I have a lot of conversations about digital textbooks, and see others doing the same under every stone I turn. No doubt, educational institutions are keen to turn to digital content entirely, and publishers are shuffling behind, most looking a little bedraggled, as if they’ve been tossed out of bed after a deep sleep.

Most real conversion to digital has happened in the US, naturally, where schools like NYU College of Dentistry have been running digital-textbook-based courses for ten years.

In Africa, take up seems slow, but I expect hockey-stick growth over the next two years. This week, the American University of Nigeria announced it would be digital-only from September this year: “the university has decided to cut waste and reduce costs to students by eliminating paper textbooks”.

This is the most common refrain: digital textbooks will cut costs. This is probably true in the long run, but I see very little discussion or planning around which costs, exactly, it will cut.

It cuts costs where broker businesses are cut out: warehousing and transport companies, bricks-and-mortar stores. These are expensive, and probably make up about 30% of the price of an average textbook. But it does not naturally cut the publisher’s price of the content alone. For textbooks, printing costs are often less than 10% of the cost of the book (most costs are in editorial and marketing), so publishers can save little there. Moreover, they have to increase staff costs in digital departments long before they can cut staff in paper-based departments. That overlap creates a spike in overheads that isn’t matched by a spike in sales.

Even where publishers do find savings, newly added costs will erode them, not least digital setup costs and ongoing costs of maintaining or subscribing to an ebook delivery platform (e.g. VitalSource in the case of NYU College of Dentistry). And I won’t even get into the costs of devices for students.

So is that it, are these huge cost savings a myth? No, there are two ways the actual price of content will drop:

1. Companies that are not traditional publishers, and therefore have no paper-based business interests (read: jobs) to protect, will enter the market and be most competitive in price. The best example of this is Flat World Knowledge in the US. (Interestingly, Random House recently bought a chunk of FWK, a very smart way to get into the educational market).
2. The purchase model for content will change dramatically. At the moment, most textbooks are purchased by the copy. Where students have to do the purchasing (based on a teacher’s adoption decision), purchase rates are low – about 50% in South African tertiary institutions. For digital texts, publishers can move to a licence-based purchase model, where an institution buys a licence to adopt a title for a particular class of students. The student is no longer the purchaser, so purchase rates are instantly 100% – by doubling purchase rates, publishers really can cut prices. Moreover, a licence-based system alleviates the need for costly DRM – if any formal adoption of a text requires a licence agreement between institution and publisher, copies that leak to individuals outside of licensed institutions drive brand loyalty and word-of-mouth, which in turn may lead to wider licensed adoptions elsewhere. Publishers can worry less about prosecuting every Photocopy Joe, and focus on pursuing and securing licensing contracts with institutions.

In the first case, there is little publishers can do, except invest in their competitors. In the second, publishers have a chance to reinvent their business model themselves.