The recent Amazon / Brazilian Department of Education announcement raises some larger questions about the future of (digital) textbooks.  It’s not enough to accept that textbooks will be read over devices like the iPad rather than in hardcopy.  Instead, the paradigm of digital has the potential to change the entire business model of the textbook market altogether.

But first, a preamble.

I remember reading a prominent author recently discuss the crisis of self he felt knowing that his ebook was to be a fundamentally different product of labor than his regular print books.  There is no “final draft” of an ebook; he can go back and change the digital text infinitely many times.  He will never be held accountable for any piece of writing in the same way that he would have been with hardcopy.  With that realization came flux.  What does it mean to put one’s thoughts down anymore?  Imagine the mandates of authors like Nabokov and Kafka who wanted all their unfinished fiction burnt upon their death.  In the care of opportunistic or merely generous relatives, those directives were ignored and the works shared with the world, giving us invaluable literary benchmarks like The Castle and The Original of Laura.

Textbook authors are similarly less beholden to history with the new digital textbook world.  It may not mean similarly existential crises of self-understanding as fiction authors face (as comical as that would be), but it does lead to a large disconnect around the current textbook model.

Let’s review: textbook authors are, for the most part, dealing with a fixity of knowledge and some commonly accepted scientific principles which do not dramatically change.  Acceleration of a falling object will, for the foreseeable future, remain at 9.8 m/s²; Flannery O’Connor will, for the time being, remain an anthological stalwart in the American (Southern Gothic) short story tradition.  There’s a number of ways to present subject matter and an optimal ordering of material, etc., but that won’t change for the author on a yearly basis.

This creates a very static book which is of limited use to its consumer after 9 months or so when they finish with the class.  (My argument assumes that most people don’t have value for textbooks when they’re out of the class – it’s clearly less true for some, but very true for most.)  The used textbook market would almost entirely wipe out any need for new textbooks if consumers are able to simply sell textbooks to the next cohort of students taking the same classes.  This is what happens to some extent, though mitigated by the concept of “editions:” namely, authors updating textbooks with some highly trumpeted, but nominal, incremental content so as to convince the next crop of students that they really ought to buy the 8^th edition of Macroeconomics new (and funnel dollars in Greg Mankiw’s and his publisher’s direction) instead of the 7^th edition used (and funnel Mankiw and publisher nothing).  The practice is generally accepted to be a croc, but tolerated given the economic mandate.

On top of this is layered the more acute problem that textbook authors and publishers face which is the irrelevance and increasing substitutability of their textbooks.  The frequency of college students complaining that they never referred to their textbook once in a semester, the immediacy of explanatory material available for free online – all of these have made college students in particular more reluctant to buy textbooks, new OR used.

The textbook market then sees the following situation:

1. Students are unhappy because they’re forced to buy stale and overpriced supplementary content that often sees utilization at a de minimis rate.
2. Professors are unhappy because the friction in this marketplace results in not insubstantial amounts of unprepared or disengaged students as well as legacy textbook contracts that they are in some manner or another coerced into honoring.
3. Authors are unhappy because of the thriving secondary textbook market that ensures that their work requires constant updating and marketing to see even a modest distribution over time.
4. Publishers are unhappy for that same reason, not to mention the growing availability of a free, cannibalized offering known as the Internet.
5. Even the marketplaces – campus bookstores – are forced to stock inventory in a brick-and-mortar location that is increasingly moving online.  Their real business comes from the used book sales (again, competing against Amazon, eBay, and Chegg) or college swag.

Every single participant is unhappy in this situation.

The digitization of textbooks – the flux of content – represents a paradigm shift in the consumption of textbooks…and with it, the opportunity to correct most of those issues above.  The first major potential shift is the move from transactional to subscription sales.  Digital textbooks, as easily updatable, amorphous content organisms are now like software applications rather than hardcopy books.  As a result, it makes sense to start selling subscriptions to constantly updating textbooks (and charge based on usage) rather than relying on an age-old, non-optimized transactional sales model.  If students bought textbook subscriptions, they’d probably buy access to a library of different titles, allowing unlimited access to [X] number of books per billing period, and re-specify the books they want access to at the start of each school term.  They benefit by having lower prices – subscription vs. outright purchase – and not needing to worry about 1) updated content in newer editions, and 2) re-selling textbooks to recoup some of the huge initial purchase price.  Publishers / authors stand to greatly benefit by losing no money on the used book market anymore, while being able to issue only minor changes as necessary for each new edition (rather than forcing new content creation just to justify the purchase of a new edition to incoming students).

Textbooks, by being digital, could also become bespoke documents, rather than the current one-size-fits-all.  Just like adaptive learning is starting to do with general educational content, each digital textbook could serve the optimized set of exercises to each student to maximize its usefulness to every single customer.  (The analytics for this would be massively complicated, but as adaptive learning companies are proving, not unthinkable.)  On top of that, with the increasing reliance upon digital content to collect student engagement data, these bespoke textbooks could serve as a conduit and repository for any number of student performance metrics.  All grades on multiple choice exercises or quizzes/tests, if delivered via digital textbooks (or through the same medium) would then stay with each student and provide insight into their learning as they progress through school.  Students would benefit by getting “big data” analytics on their learning over time and would buy every single textbook mandated given this very customized benefit to them.  Authors/publishers would see higher textbook purchase rates and might even get to charge more given the huge new value that their textbooks would deliver.  (Obviously, the textbook content creation work would dramatically change.)

Here’s a way to think about the potential business models:

The analogy to the software market’s shift from license/maintenance purchase and upgrade cycles to SaaS is fair, if not exactly accurate.  The textbook market currently operates on a license/maintenance basis – books are purchased for a huge upfront cost and diminish in value as time goes on.  (In most cases, their value diminishes to zero immediately after the term.)  To pursue the L/M analogy, if you wanted to upgrade your textbook to a later version, you could sell back your current edition (typically online) and use the proceeds to offset the cost of a newer edition.  The reason the software market has moved to SaaS is because it makes sense for every party involved.  Similarly, the textbook market’s shift to an “as-a-Service” model likely makes sense to every party involved.

In the quadrant above, the subscription model half is likely where we’ll end up; part of the reason for the SaaS model’s success is the subscription element (as opposed to just the technological elements of delivery).  Why?  Because everyone benefits.  In a subscription pricing model for textbooks, pricing to the end customer is lower given they are only borrowing the product for a period of a year, rather than fully owning it.  Yet this is still financially beneficial to publishers because it completely invalidates the need for a used market for textbooks.  No consumer owns textbooks and so no consumer needs to monetize a useless good after consumption.  Publishers, I’m willing to bet, would financially benefit with the flexibility that digital subscription models provide them as well as the promise to reach 100% of their user base (as opposed to some fraction of that that achieve today as a result of the disintermediation from the end customer that used sales introduces).

Digital content is never going to be the same, and it’s not just because of the existential angst of the author with the impermanent medium of electronics.  Digital brings with it superpowers for the written word and it’s silly to think that the only change with the move to digital textbooks is going to be people reading textbooks on iPads instead of in hardcopy.  The models above, especially the subscription models, are ones that I think are likely to take place in the next 5 – 10 years.