The DOJ E-Book Suit May Speed E-Books to the Classroom

Pablo Valerio, International Business & IT Consultant | 4/19/2012 | 18 comments

Pablo Valerio
I remember queuing for several hours in downtown Madrid not so long ago to purchase a couple of textbooks for my daughter. There was only one bookshop that had some of the books she needed for school in stock.

Had those textbooks been available in electronic format, I would have gladly paid the full printed price to get them.

Everyone in the tablet and e-book market is looking at textbooks. From industry executives to publishers and from parents to educators, everyone is aware that textbooks are the next big market for e-books.

Despite the fact that e-readers are not suitable for education, the potential advantages of delivering textbooks in electronic format makes everyone anxious to explore the possibilities and cash of this lucrative market.

But the recent DOJ suit against Apple and some publishers for fixing the price of e-books might deter more textbook publishers from converting their titles to electronic format.

In many countries, especially in Europe, prices for textbooks in mandatory education are regulated within a price bracket for every subject, and retailers can only discount them to a maximum percentage. Many shops stock certain textbooks with the hope to sell them at full price and make a profit.

Also in Europe, predatory pricing is forbidden, and prosecuted. No one can sell below purchase price except in extraordinary circumstances or going-out-of-business sales. But that is not the case in the US, where Amazon is famous for slashing prices of e-books to convert the market to e-books and promote their Kindle devices.

The big e-book retailers such as Amazon, B&N, and Apple are expecting textbooks to be their next big source of revenue, the new panacea of the e-book market. But the possibility of destroying their current business model and margins in the hands of Amazon and other e-retailers scares textbook publishers.

If Apple and the publishers named by the DOJ settle the lawsuit with the government –- and everyone agrees that they should -- then the gates are open for Amazon and other discount online stores to price e-books as low as they want. And based on the previous experience of the New York publishers with Amazon, textbook publishers fear that the online giants will try to destroy the printed market of textbooks as well. This is raising the alarm in the industry for the same reasons.

If Amazon starts slashing prices of e-textbooks, then peoples' perception of the textbook price will change forever. No one will pay a premium price for the printed version.

Independent bookstores will be hurt most. Many bookstores rely on textbooks as their main source of revenue in the back-to-school season. If they lose that revenue, many will go out of business.

Textbook publishers are looking at the e-book market with envy and hate. They would be happy with the “agency model” Apple pioneered with the e-book publishers, but if the DOJ wins the case then that model is over.

On the other hand, consumers are happy. Parents can see their textbook expenses (sometimes several thousand dollars) being reduced to Amazon levels. Teachers are puzzled! A few years ago they didn’t want Internet in the classrooms, now they can’t live without it. But e-books are a radical change in the way they conduct classes and they will resist that for the moment.

There is no doubt in the industry that e-textbooks will finally make it to the classroom. The question is when and how.

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Umair Ahmed   The DOJ E-Book Suit May Speed E-Books to the Classroom   4/19/2012 6:01:40 PM
Impact on Educators

Thanks for the great article, Pablo. Success of e-textbooks seems to be largely dependent on the willingness of schools to incorporate digital content and devices in the class room. Decision of DOJ e-book suit will have a significant effect on educators. If the prices of e-books are set at the Amazon level, then schools will be under immense pressure by the parents and society to upgrade their teaching method for the digital content, so students can benefit from the lower priced e-textbooks.

David Wagner   The DOJ E-Book Suit May Speed E-Books to the Classroom   4/19/2012 5:59:38 PM
Re: Apple and two publishers want to go to court
I don't blame them for fighting because i have to say, I don't see how what they did was any different than what they did in the paper book market. If it was illegal, it has been illegal a century ago unless I've really missed something.
Hammad Masood   The DOJ E-Book Suit May Speed E-Books to the Classroom   4/19/2012 2:47:44 PM
Re: e-books
Some other names should also look towards this market, not only big names like Amazon. After reading this I see a lot of room for others to fit in and make this market more competitive !
Pablo Valerio   The DOJ E-Book Suit May Speed E-Books to the Classroom   4/19/2012 1:39:09 PM
Re: e-books
"The cost of ebook production is much lower than that of physical production but the dip in price of ebooks compared to hard copies is not so much"

@Taimoor. That is exactly what the NY publishers thought years ago when Amazon launched the Kindle. They agreed to convert the New York Times betsellers to the Kindle to expand their market. But then Amazon decided to sell them for $9.99, taking a loss in some and destroying the margins forever.

An agressive price from Amazon could change people perceptions about the value of textbooks. If parents and students pay $15 per e-textbook they can't continue to sell the printed version for $50. That's why the "agency model", being challenged by the DOJ in court, is attractive to them: this way they can set the final price.
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Taimoor Zubair   The DOJ E-Book Suit May Speed E-Books to the Classroom   4/19/2012 1:21:39 PM
Re: e-books
"textbook publishers fear that the online giants will try to destroy the printed market of textbooks as well"

I don't see why texbook publishers should fear that. The cost of ebook production is much lower than that of physical production but the dip in price of ebooks compared to hard copies is not so much. I feel the publishers would tend to gain if their text books are sold as ebooks.

Pablo Valerio   The DOJ E-Book Suit May Speed E-Books to the Classroom   4/19/2012 11:45:21 AM
Apple and two publishers want to go to court
According to Reuter's Grant McCool Apple, Macmillan, a unit of Verlagsgruppe Georg von Holtzbrinck GmbH, and Pearson Plc's Penguin Group want to fight the DOJ case against them in court.

"Our basic view is that we would like the case to be decided on the merits," Apple lawyer, Daniel Floyd, told U.S. District Judge Denise Cote. "We believe that this is not an appropriate case against us, and we would like to validate that."

If the case goes to trial, armed with Apple's legal power, nobody knows what will happen.

But the fact that three publishers are already in settlement talks doesn't leave to much room for Apple and the other two.
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Pablo Valerio   The DOJ E-Book Suit May Speed E-Books to the Classroom   4/19/2012 11:10:55 AM
Re: e-books
@Pedro. I'm interested to know the model of selling textbooks for schools in the US.

In their January deal with Apple to publish e-textbooks, Pearson, McGraw-Hill and Houghton Mifflin Harcourt agreed to offer the books at $14.99. But the textbooks are mostly purchased by schools or school districts, with individual licenses given to each student each school year.

The Apple McGraw-Hill idea was to sell electronic textbooks directly to the students, with a one-year license and no possibility to sell the books to others.

Still, $14.99 is a lot lower than the usual price, provided you already have an iPad.
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Pedro Gonzales   The DOJ E-Book Suit May Speed E-Books to the Classroom   4/19/2012 10:15:50 AM
great article pablo, I had no idea of the challenges the publishing industry has in regards to textbooks. I can only share my experience here in the states as a teacher.  first, before the upoming semester, the secretary ask me to order new books for my classes, I think it is the same for all other professors as well, when will I get a request to order e-textbook, as you indicated, it will take some time for that.  I don't like is that textbook publisher often times, add a new chapter to a book therefore, a student has to buy that book, even tough, the old book is exactly the same, just with one less chapter, the price of most text books are around $100 imagine you have to take 4 or 5 classes per semester.  



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