INCREASINGLY BUY FROM ETAILERS, NOT COLLEGE BOOKSTORES
  22. 22. AUTHOR CONTRACTS TYPICALLY CONTAIN A CLAUSE THAT CUTS THE ROYALTY RATE IN HALF FOR SALES MADE TO RETAILERS, SUCH AS AMAZON AND CHEGG, AND WHOLESALERS
  23. 23. THREAT OF SUBSTITUTE PRODUCTS OR SERVICES MOOCs Instructor-created EVEN MORE TROUBLING IS THE POSSIBILITY THAT TEXTBOOKS WILL BE REPLACED BY OTHER CONTENT DELIVERY METHODS
  24. 24. Educause Center for Analysis and Research Undergraduates and IT, 2013 “MOOC is the new textbook.” David Finegold, Rutgers THE HYPE ABOUT MOOCS IS FADING, BUT SOME SIMILAR TECHNOLOGY MAY BE THE DEMISE OF TEXTBOOKS
  25. 25. THERE ARE WARNING SIGNS STUDENT SMIGHT NOT BUY 6 out of 10 5,500 INSTRUCTIONAL VIDEOS 100,000 PRACTICE PROBLEMS THE NUMBER OF Instructors WHO DO NOT REQUIRE TEXTBOOKS
  26. 26. Source: Nielsen PubTrack Higher Ed, stats from one major publisher. 40% 28% 32% 29% 20% 16% 9% 10% 8% 9% 6% 5% English Psychology Math Economics Rent Used New 100 90 80 70 60 50 40 30 20 10 0 A SIGNIFICANT PERCENTAGE OF STUDENTS DO NOT BUY OR RENT THE REQUIRED TEXTBOOK At most, only 70% of students get the required textbook.
  27. 27. Analytics CommunicationContent Interactive Media Management ELEMENTS OF SUCCESSFUL TECH-ENHANCED LEARNING SYSTEMS Note taking, computer-scored assessment, projects, assignments, links to ancillaries Syllabus, calendar, student roster, test banks Track student progress, grading, remediation S2I, S2SVideos, photos, illustrations, animated diagrams, audio, narration, accessibility, games, simulations Outline, objectives, progression, facts, issues
  28. 28. REASONS TO USE A TEXTBOOK (PRINT OR DIGITAL) 1. The textbook is a defacto contract between the instructor and students; it encompasses the main body of knowledge that students are expected to learn. In other words; it gives students a good idea of what's on the test. 2. Textbooks provide an organized framework for learning, unlike a collection of random articles accessed from the Web. 3. Textbooks save you time. The author has gathered the materials for you, so you don't have to wade through a bunch of Google results. 4. Textbooks give you the straight story. Sure there's lots of information on the Internet, but much of it is misleading, incomplete, biased, or false. 5. Textbooks improve your grade. They contain exercises, activities, and quizzes. 78% of students believe (and the evidence supports it) that they will get lower grades if they do not have their own copy of the required text. 6. Textbooks are a bargain. Each hour a student spends sitting in class costs about $42; each hour spent with a textbook costs about $2.50.
  29. 29. June Jamrich Parsons is an author, educator, and digital book pioneer. She is coauthor of the 2012 TAA McGuffey Award-winning textbook New Perspectives on Computer Concepts and the 2014 Texty Award for the Practical Computer Literacy series. She co-developed the first commercially successful multimedia, interactive digital textbook; one that set the bar for platforms now being developed by educational publishers. Her career includes extensive classroom teaching, product design for eCourseware, textbook authoring for Course Technology and Cengage Learning, and Creative Strategist for MediaTechnics Corporation. She holds a doctorate in instructional technology, a CDP (Certified Data Processing), and is a member of the Association for Computing Machinery and a Fellow of the Text and Academic Authors Association (TAA).

Editor's Notes

  • The textbook industry is huge—14 billion dollars annual sales. Five billion from college book sales. The sheer number of dollars (and students) has attracted all manner of businesses, many of them intending to disrupt the traditional publisher-bookstore model.
  • Although sales of ebooks in general increased quite dramatically from 2010 to 2011, the trend seems to be leveling off. Digital textbooks are still struggling to take off, though now it seems that about 40% of college students have used at least one digital textbook in the past two years.
  • The biggest reason students give for hanging on to print is that they can sell used books at a good price. Reason #2 is that print is comfortable, even for students who are classified as digital natives.
  • According to data from Nielsen Pubtrack, the price of digital is approaching the price of print, but that seems disputable unless the print price takes into consideration new, used, and rentals.
  • Although students experimented with tablets, that platform does not appear to the major one used by undergraduates. Laptops are the device of choice, giving students a good size screen, full keyboard, and access to full featured applications. Smartphones are also pervasive, but have limitations for schoolwork.
  • Close to 90% of college students own a laptop. The Mac market share is higher at 4-yr institutions, especially doctoral institutions. There are also more Macs at Canadian institutions. At most institutions, enough students use both platforms to warrant supporting both Windows and OS X. Although iPhones currently enjoy great popularity, Gartner predicts a surge in Android phone ownership in the coming years.

  • When classifying ebook technologies, an important factor is whether they are fixed or flowing. Flowing formats have similarities to e-readers, such as the Kindle, and to Web pages. Text flows to fill the screen regardless of pagination. Fixed formats have similarities to PDFs in that the position of graphics and columns is stable and there can be a page-for-page correspondence between a printed textbook and its digital incarnation. PDFs have gotten a sullied reputation as a textbook platform, even though they contain the same information as printed textbooks, but adding media and interaction creates a superior learning environment.
  • Interaction is one of the keys of effective learning. Most interactive textbook technologies provide computer-scored response. The next question is: What happens to that response? Can it be stored locally if an Internet connection is not at hand, and can it be sent to a learning management system (LMS) so an instructor can keep track of student progress?
  • The major digital textbook technologies available today have varying capabilities. No single platform appears ready to emerge.
  • Michael Porter proposed the Five Forces Model, which helps sort out the pressures on an industry that is in transformation. We can use his model to look at the textbook publishing industry in order to get a handle on the possible effect of various disruptors. For textbook publishers, the bargaining power of suppliers has minimal relevance. The other four factors, however, are important to consider.
  • Traditionally, the main threats to textbook publishers have come from other publishers in the same industry. So, Pearson competes with Cengage, Houghton Mifflin Harcourt, Wiley, and the rest of the crew. These companies all have similar business models and in the past have been able to maintain something of a competitive equilibrium based on honing this traditional model.
  • New entrants can challenge traditional market leaders. Before the advent of digital, barriers to entry were high; textbook publishing required a huge sales force and a bevy of authors, editors, and compositors. The upfront investment in product development and printing was enormous. Digital reduced many of the barriers and several challengers stepped into the marketplace.
  • Boundless provides low cost alternatives to standard college textbooks. While the average price of an assigned textbook is $175, Boundless sells an online textbook covering the same subject matter for $20. The search feature of the Boundless textbook allows the student to find the information that matches the content of the textbook pages assigned by the professor. Flatworld Knowledge offers over 100 online textbooks, which professors can customize for their courses. Students purchase an individual textbook for $20, or a “Study Pass” to the entire catalogue for a higher flat fee. Bookboon employs an advertising model to make 1000 textbooks available for free download.
  • A number of initiatives to supply free or very low cost textbooks have taken shape, funded by for-profit and non-profit organizations, foundations, and state governments. Can these initiatives supply high-quality materials and are they sustainable through the development of subsequent editions? Several attempts, such as Flatworld Knowledge, have floundered. The jury is still out on other initiatives.
  • Buyers include instructors who adopt books for a course, and students who ultimately are the consumers.
  • Actual BLS data shows a 285 point increase in CPI for textbooks from 1989-2014
  • Authors should check their contracts to determine if rentals are included and if so, determine their royalty rate. Rentals are returned at the end of the rental period. Authors should make certain that these “returns” are not debited on royalty statements.
  • Rentals sold through PubTrack Higher Education Suppliers, not including Chegg. Authors need information on how rentals are reflected on royalty statements. When the publisher rents books directly to students, the royalty should be clear, but is it at the full royalty rate or ½ the rate? What about rentals through third parties, such as Amazon? Do these parties purchase the book from the publisher and then subsequently rent it out? Does the author receive a royalty on the sales to the wholesaler and is the royalty rate full or half?
  • Online tools help students shop for the best price, which is decreasingly from the publisher. Where do author royalties come into the picture? How are they computed?
  • As more textbooks are sold through Amazon and other etailers, authors may see a precipitous drop in their royalties because the royalty rate for those sales is half the regular rate.
  • Will textbooks go the way of the buggywhip? When horses were retired for gasoline-fired “horsepower,” buggywhips didn’t evolve; they became obsolete. Might MOOCs, online courseware, and educational apps supplant textbooks?
  • Judging from the plethora of articles about MOOCs in the Chronicle of Higher Education over the past two years, it is surprising that very few students know what they are and even fewer students have participated in one. Though the bloom is off the rose, MOOCs provide an object lesson. Textbooks are not an absolutely necessary part of the learning experience.
  • Especially troubling is the trend for instructors NOT to require a textbook, and instead use alternative materials, such as free online content.
  • The statistics are astounding: In the best of cases, only 70% of the students in a course purchase the required textbook.
  • What might ultimately replace textbooks? The features of technology-enhanced learning systems are falling into place. Textbooks, as content, are only one element of this over-arching umbrella. Authors may want to consider how their role may evolve.
  • And yet, textbooks (whether print or digital) have numerous benefits. The question is: Can authors and publishers build on this foundation to evolve a productive set of learning technologies within an industry that is besieged with disruption? We will continue to gather information to track evolving developments.

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