I was wandering through the UW Bookstore the other day and took a look at some prices for textbooks. WOW – they are really expensive. One new textbook for an Introduction to Information Systems course was priced at $175. I have a couple of textbooks from when I was an undergraduate on my bookshelf. A book titled "A Guide to FORTRAN IV Programming" by Daniel McCracken cost $3.95. Another, "BASIC, An Introduction to Computer Programming Using the BASIC Language" by William F. Sharpe also cost $3.95.
Ok, so my texts were purchased a long time ago when the price of gasoline was $.35/gallon. But if gas prices had risen like textbook prices, we would be paying over $15/gallon. Why are the prices so high?
Having written a few textbooks, I am familiar with the economics of college textbook sales. The price of the book is set by the publisher, let’s say $100. The author gets about 15% in royalties so the author gets $15. The remainder, $85, goes to the publisher to cover development costs (editing, proofing, design layout, etc.), printing costs, advertising/sales, and finally profit. The publisher also assumes the risks associated with sales not meeting projections meaning that they may not recover all their fixed costs.
The bookstore sells the book with a 25% markup ($25 in this case) so the student pays $125 for the book. Note that the bookstore makes more per book than the author.
A typical bookstore will buy the book back from the student at the end of the quarter/semester generally paying the student 50% of the original price. In this case, the student gets back $67.50. The bookstore then marks up the price by 25% ($84.37) and sells the book again (making an additional $16.87). The publisher and the author make NO money on this resale and herein lies the problem.
In the "old days", there was not a very viable used book market. This meant that many more new texts were purchased each quarter which contributed to the publisher’s income. Back in the old days, this additional income coming from higher new book sales meant that the original price of the book could be lower and still make a reasonable return on the book.
With the advent of better information systems that made it possible for bookstores to have better information on where the used books could be found, and the advent of fast, lower-cost shipping, the used book market started to thrive. Publishes responded by raising the initial price per book and new sales fell. Students, who were the ones paying the higher prices, starting selling back more of their textbooks to reduce the overall cost to them. Students selling back more books enhanced the used book inventory and new book prices went up even more.
We are now at a stage where the price of a new book is really unreasonable. This opens up alternatives such as self-publishing by authors as well as new media (electronic books). Of course, electronic textbooks still require an author and the price of original material will only go down when the traditional publishers step out of the loop. Watch for companies like Amazon making direct contracts with authors to make material available for Amazon’s electronic distribution.
What about the "traditional publishers"? They will likely follow the path of the dinosaurs. They failed to foresee the used book market, failed to lobby lawmakers for "perpetual rights" like the music and film industry enjoys, and because of this lack of foresight, they are likely going to price themselves out of business.