Chapter 31 Why College Textbooks Cost So Much Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

31-2 CHAPTER OUTLINE The Process Market Forms Technology and the Impact of Used Books When Price Does and Does Not Matter

31-3 You Are Here

31-4 The Process Marketing the Idea –Identifying the Niche –Pushing it to the Publisher –Sample Chapters –Reviews Signing the Contract –Advance The amount of money paid to authors typically counted against future royalties. –Royalties The amount of money paid to authors. Typically paid on a percentage basis. Drafting –Complete Draft –More Reviews –Finished Draft –Editting

31-5 Marketing and Adoption Marketing –Mailed free to many (sometimes thousands) of faculty. –Sales force on campuses February and March for Fall September and October for Spring Adoption –Faculty decide the book in the vast majority of cases. –Sometimes a committee will decide on a common book for a multi-section class –Neither typically know the book’s price

31-6 Who Gets the Green Bookstore Markup, $31.25 Ink, paper, printing cost, $5-$10 Author royalty $14.06 $125 Publisher fixed expenses and profit, $69.69-$74.69

31-7 New vs Used Used books are typically price 25% to 33% less than new ones. A book only makes money for the publisher and author on its first sale. Bookstores make (about the same) profit selling new as used. Publishers will (usually) not ship old editions even if faculty request them.

31-8 Are New Editions a Scam? Economic Issues Change –New to the 2 nd Ed Economics of Terrorism Economics of War –New to the 3 rd Ed Wal-Mart Casinos This chapter –New to the 4 th Ed You Are Here Economics and the Law Economic Growth –New to the 5 th Ed The Recession of The Housing Bubble International Finance Calculus Hasn’t Changed Very little has changed in many new editions. Publishers have to change editions to make money…and the used book market has made this worse.

31-9 Other Reasons Textbooks Cost So Much Ancillaries –Cost Money Powerpoints ($5,000) Testbanks ($5,000) Instructors Manuals ($5,000) Websites ($3,000) Podcasts ($5,000) –Faculty demand them Faculty sales to used book dealers

31-10 When Prices Do Not Matter Faculty Decisions –Faculty get the book for free. –Faculty do not typically inquire about the price of books they assign. Student Decisions –There is little to no ability for students to substitute one book for another. –Not having the book is a signal to faculty.

31-11 Where Will This Lead? Fewer Book Choices? Textbookless classes? Electronic books? –Limited printing –Limited Access (IP specific; number of accesses, etc.)

31-12 Making Money=Selling

31-13 The Market Form Monopolistic Competition –Entry level books in most areas –Intermediate level books in many areas Oligopoly –In a few upper division areas –Many graduate school areas Monopoly –Very narrow areas with small markets

31-14 Used Books and the Impact of the Internet The “May-August” Problem –Without the internet nearly all books had to travel through a central clearinghouse like Columbia, Mo’s Missouri Book Services. (high markup) –With the internet, books can travel from one bookstore to another without the middleman. The “December-January” Problem –Without the internet used books only circulated in a single school. –With the internet a book can make it across the country in 12 hours.

31-15 Rising Tuition and Textbook Costs