A Brief History of the College Textbook Pricing Racket

Its past, present, and future.

by Ernie Smith August 29, 2016

A version of this post originally appeared on Tedium, a twice-weekly newsletter that hunts for the end of the long tail.

When I recently wrote about airport stores, one of the most interesting (albeit minor) facets of the piece was the fact that airport travelers are generally considered a captive audience, making it easy for shops to jack up prices.

Airports, though, are amateur hour compared to the college textbook industry.

Any industry that can increase its prices by 1,041 percent over a 38-year period—as the textbook industry did between 1977 and 2015, according to an NBC News analysis—is one that knows how to keep, and hold, an audience. (It’s almost like they’re selling EpiPens.)

And, as students across the country return to school, this is probably the perfect time of year to ask: Was it always this way? The answer: no, and you can blame a big shift in the ’70s.

Like graphing calculators, textbooks have a price that’s artificially inflated based on its use case.

It wasn’t always that way—at some point, the way textbooks were produced fell out of whack with the expectations of students. Priceonomics suggests that the major upward shift in prices for college textbooks occurred sometime in the 1970s, and since then hasn’t stopped.

What happened in the ’70s? Let’s ask someone from the ’70s: In a 1975 piece for the The Annals of the American Academy of Political and Social Science, journalist Phillip Whitten, who spent time running his own publishing firms, said that shifts in the uptake in textbooks, driven by a desire to standardize curriculum as well as to make things easier for students, led to a significant increase in the use of textbooks during this period.

But textbook companies of the era didn’t have it easy. In his piece, Whitten crunched the numbers of a hypothetical textbook, one sold for $12.50 but generally offered to college stores at a wholesale price of $10. (In today’s dollars, the book would have sold for $44.73 before markup by the bookstore—not a bad price, actually.)

In Whitten’s example, the book sold 50,000 copies, netting half a million dollars in sales, but was offset by a variety of costs, including royalties, marketing, and manufacturing. Still though, the book made $79,000 in pre-tax profit, a solid 15.8 percent margin. But he noted that the game for publishers was generally not that easy, due to the existence of both fixed and variable costs.

“If Sociology in Modern World had sold 20,000 copies, we would have lost $75,000; had it sold 10,000 copies—and there are many texts that do not do even that well—our loss would have been greater than $126,000,” Whitten wrote.

(How does that compare to the modern day? Priceonomics writer Zachary Crockett, who spent time working for a textbook publisher, breaks down the math similarly to Whitten, though these days, publishers tend to make $40 in pure profit on a $180 book—a 22 percent margin.)

(Photo: Connie Ma/CC BY-SA 2.0)

Whitten closed out his essay noting that the publishing space had been getting increasingly competitive, and implied that only a few large publishers will survive.

Educational publishing, for the remainder of the 1970s, will not resemble at all the halcyon days of the late 1960s. In a time of economic retrenchment and static enrollments, only those publishers who can develop techniques to reduce their financial risk will survive; and only those publishers who can learn to produce quality books consistently, with the maximum innovative pedagogical features permitted by existing constraints, will prosper. It is a worthy challenge.

Instead, what happened was something different: College publishers figured out that, to improve their margins, all they had to do were two things: raise prices and release new editions of the same text, forcing students to buy new textbooks even if, in many cases, they didn’t need them.

Another factor? Improved printing technology, which led to more visuals.

In the 1960s, for example, it was somewhat uncommon for a textbook to have much in the way of pictures. Some books, like Knopf’s History of the Modern World, had just a handful of pictures in their nearly 1,000 pages.

But by the 1980s, this changed, a change that at first was seen as generally positive for students, according to a 1986 study done by Georgia State University researchers Brenda D. Smith and Joan M. Elifson. The duo noted the picture-free material tended to be comprehended just as well as material with pictures, but students preferred the more vibrant option.

“Student preference proved to be overwhelmingly in favor of pictures,” the researchers wrote. “Of the 145 students, 119 chose the passage with pictures, while only 26 chose the passage without pictures.”

Soon enough, if you were a textbook publisher, you couldn’t get away with just two colors anymore, and the number of pictures in textbooks increased dramatically between the 1960s and 1980s, and, with that, of course, also costs.

(Photo: wohnai/CC BY 2.0)

And, perhaps surprisingly, the forces driving prices up have won out against some powerful forces driving them down, like the increase in paperback books and the rise of the used book trade.

In fact, it was 1933 when Princeton University, in the midst of the Great Depression, launched its Student Loan Library as part of an effort to help students struggling to make ends meet.

The library, made up of used books from students who had read them in prior semesters, represents one of the earliest examples of the used book trade in colleges, one that picked up a few years later, when New York University students launched a used bookstore—the result of an outcry after four students were arrested for “peddling without a license.”

As for paperback books, college professors were more supportive of them for literature than their K-12 peers.

“Many teachers and college administrators report that paperbacks have had a noticeable effect upon the reading habits of students,” New York Times scribe Edward A. Walsh wrote in 1960. “The world of books suddenly appears more inviting. Students crowd bookstores to buy required volumes, stay to browse among the tastefully designed offerings and come away with several additional purchases whose colorful appeal they could not resist.”

(Fun fact: Paperback books used to receive a lot of the same criticism that e-books currently do.)

Both of these factors helped, but only so much—as anyone enrolled in a university can tell you.

Last year, two separate incidents occurred that raised the ire of textbook critics. In some ways, they kind of dovetail into one another.

The good professor, punished: Last October, Alain Bourget, an associate math professor at the California State University at Fullerton, received a formal reprimand after choosing not to give his students the $180 textbook recommended to him by the school, instead offering a cheaper $80 option, supplemented by online offerings. The school said this broke the rules, because he veered from the book every other introductory linear algebra course was using at the school. He fought the reprimand, but failed. (His hometown paper treated him like a hero.)

The economist who’s made bank from a single book: Harvard University Economist Gregory Mankiw was raked over the coals by The Oregonian last year for the high cost of his tome Principles of Economics, an introductory book that sells on Amazon for $333.35 and can be rented on Chegg for $49.99. The absurdity of Mankiw’s book, which exemplifies many of the economic disparities covered in the book, was further highlighted by writer Richard Read’s story. When asked if he’d ever write an open-source textbook, Mankiw had this to say: “Let me fix that for you: Would you keep doing your job if you stopped being paid? Why or why not?” A fair point—until you realize that Mankiw has, by some estimates, made $42 million in royalties from this book alone.

What’s fascinating about the second example is that the professor that brought the book to Reed’s attention, Mike Paruszkiewicz, notes that he assigns the book reluctantly, though he admits that he wouldn’t if it wasn’t easy to rent it out or acquire prior versions for cheap.

But it’s worth asking—if professors know these textbooks are absurdly expensive, why assign them? Well, the answer involves a couple of factors, basically: Many professors simply don’t know the prices of the textbooks, and, far less frequently, sometimes the professors themselves wrote the book. (The American Association of University Professors, while not opposing it entirely, discourages this practice.)

The former case is generally more common than the latter—with the Daily Texan noting earlier this year a case of a German book increasing in price from $90 to $200, catching both the professor and students off-guard. Though this, too, highlights a another factor: a limited number of options, as five major publishers control 85 percent of the market.

When I was in college, I remember feeling like a genius because I spent a lot of time looking around Amazon and eBay, finding copies of the textbooks I needed, sometimes for ten cents on the dollar. It felt good to get one over on the man as I ate my Life cereal with rice milk.

My eBay victories came during the brief window after the launch of Napster, which introduced a lot of students to the power of the ethernet pipes in their dorms, but before the launch of the last big innovation in textbooks—the rental marketplace Chegg.

(Sure, electronic textbooks exist and they look snazzy, but they’re a bad deal.)

But will textbooks ever move to the Napster model? Probably. In fact, it’s already happening.

OpenStax, a nonprofit project of Rice University, has been working to both release open-source textbooks and to tailor-make books for professors that can be sold at college stores for much lower costs.

Community colleges, whose students feel the pain of textbook costs more acutely than students at larger schools, have been quick to jump on the open education resource model, which is spreading more and more.

“The educational materials and publishing industry in five to 10 years will be completely remade,” OpenStax’s Richard Baraniuk told University Business in 2014, ”just as the music industry, the newspaper industry and the computer software industry were completely remade by the internet.”