Textbook Rentals

WSJ is reporting that Case Western will start experimenting with Amazon's Kindle for some of their classes this Fall. I hope this is a success and that we'll eventually see more electronic books going forward. If this happens, traditional book publishers will have to find better ways to remain profitable than resort to printing a new edition every year.

Profit margins of book publishers is a very well kept secret. Publishers invest between $1-2M for the first edition of a new book. If it is a success, they keep printing a new edition every year or two. Interestingly, most of the changes between editions are cosmetic - a few color changes, end of chapter problems rearranged, etc. Ever wondered why? Unless they do this, students will stop buying new books and prefer to buy used books from their seniors in school. Also, the cost of reprinting a successful book is less than $1/copy. Yes, that is right - the books that we typically buy for an average of $80-$120, actually cost about $1 to print. Clearly, it is in the publisher's best interests to suppress the used book market. The real cost, sadly, is borne by the environment.

But, despite the publisher's best efforts, the used book market continues to thrive. I recently heard about Chegg.com, a startup which offers textbook rentals and has a Netflix-style business model. They even allow you to highlight the rented books, so long as you don't make the books completely unusable for the next renter. I'm sure Amazon's Kindle will feature an electronic expiry of the books, using which publishers will be able to offer subscription and perpetual pricing. But, the real question is will the publishing industry survive? What if the authors published to Amazon's Kindle directly instead of using the service of a publisher? How would you stay relevant if you were the CEO of a publisher? I don't know, but would love to hear the thoughts of anyone in this industry