Kindles in the Classroom: The Forecast for Education is “Cloudy”

Cloud computing is currently the hot trend in geek- world, if my RSS feeds from Mashable, Ars Technica and Technorati are any indication. The concept of being able to access all your information from anywhere, anytime using any device has a certain appeal, if you can get over the privacy concerns. Much digital ink has been spilled speculating on the benefits and risks of cloud computing, and there’s no need to rehash all that here.  However, one domain where it has the potential to fulfill that trite prediction, “This changes everything!” is in  the field of education. Many critics of the public school system have argued that it is fraught with so many antiquated practices and restrictive union rules that any effort to reform our educational system is doomed to failure. But even in the scorched aftermath of a forest fire, the seeds of a new generation of flora are covertly taking root, and one simply needs to nurture them and be patient while a new ecosystem emerges.

An example of how the Kindle (or another ebook reader) will play an integral role in shaping the future of education appears in an interview with a high school world history teacher conducted by Joe Wikert on his Kindleville blog. The teacher, Chris Edwards, makes some bold and, in my opinion, insightful predictions about the future of learning, as well as the demise of the textbook as we know it:

Practically speaking, there is no way that any district 10 years from now is going to be able to resist buying a $200 Kindle for their students at the beginning of their 7th grade year and then simply buying textbook updates as the student progresses. The money saved and hassle avoided will be tremendous.

I look at the Kindle as a kind of transitional species. Certainly textbook downloading is going to be an important feature for the Kindle, but I actually don’t think that it will be necessary to buy textbooks with them. I really think that humanity is quickly moving toward compiling a kind of Comprehensive Human Memory (CHM) that will exist in binary code form and will, metaphorically, just kind of float above us. This is kind of the case now. We’re simply realizing how to access it. It is very likely that in 20 years we will all be carrying blue-tooth type devices that will access this CHM and bring us whatever facts we need on command.

If I had a class set of Kindles with Internet access I would not, strictly speaking, need a textbook. I could simply access sites that have the historical information I’m looking for and use my state standards as a road map. Textbook companies will, of course, evolve with this. If they are going to compete they are going to have to figure out how to make Kindle books accessible and cheap.

What Mr. Edwards is describing when he talks about “Comprehensive Human Memory” is cloud computing in education: all knowledge is floating out in the ether and it can be accessed on demand, by any device. The device may not be a Kindle, however, given Amazon’s “walled garden” model, which favors content from the Amazon bookstore. The Kindle was developed as a delivery mechanism for Amazon’s content, and for that it achieves its objective. It was not, however, designed to seamlessly access and display a whole array of material that might be considered an integral part of a student’s learning: textbooks (either open source or proprietary), PDFs, Poweprpoints, etc. Two years from now there will likely be a handful of such devices, and while they may not have the Kindle’s national wireless coverage, as more and more campuses and schools offer wi-fi, that may become less of an issue in the education space.

What will almost certainly be widely available will be open source textbooks as start-ups like CK12, Connexions, and Flatworld Knowledge begin to proliferate.  This new, disruptive technology, will at last tilt the economics of  education sharply in favor of the student. Instead of spending hundreds of dollars per year on books with a limited shelf life, they (or the school system) will be able to simply purchase an e-book reader (for less than $200) and put all their semester’s required reading material on it for the price of one college textbook today. Truly a cloudy, but bright, future for today’s students.

NY Times says textbook publishers are like drug companies: (Prozac with your Proust?)

Another article in the continuing odyssey of the nefarious publishing industry appears in today’s New York Times. It contains the usual litany of egregious behavior by the textbook oligarchy: double-digit price increases, crippled digital versions padded with empty caloric content, under-the table-kickbacks to faculty members, etc. But it also charges that the publishers are similar to drug companies in that they both benefit from the so-called “moral hazard” problem, as explained by Cal Tech economist and open source microeconomics textbook author R. Preston McAfee:

that is, the doctor who prescribes medication and the professor who requires a textbook don’t have to bear the cost and thus usually don’t think twice about it. “The person who pays for the book, the parent or the student, doesn’t choose it,” he said. “There is this sort of creep. It’s always O.K. to add $5.”

Hmm… Maybe MacMillan could throw in a free prescription for a semester’s supply of Paxil. Having been back on campus for a few weeks now and having to deal with higher tuition and outrageous textbook prices, the class of 2012 is coming to the painful realization that they can barely afford their case of Heineken, their daily Starbucks double iced frappacino, and their music downloads (oh, I forgot – they get that last one for free.)

Professor McAfee adds one more comment:

“This market is not working very well — except for the shareholders in the textbook publishers,” he said. “We have lots of knowledge, but we are not getting it out.”

This is a true but incomplete statement, at least as quoted in the article. It is accurate to point to the increasing returns to shareholders, although it is becoming increasingly difficult to track this data as the trend towards consolidation and private equity in the publishing field removes the need for public disclosure:

There is no doubt that major textbook publishers are big business. The college textbook market represents between $5 billion and $6 billion and the the last 18 months have seen the sale of two major publishers (Houghton Mifflin College and Thomson Learning) for $750 million and $7.75 billion respectively. The overall consolidation of the college textbook market has left four primary players (listed in order of size and market share): Pearson, Cengage Learning, McGraw-Hill, and Wiley.

There is little doubt that the M&A activity has resulted in the remaining publishers adding staggering amounts of debt to their balance sheets. A consequence of this new economic reality is a shift in attention from textbooks to those other books that the company produces: the ones that deal with assets, liabilities and net income. Accountants tend to focus on different assets than editorial directors do.

But another party is apparently complicit in this cozy arrangement of uncontrolled textbook price increases, according to a 2006 study by Dr. James Koch called

An Economic Analysis of Textbook Pricing and Textbook Markets.

Yet another distinctive characteristic of textbook markets is that nearly
every institution of higher education has a financial stake in higher
textbook prices.  With a few exceptions, noted below, institutions of
higher education either own and operate their own bookstores, or they
contract that responsibility to an external vendor such as Follett or Barnes
and Noble, in which case they usually receive a lump-sum payment plus a
percentage of dollar value of sales at contracted on-campus stores.

What this market structure leads to is ever increasing pressure on the producers to raise prices, which works well for as long as there are few supply alternatives for the consumers (students). As thought leaders such as Preston McAfee, enabled by disruptive innovators like Lulu and Flatworld Knowledge, (which I have blogged about frequently this year) begin to offer a viable alternative to the two extremes currently faced by most students – price gouging or illegal file sharing sites – the publishing cartel may soon find itself cozying up to the drug makers, if only to get their own supply of Prozac.

PIRG claims e-textbooks are due for “Course Correction”

In a stinging critique of its recent foray into the field of digital textbooks, the publishing industry was taken to task in a report released this week  by the Student Public Interest Research Group. The study, entitled, “Course Correction: How Digital Textbooks Are Off Track, and How to Set Them Straight”, outlines the findings of a survey conducted on two different college campuses last spring, and presents the following findings:

1. Digital textbooks must meet three criteria – affordable, printable and accessible:

In order to be a solution to high costs, digital textbooks must cost less than traditional books. That means digital textbooks must be priced lower than the net cost of buying a textbook – the purchase price minus the amount the student can expect to receive for selling it back to the bookstore.

2. Digital textbooks done wrong: e-textbooks fail to meet the criteria:

The first type of digital text we reviewed was e-textbooks, the digital book format offered by the major publishers through CourseSmart.  We found that they fall short on each of the three criteria we found digital textbooks must meet.

E-textbooks are too expensive
* The e-textbooks we surveyed cost on average exactly the same as a new hard copy of the same title bought and sold back to the bookstore.
* The e-textbooks we surveyed cost on average 39% more than a used hard copy of the same title bought and sold back online.

Printing is costly and difficult
* Printing was limited to 10 pages per session for each of the e-textbooks we surveyed.
* Buying and printing half of an e-textbook was three times the cost of buying a used hard copy and selling it back to the bookstore, for the books we surveyed.

E-textbooks are difficult to access
* Students have to choose between using the book online or using it offline – they cannot do both.
* Most (75%) of the e-textbooks we surveyed expired after 180 days, so students do not have the option to access their books in the future.

3. Digital textbooks done right: open textbooks meet all of the criteria

Open textbooks are textbooks distributed free digitally under an open license.  The key feature of an open license is that it permits users to make copies of the textbook and translate it into different formats.  So, open textbooks start as digital textbooks but can be printed in a variety of formats. We found that open textbooks accomplish what e-textbooks do not: low prices, printing options and accessibility.

Open textbooks are affordable. Open textbooks are free digitally, and students can purchase other formats at a low cost.

Open textbooks are easy and inexpensive to print. Students can print digital textbooks anytime, anywhere and in a variety of formats.  They can print individual pages at home, order a print-on-demand bound copy, or anything in between.

Open textbooks are accessible. Students can access open textbooks anytime, from any computer, without the book expiring.

The authors of the study urge faculty and institutions to do everything they can to encourage adoption of open textbooks:

For faculty, this means giving preference to open textbooks whenever pedagogically appropriate.  For institutions, this means providing incentives to faculty authors and pooling resources to develop a viable infrastructure to support open textbooks.

This report seems to be getting noticed, as it’s been quoted by most of the major tech and publishing blogs. If nothing else, it will most likely lead to a spike in hits on a couple of sites: Coursesmart (which PIRG ranks slightly below the IRS in its contribution to society), and on Flatworld Knowledge, which receives high praise for its approach to open textbooks. (Another site Connexions, offers open source educational content as well.) There will also quite possibly be a lot more traffic to file sharing sites like Textbook Torrents, which didn’t let pesky conventions such as copyright laws interfere with its users’ access to every textbook that has been scanned and uploaded by disgruntled students. (Although the site is currently not accepting any more registrations, which suggests that their legal bills may be exceeding their server costs.)

As the report indicates, the textbook publishing industry is overdue for change. But for some insight into some factors that might keep the business from changing as quickly as the technology is, it’s worth reading a column posted by a writer with impressive credentials, as an author, college professor, and a publishing executive. His post is called Why the Kindle Won’t Have a Dramatic Impact on College Course Materials for at least Five Years and although it focuses largely on the barriers to the adoption of the Kindle in the college market, it provides a cogent and laconic account of the economics of the textbook publishing industry. Among his observations:

  • Within this context, e-books are budgeted as a small percentage of the overall budget. From the textbook publisher’s perspective the development costs are identical whether the content is being flowed into a print textbook or an e-book. This is because textbook publishers make most of their revenue of print textbooks and, consequently, most of the content development strategy is formulated around those print textbooks. E-books are simply “add-ons” or extra products that can be viewed as a by product of the core print development process.
  • Within the current content development workflow for textbook publishers, the plant investment remains the same regardless of whether the product is a print textbook or an e-book. And, since publishers sell far more print textbooks than e-books, there is no incentive to change production workflows to favor the creation of minimized or lower-cost e-books from which print textbooks could be created. This means that publishing e-books, without significant changes to current design and production workflow, does not reduce the publishers’ costs significantly. This is important because it means all current e-book solutions for textbook publishers take into consideration the print book production process and derives cost efficiencies from that process. There are neither sales incentive or cost efficiencies in the current workflow that would cause publishers to get excited about the Kindle.

One could surmise that the same might be said for ebooks in general, not only Kindle versions. Until the design and workflow process undergoes a radical transformation, thus reducing the cost curve by an order of magnitude, traditional publishers will not be in a position to offer their content in an open (free or nearly so) model. This is a clear symptom of an industry about to undergo a stage of disintermediation, which is usually accompanied by major sell-offs of assets, restructuring and layoffs of thousands of managers and editors. It may take a decade or so, but eventually the textbook industry may consist of hundreds of small, specialized content producers, and a handful of POD providers. Instead of going to Barnes & Noble to buy their textbooks, the freshmen of 2015 may be stopping by Kinko’s.

College Textbook Economics 101: Pay, or Pirate and Party?

With a new semester starting in a little over a month, the media is full of coverage of the cost of textbooks, and what publishers, colleges and students are doing about it. As you might expect, the solutions and strategies vary depending on which segment of the market they are coming from.

The first article comes from Wednesday’s Wall Street Journal, which describes a move by publishers and colleges to create custom editions of textbooks, that carry a higher retail price, along with some legally questionable restrictions:

The University of Alabama, for instance, requires freshman composition students at its main campus to buy a $59.35 writing textbook titled “A Writer’s Reference,” by Diana Hacker. The spiral-bound book is nearly identical to the same “A Writer’s Reference” that goes for $30 in the used-book market and costs about $54 new. The only difference in the Alabama version: a 32-page section describing the school’s writing program — which is available for free on the university’s Web site. This version also has the University of Alabama’s name printed across the top of the front cover, and a notice on the back that reads: “This book may not be bought or sold used.” Custom textbooks like this one are proliferating on U.S. college campuses, guaranteeing hefty sales for publishers — and payments to colleges that are generally undisclosed to students. For publishers, the custom market is a way to thwart used-book sales, which cut deeply into their profits. Though used books have been around for decades, they have become a much bigger industry threat in the Internet age. Web sites for used books, such as Amazon.com and eBay, have transformed fragmented, campus-by-campus dealings in old texts into a national market, where discounts of 50% off the new-book price are common. Because of their limited audience, custom books are difficult to resell — and they sometimes aren’t eligible for authorized campus book-buyback programs.

Whenever apparently nefarious and price-gouging business deals are exposed, one can usually predict two parallel backlash reactions. One is a rapid response, the other slow and bureaucratic. In this case, the first is a reaction by students, the primary consumers and victims of this so-called conspiracy. The other is by the government, which is compelled to at least appear to be doing something, despite the massive publishing industry’s lobbying efforts in the nation’s capital. (From the WSJ article: In recent years, 34 states have proposed or passed legislation to control textbook costs, including measures to prohibit inducements to professors for adopting textbooks, according to a May 2007 congressional study. A bill pending in Congress would require more disclosure of textbook pricing, in part by requiring publishers to sell textbooks separately from the bundles of extras with which they are now often packaged.)

Students, as might be expected when they are feeling exploited, are responding with typical home grown, grass roots solutions. There’s the website: www.maketexbooksaffordable.org, which purports to fight textbook ripoffs, and has apparently collected signatures from over 1200 faculty members supporting their efforts. There is also the predictable market response to this cozy and collusive cartel, which is leading to the growth of the “open textbook movement”, covered yesterday by USA Today. One of the early players in this market is Flatworld Knowledge, which was founded in 2007 by a couple of publishing industry veterans, who recognized that the world was ready for a new publishing paradigm, and that it wasn’t likely to emerge from the established players.

It will come as no surprise, that, if there is an opportunity to get something for free, students do not feel compelled to wait for either the government or the forces of creative destruction to come to their rescue. And just as the recording industry saw its fortunes begin to shift on college campuses a decade ago, the textbook business is beginning to experience a similar threat from file sharing sites. The primary obstacle to massive pirating is of course the difficulty of converting the content from the printed page to a digital format. This step was relatively straightforward with CDs; it’s considerably more complicated to rip a book. As Ars Technica puts it” In contrast to ripping an MP3, scanning a textbook is a major task that requires a significant personal involvement, placing it beyond the attention span of many college students.

The best known textbook filesharing site Textbook Torrents, (catchphrase: “because you can’t torrent beer”) and its administrators clearly view themselves as providing a public good. The site’s rules page exhorts users who’ve saved money by downloading texts there to go out and spend the equivalent money on a scanner. “Scan as many of your other textbooks as you can, and put them up here for others to benefit from,” it reads. “There aren’t very many scanned texts out there, so let’s change that.” Anyone who manages to find all their books through the site are encouraged to go out and buy a text simply to contribute it to TT’s collection. [As of this date’s posting, the site is “currently temporarily unavailable”].

I predict an outcome similar to Napster for sites like Textbook Torrent. Due to their blatant copyright infringement practices, they are low hanging fruit for the enforcement arm of the publishing industry, and they will be sued into oblivion. Given a choice between “Free and Illegal” or “Free and Legal” most students would opt for the latter. This is where sites like Flatworld Knowledge can take advantage of the rapidly evolving dynamics of the textbook publishing industry (both legal and financial). They will succeed if they can adapt their marketing strategies to the channels that are already part of students; DNA. That means Facebook, the most popular site on college campuses after the filesharing sites. A search on FB Apps Directory for “Textbook” yields over two dozen apps (including one called “Free the Textbook”, by, you guessed it, Flatworld Knowledge”), but none currently have more than a handful of users. That will likely change by Labor Day, as students begin to return to classes.

Freeloaders unite! YAFTOS is here(Yet another free textbook online site)

Readers of this blog have seen references in earlier posts to a couple of start-ups in the free e-book space, notably Flatworld Knowledge, (www.flatworldknowledge.com ) and Wowio (www.wowio.com) Well it turns out another company has been doing it for several years. Actually, it could be argued that this company originated the concept of free college textbooks. I’m referring to Freeload Press, which dates back to 2005, arguably the Middle Ages in terms of e-book evolution. The banners on their site read:

  • Students spend an average of $900 a year on textbooks, We propose they spend $0
  • Books + Download + Free = Freeload Press
  • Liberating textbooks and study aids for students from all financial backgrounds

http://freeloadpress.com/booklist.aspx

The CEO of Freeload, Tom Doran, informed me today that beginning this August, all of Freeload’s Textbook Media e-books will be browser-based, which permits use of rich media for academic content and advertising. While Freeeload Press will continue to offer ad-supported e-books for free, other publishers using Textbook Media can set end-user prices for the ad-supported e-book version. In either case, students can choose to pay for an ad-free e-book version, or an ad-free paperback version. The texts are in use at over 250 colleges and universities.

But one needs to look at the bigger picture of free vs paid content. All sorts of approaches are being experimented with, including 1)”Freemium” (a small percentage of users choose to pay for a premium level of service; 2) Cross-subsidies: also known as “loss leaders”, in which something free or cheap leads the buyer to purchase another, more expensive item, 3) Data Aggregation: Collect enough data from a large enough community of users, and sell that to sponsors who desire that demographic; 4) Altruism and the gift economy: aka open source movement and user generated content [for more on this, see Chris Anderson’s insightful piece in the MArch issue of Wired: “Free, why $0.00 is the future of business”, from which the above paragraph borrows generously]

All of which points to more reason to short Pearson and Prentice Hall, et al.

Tarzan Economics: It’s a jungle out there…

There have been an increasing number of posts recently about the availability (or lack of) textbooks in Kindle or similar e-book format. Here’s a post that appeared this week on the Amazon customer forum:

I emailed Pearson, one of the largest publisher of textbooks in the world, asking why most of their books were not yet available for the kindle; this was their response:

David, thanks for your inquiry about whether we offer eBooks. As a matter of fact, Pearson was one of the early leaders among publishers to offer our textbooks in digital format, beginning in 2004. Today we have more than 1,000 titles available through Course Smart (www.coursesmart.com), which is online site where all of the leading publishers are offering their digital textbooks for sale. Students can save up to 50 percent off the price of the hardback edition of the textbook, and, as you note, there’s no heavy book to haul around, nor do you need to worry about selling it back at the end of the term. The ebooks have all of the content of the hardcover edition, with the same pagination, but allow you the ability to search the text using key words, highlight passages and make notes electronically. All you need is web access. Be sure to check out the site and see how it works.

Regarding the Kindle, some of our professional and technology books are available this way, but most textbooks are not, as the Kindle does not support text that is heavy with illustrations, which many textbooks are. But we’re monitoring developments closely.

David Hakensen
Pearson Education
Corporate Communications

A visit to the Coursesmart site confirms that indeed there is a wide selection of titles available for download to a PC. What the corporate spinmeister omitted from his response to the inquiry is that in spite of coughing up roughly half the cost of a new hardcover edition, you don’t actually own the book. It operates more like a subscription, and your right to use it expires in six months. That’s right, it evaporates, kind of like the morning dew under a warm sun. And if you hoped to stretch your textbook budget a little further by sharing your e-book with a classmate, forget it. That’s a violation of the Terms of Use. Also, better make sure it’s the right book for you, because you can’t get a refund of your subscription fee after two weeks, or if you’ve viewed more than 20% of the pages (See Terms of Service).

But if you’re a textbook publisher, you probably think you’ve found the Holy Grail. No printing, warehousing or shipping costs, no worries about second-hand texts putting downward pressure on your monopolistic prices, and you still get half of the MSRP! It’s “innovative” thinking like this that makes me think that it was the publishing industry that originally coined the term “DRM”, but that it’s really code for “Dated, Regressive Manipulation”. Their collective response to the challenge posed by the digital age has been to use the technology to protect their margins at all costs.

Don Tapscott puts it well in his book “Wikinomics”:
Publishers can’t reasonably adopt open approaches that would cannibalize existing revenues without a viable means to shore up their ailing income streams. Jim Griffin, the managing director of One House LLC calls it “Tarzan economics”. “We cling to the vine that holds us off the jungle floor, and we can’t let go of the one until we’ve got the next vine firmly in our hand”. The problem is that media incumbents are moving too slowly. They’re getting mired in the thick underbrush of thorny contractual agreements and outdated and costly infrastructures. The economic model is based on a business model suited for the era of analog publishing, not for a world of user-driven creation and distribution.
For an example of thinking outside the digital fortress built by the textbook publishers, have a look at the following post:
  • FlatWorld Knowledge – the publisher I’ve been waiting for?

  • David Wiley is part of a startup called FlatWorld Knowledge. Their aim is to release digital textbooks free of charge, with students paying for the print copy if they want. What is more interesting though is the way they take the notion of the text book and make it more of a social object. So the educator can edit the book for their class, the student can interact with other students around it, and people can sell related services and content. In fact, when you view their little cartoons it makes you realise just how limited the traditional text book model is in education. Why didn’t we do this years ago?
    http://nogoodreason.typepad.co.uk/no_good_reason/2008/04/flatworld-knowl.html
  • The Tarzans of the publishing industry may cling to any vine that keeps them aloft, but in their quest for the next branch to grab onto, they are ignoring the three forces that are completely altering the landscape they’ve existed in for centuries: Open-Source, Creative Commons Licensing, and, most importantly, Free. (Chris Anderson: Free: Why $0.00 is the Future Of Business, Wired, March 2008) (http://www.wired.com/techbiz/it/magazine/16-03/ff_free)
  • Simply compare the state of a couple of other industries in the pre- and post-digital world: Kodak is a shell of the company it once was when film was the dominant photographic medium. And look at what happened to the telephone companies when long distance rates declined from a dollar a minute to zero. There will be the inevitable protectionist efforts, through vigorous enforcement of copyright law, and vain attempts to protect their content, but the outcome will be the same: new entrants, (like Flatworld Knowledge) unburdened by legacy cost structures, generating sustainable revenue from content that is free or close to it.