Amazon Goes Back to School

It may be summer, but Amazon.com (Nasdaq: AMZN  ) is already thinking about school.

Amazon's Kindle is rolling out textbook rentals in e-book form, hoping to cash in on the lucrative student market.

The premise is simple: Readers can save as much as 80% off a textbook's price by renting it virtually for as little as a month to as long as a year. Instead of lugging around a ton of heavy textbooks, a light yet sturdy Kindle will spare the backpack-toting youth unnecessary back pain. Let's not even get started on the hassle of either keeping costly books that you will likely never crack open again or having to cope with the burdensome reselling process.

Many publishers are jumping into Kindle's new program. Elsevier (NYSE: RUK  ) , John Wiley & Sons (NYSE: JW-A  ) , and Informa's Taylor & Francis are all onboard. Surprised? Don't be. The margins on rentals are likely just as compelling as the printing, shipping, and distributing of textbooks that will probably be resold without their ability to cash in on the repeat sale.

This could be a game-changer for the textbook publishing industry, and it won't be long before McGraw-Hill (NYSE: MHP  ) and Pearson (NYSE: PSO  ) follow suit if schools and students begin turning to Kindles.

It's not as easy as this morning's idyllic press release makes it out, though. The Kindle still has limitations, especially when it comes to graphically rich textbooks.

Amazon's also promoting the ability to keep the margin notes and highlighted passages that Kindle owners can scribble virtually beyond the terms of the rental. I can't be the only one that has never had the desire to revisit my personal textbook notes. If anything, this reminds me that it's fundamentally harder to highlight or make margin notes on a Kindle than it is to whip out a highlighter or pen and mark up a real book.

Oh, and does this mean that if I highlight the entire book that I get to keep it in perpetuity on Amazon's cloud?

Amazon isn't the only one in this space. Textbook e-tailer eCampus has a virtual bookstore program, and I imagine most textbook distributors on the cusp of potential extinction are also exploring ways to reach out to their customers.

If anything, the Kindle's shortcomings on some display-intensive textbooks may open the door for Apple's (Nasdaq: AAPL  ) iPad 2 or Barnes & Noble's (NYSE: BKS  ) Nook Color to steal some of the Kindle's thunder.

Then again, it's easy to smell the scorched shorts that bet against Amazon's ability to stay one step ahead of the market. New Kindles and Amazon's first tablet are reportedly just weeks away at this point.

Somebody's going to school somebody, and it's hard to bet on Amazon being the one with the dunce cap at the end of the lesson.

Can textbook rentals in e-book form be successful? Share your thoughts in the comment box below.

The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple, John Wiley & Sons, and Amazon.com. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz owns a Kindle and an iPad, but he uses his iPad a lot more. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


Read/Post Comments (6) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 18, 2011, at 4:24 PM, megoogler wrote:

    Again, Amazon is late to the market. Barnes & Noble already has Color tablet, touch screen e-Ink eReader, and NookStudy software that allows to rent text books. So called technology company leader has been three steps behind a book store company.

  • Report this Comment On July 18, 2011, at 4:34 PM, DaveGruska wrote:

    I feel bad for Kno. They're not even getting any mentions in these Amazon e-textbook rental articles.

  • Report this Comment On July 18, 2011, at 4:57 PM, Popnfresh100 wrote:

    The e-textbook fight hasn't really begun yet; but Amazon should be careful about starting it.

    The textbook market is a racket- Universities own the property that the campus bookstore is located on and receive a cut of the proceeds from the operator- the largest of which is Barnes and Noble.

    In other words, when e-textbooks become common, the people that make the required course reading list will have a vested interest in making sure student's buy them on a Nook rather than a Kindle.

    With traditional textbooks, it's easy for Amazon to overcome this bias- most textbook publisher's are too big to be pushed around by individual Universities, and it's not really a problem for students to order most of their textbooks online even if one or two little required hand-bound course note packets aren't available online and have to be bought from the official bookstore. But it will be a problem if those one or two little course note packets would require the purchase of a second tablet or e-reader altogether.

  • Report this Comment On July 18, 2011, at 5:14 PM, Borbality wrote:

    ha just wait til you can pirate textbooks online. in the true modern college student tradition, I wouldn't bet against it.

  • Report this Comment On July 18, 2011, at 9:09 PM, tim40744 wrote:

    @ megoogler

    Since NOOKStudy only works on PC and Mac computers, B&N doesn't have any advantage over Amazon. I'm sure Amazon will be smart enough to offer textbook rentals on their readers and forthcoming color tablets.

  • Report this Comment On July 19, 2011, at 10:32 AM, CDogRun wrote:

    I'm sure a lot of this is result of the Kindle experiment at Clearwater HS in Florida. This last year all students were given Kindles (a few opted out) for their text books - and several companies had to be contacted about making some texts kindle ready. I, personally, prefer my iPad, but it does present more distractions than the kindle. I don't have a working familiarity with the other readers - yet - but I do believe the Kindle, as is, will be 'old school' quickly.

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