College textbooks can be expensive! The list price for the hardcover print version of N. Gregory Mankiw’s “Principles of Economics,” which I am singling out for reasons that will become apparent later, is $249.95.
Textbooks have also gotten a lot more expensive over the past few decades. Prices of college textbooks are up 135% since 2001, when the Bureau of Labor Statistics began keeping track, while the overall consumer price index is up 46% and what the BLS calls “recreational books” have actually gotten a little cheaper. In the broader category of educational books and supplies, for which the BLS has price data going back to 1967, prices started rising faster than inflation in 1981 and are up almost ninefold since.
This price explosion has gotten lots and lots of attention in the news media and in academia. What has gotten somewhat less attention is that, as you may be able to see in the above chart, it seems to have ended in 2016. Here’s the chart since 2001 just for college textbooks, which makes that even clearer.
Economist and inveterate chart-maker Mark J. Perry of the University of Michigan at Flint and the American Enterprise Institute was among the first to pick up on this, in 2017. He speculated that the causes included the rise of new sales and rental channels, digital offerings from established publishers, and competition from newcomers such as the for-profit FlatWorld and the nonprofit OpenStax.
That … sounds about right. Used-textbook sales started growing in the late 1990s thanks to eBay and Amazon.com, according to a 2014 analysis by the consulting firm McKinsey. Textbook-rental services “emerged as a mainstream option” in 2008 and rapidly gained market share. Established publishers reacted by accelerating the move to digital course materials that they effectively rent to students, usually at lower upfront cost than a textbook. But others are now providing similar offerings free: OpenStax, based at Rice University in Houston, estimates that 2.9 million students used its free digital textbooks last year. Other university-backed free-textbook efforts include the University of Minnesota’s Open Textbook Library and the Massachusetts Institute of Technology’s Open Courseware project.
The National Association of College Stores’ most recent survey of student spending found that 44% of U.S. and Canadian college students rented course materials in spring 2019, while 22% downloaded free course materials — double the share who reported doing so in 2016. The survey also found that average annual student spending on textbooks and other course materials is down 31% since the 2015-2016 academic year, and 41% since 2007-2008.
A different survey, by the research firm Student Monitor, found a similar decline. Textbook publishers have definitely been feeling the impact, as is clear from Pearson Plc’s stock performance since it sold off the Financial Times and the Economist in the summer of 2015 to focus on what Chief Executive Officer John Fallon predicted would be “one of the great global growth stories of the next decade.” (I use the Standard & Poor’s 500 Index as the standard of comparison here because, although it’s a British company, Pearson gets more than 60% of its revenue from the U.S.)
In the U.S. market for new college course materials, Pearson had a 42.7% share in 2018, Cengage 21.8% and McGraw-Hill Education 15.9%, according to research firm Simba Information. That’s their share of revenue, and thus doesn’t reflect the inroads made by free textbooks. The fact that all three saw significant declines in college-course-materials revenue in 2018 (6.5% for Pearson, 5.8% for Cengage and 8.5% for McGraw-Hill, estimates Simba) presumably does reflect those inroads.
Cengage and McGraw-Hill are both owned by private-equity firms, which is why they’re not included in the above stock chart. They are also in the midst of consummating a merger, which is opposed by various organizations that say this will give them the leverage to jack up prices. A market of which the top two players control a combined 80% would in fact be quite concentrated, but given that publishers are struggling and prices falling, is this really something to worry about?
For the full article click here: https://finance.yahoo.com/news/college-students-catch-break-one-130020056.html