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

GLGi: The Current and Future Market for Elementary, High School and College Textbooks

Albert Greco

October 30 2007 - New York

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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: 1989-1994" and "The Market for Consumer Books in the U.S.: 1985-1995." 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.

Table of Contents

► Updated analysis of the 2007-2008-2009 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 2010-2011-2012

The Elhi Publishing Section**

1. Major Publishing Corporations

2. Textbooks

3. Supplementals

4. Testing

5. Key Elhi Market Drivers

**All numbers rounded off in the Elhi and college

presentation and may not add up to 100%.

Elhi PublishersU.S. $ Billions (B) or $ Millions (M)

2005 2006 % ChangePearson $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 -12.4School 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, QuarterlyConference Calls. Totals include: textbooks, supplementals,testing, software, online, and various educational products and services.

Elhi Net Publishers’ Revenues: Textbooks and Supplementals ($ Billions)

Totals % Ch. Textbooks % Ch. Supplementals % Ch.

2006 $4.75 -- $2.78 -- $1.97 --2007 $5.05 6.32% $2.93 5.40% $2.12 7.61%2008 $5.41 7.13% $3.13 6.83% $2.28 7.55%2009 $5.74 6.10% $3.29 5.11% $2.45 7.46%2010 $5.974.01% $3.40 3.34% $2.57 4.90%2011 $6.214.02% $3.51 3.24% $2.70 5.06%2012 $6.464.03% $3.58 2.00% $2.88 6.67%

% Ch. 36.00% --- 28.78% --- 46.19% ---2006-2012

Source: Greco. All numbers are calculated and then rounded off and maynot add up to 100%.

Elhi Textbooks and Supplementals: Market Share

Subject Area Textbooks Supplementals

• Reading/English/Language Arts 38.6% 53.2%• Mathematics 29.8% 10.5%• Science 10.5% 4.0%• Social Studies 9.3% 4.1%

Total 88.2% 71.8%

All Others 11.8% 28.2%

Source: Greco. “All others” include: foreign languages, ESL,music, art, vocational, computers, technology, health, etc.

Elhi Technology Products

Technology Products: Hardware, Software, and Internet Expenses

Amount % Change2000 $5.7 Billion ---2001 $6.1 Billion +7.02%2002 $6.0 Billion -1.64%2003 $5.7 Billion -5.00%2004 $6.0 Billion +5.26%2005 $6.4 Billion +6.67%2006 $6.8 Billion +6.25%

% Ch. +19.30%2000-2006

Source: Greco.

Elhi Testing ($ Billions)

Totals % Change2006 $1.22 --2007 $1.36 11.48%2008 $1.49 9.56%2009 $1.61 8.05%2010 $1.74 8.07%2011 $1.86 6.90%2012 $1.99 7.00%

% Ch. 63.11%2006-2012

Source: Greco. All totals rounded off and may not add up to 100%.

Key Elhi Market Drivers

1. The growth in enrollments2. Funding sources3. Per pupil expenditures4. Adoption schedules5. “Other media” competition to textbooks and

supplementals6. Technological changes7. The used textbook market

Source: Greco.

1. The Growth in Enrollments (In Thousands)

Total Public Schools Private Schools

2006 73,108 62,308 10,8002007 73,554 62,647 10,8972008 73,928 62,931 10,9972009 74,332 63,235 11,0972010 74,779 63,574 11,2052011 75,252 63,948 11,3042012 75,829 64,411 11,418

% 3.72% 3.38% 5.72%Change2006-2012

Source: U.S. Department of Education, National Center for EducationStatistics, Digest of Education Statistics (annual). “Private schools” refer toindependent schools, religious schools, etc.

1. The Growth in Enrollment (In Thousands)

Pre-K Thru 8 Grades 9-Thru 12Public Private Public Private

2006 33,906 5,055 15,042 1,4562007 33,990 5,074 15,101 1,4632008 34,154 5,105 15,013 1,4542009 34,350 5,139 14,917 1,4462010 34,618 5,181 14,797 1,4372011 34,907 5,224 14,730 1,4352012 35,297 5,280 14,641 1,429

% Ch. 4.10% 4.45% -2.67% -1.85%2006-2012

Source: U.S. Department of Education, National Center for EducationStatistics, Digest of Education Statistics (annual).

1. The Growth in Enrollments

U.S. Department of Education Projections: 2002-2014

Pre-K-8 +5% 9-12 +2%

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%

1. The Growth in Elhi Enrollments: Adoption States


Alabama -4.1% Arkansas -0.5%California +14.2% Florida +9.9%Georgia +8.7% Idaho +13.8%Indiana +2.5% Kentucky -6.5%Louisiana -3.3% Mississippi -4.8%Nevada +28.4% New Mexico +5.7%North Carolina +3.3% Oklahoma +0.3%Oregon +6.7% South Carolina -2.7%Tennessee +0.1% Texas +15.6%Utah +14.9% Virginia +2.1%West Virginia -9.8%

1. The Growth in Elhi Enrollments: Non-Adoption States


Alaska +7.7% Arizona +14.5%Colorado +10.9% Connecticut -0.6%Delaware -2.0% District of Columbia -2.8%Hawaii +5.0% Illinois +1.6%Iowa -6.3% Kansas +0.1%Maine -12.8% Maryland -1.0%Massachusetts -6.5% Michigan -3.2%Minnesota -2.5% Missouri -1.6%Montana -5.9% Nebraska -0.2%New Hampshire -7.1% New Jersey +3.5%New York -6.0% North Dakota -10.2%Ohio -4.7% Pennsylvania -7.7%Rhode Island -3.6% South Dakota -3.6%Vermont -15.2% Wisconsin -3.9%Washington +4.1% Wyoming +0.9%

2. Elhi Funding Sources($ Millions)

Federal State Local Total % Ch.

2000 $26,346 $183,986 159,421 369,754 6.90%2001 $28,009 $198,310 170,076 396,395 7.21%2002 $32,101 $206,139 178,514 416,754 5.14%2003 $35,598 $212,965 185,340 433,904 4.12%2004 $38,856 $217,140 196,798 452,795 4.35%

% Ch. 27.28% 18.02% 23.45% 22.46% ---2000-2004

Source: U.S. Department of Education, National Center for EducationStatistics, Digest of Education Statistics (annual).

2. Elhi Funding: Total Amount and Percent of G.D.P.

Total Funding from All Sources% of G.D.P.

2000 4.5% 2001 4.7%

2002 4.7% 2003 4.7%

2004 4.6% 2005 4.5%

Source: U.S. Department of Education. Estimates are utilized byEducation; 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 andsupplies. This could hover near the $2 billion mark.

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 +10.9%• personal income taxes +2.4%• sales taxes +0.6%• 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.

2. Funding Sources: States

Total state funding allocations:• Medicaid 22%

• Elementary and

secondary schools 21.5%

• Higher education 10.7%

• Transportation 8.7% Corrections 3.4%• Public assistance 1.9% All other 31.6%

Source: National Association of State Budget Officers.

2. Funding Sources: States

State funding increases:

Year Nominal Increases Real Increases

2005 6.5% 3.1%

2006 8.7% 5.4%

2007 8.6% 5.3%

2008 4.2% 1.0%

Source: National Association of State Budget Officers.

2. Elhi State Funding: Selected List of States ($ Millions)

2004 2005 2006

CT. $2,372 $3,089 $3,336MASS. 4,064 5,334 5,659NJ 9,093 9,805 10,330NY 18,828 19,880 21,074PA 8,994 9,598 10,022ILL. 8,512 8,960 9,077IND. 4,915 5,239 5,356MICH. 12,446 12,515 12,923OHIO 9,323 9,650 10,444

Source: National Association of State Budget Directors.

2. Elhi State Funding: Selected List of States ($ Million)

2004 2005 2006

FL. $10,676 $11,489 $12,558

GA. 7,625 7,761 7,895

N.C. 7,226 7,697 7,542

VA. 4,762 5,417 5,730

TX. 17,118 17,703 18,601

CA. 36,879 41,112 46,076

WA. 6,136 6,243 7,104

Source: National Association of Budget Officers.

2. No Child Left Behind (NCLB)

Purpose: to reflect student achievement test resultsand hold the school level educators accountable.

Year Funding Amount % Change2002 $1.363 Billion --2003 $1.452 Billion 6.53%2004 $1.508 Billion 3.86%2005 $1.583 Billion 4.97%2006 $1.758 Billion 11.05%

% Ch. 28.98% ---2002-2006

Source: U.S. Department of Education

2. Elhi Funding SourcesAverage Elhi School Budget: 2006-2007

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.

3. Elhi Per Pupil Expenditures

Expenditure % Change

1999-2000 $7,418 5.81%2000-2001 $7,841 5.70%2001-2002 $8,183 4.36%2002-2003 $8,630 5.46%2003-2004 $8,807 2.05%

% Ch. 18.72% ---1999-2004

Source: U.S. Department of Education, National Center forEducation Statistics, Digest of Education Statistics (annual).

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


3. Per Pupil Expenditures: Non-Adoption (Open) States 2003 [30 States]

Alaska $9,870 Arizona $6,282Colorado $7,384 Connecticut $11,057Delaware $9,693 District of Columbia $11,847Hawaii $8,100 Illinois $8,287Iowa $7,584 Kansas $7,454Maine $9,344 Maryland $9,153Massachusetts $10,460 Michigan $8,781Minnesota $8,109 Missouri $7,349Montana $7,496 Nebraska $8,074New Hampshire $8,579 New Jersey $12,568New York $11,961 North Dakota $6,870Ohio $8,632 Pennsylvania $8,997Rhode Island $10,349 South Dakota $6,547Vermont $10,454 Wisconsin $9,004Washington $7,252 Wyoming $8,985

Source: U.S. Department of Education. The District of Columbia is listed as a“state.”

4. State Adoption Schedules (Selected List)

Elementary School CategoriesReading LiteratureIndiana 2007 Indiana 2008 Oregon 2007 Alabama 2008Tennessee 2007 Oklahoma 2008West Virginia 2007Florida 2008Alabama 2008Louisiana 2008Oklahoma 2008Idaho 2008California 2009Georgia 2009New Mexico 2009


4. State Adoption Schedules: Selected List

Elementary School CategoriesMathematics ScienceCalifornia 2008 California 2007Mississippi 2008 South Carolina 2007South Carolina 2009 Arkansas 2007Kentucky 2009 Georgia 2008Idaho 2009 Kentucky 2008

Tennessee 2009Oregon 2009Mississippi 2009


4. State Adoption Schedules: Selected List

High School CategoriesReading Mathematics ScienceIndiana 2007 Texas 2007 Arkansas 2007Tennessee 2007 New Mexico 2007 Georgia 2008West Virginia 2007 Georgia 2008 Kentucky 2008Florida 2008 Mississippi 2008 South Carolina

2008Alabama 2008 North Carolina 2009 Tenn. 2009Louisiana 2008 Kentucky 2009 Oregon 2009Oklahoma 2008 Idaho 2009 Mississippi 2009Idaho 2008New Mexico 2009


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.

4. Indiana Adoption List: High School Science Short List (Covering July 1, 2005 Through June 30, 2011)

1st Year Biology 1st Year ChemistryAddison Wesley Longman* Addison Wesley LongmanGlencoe/McGraw-Hill Glencoe/McGraw-HillAGS/Globe Holt Rinehart & Winston*Holt Rinehart & Winston* Kendall/HuntKendall/Hunt McDougal Littell*Prentice Hall Prentice Hall

1st Year PhysicsAddison Wesley Longman Glencoe/McGraw-HillHolt Rinehart & Winston It’s About Time Prentice Hall

Source: Indiana Department of Education.

*Addison Wesley Longman is Pearson; Holt Rinehart & Winston isHarcourt; McDougal Little is Houghton Mifflin.

4. California Adoption: 8th Grade Science Price Glencoe/McGraw-Hill (Selective Price List)

Student’s textbook $68.47 Class Inter’act. CD-ROM $105.93

CD-ROM $87.73 Super DVD $74.89

Lab manual $9.60 Instruction Folders $42.79

Teacher’s text. edition $92.29 Consumable Kit $278.18

Teacher’s CD-ROM ed. $202.23 Equip. Kit $1,215.50

Classroom resources $243.33 Non-consumable kit $666.59

12 Chapter resources $147.48 Transparencies $51.36

Teacher’s lab manual $14.96 Reading essentials $31.01

Exam Suite CD-ROM $139.09 Chapter outlines $46.00

Source: California State Department of Education

5. Elhi Content: Use of “Non-Textbooks” & “Political” Issues

Other Materials Used in Elhi Classrooms

Teacher created resources Trade books Reference books InternetVideos/DVDs Newspapers Magazines MapsGlobes

“Political Issues” Regarding Textbook Content

Various special interest groups Religious groupsEthnic groups Racial groups

Source: Greco

6. Technological Changes: Computer Use in Elhi Classrooms

Public schools with computers (in thousands of computers):Number of Students per computers computer2004- 2005- 2004- 2005-2005 2006 2005 2006

Elementary schools5,412 5,612 4.4 4.2

Middle schools 2,378 2,503 4.0 3.7

High schools 3,948 4,067 3.5 3.4

Source: The U.S. Department of Commerce, The Statistical Abstract ofthe U.S. 2007.

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

1995 46% 65% 8% 8%

2000 97% 100% 76% 79%

2002 99% 100% 92% 91%

2003 100% 100% 93% 94%


6. Technological Changes: Computer Usage At Home 2003

Ages Percent Using At Home Complete School Assignments

5-7 59.3% 16.6%8-10 66.1% 42.7%11-14 72.0% 61.8%15-17 75.0% 68.1%Males 68.0% 47.5%Females 69.3% 50.9%

HHI <$20,000 51.7% 36.2%$20,000-34,999 55.7% 38.2%$35,000-49,999 72.2% 50.5%$50,000-74,99 80.5% 57.6%>$75,000 89.3% 67.0%


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.

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.

College-Higher Education Publishing

1. Revenues

2. Major publishing firms

3. Market drivers

College Net Publishers’ Revenues ($ Millions)

Hardcovers Paperbacks Total % Change

2006 $3,093.5 $1,548.6 $4,642.1 ---

2007 $3,203.2 $1,601.3 $4,804.5 3.50%

2008 $3,314.3 $1,658.4 $4,972.7 3.50%

2009 $3,430.5 $1,715.6 $5,146.1 3.49%

2010 $3,548.4 $1,772.7 $5,321.1 3.40%

2011 $3,665.7 $1,831.7 $5,497.4 3.31%

2012 $3,785.1 $1,893.7 $5,678.8 3.30%

% Ch. 22.36% 22.28% 22.33% ---

2006-2012

Source: Greco.

College PublishersU.S. $ Billions (B) or $Millions (M)

2005 2006 % 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, electronicproducts, etc.

College Market Drivers

1. Faculty adoptions2. Total student enrollments3. Student enrollments in specific academic fields4. Funding sources, economic conditions & student tuition5. Book prices: suggested retail prices6. Return rates7. The used book market8. Electronic distribution of content9. Alternatives to textbooks: cases; ERES; Blackboard;

custom course packs; etc.10. Backlash: CALPIRG; Congress; states; newspapers; etc.11. Exports and imports

1. Faculty Adoptions

Faculty members individually (or in some instances a department) willselect a textbook based on:

1. Support and supplements (Power Points; computer disks;publisher’s online services; etc)

2. Comprehensive content (depth) in textbook3. 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 textbook7. Reputation of the textbook’s author(s)

Source: Greco; interviews/discussions with faculty members invarious disciplines.

2. College Student Enrollments

Public Private Total % Change

2005 13,283 4,068 17,351 1.502006 13,518 4,146 17,664 1.802007 13,752 4,223 17,975 1.762008 14,034 4,316 18,350 2.092009 14,251 4,389 18,640 1.582010 14,380 4,436 18,816 0.942011 14,494 4,478 18,972 0.832012 14,612 4,520 19,132 0.84


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%


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


3. Student Enrollment: Top Selling College Textbook Categories

Business Administration & Accounting: 15%

Mathematics: 11%

Computer Science: 8%

English: 7%

Psychology: 5%

Biology: 5%

Sociology: 3%

Education: 3%

History: 3%

“Other:” 40%

Source: Greco

4. Funding Sources: 2006-2007

States:

47 states increased funding

1 state no change in funding

2 states cut spending

U.S. Government:

2003: +28.45%

2004: -2.64%


5. Book Prices: College Bookstores 2006

Major College Bookstore Management Companies

Follett: 729 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; www.nacs.org

** “Separate” from the chain bookstore operations.

http://www.nacs.org/

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; www.nacs.org

http://www.nacs.org/

5. Book Prices: P & L #1*

Basic AssumptionsPrint run (litho): 275,000 copiesFree copies: 4,000Gross sales: 271,000Returns: 62,330 (23%)Never shipped: 4,010 (1.48%)Sell through: 204,660 (75.52%)SRP: $100.00Avg. Discount $25.00/copy (25%)Publishers’ net income $75.00/copyRoyalty: 10% ($7.50/copy sold)

Source: Greco.

*Assumes: P & L for a new textbook in its first edition; and a standardthree year revision cycle; domestic and export sales.

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


Gross sales: $20,325,000 (271,000 @$75 each)Returns/never shipped: $4,975,500 (66,340 @ $75 each)Net sales: $15,349,500 (204,660 @$75 each)

Expenses• PPB: $4,383,500 (275,000 @$15.94 each• Plant: $50,000• Earned royalty: $1,534,950 (net sales @ $7.50@)• Marketing $400,000• Inventory write-off $1,057,459 (66,340 @$15.94 each)

Total costs: $7,425,909

Source: Greco; all numbers rounded off.


Net sales $15,349,500Other income $ 50,000 (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.

6. College Textbook Return Rates: National Averages For Hardbound and Paperbound Books

1995 21.61996 23.11997 23.21998 23.61999 22.82000 24.72001 23.02002 21.92003 22.72004 22.92005 23.32006 24.1

Source: Book Industry Study Group.

7. College Textbooks: Used Books

Revenues % Units %($ Billions) Change (Millions) Change

2005 $2.200 --- 37.40 ---2006 $2.267 3.05% 37.50 0.272007 $2.332 2.87% 37.65 0.402008 $2.396 2.74% 37.88 0.612009 $2.462 2.75% 37.99 0.292010 $2.531 2.80% 38.12 0.342011 $2.599 2.69% 38.23 0.292012 $2.668 2.65% 38.33 0.26

Source: Greco. Revenues from college bookstores and onlineShopbots.

7. Used Textbooks: New vs. Used Prices

N. Gregory Mankiw. Principles of Economics (Cengage Learning*)4th ed. Published 2/16/06List price: $154.95 (September 2006)

$167.95 (September 2007): +8.4%Used price: $36.40 (inc. S/H)

3rd ed.List price: $159.95 (Published March 2003)Used price: $10.44 (inc. S/H)

2nd ed.List price: $135.95 (Published June 2000)Used price: $4.24 (inc. S/H)

Source: Greco; survey of Shopbot prices. *Cengage Learning formerly Thomson Learning.

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 andread electronic versions of a textbook?” Yes.78% female undergrads 81.4% male undergrads60% 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

9. Alternatives to College Textbooks

Case Studies (HBS)

ERES

Blackboard

Custom Packs

Articles

Hand-outs/photo copies

Lectures

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.

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.


• 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


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”

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 $243,489 596,119

2007 $191,942 1,181,497 $147,263 563,000

YTD

Source: U.S. Department of Commerce, International Trade

Administration

Documents

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