Why Textbooks are so Expensive and How They’re Getting Cheaper
Since 1978, textbook prices have gone up by 812%. That’s double the cost increase of new homes. From 2003 to 2013 alone, these prices have gone up 82% which was twice the rate of inflation over that period. The only college-related expense that rose quicker during that time was, unfortunately, college tuition. Why is college getting expensive? There are a few reasons, but I’m going to get into the textbook industry right now. These price increases are mostly because of how the industry is set up and the way textbooks are chosen.
Let’s look at how the textbook industry works. First, a publisher creates the textbook and a wholesaler purchases that textbook to sell to a college bookstore. Just five publishers control about 80% of the market though. This is incredible when you think about it because these five don’t really have to compete on price. They each own such a large portion of the market that it’s more profitable for them to differentiate with products or price than it is to compete directly. Furthermore, only four wholesalers control the market for textbook distribution. This means that almost none of the companies in this industry have an interest in lowering prices to compete with each other. This is called a loose oligopoly and can be bad for consumers. Retailers like college bookstores don’t get a discount either, but they do keep about 4.5% of the price that you pay for a textbook as a profit, so they are responsible for a slight markup. It should be noted that the textbook companies keep 7% in profits.
The other reason that textbooks are so expensive is the way in which they are selected for classes. Textbook companies send representatives to professors across the country and pitch their textbooks to these professors. Professors are worried about the content of the books and the quality of the teaching material that their students will receive, so they are more concerned about the textbook quality. This means textbook companies focus on the quality of the book, and not on making the books cheaper. Professors think textbooks should be cheaper, but they focus on good content more. The target market that decides the textbook isn’t the consumer that pays the price. This economic model has quite a lot of pitfalls for the consumer. One reason that allows this to go on is that professors of universities usually have the right to set the course material for their courses, so the college or university shares some responsibility for these expensive textbooks.
Rhett Allain, an associate professor of Physics at Southeastern Louisiana University often meets with these reps. They usually try to sell him on new textbook sidebars that apply the core textbook information to real world scenarios, or textbooks that have summaries at the end of the chapters. Allain makes the point though that the extra material is only valuable if students read it. The core content is essentially the same between these textbooks, and that’s what students will be using most as they search for answers before their upcoming exams.
This all feeds into the idea that there is an unsustainable bubble in higher education. The prices to attend institutions has been rising at an aggressive rate and at some point, the costs of going to school are likely to outweigh the benefits. Complicating the issue is that college students are increasingly having trouble securing jobs that allow them to pay back their loans. Today, student loan payments are being made on just 38% of loan balances, which is down from 46% five years ago. Textbooks only add to this bubble. Almost 5.2 million undergraduates spent more than $1.5 billion of financial aid money on their textbooks each semester in 2016. Here’s how students end up purchasing this content:
The most recent studies suggest that students will spend an average of $1,200 a year on textbooks. This can be a prohibitive burden on those that take out loans to attend college. Some institutions are looking out for students by trying to make textbooks cheaper, but it’s a slow process. An education advocacy group called “Achieving the Dream” announced that they are giving out $9.8 million in grants to developing degree programs that use online and open-source course materials instead of the more expensive textbooks. Companies like OpenStax and Boundless offer cheaper alternatives to new and used textbooks. These companies offer peer-reviewed content that professors can choose for students to learn from. Ethan Senack of Student Public Interest Research Groups (PIRGS) has said that large textbook companies are continuing to make a concerted effort against these alternatives to dissuade professors and students from going the cheap route. From a business standpoint, this makes complete sense. The oligopoly is trying to protect their income source from new entrants.
Some universities are working to alleviate the cost of textbooks too. UMass Amherst has an Open Education Initiative which champions Open Educational Resources. These are textbooks that are not covered by licenses and are therefore much less expensive. Purdue University – West Lafayette has collaborated with Amazon.com to provide a 30% discount to students for textbook rentals. These are only a few specific cases, but it is nice to see some institutions working to help their students. The shift to eBooks should also create a cheaper atmosphere for the book industry, as eTextbooks are 50-60% cheaper than their traditional counterparts.
The shift to a cheaper textbook is occurring, it is just taking quite a while. Only time will tell if textbook companies can squish the little guys trying to bring cheap education material to the masses, or if there will be a massive shift in the industry by the time your kids are ready for school. Either way, hopefully, you’ll have a stable and well-paying job by then; college doesn’t look like it’s getting cheaper for quite a while.
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