In their article ‘Textbooks are changing – the way we buy them needs to change too‘ for Wonkhe, James Gray and Tim O’Shea of Kortext discuss the market for etextbooks. In doing so they briefly discuss pricing:

‘You might think that e-textbooks should be cheaper than their printed counterparts. After all, there are huge savings in printing, inventory, and logistics costs, and the cost of producing an additional copy is almost zero. This has not been the case. Partially this can be explained by the development costs of multimedia, and interactive features – but it does still come as a surprise to many. The trouble is – some of these books and resources become very expensive when every student needs their own copy’

Their comments are interesting, particularly given the current debate about pricing of books to libraries during the Covid crisis, and the #ebooksos campaign which argues that eBooks are becoming increasingly unaffordable, unsustainable and inaccessible for academic libraries to purchase. #ebooksos provide evidence of differential (and exorbitant) ebook pricing.

So does higher ebook compared to physical book pricing to libraries reflect only the additional fixed costs associated with multimedia features, and that every student needs a copy? Lower production costs for ebooks may be partly offset by the costs of digitisation and ‘multimedia’ bells and whistles. However, libraries argue that these ‘interactive multimedia’ features are overstated, and most etextbooks are simply pdfs which are very low cost to produce. One is inclined to believe that ebooks have lower marginal costs than physical books. Moreover, It is also difficult to see why libraries need ‘more’ digital copies than physical copies; students have always needed their own copy of a textbook, but – as before – they don’t need one all the time. The only thing that has changed during Covid is that they have needed an electronic copy (not a physical one).

If these factors don’t explain the price hikes can we explain them in another way? In looking at this issue it is helpful to distinguish between the information product (the book content) and the delivery mechanism (the physical or digital rendition of that content) as it is only in the former where market failure occurs and intervention is desirable.

Information has a high fixed cost of production relative to its cost of reproduction. Investing firms need to price at average cost to recoup their initial investment, but their copying competitors – who did not need to invest to ‘produce’ the information – can price at the lower marginal cost and take the market. Without some sort of protection from copying, there is an economic argument that there would be no incentive for firms to invest. Copyright law is therefore designed to protect such investments.

Given this, how can firms get away with charging more for ebooks than for physical books? The cost of producing the content (the ‘information’) has not changed. The cost of the vehicle for delivering the information is arguably lower for ebooks than physical books.  There are no ‘more’ students needing the information, so demand as a whole has not changed.

What has changed is that students have shifted vehicle delivery. Covid has prevented students accessing physical books through their libraries and they have switched from demanding a physical delivery of that information to an electronic one.

And while students have been forced by circumstance towards ebooks, publishers have applied existing copyright ‘rules’ governing the market in information  to their own advantage. They have used existing copyright law – designed for a world of physical books – to stop libraries switching between electronic and physical delivery of information. By preventing libraries from lending an electronic copy in lieu of a hard copy they already own, publishers have been able to prevent substitution of one delivery vehicle for another.

Preventing delivery substitution has had two effects. The first has been to artificially create demand as libraries have been forced to buy electronic versions of books they already have on their shelves. The second has been to limit competition in the electronic delivery market for information. By separating electronic and physical delivery, the publishers have been able to shield the ebook market from competition in physical books provided by the second hand book market. This second effect will have impacted individual consumers as well as libraries.

Academic libraries are looking to different models – be that open source textbooks and/or in house publishing – going forward to improve their position. Such specific solutions may help in the long term, although effectiveness may be limited if such publishing houses go native. (One can point to a number of publishing houses which started out within Universities and are now seen to be part of the problem).

I would argue, though, that this is but one arrow in the quiver. The threat of self-publishing may be helpful in pressuring publishers to cooperate. However, the explicit legalisation of Controlled Digital Lending would, by making delivery vehicles substitutable, remove the distinction between the physical and digital delivery mechanisms and return copyright law to its rightful place in protecting the market for information.  Moreover this solution would drive competition through all sectors of the book market, not just textbooks.

One cannot criticise publishers for profit seeking – they operate at the behest of their shareholders. However, when bending the rules allows firms to generate excess profits, governments should intervene. Controlled Digital Lending offers an easy structural remedy to publishers’ exploitative behaviour.

Bridget Martindale, TheBookSeekers

29-03-2021