Publishing sales reps work with faculty members to try to convince them that their textbook is the best one. From there, faculty decide what books to require, but the students are the ones who actually open their wallets to pay for them.
This is called the principal-agent problem. So how can universities help solve this problem to get the very best textbook at the most affordable price?
Jason Lorgan, Executive Director of Campus Recreation, Memorial Union and UC Davis Stores at University of California, Davis, joined the Enrollment Growth University podcast to talk about the “principal-agent” problem and how they’re attempting to solve for it at UC Davis with a flat-fee textbook model.
What Is the Principal-Agent Problem?
“I can share a true story with one of our staff members,” Jason said. “His name is Carlo and he was a UC Davis student…. When he arrived at UC Davis about 10 years ago or so as a college student, he was a first generation college student.”
Carlo came from a low-income background and was the first in his family to go to college. When his mother dropped him off at the campus, she handed him an envelope and said, “This is for your textbooks.”
He opened the envelope and found $100 there.
Carlo’s planned to major in aerospace engineering. Once in the bookstore, though he realized that that $100 wouldn’t even buy him one textbook. So right there, as a freshman, before classes even began, Carlo decided that maybe aerospace engineering wasn’t for him.
He walked around the bookstore looking at different disciplines. Though Carlo wasn’t really sure what political science was, he realized that he was able to afford the political science books. Carlo changed his major based on what he saw as the average cost of textbooks per major.
Significant inequities exist today within the course materials space. There are those students who can afford access to their content and those students who cannot afford access to their content. Those two students are in very unequal places.
“There’s also a financial aid component in this program,” Jason explained, “where the way financial aid works in regards to textbooks is somewhat dysfunctional because it’s based on the average cost of textbooks.”
Many STEM-related textbooks cost between $250 and $300 range, a huge burden for almost anyone, at almost any income level.
If anyone pays above the average, they don’t receive institutional support for that course material cost. A flat fee, UC Davis found, solves that problem. Almost all other campus costs are a flat fee, after all.
“Whether you’re an English major or an engineering major,” Jason said, “tuition is the same, for example. And so this (approach) tries to take the textbook model and work it into the same model that the rest of higher education uses for other student costs.”
How to Make the Economics Work for Both Students and Publishers
In studying why textbooks cost so much money, Jason discovered that publishers, which are really just a collection of authors, primarily make their money the first time a textbook gets sold.
A new class of students must buy new editions. But once that class has purchased those books, students rarely buy new copies since they can trade in the secondary marketplace. So if that book exists for three or four years before a new edition comes out, the publisher only sees that very first sale.
So UC Davis created the Netflix or Spotify of textbooks, a subscription model in which students have access to course materials for just a $199.
“Publishers have to raise the price to cover their costs based on that one sale,” Jason explained. “And so in this model, we’ll ask the publishers to take a dramatic price reduction, but in exchange they’ll be paid every solitary term instead of just once. Our current ask of large publishers is for them to drop their price, sometimes in the neighborhood of 80%; however, overall their revenue will significantly increase.”
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