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Albert Greco October New York

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1 Albert Greco October 30 2007 - New York
GLGi: The Current and Future Market for Elementary, High School and College Textbooks Albert Greco October New York

2 About GLG Institute GLG Institute (GLGiSM) is a professional organization focused on educating business and investment professionals through in-person meetings. It is designed to revolutionize the professional education market by putting the power of programming into the hands of the GLG community. GLGi hosts hundreds of Seminars worldwide each year. GLGi clients receive two seats to all Seminars in all Practice Areas. GLGi’s website enables clients to: Propose Seminar topics, agenda items and locations View and RSVP to scheduled and proposed Seminars Receive a daily briefing with new posts on your favorite tickers, subject areas and from trusted Council Members Share Seminar details with colleagues or friends © 2007 Gerson Lehrman Group Inc., All Rights Reserved

3 Gerson Lehrman Group Contacts
John Aronsohn Vice President Gerson Lehrman Group 850 Third Avenue, 9th Floor New York, NY 10022 Aaron Liberman Managing Director, Sales and Marketing Carly Pisarri Process Manager © 2007 Gerson Lehrman Group Inc., All Rights Reserved

4 IMPORTANT GLG INSTITUTE DISCLAIMER – By making contact with this/these Council Members and participating in this event, you specifically acknowledge, understand and agree that you must not seek out material non-public or confidential information from Council Members. You understand and agree that the information and material provided by Council Members is provided for your own insight and educational purposes and may not be redistributed or displayed in any form without the prior written consent of Gerson Lehrman Group. You agree to keep the material provided by Council Members for this event and the business information of Gerson Lehrman Group, including information about Council Members, confidential until such information becomes known to the public generally and except to the extent that disclosure may be required by law, regulation or legal process. You must respect any agreements they may have and understand the Council Members may be constrained by obligations or agreements in their ability to consult on certain topics and answer certain questions. Please note that Council Members do not provide investment advice, nor do they provide professional opinions. Council Members who are lawyers do not provide legal advice and no attorney- client relationship is established from their participation in this project. You acknowledge and agree that Gerson Lehrman Group does not screen and is not responsible for the content of materials produced by Council Members. You understand and agree that you will not hold Council Members or Gerson Lehrman Group liable for the accuracy or completeness of the information provided to you by the Council Members. You acknowledge and agree that Gerson Lehrman Group shall have no liability whatsoever arising from your attendance at the event or the actions or omissions of Council Members including, but not limited to claims by third parties relating to the actions or omissions of Council Members, and you agree to release Gerson Lehrman Group from any and all claims for lost profits and liabilities that result from your participation in this event or the information provided by Council Members, regardless of whether or not such liability arises is based in tort, contract, strict liability or otherwise. You acknowledge and agree that Gerson Lehrman Group shall not be liable for any incidental, consequential, punitive or special damages, or any other indirect damages, even if advised of the possibility of such damages arising from your attendance at the event or use of the information provided at this event. © 2007 Gerson Lehrman Group Inc., All Rights Reserved

5 Council Member Biography
Albert Greco is a Senior Researcher at Institute for Publishing Research, Inc. and a professor at the Fordham's Graduate School of Business Administration. He prepares industry projections for the Book Industry Study Group Inc. He has authored “The Book Publishing Industry"; and "Advertising Management and the Business Publishing Industry”, and articles, "The Impact of Horizontal Mergers and Acquisitions on Corporate Concentration in the U.S. Book Publishing Industry: " and "The Market for Consumer Books in the U.S.: " He specializes in communications and mass media management; media economics; industrial organization; the book publishing industry; the entertainment industry; marketing entertainment, publishing and information products; and the magazine publishing industry. He has also authored “The Culture and Commerce of Publishing in the 21st Century” (Stanford University Press; Stanford University Press, 2007). He lectured recently on the book industry at The World Bank. © 2007 Gerson Lehrman Group Inc., All Rights Reserved

6 Table of Contents Updated analysis of the market for elementary and high school (Elhi) textbooks, supplemental and testing- assessments and college textbooks Key market drivers, including adoption cycles, funding sources, enrollment projections, the electronic distribution of texts, supplementals, and tests Review of the major Elhi publishers, including the sale of Harcourt to Riverdeep Elhi and college textbook projections for © 2007 Gerson Lehrman Group Inc., All Rights Reserved

7 The Elhi Publishing Section**
Major Publishing Corporations Textbooks Supplementals Testing Key Elhi Market Drivers **All numbers rounded off in the Elhi and college presentation and may not add up to 100%.

8 Elhi Publishers U.S. $ Billions (B) or $ Millions (M)
% Change Pearson $2.538 B $2.852 B 12.4% Harcourt $1.640 B $1.636 B -0.2% McGraw-Hill $1.520 B $1.331 B -12.4 School Specialty $977.0 M $1.043 B 6.8% Houghton Mifflin $926.0 M $900.0 M -2.8% Scholastic $416.0 M $413.0 M -0.7% Haights Cross $184.0 M $190.0 M 3.3% Total $8.201 B $8.365 B 2.0% Source: Corporate Annual Reports, Quarterly Reports, Quarterly Conference Calls. Totals include: textbooks, supplementals, testing, software, online, and various educational products and services.

9 Totals % Ch. Textbooks % Ch. Supplementals % Ch.
Elhi Net Publishers’ Revenues: Textbooks and Supplementals ($ Billions) Totals % Ch Textbooks % Ch. Supplementals % Ch. 2006 $ $ $ 2007 $ % $ % $ % 2008 $ % $ % $ % 2009 $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % $ % % Ch % % % Source: Greco. All numbers are calculated and then rounded off and may not add up to 100%.

10 Elhi Textbooks and Supplementals: Market Share
Subject Area Textbooks Supplementals Reading/English/Language Arts 38.6% 53.2% Mathematics % 10.5% Science % 4.0% Social Studies 9.3% 4.1% Total % 71.8% All Others % 28.2% Source: Greco. “All others” include: foreign languages, ESL, music, art, vocational, computers, technology, health, etc.

11 Elhi Technology Products
Technology Products: Hardware, Software, and Internet Expenses Amount % Change 2000 $5.7 Billion --- 2001 $6.1 Billion % 2002 $6.0 Billion % 2003 $5.7 Billion % 2004 $6.0 Billion % 2005 $6.4 Billion % $6.8 Billion % % Ch % Source: Greco.

12 Elhi Testing ($ Billions)
Totals % Change 2006 $ 2007 $ % 2008 $ % 2009 $ % 2010 $ % 2011 $ % $ % % Ch % Source: Greco. All totals rounded off and may not add up to 100%.

13 Key Elhi Market Drivers
The growth in enrollments Funding sources Per pupil expenditures Adoption schedules “Other media” competition to textbooks and supplementals Technological changes The used textbook market Source: Greco.

14 The Growth in Enrollments (In Thousands)
Total Public Schools Private Schools , , ,800 , , ,897 , , ,997 , , ,097 , , ,205 , , ,304 , , ,418 % % 3.38% % Change Source: U.S. Department of Education, National Center for Education Statistics, Digest of Education Statistics (annual). “Private schools” refer to independent schools, religious schools, etc.

15 The Growth in Enrollment (In Thousands)
Pre-K Thru 8 Grades 9-Thru 12 Public Private Public Private , , , ,456 , , , ,463 , , , ,454 , , , ,446 , , , ,437 , , , ,435 35, , , ,429 % Ch. 4.10% % % % Source: U.S. Department of Education, National Center for Education Statistics, Digest of Education Statistics (annual).

16 1. The Growth in Enrollments
U.S. Department of Education Projections: Pre-K % % 23 states will have increases in K-12 enrollments: 2 states +15% 11 states between 5% and 15% 10 states less than 5% 28 states will have decreases in K-12 enrollments: 11 states more than 5% 16 states between 0.1% and 4.99% Regions: The West 13% The South +5% The Midwest -2% Northeast -5%

17 1. The Growth in Elhi Enrollments: Adoption States
U.S. Department of Education Projections: Alabama -4.1% Arkansas -0.5% California +14.2% Florida +9.9% Georgia +8.7% Idaho % Indiana +2.5% Kentucky -6.5% Louisiana -3.3% Mississippi -4.8% Nevada % New Mexico +5.7% North Carolina +3.3% Oklahoma +0.3% Oregon +6.7% South Carolina -2.7% Tennessee +0.1% Texas % Utah % Virginia +2.1% West Virginia -9.8%

18 1. The Growth in Elhi Enrollments: Non-Adoption States
U.S. Department of Education Projections: Alaska +7.7% Arizona % Colorado % Connecticut -0.6% Delaware -2.0% District of Columbia -2.8% Hawaii +5.0% Illinois % Iowa -6.3% Kansas % Maine % Maryland % Massachusetts -6.5% Michigan % Minnesota -2.5% Missouri % Montana -5.9% Nebraska % New Hampshire -7.1% New Jersey +3.5% New York -6.0% North Dakota % Ohio -4.7% Pennsylvania -7.7% Rhode Island -3.6% South Dakota -3.6% Vermont % Wisconsin -3.9% Washington +4.1% Wyoming +0.9%

19 2. Elhi Funding Sources ($ Millions)
Federal State Local Total % Ch. 2000 $26, $183, , , % 2001 $28, $198, , , % 2002 $32, $206, , , % 2003 $35, $212, , , % 2004 $38, $217, , , % % Ch % % 23.45% % Source: U.S. Department of Education, National Center for Education Statistics, Digest of Education Statistics (annual).

20 2. Elhi Funding: Total Amount and Percent of G.D.P.
Total Funding from All Sources % of G.D.P. 4.5% % % % % % Source: U.S. Department of Education. Estimates are utilized by Education; and totals can vary depending on the data sources (including “other” sources”) used by Education. Also: K-12 teachers spend an avg. of $475 of their own money annually for classroom materials and supplies. This could hover near the $2 billion mark.

21 2. Elhi Funding Sources: State Revenues
State revenues in FY 2007 from personal, corporate income taxes, sales taxes,, etc. were 2.4% higher than original projections. corporate income taxes % personal income taxes +2.4% sales taxes % State tax revenues up in 27 states, on target in 14 states, and below targets in 9 states Governor’s recommended budgets projected to be 3.3% higher than estimated fiscal collections Source: National Association of State Budget Officers, The Fiscal Survey of the States.

22 2. Funding Sources: States
Total state funding allocations: Medicaid 22% Elementary and secondary schools % Higher education % Transportation 8.7% Corrections 3.4% Public assistance 1.9% All other 31.6% Source: National Association of State Budget Officers.

23 2. Funding Sources: States
State funding increases: Year Nominal Increases Real Increases % 3.1% % 5.4% % 5.3% % 1.0% Source: National Association of State Budget Officers.

24 2. Elhi State Funding: Selected List of States ($ Millions)
CT. $2,372 $3,089 $3,336 MASS. 4, , ,659 NJ 9, , ,330 NY 18, , ,074 PA 8, , ,022 ILL. 8, , ,077 IND. 4, , ,356 MICH. 12, , ,923 OHIO 9, , ,444 Source: National Association of State Budget Directors.

25 2. Elhi State Funding: Selected List of States ($ Million)
FL $10, $11, $12,558 GA. 7, , ,895 N.C. 7, , ,542 VA. 4, , ,730 TX. 17, , ,601 CA. 36, , ,076 WA. 6, , ,104 Source: National Association of Budget Officers.

26 2. No Child Left Behind (NCLB)
Purpose: to reflect student achievement test results and hold the school level educators accountable. Year Funding Amount % Change 2002 $1.363 Billion -- 2003 $1.452 Billion 6.53% 2004 $1.508 Billion 3.86% $1.583 Billion 4.97% $1.758 Billion % % Ch % --- Source: U.S. Department of Education

27 Average Elhi School Budget: 2006-2007
2. Elhi Funding Sources Average Elhi School Budget: Contractual Obligations: 91% Faculty and Admin. Salaries 72% Mandated Employee Benefits 19% Variable Expenses: Purchased Services, etc. 3% Educational Supplies, Textbooks, Supplementals, etc. Instructional Supplies 5% Textbooks 1% Source: U.S. Department of Education.

28 3. Elhi Per Pupil Expenditures
Expenditure % Change $7, % $7, % $8, % $8, % $8, % % Ch % --- Source: U.S. Department of Education, National Center for Education Statistics, Digest of Education Statistics (annual).

29 3. Per Pupil Expenditures: Adoption States 2003 [21 States]
Alabama $6,300 Arkansas $6,482 California $7,552 Florida $6,439 Georgia $7,774 Idaho $6,081 Indiana $8,057 Kentucky $6,661 Louisiana $6,922 Mississippi $5,792 Nevada $6,092 New Mexico $7,125 North Carolina $6,562 Oklahoma $6,092 Oregon $7,491 South Carolina $7,040 Tennessee $6,118 Texas $7,136 Utah $4,838 Virginia $7,822 West Virginia $8,319 Source: U.S. Department of Education.

30 3. Per Pupil Expenditures: Non-Adoption (Open) States 2003 [30 States]
Alaska $9,870 Arizona $6,282 Colorado $7,384 Connecticut $11,057 Delaware $9,693 District of Columbia $11,847 Hawaii $8,100 Illinois $8,287 Iowa $7,584 Kansas $7,454 Maine $9,344 Maryland $9,153 Massachusetts $10,460 Michigan $8,781 Minnesota $8,109 Missouri $7,349 Montana $7,496 Nebraska $8,074 New Hampshire $8,579 New Jersey $12,568 New York $11,961 North Dakota $6,870 Ohio $8,632 Pennsylvania $8,997 Rhode Island $10,349 South Dakota $6,547 Vermont $10,454 Wisconsin $9,004 Washington $7,252 Wyoming $8,985 Source: U.S. Department of Education. The District of Columbia is listed as a “state.”

31 4. State Adoption Schedules (Selected List)
Elementary School Categories Reading Literature Indiana Indiana 2008 Oregon Alabama 2008 Tennessee Oklahoma 2008 West Virginia 2007 Florida 2008 Alabama 2008 Louisiana 2008 Oklahoma 2008 Idaho 2008 California 2009 Georgia 2009 New Mexico 2009 Source: U.S. Department of Education.

32 4. State Adoption Schedules: Selected List
Elementary School Categories Mathematics Science California California 2007 Mississippi South Carolina 2007 South Carolina Arkansas 2007 Kentucky Georgia 2008 Idaho Kentucky 2008 Tennessee 2009 Oregon 2009 Mississippi 2009 Source: U.S. Department of Education.

33 4. State Adoption Schedules: Selected List
High School Categories Reading Mathematics Science Indiana Texas Arkansas 2007 Tennessee 2007 New Mexico 2007 Georgia 2008 West Virginia 2007 Georgia Kentucky 2008 Florida Mississippi 2008 South Carolina 2008 Alabama North Carolina 2009 Tenn. 2009 Louisiana Kentucky Oregon 2009 Oklahoma 2008 Idaho Mississippi 2009 Idaho 2008 New Mexico 2009 Source: U.S. Department of Education.

34 4. California Adoption List
California 8th Grade Science Short List of Publishers CPO Focus on Physical Science Glencoe/McGraw-Hill Holt, Rinehart and Winston It’s About Time McDoudal, Littell & Company/Houghton Mifflin Pearson Prentice Hall Source: California State Department of Education.

35 4. Indiana Adoption List: High School Science Short List (Covering July 1, 2005 Through June 30, 2011) 1st Year Biology 1st Year Chemistry Addison Wesley Longman* Addison Wesley Longman Glencoe/McGraw-Hill Glencoe/McGraw-Hill AGS/Globe Holt Rinehart & Winston* Holt Rinehart & Winston* Kendall/Hunt Kendall/Hunt McDougal Littell* Prentice Hall Prentice Hall 1st Year Physics Addison Wesley Longman Glencoe/McGraw-Hill Holt Rinehart & Winston It’s About Time Prentice Hall Source: Indiana Department of Education. *Addison Wesley Longman is Pearson; Holt Rinehart & Winston is Harcourt; McDougal Little is Houghton Mifflin.

36 4. California Adoption: 8th Grade Science Price Glencoe/McGraw-Hill (Selective Price List)
Student’s textbook $ Class Inter’act. CD-ROM $105.93 CD-ROM $ Super DVD $74.89 Lab manual $ Instruction Folders $42.79 Teacher’s text. edition $ Consumable Kit $278.18 Teacher’s CD-ROM ed. $ Equip. Kit $1,215.50 Classroom resources $ Non-consumable kit $666.59 12 Chapter resources $ Transparencies $51.36 Teacher’s lab manual $ Reading essentials $31.01 Exam Suite CD-ROM $ Chapter outlines $46.00 Source: California State Department of Education

37 5. Elhi Content: Use of “Non-Textbooks” & “Political” Issues
Other Materials Used in Elhi Classrooms Teacher created resources Trade books Reference books Internet Videos/DVDs Newspapers Magazines Maps Globes “Political Issues” Regarding Textbook Content Various special interest groups Religious groups Ethnic groups Racial groups Source: Greco

38 6. Technological Changes: Computer Use in Elhi Classrooms
Public schools with computers (in thousands of computers): Number of Students per computers computer Elementary schools 5,412 5, Middle schools 2,378 2, High schools 3,948 4, Source: The U.S. Department of Commerce, The Statistical Abstract of the U.S

39 6. Technological Changes: Computers in the Classroom
Percent of Schools Percent of Classrooms With Internet Access With Internet Access Elementary High School Elementary High School % 65% 8% 8% % 100% 76% 79% % 100% 92% 91% % 100% 93% 94% Source: U.S. Department of Education

40 6. Technological Changes: Computer Usage At Home 2003
Ages Percent Using At Home Complete School Assignments % % % % % % % % Males % % Females % % HHI <$20, % % $20,000-34, % % $35,000-49, % % $50,000-74, % % >$75, % % Source: U.S. Department of Education.

41 6. Technological Changes
Some 9th grade students in certain (mainly affluent) school districts receive a laptop from the Board of Education-high school that contains ALL of the textbooks, supplementals, study manuals, lab manuals, etc. The laptop is used in the classroom and at home. This allows publishers to sell electronic versions of educational materials to a school district, thereby reducing P & L expenditures for printing, paper, and binding, warehouse expenses, etc., and increasing margins.

42 6. Technological Changes
Publishers are finally starting to see substantive results from their investments in educational technologies. With increased use of computers in the classroom and the home, publishers are getting closer to a transformation of a “print” world to a “digital” world, with the possibility of better margins. Pearson has the number 1 market share because of strong product lines and an early 2000 technology adopter strategy (about $3.3 billion in 2007 dollars). The goal was to create a “blended learning” approach to Elhi learning. The other publishers are trying to catch up to Pearson. U.S. Dept. of Ed. projection: between 700,000 and 800,000 classroom teachers are expected to retire in the next decade. So the educational technological revolution is likely to occur as these techno-literate people enter Elhi schools as teachers.

43 College-Higher Education Publishing
Revenues Major publishing firms Market drivers

44 College Net Publishers’ Revenues ($ Millions)
Hardcovers Paperbacks Total % Change 2006 $3,093.5 $1,548.6 $4, 2007 $3,203.2 $1,601.3 $4, % 2008 $3,314.3 $1,658.4 $4, % $3,430.5 $1,715.6 $5, % $3,548.4 $1,772.7 $5, % $3,665.7 $1,831.7 $5, % $3,785.1 $1,893.7 $5, % % Ch % % % --- Source: Greco.

45 College Publishers U.S. $ Billions (B) or $Millions (M)
% Change Pearson $1.527 B $1.558 B 2.0% Thomson $1.200 B $1.240 B 3.3% McGraw-Hill $570.0 M $570.0 M 0.0% Houghton-Mifflin $228.0 M $225.0 M -1.3% John Wiley $203.0 M $215.0 M 5.9% Total $3.728 B $3.808 B 2.2% Source: Corporate Annual Reports, Quarterly Reports, Quarterly Conference Calls. Totals include textbooks, electronic products, etc.

46 College Market Drivers
1. Faculty adoptions 2. Total student enrollments 3. Student enrollments in specific academic fields 4. Funding sources, economic conditions & student tuition 5. Book prices: suggested retail prices 6. Return rates 7. The used book market 8. Electronic distribution of content 9. Alternatives to textbooks: cases; ERES; Blackboard; custom course packs; etc. 10. Backlash: CALPIRG; Congress; states; newspapers; etc. 11. Exports and imports

47 1. Faculty Adoptions Faculty members individually (or in some instances a department) will select a textbook based on: 1. Support and supplements (Power Points; computer disks; publisher’s online services; etc) 2. Comprehensive content (depth) in textbook 3. Textbook content “up to date” 4. Price 5. Textbook “blends” with professor’s teaching “style” or “orientation” 6. Opinion (or use) of a previous edition(s) of the textbook 7. Reputation of the textbook’s author(s) Source: Greco; interviews/discussions with faculty members in various disciplines.

48 2. College Student Enrollments
Public Private Total % Change ,283 4, , ,518 4, , ,752 4, , ,034 4, , ,251 4, , ,380 4, , ,494 4, , ,612 4, , Source: U.S. Department of Education.

49 2. College Student Enrollment Projections: 2002-2014
Ages 18-24: +16% Ages +35: +5% Men: +12% Women: +21% Full-time: +20% Part-time: +14% Undergrads: +16% Grad Students: +21% 1st Professional: +32% Public: +17% Private: +19% Source: U.S. Department of Education.

50 3. Student Enrollments In Ten Largest Academic Majors
1. Business Administration & Accounting 2. Social Sciences & History 3. Education 4. Psychology 5. Engineering 6. Visual & Performing Arts 7. Health Professions 8. Communications 9. Biology 10. Computer & information Science Source: U.S. Department of Education

51 3. Student Enrollment: Top Selling College Textbook Categories
Business Administration & Accounting: 15% Mathematics: % Computer Science: 8% English: 7% Psychology: 5% Biology: 5% Sociology: 3% Education: 3% History: 3% “Other:” % Source: Greco

52 4. Funding Sources: 2006-2007 States: 47 states increased funding
1 state no change in funding 2 states cut spending U.S. Government: 2003: % 2004: -2.64% Source: U.S. Department of Education

53 5. Book Prices: College Bookstores 2006
Major College Bookstore Management Companies Follett: college stores Barnes & Noble: 550 college stores** Nebraska/NBC: 120 college stores Major Used Book Distributors Follett Barnes & Noble/MBS** Source: National Association of College Stores; ** “Separate” from the chain bookstore operations.

54 5. Book Prices: College Bookstores Gross Margins As % of Net Sales
New textbooks 25% (standard discount) Custom materials 23% Used textbooks 35% Insignia products 40-50% Store “fee” to college 13.3% of sales (average; varies) Source: National Association of College Stores;

55 5. Book Prices: P & L #1* Basic Assumptions
Print run (litho): 275,000 copies Free copies: 4,000 Gross sales: 271,000 Returns: 62,330 (23%) Never shipped: 4,010 (1.48%) Sell through: 204,660 (75.52%) SRP: $100.00 Avg. Discount $25.00/copy (25%) Publishers’ net income $75.00/copy Royalty: 10% ($7.50/copy sold) Source: Greco. *Assumes: P & L for a new textbook in its first edition; and a standard three year revision cycle; domestic and export sales.

56 5. Book Prices: P & L #2 Basic Assumptions Foreign rights: $100,000
Author: $50,000 (50% share) Publisher: $50,000 (50% share) Unit PPB: $15.94/copy (U.S. printer) Plant: $50,000 (editorial, art, design, etc.) Author’s advance: $500,000 Marketing: $400,000 Source: Greco

57 5. Book Prices: P & L #3 Gross sales: $20,325,000 (271,000 @$75 each)
Returns/never shipped: $4,975,500 $75 each) Net sales: $15,349,500 each) Expenses PPB: $4,383,500 each Plant: $50,000 Earned royalty: $1,534,950 (net Marketing $400,000 Inventory write-off $1,057,459 each) Total costs: $7,425,909 Source: Greco; all numbers rounded off.

58 5. Book Prices: P & L #4 Net sales $15,349,500
Other income $ ,000 (foreign rights) Total income $15,399,500 Total costs -$7,425,909 Gross margin: $7,973,591 (total income minus total costs) Overhead: -$4,604,850 (30% of net sales) Total profit: $3,368,741 (gross margin minus overhead) Total profit % net sales: 21.95% Source: Greco; all numbers rounded off.

59 6. College Textbook Return Rates: National Averages For Hardbound and Paperbound Books
21.6 24.1 Source: Book Industry Study Group.

60 7. College Textbooks: Used Books
Revenues % Units % ($ Billions) Change (Millions) Change 2005 $ 2006 $ % 2007 $ % 2008 $ % 2009 $ % 2010 $ % $ % $ % Source: Greco. Revenues from college bookstores and online Shopbots.

61 7. Used Textbooks: New vs. Used Prices
N. Gregory Mankiw. Principles of Economics (Cengage Learning*) 4th ed. Published 2/16/06 List price: $ (September 2006) $ (September 2007): +8.4% Used price: $36.40 (inc. S/H) 3rd ed. List price: $ (Published March 2003) Used price: $10.44 (inc. S/H) 2nd ed. List price: $ (Published June 2000) Used price: $4.24 (inc. S/H) Source: Greco; survey of Shopbot prices. *Cengage Learning formerly Thomson Learning.

62 8. Electronic Distribution of Textbook Content
Numerous texts available online. So far small number of sales. Greco’s student focus groups (225 students): “Are you willing to buy and read electronic versions of a textbook?” Yes. 78% female undergrads 81.4% male undergrads 60% female grad students 66% male grad students Options: E-books (on an E-book reader) Direct sale by publisher or from publisher to distributor to student’s laptop/desk computer “Chapter” sales by an aggregator: “I-Tunes” business model POD

63 9. Alternatives to College Textbooks
Case Studies (HBS) ERES Blackboard Custom Packs Articles Hand-outs/photo copies Lectures

64 10. Backlash Against Publishers
CALPIRG: Rip-Off 101 (1st ed.) Rip-Off 101 (2nd ed.) Congressman Wu (OR): National and Congressional hearings on the price of textbooks “Turn the Page: Making College Textbooks More Affordable” (A Report of the Advisory Committee on Student Financial Assistance; U.S. House of Representatives) College math professors: petition signed by hundreds of professors sent to publishers protesting the cost of textbooks and urging professors to use older editions of a text rather than a new version.

65 10. “Backlash” Against College Publishers: States
CA: “The College Affordability Act, SB 832” Requires “publishers to provide faculty a price list of all books in a subject area, an estimate of how long the publisher intends to keep the text(s) on the market, and a list of substantive changes the newest edition contains.” ILL: Bill require “publishers to be more transparent about the cost of materials when marketing them to professors.” ARIZ Board of Regents: Would “create book buyback incentives, encourage the use of non-print materials and other alternatives to textbooks, and establish textbook-rental programs at each university campus.” Source: Greco.

66 10. Backlash Against Publishers
MASS: Bill requires “publishers to provide faculty with a list of the company’s products, wholesale prices, and estimated length of time the publisher intends to keep the product on the market…limits companies from bundling books.” CT: Bill limits bundling The complete list of states considering textbook legislation (for state funded colleges) is 20 pages long. Source: Greco

67 10. Backlash Against Publishers
Newspapers: The New York Times “Help, By The Book” (5/1/07) “What Should A Textbook Cost? Do The Math” (5/5/07) “Course Requirement: Extortion” (8/12/07) “Knowledge Is Priceless But Textbooks Are Not” (8/30/07) San Jose Mercury News “Backers Hope Governor Signs Textbook-Affordability Bill” (9/21/07) The [Charlotte, NC] News & Observer “Sticker Shock At Campus Bookstore”

68 11. Exports and Imports Exports Imports
$ Million Millions $ Millions Millions Units Units 2003 $355,071 4,034,898 $197,175 1,560,357 2004 $402,057 4,233,249 $217,413 1,194,110 2005 $413,408 5,225,705 $232,518 1,615,272 2006 $425,951 3,196,269 $243, ,119 2007 $191,942 1,181,497 $147, ,000 YTD Source: U.S. Department of Commerce, International Trade Administration


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