Kindle is chasing CourseSmart, the leader in e-textbooks

Amazon's (AMZN) unveiling of the Kindle DX, designed in part for digital textbooks, is probably the first exposure many people have had to this revolution in publishing, but Amazon is not first to the table with the idea. In fact, it faces strong competition from an established market presence, CourseSmart, which is already selling e-textbooks to students from 5,647 schools and counting.

CourseSmart was founded by five of the largest textbook publishers, including McGraw Hill (MHP) and Pearson (PSO), to market electronic versions of its school texts at roughly half the price of paper ones. Using a downloadable proprietary file format or a web-based option, students can read the books on their PCs, integrating the text with their notes by cutting and pasting.

I had the opportunity to speak with Frank Lyman, the Vice President of Marketing for CourseSmart, about the rapidly evolving e-textbook market. He told me that his company has three missions: to provide faculty a place to review texts online, to serve as a marketplace for students and publishers, and to partner with book stores, distributors, and other text-related businesses to maintain the market.

I had to ask Lyman, of course, for his thoughts about the new Kindle. He was surprisingly sanguine about its introduction, feeling that the additional exposure it would bring to the electronic format for textbooks would help CourseSmart build its business. He expressed some skepticism at the price of the new Kindle, as well as the willingness of the average student to fork over $500 bucks for a device with a black and white display. CourseSmart's books run on the laptop that 82 percent of college students already purchase, a device that also allows them to do all the other things students want to do: IM, listen to music, make phone calls, all tasks that the Kindle doesn't do or does not as well.

However, one can't ignore Amazon's tremendous reach. Lyman told me that CourseSmart doesn't have an exclusive deal with its founding companies, so it is possible that Kindle-formatted texts could show up in the Amazon catalog. The work involved in formatting each text is considerable, though, and Lyman doubts that many of the books that are offered by CourseSmart will be available for the Kindle soon.

According to the National Association of College Stores, 51.4 percent of the cost of a college textbook reflects the printing, distribution, and point of sale costs (pdf) of a textbook. Given this, the price of the electronic book, around half of the paper version, seems appropriate.

At the moment, then, I size the battle for the schoolbook market up this way: Amazon has massive distribution, logistical, and marketing advantages. The Kindle, however, is a single-purpose device, and I'm not convinced a student would want to buy a laptop for all his other needs, in addition to a Kindle to read textbooks. While I appreciate the better quality of print the Kindle provides, younger eyes probably won't be bothered by reading from a PC screen. Lyman reports that 75 percent of his company's customers are satisfied with the product and would buy more or all of their texts in this format. And color is a huge advantage for CourseSmart.

The question will come down to how publishers can best continue to wring profits out of the textbook business. As technology evolves, the laptop and the Kindle will blend into a device that offers the best of both, so the device won't determine the victor -- money will. I can't predict where the market will go, but I'll be watching it with great interest.

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