Market Failure, Copyright Law and Controlled Digital Lending – curbing publisher pricing in the markets for ebooks

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

How To Filter by Page Range

FILTERING BY PAGE RANGE

We offer filtering by page range so that customers can limit search results to a smaller set that is more closely aligned to the age of the child. The number of pages in a book provides some indicator of the amount of text in a book. However customers should note this is a very broad brush guide as it does not indicate how difficult a book is to read or understand.

Also please note that whilst the ranges may look a bit odd, they reflect the fact that in the past books were printed on offset presses and so the total pages had to be multiples of 8, 16, or 32.

More information as to the types of books which may fall in the categories is shown below:

0 – 40
Board books aimed at very young children tend to have few pages. Picture books – which have a standard page count of 32 – also fall in here. Example would be ‘Goodnight Moon’ by Margaret Wise Brown.

41 – 64
Books in this category are likely to have lots of pictures alongside the text and tend to be aimed at emerging readers.  Example would be ‘The Glow-Worm who Lost her Glow’ by William Bedford and Sophie Joyce 

65 – 96
This category is the start of ‘chapter books’. Here we should still see lots of pictures, but more words than in the previous category. Example would be ‘Winnie goes batty’ by Korky Paul and Laura Owen.

97 – 128
More chapter books. The text is getting longer here and there are more likely to be line drawings than full illustrations. Example would be ‘Sophie’s Tom’ by Dick King Smith.

129 – 192
These books would likely fall in the 8-12 category in bookshops. Example would be Captain Underpants and the Attack of the Talking Toilets’ by Dav Pilky 

193 – 256
Again these books would likely fall in the 8-12 category in bookshops. Example would be ‘A Dog so Small’ by Philippa Pearce.

257 – 352
Stories here are getting longer and more complex – so upper end of the 8-12 and into the teen category. Example would be ‘Charlie Bone and the Time Twister’ by Jenny Nimmo.

353+
This category will cover books aimed at older readers, including YA.  Example would be ‘The Hunger Games’ by Suzanne Collins.

 

PUBLISHER CATEGORIES

Publishers categorise books by target audience, and these  categories reflect content as well as reading difficulty. The following outlines the criteria for  YA and Middle Grade:

Middle Grade: used for books which have the following characteristics:

  • - aimed at ages 8-11 years, US grades 3-6, UK school years 4-7,
  • - around 30-50k words long,
  • - main character is around the age of the reader or younger,
  • - topics include friendship, family, the character’s life and world, external conflict,
  • - point of view is frequently in the third person,
  • - content is restricted so swearing, graphic violence and sexuality are not allowed.

YA (Young Adult): used for books which have the following characteristics:

  • - aimed at ages 12-18 years, US grades 7-12, UK school years 8-15,
  • - around 50-75k words long,
  • - main character is aged 12-18 years,
  • - topics include self-reflection, internal conflict vs external, analysing life and its meaning,
  • - point of view is often in the first person
  • - swearing, violence, romance and sexuality are allowed.

 

There is a useful guide to age groups and children’s books in this post by Jenny Bowman.