Textbooks in the iPad Age: Will Cool Tech on Campus Beat Renting?

With just over a month to go before Apple's (AAPL) long-awaited iPad device goes on sale, expectations that it will transform publishing and media are sky-high. Some of those hopes will dissipate: The iPad won't "save" publishing (whether books, magazines, or newspapers). But it may finally bust open the door for massive digital textbook adoption in a way that has never been feasible.Widespread digital textbook use should have already happened, in theory. College students are loath to go to class without a laptop or smartphone, and they're more likely to find course materials on virtual systems like Blackboard than through class handouts. They can buy electronic editions of textbooks through CourseSmart, set up by a consortium of leading education publishers. And yet students remain underwhelmed by digital textbooks.

The Price of E-Textbooks

E-textbook sales have been lethargic, and the reason usually comes down to cost. Devices like Amazon's (AMZN) Kindle DX or Sony's (SNE) Reader are too expensive for their limited capability. Digital textbooks aren't appreciably cheaper than print editions, and free or substantially cheaper software upgrades to the text haven't caught on. "I don't think we're going to see anything dramatic unless a sufficiently affordable product comes onto the market," Nicole Allen, textbook advocate for the Student Public Interest Research Groups, told us in November. "And frankly, I think it's more probable for an affordable e-reader to appear before affordable content."

The iPad may not fit the bill for students on a budget -- the most bare-bones model is $499 -- but that's only $10 more than the similar-sized Kindle DX, and it far outpaces Amazon's textbook presentation. A Kindle DX presents textbooks in black-and-white (e-Ink doesn't handle color) and are text-based, while the iPad's full-color touchscreen permits web-based interactivity, and Apple promises an iBookstore with an iTunes-like shopping experience that might rival Amazon's vaunted wireless one-click service.

ScrollMotion and Inkling

At least that's what textbook publishers seem to be banking on, given the deals already announced or in the works. Prominent texbook companies including Houghton Mifflin Harcourt, Pearson (PSO) and McGraw-Hill (MHP) this month signed with the software company ScrollMotion to adapt textbooks specifically for the iPad, The Wall Street Journal reported. ScrollMotion had already worked with publishers to make select titles available as standalone iPhone apps, but the textbook deal goes many steps forward: ScrollMotion's mandate is to turn publishers' digital textbook files into applications (such as dictionaries and quizzes), test-prep and study guides, and other ancillary materials.

Another startup, Inkling in San Francisco, is chomping at the bit to get textbooks iPad-ready. The company is working with McGraw-Hill and Pearson to update print and digital textbooks into interactive files more conducive to the iPad's features and to students' nonlinear textbook-reading habits, VentureBeat reported in January. Like ScrollMotiion, Inkling promises "to replace static images with interactive puzzles that burn important concepts in to students' brains better and longer," according to CEO Paul McInnis.

But the kicker, VentureBeat explained, is pricing. Students buying an Inkling e-text could buy just the chapters they need, rather than forking over several hundred dollars for a printed book containing only a couple of chapters a course requires. And instead of shelling out extra cash for a new edition of a textbook that's only marginally updated, students using Inkling could pay for customized bundles of the material they need, and nothing more.

Renting vs. Buying

A pay-as-you-go, buy-what-you-want model might just be the thing to take a bite out of the used textbook market, which thrives on its exorbitant prices. Then again, another sector of educational publishing is betting on another revenue stream: rentals. Chegg.com, a Netflix-style textbook-rental service that places its bright orange boxes in university bookstores, has raised more than $160 million in venture funding and loaned out more than 2 million textbooks since the company launched five years ago.

What's Chegg's secret? Social media. The company pays students $5 for every customer they recruit through Twitter, Facebook, and other services, according to The Washington Post. Rental prices fall far below the four-figure sum students are now resigned to spending each year they're in school, and Congress has set aside $10 million in grants to fund college-textbook rental programs. Which is why another textbook-rental company, BookRenter, recently partnered with leading online used bookstore Alibris.com -- a partnership so natural, it's surprising it didn't happen years ago -- and why Barnes & Noble's (BKS) College division has finally made its own push in the book-rental market.

The iPad will be a shiny new toy that should finally push textbooks into the 21st century. The question remains whether publishers' excitement for the device will reach the classroom. Recent statistics estimate that 70% of students prefer using printed textbooks to e-textbooks. The iPad may up that number, but when there are still new and used physical books to sell or rent, students aren't about to replace existing markets for one that still has to find its footing within the halls of higher education.
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