Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin Chapter 33 Why College Textbooks Cost So Much

1- 2 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 33-2 Chapter Outline The Process Textbooks and Market Forms Technology and the Impact of Used Books When Price Does and Does Not Matter So Why Do They cost So Much and Who’s to Blame? Renting, e-Books, and Failing to “Roll”: Still More Attempts to Ease the Pain Where This is Headed

1- 3 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 33-3 The Process Marketing the Idea Identifying the Niche Pushing it to the Publisher Sample Chapters Reviews Signing the Contract Advance The amount of money paid to authors typically counted against future royalties. Royalties The amount of money paid to authors. Typically paid on a percentage basis. Drafting Complete Draft More Reviews Finished Draft Editing

1- 4 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 33-4 Marketing and Adoption Marketing Mailed free to many (sometimes thousands) of faculty. Sales force on campuses February and March for Fall September and October for Spring Adoption Faculty decide the book in the vast majority of cases. Sometimes a committee will decide on a common book for a multi-section class Neither typically know the book’s price

1- 5 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 33-5 Who Gets the Green Bookstore Markup, $25 Ink, paper, printing cost, $5-$10 Author royalty $15 $125 Publisher fixed expenses and profit, $75-$80

1- 6 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 33-6 New vs. Used Used books are typically price 25% to 33% less than new ones. A book only makes money for the publisher and author on its first sale. Bookstores make (about the same) profit selling new as used. Publishers will (usually) not ship old editions even if faculty request them.

1- 7 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 33-7 Are New Editions a Scam? Economic Issues Change New to the 2 nd Ed Economics of Terrorism Economics of War New to the 3 rd Ed Wal-Mart Casinos This chapter New to the 4 th Ed You Are Here Economics and the Law Economic Growth New to the 5 th Ed The Recession of The Housing Bubble International Finance New to the 6 th Ed Japan’s Lost Decade Is the Fiscal Sky Falling? The Patient Protection and Affordable Care Act On The other Hand Calculus Hasn’t Changed Very little has changed in many new editions. Publishers have to change editions to make money…and the used book market has made this worse.

1- 8 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 33-8 Other Reasons Textbooks Cost So Much Ancillaries Cost Money PowerPoint's ($5,000) Test banks ($5,000) Instructors Manuals ($5,000) Websites ($3,000) Podcasts ($5,000) Faculty demand them Faculty sales to used book dealers

1- 9 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin 33-9 When Prices Do Not Matter Faculty Decisions Faculty get the book for free. Faculty do not typically inquire about the price of books they assign. Student Decisions There is little to no ability for students to substitute one book for another. Not having the book is a signal to faculty.

1- 10 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin Where Will This Lead? Fewer Book Choices? Textbookless classes? Electronic books? Limited printing Limited Access (IP specific; number of accesses, etc.)

1- 11 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin Making Money=Selling

1- 12 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin The Market Form Monopolistic Competition Entry level books in most areas Intermediate level books in many areas Oligopoly In a few upper division areas Many graduate school areas Monopoly Very narrow areas with small markets

1- 13 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin Used Books and the Impact of the Internet The “May-August” Problem Without the internet nearly all books had to travel through a central clearinghouse like Columbia, Mo’s Missouri Book Services. (high markup) With the internet, books can travel from one bookstore to another without the middleman. The “December-January” Problem Without the internet used books only circulated in a single school. With the internet a book can make it across the country in 12 hours.

1- 14 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin Rising Tuition and Textbook Costs

1- 15 ©2012 The McGraw-Hill Companies, All Rights ReservedMcGraw-Hill/Irwin Avoiding Increasing Costs Failure to roll Faculty purposefully choosing not to move to the next edition so as to save students money. Renting Books Pay about half the new book price and return the book at the end of the semester to avoid being charged the other half. Ebooks Same as renting but the book is only accessible in electronic form