Apple’s new math on textbook pricing
19 Jan
McGraw-Hill Cos. normally sells high-school textbooks for $75 a pop. Now it says it will sell electronic versions of the same books, via Apple, for $15 each. How can the publisher make that work?
It’s the usual answer for this kind of digital question:
“Volume,” says McGraw-Hill CEO Terry McGraw.
But there’s an important asterisk here, too. Normally, McGraw-Hill would sell its books directly to public schools, which would keep the texts for an average of five years.
Under Apple’s new textbooks plan, though, McGraw-Hill will try something different. It will sell its books directly to each student, who will use the book for a year, then move on. They’ll be able to keep the digital text, but won’t be able to resell it or pass it along to another student, and McGraw-Hill anticipates that another set of students will buy new books the following year.
So Mr. McGraw figures that over five years, he’ll generate the same total sales selling $15 ebooks as he would selling $75 books.
Of course, Apple will take an undisclosed cut of sales— McGraw-Hill execs wouldn’t go into details, so let’s assume for now that it’s Apple’s standard 30%—but presumably McGraw-Hill can make up some of that by forgoing the cost of print and distribution.
All of this assumes that the book pricing stays at $15. After Apple’s event, McGraw-Hill executives repeatedly used the phrase “pilot pricing” to describe their near-term plans. They said they have the ability to change the price when and if they want.
But Apple senior vice president Eddy Cue, Apple’s frontman on all media matters, said, “This isn’t pilot pricing…. All of our books will be $14.99.”
It’s important to note that this is about the high-school textbook market, for now. While McGraw-Hill and other publishers sell college texts though other digital platforms, they still haven’t announced plans to do so with Apple.