A View of Why The Textbook Market is So Broken (Score 1)

I am a co-founder of Flat World Knowledge, the company referenced in the New York Times editorial, so take any/all comments with a grain of salt - I'm hardly objective :-) I spent 10 years at Thomson and Prentice Hall. Traditional publishers like these are caught up in changing market conditions that they are in some cases unable, and other cases unwilling, to respond to in ways that are good for customers. Instead, they've gone the opposite direction. The internet has disrupted the business (suprise), primarily on the distribution side. It has made more "alternatives" to the publisher's new book (that's the only one they make money on) available. Three examples: (1) used books: was a cottage industry pre-internet, now it is highly organized and efficient at aggregating used books from around the country, and redistributing them efficiently to where the demand. (2) international editions: as publishers sell books overseas at lower prices in lower-priced markets (e.g. southeast Asia), those books come back into northamerica via a global gray market and displace new book sales (3) peer-to-peer networks: these have gone from posting a notice on a physical board to more sophisticated posts on things like Craig's list or dedicated trading networks. All three phenomena displace new book sales with some other form of the book, for which the publisher does not get compensated. I'm not rendering a value judgment on this good or bad - it's just what happens in markets where there is change. The key issue is how does the industry respond? And the traditional textbook publisher has responded in a very anti-customer way, vs. innovating in their business model to take advantage of the new conditions. What have they done? First, to compensate for the lower unit sales, they have increased prices to try and preserve revenue. Second, they have increased the pace of new editions dramatically, with the hope of flushing all of the used and international editions of the books out of the market each time a new edition publishes. Third, they eliminate these alternatives by trying to create what we would call in the business "unique isbns". Every book has an ISBN - when a bookstore orders books, or a student orders directly online from, say, half.com, they use the ISBN. If the publisher can create a unique ISBN at a particular university where a book has been adopted by a professor, it confuses the market - it becomes harder for the bookstore or student to find a used book, or an international edition. The two primary mechanisms for publishers to create unique ISBN's is to (a) bundle a bunch of supplements with the book, like a CD and a study guide. The resulting "bundle" has a different ISBN than the original, and thus throws off searches for used books - there will be none that show up. (b) custom books - where a publishers changes a cover, adds a syllabus from the school, takes off a chapter that the professor doesn't want, and creates a new ISBN. Again, the effect is to deaden the alternative to the new text market. Of course, customizing a book could add value to the teaching instructor and the student if it improved the book for that course, but generally that hasn't been the publisher's reason for wanting to see more custom titles. Anyway, as you can imagine, all of this creates a negative feedback loop. As the publishers respond defensively, the drive up prices and anti-publisher anger, and then students look even harder for alternatives. It goes on... Enter Flat World Knowledge. We just figured that it is time for a new business model that flips all of this on its head. We have a business model that is a lot more like a commercial open-source model, modified appropriately for the higher education textbook market. "We preserve the best of the old - books by leading experts that are rigorously reviewed and developed to the highest standards. Then we flip it all on its head. Our books are free online. We offer convenient, low-cost choices for students - print, audio, by-the-chapter, and more. Our books are open for instructors to mix, mash, and make their own. Our books are the hub of a social learning network where students learn from the book and each other." How do we, and our authors, make money (because we do believe that top authors are the key to the model and should be well compensated financially for their efforts)? While we will make the book available online for free, we will generate revenue by selling (a) alternative formats like print-on-demand versions, audio versions, Kindle versions, etc (b) study aids like podcast study guides, mobile phone flash cards, web-quizzes with feedback, animated complex problem solutions, etc (c) hosting a user-marketplace around our core content where people can post and sell their own study aids (peer ranked, etc) and name their price - we will share the revenue. Our authors get a percentage of all revenues generated, which when modeled out, means that they will make comparable money to the traditional space when they publish with us. I've gone on long enough, though. If you want to learn more about how we're tackling this problem go to www.flatworldknowledge.com My apologies for the long post - there was so much good discusson I thought it useful to provide a sense of why I think this market is so broken, and at least one view of what is possible. There are lots of other cool models, as Ben Crowell pointed out, so we're bound to see some change from different directions.