You’ve heard of the big four record labels and probably the big six studios, but how about the big four textbook publishers: Pearson, Cengage Learning, McGraw-Hill, and Houghton Mifflin Harcourt? I’m reading up on the publishing business in anticipation of our next project on access to educational materials in universities and, man, has this business gotten itself into a jam. And all very familiar sounding and all prior to any significant digital piracy in the textbook market. A key development, it seems, was the organization of the used textbook market in the late 1990s, which led to declining ‘sell-through’ of new copies of textbooks after the first year of introduction and a spiraling strategy of price increases and rapid releases of new editions—which exist solely to make the previous editions circulating in the used market obsolete. Here’s John Thompson’s account in Books in the Digital Age (2005).

The big textbook publishers are locked into a cycle of producing ever more elaborate textbooks and packages and of continuous revision which, together with the connivance of the gatekeepers [the faculty adopters], is very much of their own making. The stakes are high, the barriers to entry at the lower levels of the curriculum are prohibitive and the competition is intense….

The vicious circle of used books and frequent revisions has resulted in what one editor described as a ‘tremendous wastage of resources and time on the part of the major players in the college market trying to fend off used books.’ Whether the textbook publishers realistically could have done anything to avoid this outcome is difficult to say. There are some who believe that textbook publishers … could have been less moralistic and could have seen the rise of the used book market as an opporuntity rather than a threat. ‘They didn’t get into the business themselves because they felt above it,’ reflected one senior editor. ‘It was the biggest mistake college publishers made. It killed them in the end.’ P.217


One senior figure who has been in the business for many years put it like this: in 1980, if you secured an adoption for a course with 300 students, in the first year of the first edition of the textbook you could count on nearly 300 sales… Of course, the sell-through in subsequent years would decline, thanks largely to the used book market. By 2000, however, an adoption for a course with 300 students would typically generate sales of only 150 units in the first year of the first edition… And this is before you take account of the used book market, which only really kicks in during the second year.” P.226

So the combination of the shortened sales horizon cause by the rise of the used book market and the increasing costs of waging the adoption struggles created a strong and constant pressure to increase the prices of textbooks. Indeed textbook publishers settled in to the practice of raising their prices every six months almost as a matter of routine…. In recent years, the industry has settled into a practice of raising its prices twice a year by about 3 per cent each time. There are some who say that this is what accounts for most of the growth in the industry, which in the last few years has been about 6-8 per cent per annum. It was generally assumbed that the ultimate consumers – the students – were a captive market and that they would buy whatever their professors told them to buy. So the key thing was to win over the professor, and the cost of doing so could be passed on to the student in the form of higher prices….

But now the silent partner is this deal is demanding to be heard in the only voice that really matters: they are refusing to buy. They regard the prices as too high and they are inventing all sorts of ways to avoid doing the one thing they were supposed to do, which was to buy the books. One senior manager put it like this:

As an industry and in all sectors, we have reached the absolute ceiling in terms of prices. The sell-through is half of what it was. Students are actually signing up for the same courses as roommates so that they can go halves on a book, or they’re just not buying the book,… or they’re renting them for a week before finals and then returning them to the publishers…. P.227

And think about it: what the student has paid for over the last twenty years is the comfort of the professor – the free test banks, the laser disks, the video tapes, the software, you name it, they get it, it’s endless. All this stuff is free, and it all gets added on as a cost and the only way to make it up is price. The student has funded this whole free-for-all in terms of free ancillaries, and now the student is saying the chickens are coming home to roost. P.228

… The competitive dynamic of the adoption system has raised the bar of expectation in terms of the production quality of textbooks and the array of supplements… and it would now be difficult to go back on these features without running the risk of losing adoptions: “We’ve got into one of those unfortunate vicious circles where the books are too expensive and no one knows how to make them cheaper any more.”

I’m pretty sure we’ve seen what happens to a market like this.