Wednesday, December 14, 2011

Is the college bookstore doomed?

Rehash originally published August 30th, 2006:

Some recent examples suggest that print books continue to be the format of choice for college students but is this because they like the format or because the tangible item can be resold at the end of the semester? Is the problem really that no demonstrably better alternatives yet exist to replace the print version; i.e., electronic titles that offer a better learning experience? Clearly, e-books garner a lot of attention and investment from publishers and as I have discussed in an earlier post the opportunities in e-Content for publishers, students and administrators are potentially significant yet no one appears to have cracked the content code.

Electronic delivery of content will materially change the business model for students, institutions and publishers. In my view, the main reason this has not happened yet is that publishers and institutions are dealing with legacy issues that preclude a (willing) change in their business practices. Content creation in all but a few subject areas is an iterative process; meaning that few titles are created from scratch for each new edition. Indeed for some subject areas many have suggested that new editions are only created to mitigate the used book issue. While publishers recognize that the creation of e-books is critical, with few exceptions, they are not willing to start over and create a true e-book course product but are satisfied to convert existing titles to e-book format.

The institution on the other hand receives revenues from the sale of textbooks either directly or via trade agreements with store managers such as Follett and Barnes & Noble. As such, they have remained paradoxically disassociated from the annual chorus of criticism regarding textbook pricing. Assuming e-books become fundamental to course content, where will the bookstore fit in the relationship between publisher and institution?

Any number of publishers and vendors have or are developing models for direct delivery of content to students. Two vendors, Missouri Book Service (MBS) and Vitalsource have developed platforms which involve publishers and bookstores in the process. Intuitively, as a publisher, you might be encouraged to engage students directly and publishers are doing just that via services such as SafariX and Primus+ (McGraw Hill). MBS has been testing their program which integrates the sale of e-books into the retail bookstore for the past three seasons and has seen steady increases in the number of publishers and the amount of adoption of the content. In working with MBS, a publisher will not have to deal with certain college store issues such as returns and exchanges, campus debit cards and student financial aid. Centralized order process operations at publishers would find these issues difficult to deal with. E-Content in the MBS Universal Digital Textbook program is discounted 30% below the print price. The restrictions associated with this content have drawn some negative reactions particularly because the password expires at the end of the semester and the student has nothing of value to resell or reuse. As suggested above, the additional value for the user in this example may be more related to ease of use (weight) than much else because the e-content is a replica of the print version.

In the MBS solution, they protect their franchise and maintain a revenue stream for the bookstores. MBS is also creating a digital platform so that many publishers can make their titles available to students which in turn could create a competitive advantage for MBS in the provision of e-Content to students. Assuming a competitor wanted to challenge MBS for a store contract the challenger would have to match the platform capability and the content.

Vitalsource has taken a different approach to distributing e-Content to students and offer content creation through distribution help to reach students. They have had some success and are working with Wiley, Thomson West, Elsevier and others to deliver content. Their tools allow integration of ‘local’ content, unbundling of content and linking to related reference products. It isn’t clear what their relationships with bookstores is in the institutions where the product is sold; however, MBS recently added the Vitalsource format to their delivery platform.

MBS, Vitalsource, SafariX and others are generally offering discounts for the purchase of e-Content versions of the course material. There is tremendous hesitation to offer unlimited use of the e-Content because publishers believe they will create a problem greater than the used book issue. Not surprisingly, students have been slow to adopt these offerings. In my view a risk to publishers is that new entrants to the market will create new and innovate publishing products that rely on new but dynamic content that creates a profoundly different experience for students than an e-Content version of a textbook. Some of these new approaches are starting to find their way into general use and it is services like Blackboard/webCT that have created a platform for delivery of some of this content. Blackboard has an agreement with Merlot where you can find some interesting course material.

In the long run, publishers and or e-Content platform providers will have to pay to gain access to students at Higher Ed institutions. Institutions will either create their own open platforms or license from a vendor but this platform will become the store front. There may be a physical store on campus but it will not be the focus of textbook sales. As much as gaining knowledge of student purchasers is important to publishers in their drive to form long term learning relationships, institutions also realize the value of this information and will not be interested in stepping out of the chain.

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