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Can Amazon Be the Source for Cheap Textbooks Students Desperately Need?

By Daniel B. Kline – Feb 4, 2014 at 8:04AM

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Rising textbook prices are making affording college even harder for struggling students and their families. Is it possible to cap those costs and bring the price of classroom books down?

With students and parents already dealing with the rising cost of attending college, little attention is paid to the ridiculous price of text books. The U.S. Public Interest Research Group, or PIRG, is looking to change that with the release of "Fixing the Broken Textbook Market: How Students Respond to High Textbook Costs and Demand Alternatives."

Big business, captive audience
Whereas regular book publishers have to compete with the idea that you can choose the new Stephen King over the new John Grisham (or simply not read at all), academic publishers have a captive audience that has to buy their books. Because of that, while prices for regular books have fallen since the advent of e-reader's like's (AMZN -3.31%) Kindle and Barnes & Noble's (BKS) Nook, prices for textbooks continue to climb.

According to the PIRG study, the average student in United States spends around $1,200 a year on books and supplies. Between 2002 and 2013, the price of college textbooks rose 82% -- nearly three times the rate of inflation.

To make matters worse, those rising prices, the study said, have forced already strapped students to make some difficult choices.

  • 65% said they had decided against buying a textbook because it was too expensive.
  • Nearly half (48%) said the cost of books had an impact on how many or which classes they took.
  • 94% of the students, who had skipped buying a required book, said they were concerned that it would hurt their grade in that course.

Amazon to the rescue?
PIRG says publishers use "a set of tactics to drive prices skyward," such as releasing new editions every three to four years regardless of changes in the subject material.

"They price these new editions quite high, which in turn dictates the price of used books and rental books," said Ethan Senak, a higher-education associate at PIRG. "Even as they move into e-textbooks, publishers incorporate paywalls, expiration dates, and printing restrictions that further continue the practices they've used to control the traditional market."

Amazon, and a variety of online start-ups, have tried to create alternate markets for textbooks, which cuts out the publishers and Barnes & Noble, which runs bookstores at a number of universities. Through its used-book market, Amazon, has bought back books from students and resold them well-below their list price.

The textbook publishers, however, are hip to this strategy and have come up with a number of ways to force students to buy new books. According to PIRG:

  • Publishers release new editions every three to four years regardless of changes in the subject, with prices that are 12% higher on average. Once a new edition is released, that copy takes the place of older editions on store shelves. That means students are not only forced to buy the more expensive new edition, but are also unable to sell back their used book from the previous semester.
  • Publishers also increase costs by packaging textbooks with online pass-codes or CDs that increase prices 10% to 50%. These pass-codes often expire after a limited time period, eliminating the viability to sell back the book.
  • New "cost-saving" options like loose-leaf and custom editions are more affordable upfront, but often end up costing more because they have no resale value.

Little competition 
Just five textbook companies control more than 80% of the $8.8 billion publishing, market, according to PIRG. Three of those companies -- Pearson (PSO -2.32%), Cengage Learning, and Macmillan Publishers -- sued a start-up, Boundless Learning, which was attempting to offer free alternative textbooks. That federal court case was settled with the details not released, but it shows that those making the most money off of students will do whatever they can to protect their turf.

Still, change is coming
Students overwhelmingly support a change in the system. According to PIRG, 82% of students felt they would do significantly better in a course if the textbook was available free online with buying a hard copy optional. This is exactly how open textbooks are being designed.

In addition to open textbooks, which are only available for a tiny percentage of college classes, a number of schools have begun book rental programs. According to PIRG, there were only 300 schools with rental programs in 2009, "that number had increased 10-fold to more than 3,000 by 2013.

In addition, launched a college textbook rental program in 2012. Per a PIRG spokesman, "The proliferation of these programs seems to have mitigated the cost curve for students over the last several years."

Daniel Kline has no position in any stocks mentioned. The Motley Fool recommends The Motley Fool owns shares of and Barnes & Noble. 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.

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