It’s no secret that the education sector is ripe with opportunities for disruption and innovation: Edtech venture funding exceeded $1 billion in 2017, and the market is expected to grow to $93.76 billion by 2020. Entrepreneurs are using digital technology for diverse applications: to facilitate online education, train coders in developing countries and innovate classroom collaboration. But one major issue within education has yet to be solved: the unbelievably high price of textbooks.
Related: Stop Shooting For the Moon! Raising Prices Won’t Raise Your Profits. Catering to a Niche Will.
The cost of college textbooks nearly doubled over the past ten years, outpacing the growth of tuition costs by 25 percent. The average grad student spends $1,200 per year on textbooks — nearly 5 percent of his or her disposable income.
The sky-high value of the used college textbook market — $5.5 billion, according to BookBusinessmag.com — testifies to the fact that many students and families are eager for more affordable options. The challenge for entrepreneurs, then, is to find a way to meet this demand in a profitable, sustainable way that will meet the needs of students, professors and educational institutions alike.
Ready for this opportunity? Here are three things you should know if you’re considering taking a crack at this complex problem.
1. The traditional publishing giants got themselves into this mess.
The modern textbook publishing industry is dominated by a small number of large companies that have relied on more or less the same business model for decades — even as educational practices have changed significantly. These traditional publishers have been slow to innovate and adapt to new educational needs and market realities.
“The textbook publishing industry was lulled into an uncompetitive stupor by 20-plus years of price-driven growth and high margins,” Alastair Adam, CEO of FlatWorld, a digital-first college textbook publishing company, explained to me. The status quo worked well for traditional publishers as long as students were willing to purchase new textbooks, Adam said. But that held only as long as they had no other viable options.
Today, with the cost of education at historically high levels, many students no longer see purchasing new textbooks as a viable option. Years of price hikes and complacency by publishers are bringing them significant losses as that revenue goes toward the used-book market. The majority of students today purchase their textbooks on the used market, share with classmates or don’t purchase textbooks at all.
Of course, textbook publishers aren’t blind to the plight of cash-strapped students. David Levin, CEO of McGraw-Hill Education, testified to this in 2015 when he wrote, “Enrolling in college requires a significant financial investment from students and their families, and I understand the frustration they feel when, after signing up for years of loans, they see a charge for an expensive textbook appear on their credit card.”
Related: Edutor, Pearson Partner to Provide Digital Textbooks to Students in South Africa
But acknowledging that a problem exists and knowing how to fix it are two different things. And the traditional players have been largely unable to develop sustainable solutions to this long-time challenge.
2. “Digital” isn’t a magic bullet.
Some conventional publishing companies — McGraw-Hill Education included — have sought to regain market share by transitioning into the digital textbook space. By offering their products digitally, publishers are able to sell them at a lower price and, at least in theory, regain ground that they’ve lost to the used market.
But simply transitioning to a digital model isn’t going to fix the industry’s deeper problems. A recent report by U.S. PIRG found that traditional publishers tend to carry many of their detrimental habits with them into the digital world. “Even as they move into etextbooks, publishers incorporate paywalls, expiration dates and printing restrictions that further continue the practices they’ve used to control the traditional market,” said Ethan Senack, a higher education associate at U.S. PIRG.
Merely pivoting to a digital-only approach, then, will not address the deeper, more systemic issues within the textbook publishing industry. And the transition to digital has thus far not been shown to improve student outcomes. According to Adams, “Focusing solely on digital solutions as the answer to the industry’s woes is like trying to fix high airfares by investing in flying cars. A better approach is to break down the price barrier, just like the low-cost airlines did.”
True innovation will come not in scrapping the traditional idea of the textbook, but in re-thinking the ways that textbooks are produced, manufactured and sold. For example, FlatWorld uses standardized templates for each of its books; it also prints on demand and ships directly to students, bypassing considerable design and inventory costs. Benefits from solutions like these are passed on to the consumer in the form of lower prices.
Entrepreneurs entering the space should look for opportunities to disrupt the traditional textbook publishing business model without relying on digital quick fixes that don’t result in genuine progress.
3. Keep the educators at the heart of the process.
When approaching innovation within the textbook publishing industry, it’s important to consider not only the students but their professors and other teachers, as well. Many attempts to solve the textbook cost problem have fallen short because they’ve failed to take into account the needs and preferences of educators.
Take Open Educational Resources (OERs) as an example. OERs, or free, openly licensed text, media and other assets represent an inexpensive way for students to access educational materials. But they have faced significant barriers for adoption because they have an alienating effect on professors who have spent years designing courses around textbooks.
Professors are at the heart of our higher education system, and any viable innovation within the space must embrace this reality. “The value in textbooks is in leveraging professors’ time and expertise,” Adams said. “If we can make textbooks affordable again, we can leverage the time and knowledge of professors rather than disintermediate them.”
Given the lack of sustainability inherent in the current textbook ecosystem, it’s only a matter of time until a novel (pun intended!) solution achieves widespread adoption. Innovators and educators, meanwhile, who are searching for that solution will do well to learn from the faults of traditional publishers. They’ll also be wise to avoid short-term fixes and to consider all stakeholders when they develop new products.
Related: 4 Psychological Techniques That Can Improve Your Product Pricing
Overall, textbooks are a hard market to read, with a lot of players rewriting the story, and it’s going to be interesting seeing what the next chapter (another pun) brings.
