A REFRESHER COURSE IN THE PRINCIPLE OF DERIVED DEMAND. In matters of textbook selection, is the professor principal or agent? In the Chronicle of Higher Education, John B. Thompson (via Public Brewery) looks at the economics of the vanity university press. Start with the research monograph.
The main explanation almost certainly lies elsewhere. Research libraries constitute a principal market for scholarly monographs, and in the course of the 1980s and 1990s they were subjected to intense pressures of their own: the steep rise in the prices of scientific journals and the increasing costs of information technology. Library budgets were limited, and something had to give. In the period from 1986 to 1998-99, the number of monographs purchased annually by research libraries in the United States declined by more than 25 percent. Since academic publishers were also producing more monographs each year, that meant that an ever-increasing range of available titles was competing for a dwindling pool of resources.
Anybody ever look at the tariffs the academic press use? There was an institutional price for libraries, and an individual price. The institutional price anticipated university libraries being able to draw on indirect cost returns from sponsored returns; the individual price treated the sharable inputs as a free good. The most grasping vice-president of traffic at The Octopus would blush at the value-of-service pricing that resulted. Was it the avarice of the publishing houses or the end of lavish indirect cost returns that changed the calculus?
At the same time, many American university presses were coming under pressure from another source: their host institutions. In the 1970s and 1980s, some began to find themselves faced with growing pressure to reduce their dependence on direct or indirect subsidies and become more autonomous financially -- "self-supporting" was the term often used. Universities faced their own fiscal constraints, and university presses, with their somewhat ambiguous status (were they academic units or business units?), were obvious targets for financial scrutiny.
Reading between the lines, I see those indirect cost returns going away. And it took a while for the Principle of Derived Demand to bite on the textbook producers.

The professors are the gatekeepers in the marketing chain. But the person who recommends the textbook is not the person who buys it. Hence the considerations that weigh uppermost in the minds of the gatekeepers are not necessarily the considerations that matter most to the students ultimately required to buy the book. The adoption system thus creates a form of non-price competition -- that is, competition among publishers on grounds other than price -- that has shaped the evolution of the textbook-publishing business.

In the attempt to persuade professors to adopt their textbook rather than the textbook of a rival company, publishers have invested more and more resources in producing evermore elaborate and comprehensive textbooks and in developing a range of ancillaries, from instructors' manuals and test banks to packages of software and multimedia products -- the so-called "package wars." But while the struggle for adoptions ratchets up the scale of investment, the only way of generating a return on that investment is through the sale of printed textbooks to students. Most of the electronic and multimedia supplements are given away to professors with the aim of influencing their adoption decisions. Thus the only way to recoup escalating costs has been to concentrate on lower levels of the curriculum, where student numbers are large, and to increase the prices of textbooks. The big textbook publishers have done both. They have concentrated on the first and second years of the college curriculum, and they have commonly increased textbook prices by at least 6 to 8 percent per year. But the increase in prices has tended to fuel a second development, which has played a crucial role in the field of textbook publishing: the growth of the used-book market.

But bite, ultimately, it did. (The Superintendent's suspicion remains that grants, whether from the government, or from Mummy and Daddy, make many students less sensitive to textbook prices than they might be. Compare and contrast the price of a widely used paperback version of just about any introductory course textbook with that of any full-color hardback rail enthusiast book with a similar page count to see what I mean.)
Publishers listened carefully to the gatekeepers because they needed their adoptions to survive, but they didn't pay much attention to students because they assumed that students would buy what they were told to buy. Now the silent partner is demanding to be heard in the only voice that really matters in this game: They are refusing to buy. They regard prices as too high and are inventing all sorts of ways to avoid doing the one thing they are supposed to do, which is to buy the books. They are borrowing books, sharing books, going online to shop around for the cheapest books they can find, and so on. Enterprising jobbers are importing cheaper foreign editions and undercutting the sales of American editions. Textbook publishers are experiencing increasing returns of unsold books and declining levels of "sell-through," the percentage of students who purchase assigned texts.
Don't you love bypass and arbitrage? All that's missing is the representative of Harcourt Brace or South-Western or one of the other exploiters of students whinging about cream-skimming and unfair competition. At the same time, the behavior of the commercial publishers has provided an opportunity for the academic presses to profitably offer some works.
The growth in monograph output over the last couple of decades has been driven not by an overall growth in demand but by a combination of other factors (including the demand from academics for credentials that can be used in the tenure-and-review process and the short-term need of presses to meet their sales forecasts). Publishing fewer monographs and concentrating only on works of outstanding quality might result in some friction with local faculty members, and some temporary shortfalls in frontlist revenue, but if it is accompanied by an effective shift of editorial strategy to other kinds of commissioning, it would strengthen the position of the presses in the long run.
Yes, steps that would make published research more likely to be read research are steps in the right direction. And here's another opportunity.
The presses could strengthen their positions considerably by focusing their attention on publishing for the higher-education market -- especially for those levels of the curriculum, like upper-level undergraduate and graduate courses, that have been neglected by the big textbook publishers, who have been forced by the logic of their own field to concentrate on the lower levels of the curriculum. The commissioning of textbooks and supplemental texts would not compromise the commitment of the university presses to publish original works of scholarship, but would be complementary to it and entirely consistent with their overall educational mission.
Although a university administration that sees some common costs of the university press and the academic units is an administration in a position to engage in all sorts of creative cost allocations ... On the other hand, peer-reviewed textbooks, or research monographs written and edited with a view toward their utility as upper-division textbooks, cannot be all bad. We certainly hear a lot from our spokesmen about the value of the teacher-scholar.

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