Small, Flat, and Crowded

• By Rama Ramaswami
• 07/01/09

Competition is heating up in the tight eTextbook market as open source upstarts come up against veterans.

"THERE WAS ALWAYS talk that eTextbooks were not working and customers didn't really want them,” says Eric Frank, co-founder of open source digital textbook publisher Flat World Knowledge. “But what students really want are choices. Students have grown up in a world that's all about choices. Textbooks haven't turned that corner.”

Since Frank founded Flat World Knowledge about a year ago with fellow publishing veteran Jeff Shelstad (both hail from Prentice Hall), his business model has been hailed as revolutionary. Flat World gives away professionally written, peer-reviewed textbooks for free, online. How does the company expect to make money? By selling students ancillary products such as low-cost printed copies or study aids.

“It's not that people didn't want eTextbooks,” Frank points out. “There was just no sense in students paying half the price of a regular textbook for an eTextbook. The other flaw in the model was that it's sort of one or the other-- an eBook or a print book. We didn't necessarily want to build eBooks, but rather give students a choice of formats.”

This philosophy is creating quite a flap in a market that's still miniscule and struggling to find a feasible business model. According to the Association of American Publishers, the revenue for eBooks in the higher ed market in 2007 (the latest year for which statistics are available) was $17.2 million, up from $13.4 million the previous year. That's still a fraction of the $1.6 billion in revenue that the standalone textbook category generated in 2007 (up from $1.5 billion the previous year).

Veering off Course

Among the organizations that are most vocal in their criticism of current eTextbook models are the Student Public Interest Research Groups (Student PIRGs), the nation's largest student activist network, which has a presence on campuses in 20 states. In January 2008, the Student PIRGs launched Make Textbooks Affordable, a campaign to encourage faculty to adopt open source educational resources (more economical and practical than existing eTextbooks) in their classrooms. Last fall, campaign director Nicole Allen, who heads up the textbook program for the Student PIRGs, conducted a comprehensive study of the digital textbook market that challenges existing models and issues an urgent call for change.

Allen's report, Course Correction: How Digital Textbooks Are off Track, and How to Set Them Straight, is based on a survey of 504 college students and an analysis of eTextbook prices, based on 50 commonly assigned textbooks. It asserts that eTextbooks come up short on a number of important criteria.

“eTextbook publishers are fundamentally disconnected from the students,” says Allen. “Three criteria are most important to students: First, eBooks need to be affordable, more so than their print counterparts. Second, unrestricted printing options are necessary, because students still prefer a print book to an eTextbook. Third, the book needs to be accessible. Students need to be able to use it anywhere on any computer and be able to keep it forever.”

Existing digital options fail to meet those criteria, in Allen's view. “They have lower up-front prices, but are not as affordable as they need to be,” she says. In fact, she adds, eTextbooks actually end up costing more than the print version, since a student can sell a traditional textbook back to the bookstore and recoup some of its cost. What's more, eTextbook publishers drastically limit printing capabilities-- a major drawback, as 75 percent of the students surveyed in the PIRG report said they preferred a printed textbook to a digital one. “With the eTextbooks we surveyed, you can print only 10 pages at a time,” she says. “Access is so mired in DRM [digital rights management] that the eTextbooks are virtually unusable for a large portion of the student population.”

Certainly, cost is a key factor fueling the eTextbook debate. According to a report released in May 2007 by the US Department of Education's Advisory Committee on Student Financial Assistance (Turn the Page: Making College Textbooks More Affordable), the average college student shells out about $900 a year for textbooks; in fact, between 1987 and 2004, textbook expenses rose much faster than the prices of other commodities nationwide. The US Government Accountability Office reports that textbooks account for 26 percent of tuition and fees at four-year public universities, and nearly three-quarters of the costs at community colleges. Both reports note that publishers' superfluous bundling of supplemental items, release of unnecessary new editions, bookstores' high profit margins, and the whims of faculty members who rarely select lower-priced alternatives, are among the forces keeping prices high. By bypassing all these issues, eTextbooks should be a more affordable option-- except that they aren't, according to their detractors.

The Future's an Open Book

The cry for open source digital materials is gathering momentum. Last year, more than 1,000 professors at universities across the country signed a letter of intent to adopt open digital textbooks in place of commercial digital or print ones, if the former were a comparable option. Faculty also have written to publishers complaining about the high cost of textbooks.

In the past few years, publishers have been experimenting with content delivery methods, ranging from simple PDFs of printed textbooks, to interactive multimedia texts that students and faculty can customize. CourseSmart, a digital textbook company formed by six major textbook publishers, offers more than 5,000 textbooks online, and covers about 30 percent of the market. CourseSmart Executive VP Frank Lyman says he aims to “jump-start the market for eTextbooks.” CourseSmart still requires a subscription, however, and offers limited printing options. Then there's CaféScribe, a social networking site that also bills itself as “textbooks 2.0.” Students must buy their eBook from CaféScribe's bookstore, but can then invite friends and faculty (who also bought the eBook) to interact with them, share notes, set up online study groups, and so on.

Many colleges and universities are themselves experimenting with open educational resources: Last August, Connexions, based at Rice University (TX), published its own open source statistics textbook for use in transfer-level community college courses. Also at the forefront of the open textbook movement is the Community College Consortium for Open Educational Resources, which offers open textbooks on its website. And MIT's OpenCourseWare has placed most of its curriculum online-- video lectures, problem sets, and exams for more than 1,800 courses in 33 disciplines.

Clearly, publishers like Flat World are at the cutting edge of the eTextbook market. Most recently, Flat World announced plans to add support for direct integration of its books into campus learning management systems. As of February 2009, Flat World had completed beta testing of its open source books at about 15 universities across the country.

Some caution against going “overboard” with open source textbooks. “What you want is flexibility,” advises William Chesser, general manager of educational solutions at VitalSource Technologies, a company that works with publishers and academic institutions to deliver digital textbooks online. “The business model may be different for a network certification course than for a first-year undergraduate biology course. I don't think open textbooks make sense everywhere.”

Chesser points out that in some disciplines, such as the health sciences for instance, only a commercial model can protect original research. “We have to resist the temptation to think of education as a monolith-- that we're all going digital,” he says. “We need to use open textbooks in those areas where they make sense.”