When I was an undergraduate my books were much smaller, black and white, few graphs, and usually sold without any study guides or other ancillary materials. The authors received a percentage of the sales. There has been a long standing trend as education publishers have consolidated to make the book bigger, more colorful, and with many ancillaries both for the student as well as the faculty. I currently teach at the City Colleges of Chicago so I’ve seen the trends from both the distribution and sales side as well as the consumer side.

To make a long story short, while books may be books, textbooks are of a far different color than trade books. The difference is primarily in the high fixed costs to produce the first copy of the textbook as opposed to the trade book where the author bears much of the risk. The variable cost of the book are fairly well known. Printing technology has improved greatly, but those bulky texts do add up.

The revenue model for higher education textbooks has remained the same: price times units sold.

While this works great in the trade section of the market where fixed costs are relatively low, there is a problem for books that have increasingly higher fixed costs. And now we have the prospect of declining variable costs for the eBook.

If you do the math and look at profit as revenue less fixed and variable costs and where units sold is a random variable, you come to the conclusion that the variability of profit increases when fixed cost goes up and variable costs go down. This is precisely what eTextbooks are going to do.

If you equate variability with risk, then eTextbooks in higher education will probably not cost less, but should in fact cost more to offset the increased investment up front in producing the first copy. Now visualize that the costs are a lot more, such as taking the electronic media to the next level by adding features that are unavailable in print, and the situation becomes even more exacerbated. As an aside, I often used to remark that the worst thing about the word “eBook” was the word “book.” It really is a different media.

There is a solution to the higher education eTextbook dilemma, and it is found in the Elhi (elementary and high school market where materials are essentially site licensed. This type of pricing and distribution flattens the revenue line to more closely match the cost line and therefore lowers the risk to the publisher. I’ve been in the used book and textbook rental side and know full well that publishers try to maximize their sell through and minimize losses of rental and used book operations.

I had almost 10% of my students come up to me and ask if they could use the electronic version of the text chosen for my most recent class in statistics, and it’s just a plain electronic translation of the printed text. The eTextbook is here, and I know it will be successful, but look for a real push to change the sales as distribution model to more closely match the high fixed cost, low variable cost that is driving the higher education publishers today.

Without getting into the finite details, savings should come with the printing, shipping, storage, and marketing (I’ll skip the disposal costs, enviromental concerns, etc.)

Even a book on a CD is less costly (a CD with data may run $1.25 with profit,).

Currently, I see paperback books less costly than digitized books.

$9.99 for an e-book is nuts! Sounds like an accounting/manufacturing/marketing allocation problem to me! Check your figures.