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entitled 'College Textbooks: Enhanced Offerings Appear to Drive Recent 
Price Increases' which was released on August 16, 2005. 

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Report to Congressional Requesters: 

United States Government Accountability Office: 

GAO: 

July 2005: 

College Textbooks: 

Enhanced Offerings Appear to Drive Recent Price Increases: 

GAO-05-806: 

GAO Highlights: 

Highlights of GAO-05-806, a report to congressional requesters: 

Why GAO Did This Study: 

The federal government strives to make postsecondary education 
accessible and affordable, primarily by providing financial aid to 
students and their families. Given that nearly half of undergraduates 
receive federal financial aid, Congress is interested in the overall 
cost of attendance, including the cost of textbooks. We were asked to 
determine (1) what has been the change in textbook prices, (2) what 
factors have contributed to changes in textbook prices, and (3) what 
factors explain why a given U.S. textbook may retail outside the United 
States for a different price. 

We received technical comments from the Department of Labor. The 
Department of Education had no comments. The National Association of 
College Stores generally agreed with the report’s findings. The 
Association of American Publishers agreed with some findings but 
expressed concern about the data sources we used and the 
characterizations made by retailers and wholesalers regarding the 
impact of publisher practices on students. We carefully reviewed the 
data sources available on college textbook pricing and found the data 
we used to be the most complete and reliable data available for our 
purposes. Additionally, we sought perspectives from publishers, 
retailers, and used book wholesalers to ensure our characterization of 
the textbook industry was balanced and complete. 

What GAO Found: 

In the last two decades, college textbook prices have increased at 
twice the rate of inflation but have followed close behind tuition 
increases. Increasing at an average of 6 percent per year, textbook 
prices nearly tripled from December 1986 to December 2004, while 
tuition and fees increased by 240 percent and overall inflation was 72 
percent. The cost of textbooks as well as supplies as a percentage of 
tuition and fees varies for first-time, full-time, degree-seeking 
students by the type of institution attended—72 percent at 
2-year public institutions, 26 percent at 4-year public institutions, 
and 8 percent for 4-year private institutions. 

Annual Percentage Increase in College Textbook Prices, College Tuition 
and Fees, and Overall Price Inflation, December 1986 to December 2004: 

[See PDF for image] 

[End of figure] 

While many factors affect textbook pricing, the increasing costs 
associated with developing products designed to accompany textbooks, 
such as CD-ROMs and other instructional supplements, best explain price 
increases in recent years. Publishers say they have increased 
investments in developing supplements in response to demand from 
instructors. Wholesalers, retailers, and others expressed concern that 
the proliferation of supplements and more frequent revisions might 
unnecessarily increase costs to students. 

U.S. college textbook prices may exceed prices in other countries 
because prices reflect market conditions found in each country, such as 
the willingness and ability of students to purchase the textbook. While 
geographical barriers have historically limited the reentry of 
textbooks intended for international distribution back into the United 
States, known as reimportation, recent advances in electronic commerce 
have broken down this barrier. In response to concerns that the 
international availability of less expensive textbooks might negatively 
affect textbook sales, publishers have taken steps to limit large-scale 
textbook reimportation. 

www.gao.gov/cgi-bin/getrpt?GAO-05-806. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Cornelia M. Ashby at 
(202) 512-7215 or ashbyc@gao.gov. 

[End of section]

Contents: 

Letter: 

Results in Brief: 

Background: 

College Textbook Prices Have Grown at Twice the Rate of Inflation, 
Trailing Annual Tuition Increases: 

Publisher Investments in New Products Have Contributed to Increases in 
Textbook Prices: 

The Price of U.S. Textbooks Sold in Other Countries Varies according to 
Local Market Conditions: 

Concluding Observations: 

Agency Comments: 

Appendix I: Objectives, Scope, and Methodology: 

Appendix II: Consumer Price Index Average Annual Percentage Growth, 
Academic Years 1987-1988 to 2003-2004: 

Appendix III: Comments from the National Association of College Stores: 

Appendix IV: Comments from the Association of American Publishers: 

Appendix V: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Illustration of Typical Textbook Pricing Practice for $100 
Publisher-Priced Book: 

Table 2: Source and Methodology for CPI College Textbook Research 
Series Data: 

Figures: 

Figure 1: The Typical Life Cycle of a College Textbook: 

Figure 2: Annual Percentage Increase in College Textbook Prices, 
College Tuition and Fees, and Overall Price Inflation, December 1986 to 
December 2004: 

Figure 3: Estimated Cost of Textbooks and Supplies as a Percentage of 
Tuition and Fees, Academic Year 2003-2004: 

Abbreviations: 

AAP: Association of American Publishers: 

BLS: Bureau of Labor Statistics: 

CPI: Consumer Price Index: 

IPEDS: Integrated Postsecondary Education Data System: 

NACS: National Association of College Stores: 

United States Government Accountability Office: 

Washington, DC 20548: 

July 29, 2005: 

Congressional Requesters: 

The federal government endeavors to improve access to and affordability 
of postsecondary education, primarily by providing financial aid to 
students and their families. Consequently, the overall cost of 
postsecondary attendance, including components such as tuition and 
textbooks, is of national importance because escalating costs can have 
negative effects on access and affordability. In academic year 2003- 
2004, students and their families spent over $6 billion on new and used 
textbooks.[Footnote 1] Given that nearly half of undergraduates receive 
federal financial aid and the cost of textbooks is one component 
considered in making these awards, escalating textbook prices can 
impact federal spending. Because of the impact on access, 
affordability, and federal spending, recent reports of escalating 
textbook prices and instances in which publishers sell U.S. textbooks 
in other countries at lower prices have heightened congressional 
concern and raised questions about textbook pricing practices. You 
asked us to determine (1) what has been the increase, if any, in 
textbook prices? (2) what factors have contributed to changes in 
textbook prices? and (3) what factors explain why a given U.S. textbook 
may retail outside the United States for a different price?

To quantify the change in college textbook prices, the Department of 
Labor's Bureau of Labor Statistics (BLS) constructed for GAO's use a 
Consumer Price Index (CPI) data series that shows how the price of 
textbooks for consumers has changed since December 1986, the earliest 
date for which college textbook prices are available as part of BLS's 
research index. In drawing samples to compute price indices, BLS 
defines a textbook as any book required for a course, including books 
intended for general readership and packages containing the textbook 
and related supplements when the textbook alone has not been ordered. 
In order to put the price of a textbook into context, we examined the 
cost of tuition and fees to students and their families as tracked by 
the CPI since 1980. We also examined data from the Department of 
Education's (Education) Integrated Postsecondary Education Data System 
(IPEDS) to gain an understanding of the cost of textbooks and supplies 
(IPEDS does not disaggregate textbooks and supplies) for first-time, 
full-time, degree-seeking students during the course of an entire 
academic year, as estimated by postsecondary institutions, and the 
portion of the total estimated cost of tuition and fees that books and 
supplies represent. To determine what factors have contributed to the 
change in college textbook prices, we interviewed executives from five 
textbook publishers that account for more than 80 percent of new 
textbook sales; the three major national used textbook wholesalers; 
three companies that operate over 1,300 college textbook retail stores, 
or 29 percent of stores nationwide; the National Association of College 
Stores; the Association of American Publishers; the California and 
state Public Interest Research Groups; and various other industry 
experts. To determine what factors have led to differences in the price 
of some textbooks in U.S. and non-U.S. markets, we reviewed relevant 
economic theory and interviewed major industry players. Specifically, 
we spoke to representatives from textbook publishers, operators of 
textbook retail stores, and used book wholesalers to determine the 
extent to which books may be available in other countries at lower 
prices, and the reasons behind these price differences. A more detailed 
explanation of our methodology, including more information about our 
data sources, is in appendix I. We conducted our work between November 
2004 and June 2005 in accordance with generally accepted government 
accounting standards. 

Results in Brief: 

College textbook prices have risen at twice the rate of annual 
inflation over the last two decades, following close behind annual 
increases in tuition and fees at postsecondary institutions. Rising at 
an average of 6 percent each year since academic year 1987-1988, 
compared with overall average price increases of 3 percent per year, 
college textbook prices trailed tuition and fee increases, which 
averaged 7 percent per year. Since December of 1986, textbook prices 
have nearly tripled, increasing by 186 percent, while tuition and fees 
increased by 240 percent and overall prices grew by 72 percent. While 
increases in textbook prices have followed increases in tuition and 
fees, the cost of textbooks and supplies for degree-seeking students as 
a percentage of tuition and fees varies by the type of institution 
attended. For example, the average estimated cost of books and supplies 
per first-time, full-time student for academic year 2003-2004 was $898 
at 4-year public institutions, or about 26 percent of the cost of 
tuition and fees. At 2-year public institutions, where low-income 
students are more likely to pursue a degree program and tuition and 
fees are lower, the average estimated cost of books and supplies per 
first-time, full-time student was $886 in academic year 2003-2004, 
representing almost three-quarters of the cost of tuition and fees. 

While there are many factors that affect textbook pricing, the price of 
textbooks has increased in recent years, according to experts we spoke 
with, as a result of the increase in costs associated with new 
features, such as Web sites and other instructional supplements. Other 
factors that affect pricing include production costs, availability of 
used books, and the demand for textbooks. Publishers say they have 
increased their investments in the development of supplements to meet 
the demands of a changing postsecondary market. For example, publishers 
we spoke with cited increases in part-time faculty who need additional 
teaching support as a key factor that has increased demand for 
instructional supplements. Publishers also said instructors are 
requesting more supplements, such as Web-based tutorials and self- 
assessment tools, to enhance student learning. However, wholesalers, 
retailers, and others suggest that while supplements may be of value to 
students, the increasing practice of packaging them with textbooks 
effectively limits the students' ability to purchase less expensive 
used books. Industry representatives and public interest groups also 
suggested that publishers are revising textbooks more frequently, and 
some expressed concern about the financial impact on students. Their 
concern is that more frequent revisions limit the opportunity students 
have to reduce their costs by purchasing used textbooks and selling 
their textbooks back to bookstores at the end of the term. While 
publishers generally agreed that the revision cycle for many books is 3 
to 4 years, compared with 4 to 5 years that were standard 10 to 20 
years ago, they said revisions were necessary to keep the materials 
current for faculty and to recoup their investments. 

The price of a U.S. textbook may differ when the book is sold in other 
countries primarily because publishers price their textbooks in order 
to compete in local markets, and conditions exist that limit the resale 
of books from lower-priced markets back to the United States. 
Publishers told us that they produce textbooks primarily for the U.S. 
market and once they have incurred development costs, they can sell 
textbooks at a lower price in other countries because the cost of 
printing additional copies to sell outside the United States is 
relatively low. Publishers told us they price textbooks in other 
countries based on local market conditions, such as income levels, the 
extent to which students are required to purchase textbooks, and the 
availability of locally published textbooks. For example, publishers 
told us that some U.S. textbooks are priced lower in the United Kingdom 
because they must compete with locally produced textbooks that are less 
expensive. Price differences between the United States and other 
countries persist because there are barriers that limit the reentry of 
textbooks into the United States. In some cases the cost of locating 
lower-priced textbooks and shipping them to the United States would 
result in a higher cost than purchasing them in the United States. In 
other cases, purchases are restricted by agreements between publishers 
and foreign distributors. For instance, some publishers told us that 
their agreements with one online retailer outside the United States 
limit the number of copies that can be shipped back to the United 
States. 

We provided copies of a draft of this report to the Department of Labor 
and the Department of Education for review and comment. The Department 
of Labor provided technical comments on the use of its CPI data, which 
we incorporated as appropriate. The Department of Education did not 
have any comments. We received written comments from the National 
Association of College Stores (NACS) and the Association of American 
Publishers (AAP), the trade groups representing the companies we 
interviewed for this study. NACS generally agreed with our findings, 
stating that the report accurately portrayed the textbook industry. AAP 
agreed with some findings in the report, but expressed concern with 
respect to the data sources we used in our analyses and with 
characterizations provided by retailers and wholesalers on the impact 
of publisher practices on students. We carefully reviewed the data 
sources available on college textbook pricing, and found the data we 
used to be the most complete and reliable data available for our 
purposes. Additionally, we sought perspectives from publishers, 
retailers, and used book wholesalers, to ensure our characterization of 
the textbook industry was balanced and complete. Both NACS and AAP also 
provided technical comments, which we incorporated where appropriate. 

Background: 

The college textbook market is complex, comprised of many publishers, 
retailers, and used book wholesalers. Textbooks include new and used 
books and can be combined with supplemental learning materials. Figure 
1 illustrates the typical life cycle of a textbook and the roles of 
publishers, instructors, bookstores, wholesalers, and students. 

Figure 1: The Typical Life Cycle of a College Textbook: 

[See PDF for image]

[End of figure]

Publishers develop and produce textbooks and accompanying materials for 
instructors and students. While there are hundreds of college textbook 
publishers, there has been substantial industry consolidation in recent 
years, with sales at five of the largest publishers representing over 
80 percent of the market in 2004. Because developing a textbook 
involves a significant investment of time and resources, publishers 
carefully consider the potential risks and rewards before publishing a 
new textbook. Publishers consider market needs, including the size of 
the market and competing products. They also consider how the textbook 
would fit into their existing portfolios because they are more likely 
to publish in subject areas that complement successful existing 
textbooks. For example, a publisher that has successful textbooks for 
calculus might want to develop a textbook in an adjacent area like 
statistics. Publishers may also consider what value they can add by 
publishing a given textbook to move beyond reproducing what is already 
available in the market. 

Publishers direct their marketing efforts at instructors, and sometimes 
academic departments that make the decision about the course materials 
they will use and ultimately require their students to purchase. 
Publishers employ sales representatives who often call on instructors 
in person to discuss product options and provide instructors with free 
sample textbooks and instructional materials for consideration. 
Publishers also market their products at professional conferences and 
meetings, as well as through targeted mailings. Sales representatives 
typically receive a base salary and have the opportunity to earn 
commissions based on the volume of new course materials that are sold. 
They receive no compensation for materials that students purchase used. 

College textbook retailers collect information about the materials 
instructors have selected for their courses and stock them for student 
purchases. Located both on and off campus, college textbook retailers 
are made up of a diverse group of businesses including independent 
booksellers, campus cooperatives, and large retail chains. The National 
Association of College Stores reports that about half of college 
textbook stores are owned by the postsecondary institution they serve 
and one-third are operated through lease agreements by outside 
companies. The companies that operate stores on college and university 
campuses through lease agreements typically pay a commission based on 
the total volume of sales to the postsecondary institutions in lieu of 
rent. It is not uncommon for the colleges and universities that 
contract with them to limit the margin on textbooks. 

As bookstores receive information from instructors on the books 
required for the upcoming term, they determine the number of textbooks 
to order based on factors such as estimated enrollment and previous 
sales. Even with information on the number of students enrolled in the 
class, it can be difficult to estimate the number of books students 
will buy because many colleges and universities are served by more than 
one bookstore and students may also obtain textbooks from a variety of 
other sources. According to the National Association of College Stores, 
over 900 postsecondary institutions are served by multiple bookstores, 
with over 70 bookstores serving the 10 largest colleges and 
universities. Additionally, because students now have the opportunity 
to purchase their textbooks via the Internet from online retailers, no 
bookstore is without competition. 

Retailers also attempt to make used books available to students, 
recognizing that many students prefer to purchase used books because 
they are generally less expensive. Bookstores generally buy as many 
used textbooks from their students as possible and then turn to used 
textbook wholesalers to obtain additional copies. However, the demand 
for used textbooks is much greater than the available supply, which is 
estimated to be between 25 and 30 percent of all textbooks in the 
market. The ability of bookstores to make used books available depends, 
in part, on how early they are aware an instructor will use a certain 
title. Receiving an order for a textbook by the end of a term increases 
the ability bookstores have to purchase used textbooks, particularly if 
the book is currently being used and they can buy back the book 
directly from students who have finished using it. Once the supply of 
used books has been exhausted, bookstores complete their orders with 
new textbooks from publishers. When instructors require new editions or 
materials that publishers have customized specifically for their 
course, bookstores must rely exclusively on publishers to fulfill their 
orders. 

Wholesale companies facilitate the circulation of used textbooks by 
purchasing used books from retailers and directly from students to 
distribute to other retailers in need of used textbooks. Three major 
wholesale companies distribute textbooks nationally, and several 
smaller wholesalers distribute textbooks in specific regions of the 
country. Two of the national wholesalers also operate retail 
bookstores, and the other is tied to a retail chain through common 
ownership. Wholesalers have developed a complex model for determining 
the wholesale value of any given textbook based on factors such as 
demand, the available supply, and when a new edition is likely to be 
released. Because the supply of used books is limited and demand is 
high, wholesalers rank retailers in order to determine which will get 
first priority in receiving the used books they desire. Generally, 
national wholesalers give first priority to retailers that supply them 
with the most used books and do not return many of the books they 
purchase. To encourage bookstores to supply used books, wholesalers pay 
a commission and cover the cost of shipping the books to their 
warehouses. 

While students have little choice over which textbooks they must 
purchase, they have some choice in where they buy their textbooks. Many 
campuses are served by multiple bookstores, and students may also be 
able to obtain their books through book exchanges on their campus. 
Advances in technology have allowed students to bypass traditional 
textbook outlets with expanded purchasing options online. A local 
bookstore may provide convenience, speed, and return options, while 
online retailers and student-to-student exchanges may offer lower 
prices. In some cases, textbooks meant to be sold in international 
markets at lower prices are also available to U.S. students through 
online retailers. 

In addition, students can sometimes offset their costs by selling back 
their books at the end of the term. Generally, if a book is in good 
condition and will be used on the campus again, bookstores will pay 
students 50 percent of the original price paid. If the bookstore has 
not received a faculty order for the book at the end of the term and 
the edition is still current, bookstores may offer students the 
wholesale price of the book, which could range from 5 to 35 percent of 
the new retail price. This practice allows bookstores to provide an 
added service to students while supporting the national availability of 
used books. Students can also sell their books online to a wholesaler 
or to an individual. However, if a new edition of the book is 
forthcoming, students would not generally be able to sell back the 
book. 

College Textbook Prices Have Grown at Twice the Rate of Inflation, 
Trailing Annual Tuition Increases: 

College textbook prices have risen at double the rate of inflation for 
the last two decades but have followed the trend of tuition increases 
at postsecondary institutions. The average growth in college textbook 
prices has been 6 percent per year since academic year 1987-1988, 
ranging from 4 percent in 1993-1994 to 9 percent in 1989-1990.[Footnote 
2] Meanwhile, tuition and fees have increased at an average of 7 
percent per academic year during the same period, while overall price 
increases averaged 3 percent per academic year. Not only have textbook 
prices steadily increased each year, but the overall change in textbook 
prices has been substantial. According to a BLS research series on the 
CPI for college textbooks shown in figure 2, prices in December of 2004 
were 186 percent higher than they were in December of 1986, the first 
month in which data were available, compared with a 240 percent 
increase in the cost of tuition and fees at colleges, universities, and 
professional schools.[Footnote 3] Overall price inflation was 72 
percent during the same time period. 

Figure 2: Annual Percentage Increase in College Textbook Prices, 
College Tuition and Fees, and Overall Price Inflation, December 1986 to 
December 2004: 

[See PDF for image]

Note: Data have not been seasonally adjusted. 

[End of figure]

With certain publisher packaging practices, supplementary products may 
sometimes be included in the price of the textbook for this index, but 
it is not possible with available data to determine the extent to which 
these practices may have contributed to price increases. The prices 
collected for BLS's textbook index represent new college textbook 
prices at colleges, universities, and professional schools at which 
textbooks are required.[Footnote 4] Because only the price of the 
textbook is collected, the prices of any supplementary materials that 
may be available are typically not reflected in the index. However, if 
the textbook is only available at the bookstore in combination with 
some other course material--a practice commonly referred to as 
bundling--then the price of the entire bundle is collected. Officials 
at the Bureau of Labor Statistics told us that the practice of bundling 
has become increasingly prevalent in recent years. However, they told 
us it is not possible to determine with the information available the 
extent to which bundling may have contributed to increases in college 
textbook prices. For more information about the methodology used for 
constructing this index, please refer to appendix I. 

Increases in college textbook prices were particularly high for the 
academic years 1989-1990 and 2001-2002, at 9 percent and 8 percent 
respectively. Since 2001-2002, the growth in textbook prices has been 
slowed, increasing by 5 percent in 2003-2004. Appendix II contains more 
details on average annual changes in textbook prices. 

While increases in textbook prices have not followed far behind hikes 
in college tuition and fees, the cost of textbooks and supplies as a 
percentage of tuition and fees varies for degree-seeking students 
attending different types of institutions. According to data from 
Education's Integrated Postsecondary Education Data System, first- 
time, full-time students attending 4-year private, nonprofit colleges 
were estimated to spend $850 for books and supplies in their first 
year, or 8 percent of the cost of tuition and fees during academic year 
2003-2004, as shown in figure 3.[Footnote 5] In contrast, first-time, 
full-time students paying in-state tuition at 4-year public colleges or 
universities were estimated to spend 26 percent of the cost of tuition 
and fees on books and supplies, or $898, during the same period. At 2- 
year public colleges, where low-income students are more likely to 
begin their studies and tuition and fees are lower, first-time, full- 
time students are estimated to spend 72 percent of the cost of tuition 
and fees on books and supplies.[Footnote 6] Specifically, 2-year public 
colleges estimated that their first-time, full-time students would 
spend about $886 in 2003-2004 on books and supplies. In 2002-2003, the 
last year for which enrollment data are available, students attending 2-
year public colleges represented 42 percent of all postsecondary 
students. 

Figure 3: Estimated Cost of Textbooks and Supplies as a Percentage of 
Tuition and Fees, Academic Year 2003-2004: 

[See PDF for image]

[End of figure]

Publisher Investments in New Products Have Contributed to Increases in 
Textbook Prices: 

While publishers, retailers, and wholesalers all play a role in 
textbook pricing, the primary factor contributing to increases in the 
price of textbooks has been the increased investment publishers have 
made in new products to enhance instruction and learning according to 
industry executives we interviewed. In particular, publishers point to 
the high cost associated with the development of technology 
applications that supplement traditional textbooks. Publishers told us 
they have made these investments to meet changing needs of higher 
education, such as the increase in part-time faculty who require 
greater instructional support and supplements that will enhance student 
learning of the subject matter. While wholesalers, retailers, and 
others do not question the quality of these materials, they have 
expressed concern that the publishers' practice of packaging 
supplements with a textbook to sell as one unit limits the opportunity 
students have to purchase less expensive used books. Additionally, 
wholesalers, retailers, and others have expressed concern about how 
certain publisher practices, such as revising textbooks more frequently 
and increasing the availability of custom publishing options for 
instructors, have affected their ability to help students save money by 
providing used textbooks and buyback services. 

How Textbooks Are Priced: 

Publishers set the net price, or the price bookstores pay publishers to 
obtain the textbook, based on development and production costs, 
expected sales, and competition from comparable products available in 
the market. While the amount spent on development and production varies 
across publishers and specific titles, the publishers to whom we spoke 
underscored the substantial investments they make before a single 
textbook is sold. These include the cost of author advances, the 
development of content for the textbook and supplements, copyrights and 
permissions for illustrations and photographs, along with the cost of 
typesetting and printing enough copies to provide sample copies and 
cover expected sales. 

In estimating expected sales of textbooks, publishers must consider the 
size of the overall market for a given textbook, the amount of market 
share they can reasonably capture based on the availability of 
competing products, and the availability of used books in subsequent 
years. The publishers we talked to focus heavily on publishing 
textbooks for introductory-level courses because the market is larger, 
even though competition for market share tends to be greater. 
Publishing in smaller markets can still be attractive, though, 
according to one publishing executive, because publishers may be able 
to attain greater market share, as there are generally fewer competing 
titles. Regardless of the market for a particular textbook, publishers 
told us that new textbook sales are highest in the first year an 
edition is available, with sales declining each year as the supply of 
used books becomes greater. 

Publishers told us that they must price their textbooks based on what 
similar textbooks in the market are selling for, even if it will not 
generate enough revenue to offset their costs or they could lose sales 
to more competitively priced products. As a result, publishers noted 
that textbooks may not realize a profit in the first year of 
publication. Publishers told us that they are willing to take this 
financial risk because of the long-term rewards they expect for 
successful textbooks. 

While each college store determines its own pricing model, many utilize 
a similar approach for determining the price of new and used textbooks. 
Bookstores set the retail price to ensure a certain percentage of the 
selling price goes to the bookstore. This percentage, commonly referred 
to by retailers as the margin,[Footnote 7] covers bookstore costs and 
may allow the store to realize a profit. While the margin may vary at 
different individual bookstores, the average margin on new college 
textbooks among stores reporting to the National Association of College 
Stores is about 23 percent.[Footnote 8] The margin on used textbooks, 
however, is typically higher. Used textbook prices are directly linked 
to new textbook prices as retailers and wholesalers typically follow a 
traditional pricing practice. According to this practice, retailers 
purchase used books from wholesalers at 50 percent of the new retail 
price and in turn charge students 75 percent of the new retail price to 
purchase the book. This pricing practice results in a 33 percent margin 
on used books for bookstores. Table 1 illustrates the typical pricing 
practice for a new and used textbook. College bookstores justify higher 
margins on used textbooks based on increased inventory risks and 
resources involved in preparing the books for resale.[Footnote 9]

Table 1: Illustration of Typical Textbook Pricing Practice for $100 
Publisher-Priced Book: 

New textbook; 
Net price: $100; 
Retail price: $129; 
Price increase: $29; 
Margin (price increase ÷ retail price): 23%. 

Used textbook; 
Net price: $65; 
Retail price: $97; 
Price increase: $32; 
Margin (price increase ÷ retail price): 33%. 

Source: GAO analysis. 

Note: Prices rounded to the nearest dollar. 

[End of table]

Publishers Have Developed New Product Options to Meet Perceived Needs 
of Instructors and Students: 

The factors that publishers consider in determining the price of their 
textbooks has not changed over time, but the nature of offerings from 
higher education publishers has changed in recent years. Publishers say 
they have invested heavily in developing additional textbook 
supplements for instructors and students, particularly resource- 
intensive technology applications, and ensuring that the content they 
provide is updated with the most current pedagogy and examples. 
Publishers told us they are making these investments in response to the 
changing needs of the higher education community and to remain 
competitive in the marketplace. While supplements are not new, 
publishers told us the number and variety of supplements available for 
a given textbook have increased substantially in the last 10 years. 

Even though there has been widespread consolidation among textbook 
publishers over the last 20 years, publishers characterized the 
textbook market as intensely competitive and said this competition 
drives what products they offer and ultimately how they price their 
textbooks. Because the adoption process in which instructors select the 
textbooks and materials they wish to use in their courses is central to 
ensuring sales, publishers told us that they focus their efforts on 
developing textbooks and accompanying materials that will meet the 
diverse needs of instructors and their students. To ensure their 
products are appealing to instructors, publishers say they must offer a 
wide range of materials that accommodate a variety of teaching and 
learning styles. Publishers fear that if they are unable to keep up 
with offerings of their competitors they will lose adoptions and 
ultimately market share. One industry analyst we spoke to speculated 
that the consolidation of publishers and a lack of new entrants are 
largely factors of the enormous investments required to compete in the 
marketplace. The analyst said that by consolidating, publishers may 
gain economies of scale and spread their overhead and other costs 
across more titles. 

Publishers say the investments they are making in product development 
are largely in response to changes in higher education that have 
resulted in publishers playing a more central role in facilitating 
instruction and learning. For example, publishers have always provided 
no-cost instructional supplements to help faculty teach their courses, 
but these offerings have intensified in recent years. In particular, 
publishers told us that the increased demand for instructional 
technology applications has resulted in high development costs. They 
say that since the advent of the Internet, postsecondary institutions 
have made substantial investments in technology and increased their 
expectations for instructors to make use of technology in the 
classroom. In response to this demand, publishers have invested 
millions of dollars in developing content that can be delivered via 
technological applications, such as Web sites and CD-ROMs, to accompany 
their textbooks. Some of these applications are designed to help 
instructors be more effective in the classroom, while others are 
intended for student use to enhance their learning of the material. 

Publishers told us that they have tailored their instructional 
supplements to enhance instructor productivity and teaching, largely to 
meet the needs of instructors in an environment of funding cuts. 
Publishers say tools designed to enhance instructor productivity are in 
demand because reductions in the number of teaching assistants 
available to help instructors have increased the administrative burden 
for instructors. For example, publishers have developed online homework 
and quizzes that allow instructors to track student progress quickly, 
saving instructors time. The homework and quizzes students complete 
online can be graded immediately to provide both the instructor and 
students with immediate feedback on performance. The need for greater 
teaching support is another area in which publishers told us there has 
been increased demand, stemming largely from a reduction in the 
employment of full-time tenure track faculty at institutions across the 
country. Publishers say they are now providing more extensive 
curricular support including lesson plans, homework sets, multimedia 
lectures, and even workshops on specific teaching approaches. While 
these materials are provided at no cost to instructors, the cost of 
developing them is built into the price of the textbook. 

Publishers also described a wide array of supplements that faculty can 
adopt that are intended to enhance student learning and success in the 
course. Publishers say there is a growing demand for these products 
because the number of students who are unprepared for college-level 
work has been increasing. Student supplements are either sold 
separately or bundled with the textbook, but the bulk of the 
development costs are typically built into the price of the textbook, 
according to publishers. While publishers produce print supplements, 
such as study guides and solutions manuals to accompany their 
textbooks, technology content represents the area in which publishers 
say they are investing more substantially. For example, one publisher 
told us the company had invested over $1 million in the development of 
a CD-ROM that provides three-dimensional images to enhance learning in 
anatomy. In the short term, these investments are very costly for 
publishers, but publishers are predicting increased demand for these 
products over time, with more content delivered digitally. Electronic 
content is appealing to publishers because sales of these products 
would be less affected over time by the used textbook market than print 
products, which can more easily be bought and sold in the used textbook 
market. Specifically, passwords to restricted access Web sites cannot 
be resold, and there is no national used market for other types of 
electronic products, such as CD-ROMS and software, because retailers 
and wholesalers cannot easily verify that the products are functional 
once they have been used. 

Wholesalers, Retailers, and Others Express Concern That Some Publisher 
Practices May Unnecessarily Increase Costs to Students: 

Wholesalers, retailers, and some public interest groups acknowledge 
that publishers are making substantial investments to develop textbooks 
and supplementary materials, but they have expressed concern about the 
impact some publisher practices may have on student costs. In 
particular, they think some of the strategies employed by publishers, 
such as bundling textbooks with supplements and revising textbooks more 
frequently, may limit the ability students have to decrease their costs 
by purchasing less expensive used textbooks. 

Concerns about Bundling: 

Wholesalers, retailers, and some public interest groups agree that 
there has been a proliferation of supplements in recent years, and they 
have expressed concern about the increasing practice of selling 
supplements and textbooks bundled together in a package. While 
wholesalers and retailers do not question the quality of these 
materials, they suggest the practice of combining these supplements 
with textbooks limits students' ability to reduce their costs by 
purchasing less expensive used books and choosing which, if any, 
supplements they want to purchase. Retailers told us that when bundling 
started becoming more common, it became difficult for them to obtain 
supplements separately from publishers to provide students the option 
of buying a used book and selected supplements. Though publishers say 
that most supplements are now available separately, retailers said that 
because publishers often discount bundles, most of the savings students 
could expect from purchasing a used textbook would be negated if they 
bought the supplements separately. For example, a new book may be 
bundled with an access code to a companion Web site at no additional 
cost to the student. Students who choose to buy a less expensive used 
textbook will have to purchase the access code separately, but the 
combined cost of the used book and the access code will be similar to 
the price of the new course materials sold in a bundle. One retailer 
also noted that publishers assign every product a unique identification 
number, whether sold individually or bundled. Because the 
identification number for a bundle varies based on the specific 
combination of materials included in the package, the retailer told us 
it can be difficult to identify the individual components in the bundle 
to order them separately from publishers or, when available, through 
the used textbook market. Publishers note, however, that the standard 
industry practice of assigning each bundle a unique identification 
number is intended to make it easy for students, retailers, and 
wholesalers to obtain a complete description of the bundle's contents 
by entering the identification number online. 

Publishers told us that textbook sales representatives work to identify 
materials that will best meet a given instructor's needs and generally 
bundle course materials with the textbook when the instructor desires 
it. However, retailers said that instructors are often unaware that the 
course materials they selected will come bundled, based on routine 
follow-up discussions that stores have had with instructors. Retailers 
told us that many instructors want the supplements to be available for 
their students but also want students to have the option of buying a 
used book. However, some publishers say that the discounts available on 
bundles are a selling point with instructors, along with the assurance 
that students will purchase the correct course materials. 

While publishers typically allow retailers to return new textbooks that 
are not sold without penalty if the textbooks are in new condition, 
when course materials are bundled together they can be returned only if 
the seal is unbroken. Retailers explained that their stores offer 
generous return policies to accommodate students who, for example, buy 
the wrong course materials or drop a course. If a student has broken 
the seal of the bundle, retailers say they will not be able to return 
the materials to the publisher for a refund. One retailer told us that 
its stores will generally accept returns of unsealed bundles to 
minimize ill will with students but that they would have to absorb the 
return as a loss. 

Some publishers acknowledged that there has been resistance to the 
practice of bundling, and some told us they are now more carefully 
considering when bundling may be appropriate. While the practice is 
designed to provide students with greater value, publishers understand 
that students must perceive that value for a bundle to sell. Publishers 
say they are also beginning to understand that as students may be 
sensitive to high prices, they must strike a balance between quality 
and price. For example, one publisher provided an example of a bundle 
that did not sell well because the number of components increased the 
price beyond what students were willing to pay. While the publisher 
knew that the textbook and the individual components would retail 
separately for much more, students perceived the price as too high. 
Publishers also told us that bundling is most effective when 
instructors make use of all the materials included in the bundle and 
stress their importance to students. Publishers understand that when 
students spend money for course materials that are never used they may 
perceive the purchase as unnecessary. 

Concerns about the Frequency of Revisions: 

Industry representatives and some public interest groups also suggested 
that publishers are revising textbooks more frequently, and some 
expressed concern about the financial impact revisions have on 
students. Retailers and wholesalers told us that because instructors 
typically use the most current edition of textbooks in their courses, 
the previous edition becomes obsolete once a new edition is released. 
Once retailers and wholesalers learn of a pending new edition, 
typically several months in advance of the release date, they said the 
buyback value drops rapidly to zero. Once a new edition is released, 
retailers say they generally cannot buy back an old edition from 
students, a practice that helps students reduce their costs. 

Publishers agreed that the revision cycle for many books has 
accelerated over time, but most said that it has been stable in recent 
years. While textbook revision cycles can vary based on several 
factors, such as the level of the course and the discipline, publishers 
told us that textbooks are generally revised every 3 to 4 years, 
compared with cycles of 4 to 5 years that were standard 10 to 20 years 
ago. Publishers say that the revision cycle is driven by instructors 
who want the most current material and may seek products from 
competitors if they are unable to meet the demand. Publishers cited a 
recent poll of 1,029 college professors commissioned by the Association 
of American Publishers that found that 80 percent of those polled think 
it is important that the material in the textbook be as current as 
possible.[Footnote 10] However, this may not be universal across 
disciplines. For example, over 700 mathematics and physics instructors 
from 150 universities across the country have petitioned one publisher 
to delay revisions until there have been substantial changes in content 
or teaching methods that merit revision.[Footnote 11]

Publishers noted that while not every revision results in substantial 
content changes, revisions must also be made for other reasons, such as 
changing teaching methods. For example, one publisher cited a teaching 
approach from the 1980s that has regained popularity in calculus. 
Revisions may be based on current events, such as including recent 
accounting scandals in textbooks for business law and ethics courses, 
or recent elections in political science textbooks. Publishers told us 
that changes in industry standards that are relevant to a discipline 
may also necessitate out-of-cycle revisions or updates, such as 
pronouncements issued by the Financial Accounting Standards Board for 
accounting textbooks. 

Some wholesalers and retailers think that the revision cycle for some 
textbooks has the effect of limiting the used market. For example, 
retailers and wholesalers have observed that books for introductory- 
level classes are on a shorter revision cycle than other books, 
possibly because there is a greater supply of used books, as students 
are less likely to keep them. One publisher we talked to said that 
books for introductory classes are typically revised more frequently 
because demand for current content and technology applications is 
greater in these courses. Most publishers maintain that their decisions 
to revise a book are based on factors other than sales patterns. 
However, one publisher we spoke with said that the current revision 
cycle at the company is tied to the pattern of sales revenues, which 
all publishers agreed decline the longer the textbook is on the market 
and more used copies become available. Publishers estimated that in the 
second year of an edition they might sell 25 percent to 70 percent of 
the textbooks that were sold in the first year, depending on level and 
discipline. Moreover, publishers say that they count on textbook 
revisions to recoup the initial investment costs of developing the 
textbook. They told us that first-edition textbooks are highly risky 
and that only about 20 to 30 percent of their first-edition textbooks 
are ever revised. However, they said that they are willing to take on 
this risk based on the long-term rewards they expect to receive from 
successful textbooks that are revised. 

Concerns about Other Publisher Practices: 

Wholesalers, retailers, and some public interest groups have also 
raised concerns about other publisher practices that may limit 
students' ability to purchase used textbooks, such as custom 
publishing, which allows instructors to customize their course 
materials by adding or deleting chapters from a single textbook or 
multiple textbooks. According to publishers, technological advances 
have made the practice more cost-effective and the adoption of custom 
materials has been increasing. Publishers say that custom publishing 
appeals to instructors because it allows them to consolidate material 
from multiple sources into one textbook for their students. Publishers 
also think it provides students with good value because instructors are 
more likely to use all of the material they select. Because the price 
of custom publishing is based on the content, the price of custom 
textbooks may be lower than for a traditional textbook, according to 
publishers. For example, students might pay less for one custom 
textbook than they would for several books the instructor might have 
required if customization was not available. Some publishers also 
observed that sales of custom materials tend to be better because 
instructors are committed to using all of the material, and there is no 
national used textbook market for them. 

Retailers and wholesalers said that because there is no resale market 
for a given custom textbook outside the campus where it was originally 
used, students may lose out on the ability to save money by buying used 
books and selling them back at the end of the term. One retailer 
expressed particular concern about a few specific instances in which 
textbook covers had been customized with the mascot or logo of a 
specific institution, but the content of the textbook was the same. 
Because these textbooks are designed for a specific campus and have a 
unique identification number, there is no national used market for 
them. In addition, retailers say that publishers place strict return 
limits--typically 10 percent--on custom textbooks, even though 
traditional textbooks are usually fully returnable to the publisher. As 
a result, retailers say that they have to carefully balance their 
commitment to carrying an adequate supply of custom materials for 
students against the risk of exceeding the return limit if they do not 
sell enough copies. 

Wholesalers, retailers, and others are also concerned about the long- 
term cost implications for students that may result from publisher 
practices to provide lower-cost alternatives to the traditional 
textbook. Among these alternatives are loose-leaf textbooks that are 
designed to be placed in a binder and electronic textbooks that are 
available for purchase online. While these options may save students 
money initially, wholesalers and retailers are concerned about the long-
term cost implications for students. For example, students may 
initially pay less for a loose-leaf textbook than they would for a 
textbook that is bound, but wholesalers and retailers said students 
would be unable to sell a loose-leaf book back because it is not 
possible to determine whether all the pages are intact. With electronic 
textbooks, students may pay about half of the price of a new textbook 
for password-protected access to an online version of the textbook. 
Until the password expires, students can access the textbook as many 
times as they wish, either reviewing the chapters online or printing a 
hard copy. Some public interest groups initially embraced the idea of 
electronic textbooks but now point out that students may run into 
technical difficulties if they have to rely on Internet access. 
Additionally, because access to the textbook may expire, students may 
not have the option at the end of the term to keep the textbook. 
According to publishers, electronic textbooks have not caught on with 
students, and sales of these products have been unsuccessful. 

The Price of U.S. Textbooks Sold in Other Countries Varies according to 
Local Market Conditions: 

College textbook prices in the United States may exceed prices in other 
countries because textbook publishers assign prices that reflect the 
market conditions found in each country. The demand for textbooks can 
vary across countries because of, for example, differences in income 
levels or in the classroom role of textbooks. Publishers typically 
incur substantial costs in order to develop textbooks, but once these 
development costs have been undertaken, the additional cost of 
producing more copies is quite low. As a result, a publisher may be 
able to profitably sell textbooks in one country at prices that are 
closer to actual costs of printing and distributing additional copies 
while charging higher prices in the United States that reflect the 
substantial development costs undertaken. Two factors are typically 
cited as enabling a seller, such as a publisher, to profitably charge 
different prices to different buyers, such as textbook buyers in 
different countries. The seller must be able to distinguish among 
groups with differences in their willingness and ability to pay a given 
price, and the ability for these groups to buy and sell among one 
another must be restricted. Traditionally, the geographical separation 
of markets has made it difficult for U.S. students to acquire lower- 
priced textbooks from other countries. More recent developments in 
Internet commerce have reduced the costs for buyers in the United 
States to acquire textbooks from other countries, causing publishers to 
reexamine their distribution arrangements. 

Varying Local Market Conditions and Barriers to Importation Help 
Explain Textbook Price Differences between the United States and Other 
Countries: 

Textbook publishers told us that college textbooks are developed 
primarily for sale in the United States, based on cost considerations 
and demand forecasts for the North American market, but that they sell 
textbooks in other markets when there is international demand. 
Textbooks developed for certain academic disciplines are more likely to 
have broader international appeal than others, according to publishers. 
For example, the content found in many mathematics, science, and 
engineering textbooks is essentially global in its applicability. 
However, the content found in textbooks used in other disciplines, such 
as political science, may pertain much more specifically to U.S. 
experiences, institutions, or culture. If international demand for a 
textbook exists, publishers may sell the same textbook that is sold in 
the United States, an international edition produced with less 
expensive materials, or an adaptation of the textbook that includes 
locally relevant examples. In international markets where the primary 
language spoken is not English, publishers may sell the rights to 
translate the textbook into the local language. 

In assigning prices to the different versions of U.S. textbooks sold in 
the international marketplace, publishers told us that they consider 
local market conditions and the willingness and ability of students to 
purchase the textbook. As there can be significant intercountry 
differences in the demand for textbooks, publishers told us that they 
make country-by-country and book-by-book distribution and pricing 
decisions. Specifically, publishers told us that factors they consider 
in making pricing decisions are income levels, the cost of living, the 
role of the textbook in the classroom, intellectual property 
protections, the strength of the local currency, and the prices of 
competing textbooks sold in that marketplace. In some cases, 
international prices may be substantially lower than prices at which 
the textbook is sold in the United States, while in other cases, they 
may be the same as or higher than U.S. prices. For example, publishers 
told us that in many developing countries, incomes are generally too 
low for students to buy textbooks at U.S. prices. However, in areas 
where the cost of living is generally higher than in the United States, 
such as in Scandinavian countries, textbook prices may be higher. 

Publishers told us that they have to be particularly concerned about 
pricing at a level that is affordable to students in developing 
countries because of the threat of piracy in these countries. Although 
they already grapple with piracy in many of these markets, publishers 
say that even fewer legitimate copies would be sold in these markets if 
prices were too high. According to publishers, some countries do not 
have a strong commitment to intellectual property protections, but 
governments have been more responsive in dealing with piracy cases when 
textbooks are priced at a level that local students can afford. 

In addition to income levels, differences in instructional styles and 
systems of higher education influence publishers' pricing decisions. 
For example, publishers told us that even though average income levels 
are high in the United Kingdom, textbooks tend to sell for lower prices 
than in the United States because the demand for textbooks is lower. 
Specifically, they said that instructors in the United Kingdom are more 
likely to recommend several textbooks for students to consider, rather 
than requiring a specific textbook. Additionally, publishers told us 
that there is less demand for electronic and print supplements to 
support teaching and learning in non-U.S. markets. Publishers also told 
us that because higher education funding tends to be highly subsidized 
in the United Kingdom and European countries, students may not be 
willing to pay out-of-pocket costs for textbooks at U.S. prices. 
According to publishers, textbook prices in Canada and Australia tend 
to be similar to those in the United States because the instructional 
styles are similar in that instructors select specific textbooks for 
their classes. However, publishers noted that in these markets there is 
also greater demand for U.S. textbooks that have been adapted to the 
local culture or economy. 

The National Association of College Stores has criticized the practice 
of differential pricing, or the publisher practice of charging lower 
prices in some countries, saying that it is unfair for U.S. students to 
pay more for the same textbooks. However, the practice of differential 
pricing is not exclusive to textbook publishing and occurs both within 
and outside the United States. For example, GAO has reported on 
differential pricing in the airline industry, where business travelers 
typically pay much higher fares than leisure travelers.[Footnote 12] 
Likewise, we have reported on differential pricing of prescription 
drugs in the pharmaceutical industry.[Footnote 13] Publishers can 
afford to sell textbooks at prices that are sometimes lower outside the 
United States because once development costs have been incurred for the 
U.S. market, the incremental cost of producing additional copies for 
the international market is low. This allows publishers to sell 
textbooks in other countries at prices that are closer to printing and 
distribution costs while charging prices in the United States that 
better reflect the high costs of development. The publishers we talked 
to estimated that international sales make up from 5 to 15 percent of 
their total revenues. Some publishers speculated that without the added 
revenues from international sales, they would feel more cost pressure 
and would have to either increase U.S. prices or invest less in certain 
products. 

In order for international pricing differences to persist, there must 
be barriers that limit mass importation of less expensive U.S. 
textbooks from other countries. Such barriers ensure that individuals 
and businesses purchase from the intended distribution channels and 
insulate students from awareness of price differences in other 
countries. Historically, the geographic separation of countries served 
as a natural barrier preventing such trade from occurring. Geographic 
distances and lack of information made it difficult for individuals or 
businesses in the United States to save money on textbooks by 
purchasing lower-priced textbooks in other countries and having them 
shipped to the United States, a practice commonly referred to as 
reimportation. However, recent technological developments in electronic 
commerce have diminished the effects of this natural barrier, 
increasing awareness of prices in other countries and making it easier 
for students and retailers to purchase lower-priced textbooks from 
international markets. 

Publishers Have Taken Recent Steps to Limit the Reentry of Their 
Textbooks into the U.S. Market: 

Retailers and publishers have expressed concern about the reimportation 
of lower-priced textbooks from international locations. Specifically, 
they cited the ability students have to purchase books from online 
distribution channels outside the United States at lower prices, which 
may result in a loss of sales for U.S. retailers. Additionally, the 
availability of lower-priced textbooks through these channels has 
heightened distrust and frustration among students regarding textbook 
prices, and college stores find it difficult to explain why their 
textbook prices are higher, according to the National Association of 
College Stores. Retailers and publishers have also been concerned that 
some U.S. retailers may have engaged in reimportation on a large scale 
by ordering textbooks for entire courses at lower prices from 
international distribution channels. Concerned about the effects of 
differential pricing on college stores, the National Association of 
College Stores has called on publishers to stop the practice of selling 
textbooks at lower prices outside the United States. 

Publishers told us that they intend for the textbooks they distribute 
in other countries to be sold for use in those countries, not for 
resale to the United States, and so have taken recent actions to limit 
large-scale reimportation. Most of the publishers with whom we spoke 
say they are particularly concerned about the actions of foreign 
distributors and U.S. retailers that may result in large-scale 
reimportation of textbooks. As a result, publishers told us they have 
taken recent steps to limit the reimportation of textbooks in large 
quantities. Specifically, publishers told us that they have 
strengthened their agreements with foreign wholesalers to prevent the 
large-scale sale of U.S. textbooks back to the United States. Some 
publishers also said they have made an agreement with an online 
retailer outside the United States to limit the number of copies of a 
given textbook that can be delivered to a single U.S. address in one 
order. Because these measures target large-scale reimportation of U.S. 
textbooks from international sources at lower prices, they will not 
prevent U.S. students from purchasing single copies of textbooks from 
international sources. 

Concluding Observations: 

College textbook prices have risen steadily, along with tuition and 
fees, and appear to have been largely driven by investments in 
supplements. While price increases have resulted in increasing costs 
for students and their families, they reflect a change in the 
characteristics of postsecondary education. Just as teaching and 
learning have changed with increasing reliance on technology, the 
college textbook has evolved from a stand-alone text to include a 
variety of ancillary products designed to enhance the educational 
experience for instructors and students. By increasingly becoming 
involved in the development of instructional aids, publishers are 
assuming roles that have traditionally belonged to postsecondary 
institutions. If publishers continue to increase these investments, 
particularly in technology, the cost to produce a textbook is likely to 
continue to increase in the future. 

Although changes in the nature of college textbooks are evident, it is 
difficult to assess the impact of these changes on students. 
Instructors can now select from a much wider variety of supplements to 
tailor their courses to the needs of their students, but these 
additional textbook offerings may come at an increased cost to 
students. While textbook prices have risen with tuition costs, these 
costs can vary greatly depending on the type of institution a student 
is attending. Because textbooks may represent a substantial portion of 
the cost of tuition and fees for students attending some public 
institutions, any increase in textbook prices may affect affordability 
and access disproportionately for some students. Consequently, while 
students may benefit from the advances in textbook supplements, they 
may not feel the price increases are justified relative to what they 
spend on tuition. Students may also think the amount they have to pay 
for their textbooks is unfair, especially if some of the same textbooks 
are available at lower prices outside the United States. 

Because the cost to students may not be the primary factor considered 
when publishers are developing textbooks that students are ultimately 
required to buy, the rate of textbook price increases is not likely to 
slow. Students may lower their costs by purchasing used textbooks and 
may search for lower-priced textbooks from online sources, including 
international retailers, and directly from other students. However, 
these options are unlikely to provide a sustainable source of lower 
prices because the supply of these textbooks is limited and 
international prices are subject to change. In addition, because 
publishers, wholesalers, and many retailers are profit-seeking firms, 
any widespread action that would lower costs to students at the expense 
of profits would be met with changes in their business practices, such 
as changing distribution patterns. 

Agency Comments: 

We provided copies of a draft of this report to the Department of Labor 
and the Department of Education for review and comment. The Department 
of Labor provided technical comments on the use of its CPI data, which 
we incorporated as appropriate. The Department of Education did not 
have any comments. We also sought comments on our characterization of 
the textbook industry from the National Association of College Stores 
and the Association of American Publishers, the trade groups 
representing the companies we interviewed for this study. 

NACS generally agreed with our findings, stating that the report 
accurately portrayed the textbook industry. NACS also provided 
technical comments that we incorporated as appropriate. NACS's comments 
appear in appendix III. 

AAP agreed with some findings in the report but expressed concern with 
respect to the data sources we used in our analyses and the tone and 
objectivity of the report. 

With respect to the data sources we used, AAP expressed concern about 
the limitations of the data we used in determining textbook price 
increases over time, and the proportion of tuition and fees that 
spending on textbooks and supplies represent for students at different 
types of postsecondary institutions. AAP also suggested alternative 
data sources for addressing these issues, but we found that they were 
not sufficiently reliable for our purposes. 

While AAP disagreed with our use of CPI data from BLS, these are the 
most complete and reliable data on textbook prices available. Further, 
we clearly disclose the limitations and definitions of the CPI data in 
the report. AAP's claim that BLS data do not capture the "penetration 
of lower-cost alternatives" is not accurate. The college textbooks CPI 
is an index designed to capture the prices of assigned textbooks. To 
the extent that lower cost alternatives are assigned, they would be 
fully reflected in BLS's index. AAP also suggested that the 
availability of alternative data from Student Monitor that differ 
substantially from the BLS data call into question our decision to use 
BLS data as a sole source. We disagree because the two data sources are 
not comparable. Student Monitor data are measuring annual changes in 
student spending, while BLS data measure annual price changes. 

AAP also expressed concerns about the use of Education's IPEDS data, in 
particular that estimates are for textbooks and supplies and that we 
did not validate the estimates postsecondary institutions provided. We 
use IPEDS data because they are the most complete data available on 
estimated student spending. As we state in appendix I, we tested IPEDS 
for reliability and note that other available data sources are not as 
complete or reliable. AAP also questions the appropriateness of 
measuring estimated spending on textbooks and supplies as a percentage 
of tuition. We present these data to provide perspective on college 
affordability--a primary federal policy concern. To address AAP's 
concerns about what constitutes supplies, we have noted in appendix I 
that supplies are defined as usual costs incurred by a majority of 
students. AAP also expressed concern that in discussing estimates of 
student spending on textbooks, we did not take into account the extent 
to which students lower their costs through buyback. We have added this 
context where we discuss costs to students. 

AAP also provided additional data sources for consideration and 
expressed concern that deadlines prevented us from giving these sources 
appropriate consideration. We considered other sources available that 
provide estimates of student spending. Time was not a factor in our 
decision not to use the data, but rather we found these sources to be 
not as complete or as reliable as the IPEDS data. Student Monitor, one 
of the sources suggested by AAP, provides market research for those 
targeting college students as a consumer group. Student Monitor employs 
a nonprobabilistic sampling methodology using an intercept-based quota 
sample of 1,200 students covering 100 colleges and universities. 
Because of the sample selection process used, it cannot be used to 
estimate to the college student population as a whole for the purpose 
of addressing a key finding. Other industry sources AAP suggested 
provide estimates on the total size of the market, but they cannot be 
used to provide representative estimates on student spending for 
textbooks. 

AAP expressed concern about the tone and objectivity of the report, 
particularly the characterizations of retailers and wholesalers on the 
impact of publisher practices on students. In most instances we had 
already discussed issues raised by AAP in other sections of our report. 
AAP took issue with comments made by wholesalers and retailers 
regarding the impact of textbook revisions, bundling, and custom 
publishing on students' ability to pursue lower-cost, used textbooks. 
We specifically provide information on the views of wholesalers and 
retailers to add balance and include more perspectives in our report. 
We provide publisher perspectives on why they revise textbooks and 
characterize why and how the revision cycle has changed over the last 
two decades. We also extensively discuss in our report publisher 
perspectives on supplements, bundling, and other options, such as 
custom publishing, while capturing publisher views regarding their 
benefits. Wholesalers and retailers provided a different perspective on 
these practices as they relate to potential costs to students, which we 
captured in our report. 

More generally, GAO's approach to this study was to rely primarily on 
publishers to provide information on how they price textbooks and gain 
their perspectives on the factors that influence price changes. We also 
sought out other experts in the field, including retailers and 
wholesalers, to better understand how students obtain textbooks and 
what factors affect the cost to the student. Retailers and wholesalers 
did not place blame on publishers but pointed out the impact of some 
publisher practices on students. We do not place any blame in our 
report on the publishers and do in fact note that they offer a variety 
of options for students, sometimes at a discount. We also note in our 
report that faculty have primary responsibility for determining what 
students are required to buy. 

AAP stated in its letter that it agreed with the findings related to 
international price differences and the report's concluding 
observations. AAP also provided technical comments, which we 
incorporated as appropriate. AAP's comments appear in appendix IV. 

As arranged with your offices, unless you publicly announce its 
contents earlier, we plan no further distribution of this report until 
30 days from its issue date. At that time, we will send copies of this 
report to the congressional committees and subcommittees responsible 
for the Higher Education Act, the Secretary of Education, the Secretary 
of Labor, and other interested parties. Copies will also be made 
available to others upon request. In addition, this report will be 
available at no charge on GAO's Web site at http://www.gao.gov. 

If you have any questions about this report, please contact me on (202) 
512-7215. Key contributors to this report are listed in appendix IV. 

Sincerely yours,

Signed by: 

Cornelia M. Ashby: 
Director, Education, Workforce, and Income Security Issues: 

List of Requesters: 

The Honorable George Miller: 
Ranking Minority Member: 
Committee on Education and the Workforce: 
House of Representatives: 

The Honorable Dale Kildee: 
Ranking Minority Member: 
Subcommittee on 21st Century Competitiveness: 
Committee on Education and the Workforce: 
House of Representatives: 

The Honorable Major Owens: 
Ranking Minority Member: 
Subcommittee on Workforce Protections: 
Committee on Education and the Workforce: 
House of Representatives: 

The Honorable Dennis Cardoza: 
The Honorable Raul Grijalva: 
The Honorable Maurice Hinchey: 
The Honorable Dennis Kucinich: 
The Honorable Carolyn McCarthy: 
The Honorable Betty McCollum: 
The Honorable Michael McNulty: 
The Honorable Donald Payne: 
The Honorable Bobby Rush: 
The Honorable Tim Ryan: 
The Honorable David Wu: 
House of Representatives: 

[End of section]

Appendix I: Objectives, Scope, and Methodology: 

To determine the extent to which textbook prices have changed over 
time, we reviewed college textbook pricing data from the Bureau of 
Labor Statistics' Consumer Price Index (CPI).[Footnote 14] The CPI 
measures the average change over time in the prices paid by urban 
consumers for consumer goods and services, and in the case of textbooks 
represents an index of change over time of the retail price of college 
textbooks, or the price that students and their families pay. While 
college textbooks have been included in the CPI since 1964, data on 
textbooks in the Bureau of Labor Statistics' (BLS) research database 
only go back to 1986, when BLS collected textbook prices as part of an 
index on the price of books and supplies. The agency began publishing a 
separate CPI series on textbooks in 2001. Using these data, BLS 
constructed an unpublished research series on college textbooks for GAO 
for the period of December 1986 through December 2004. The index was 
compiled from three separate index series, as outlined in table 2. The 
implications on the index of these differences in methodology are 
discussed below. 

Table 2: Source and Methodology for CPI College Textbook Research 
Series Data: 

Time period: December 1986 to December 1998; 
Source and methodology: BLS produced the index using data collected for 
the Educational Books and Supplies CPI series. 

Time period: December 1998 to December 2001; 
Source and methodology: BLS applied a standard BLS calculation 
procedure to college textbook price data in order to generate the 
index. 

Time period: December 2001 to December 2004; 
Source and methodology: BLS used the published index for college 
textbooks, which employs quality adjustment methods.[A]. 

Source: BLS. 

[A] For a detailed analysis of these quality adjustment methods, see 
BLS, Hedonic Quality Adjustment Methods for College Textbooks in the 
U.S. CPI (Washington, DC.: October 2001). 

[End of table]

The college textbook CPI is constructed using a probability-based 
selection process that identifies bookstores as well as textbooks that 
are assigned for use in courses of higher education. Prices for 
specific books are taken from a variety of bookstores located on and 
off campus, as well as from Web-based retailers, reflecting prices at 
public and private postsecondary institutions, including 2-year, 4- 
year, graduate, and professional schools. The sample composition 
changes each year for the following reasons: (1) books assigned to 
classes change over time, (2) some books cycle out of circulation, and 
(3) a quarter of the sample rotates out annually. Similarly, the sample 
size for this research series varies over time as sampling procedures 
are modified and may range from 200 to 500 price quotes. This variation 
in sample size does not affect the value of the index, though fewer 
observations may affect the variance of the index. Overall, BLS reports 
that the response rate for college textbook CPI data collection is very 
high, 88 percent. 

Most of the textbooks included in the sample are designated as required 
texts for courses offered by the college or university associated with 
each sampled bookstore. In some cases, the selected textbook may not be 
available for pricing because the course has been terminated, the 
course requires a different textbook, or the course is not offered 
every term. In instances in which the course is no longer offered and 
the textbook is not used in any other course, then the assigned 
textbook for a similar course is selected as a substitute. If the 
textbook is no longer used for the selected course, it is replaced with 
the textbook that is currently used for the selected course. If the 
book is temporarily out of use (for example, the course associated with 
the book is offered only in the fall semester), then the book is listed 
as temporarily not available and the price change is imputed based on 
the price changes of the other books. 

An important limitation to this research series is that prior to 2001, 
prices for such substitute books were not usually compared and no 
adjustments were made for any qualitative changes between the previous 
and substitute books.[Footnote 15] With the introduction of quality 
adjustment in 2001, the index is adjusted when certain characteristics 
of a textbook change, such as a move from a major to a smaller 
publisher or a considerable change in the number of pages. If the new 
version of the textbook contains substantially different 
characteristics and quality adjustment values are not available, the 
price movement is imputed based on the prices of comparable textbooks. 
Because hedonic quality adjustment is implemented only for the 
published portion of the research series, for the periods before 2001, 
the index may have higher variance than the published index, which 
begins in 2001. 

In addition, BLS officials pointed out that textbooks are increasingly 
wrapped in packages along with additional materials, making it 
difficult to collect all of the qualitative characteristics of the 
textbook. If the selected textbook is sold by itself, then only the 
textbook is priced. However, if the selected textbook is automatically 
sold with another item, such as a CD or workbook, then the agency must 
price the entire package. As a result of these packaging practices, it 
is sometimes difficult for BLS to obtain the information necessary for 
quality adjustment, and other times the price recorded as the textbook 
price may also include ancillary materials. 

To put changes in textbook prices into the context of other changes in 
the cost of higher education, we also reviewed CPI data on tuition and 
fees, which are constructed using a probability-based selection process 
and reflect the cost of tuition and fees at 2-year and 4-year 
institutions and professional schools.[Footnote 16]

We analyzed data from the Department of Education's (Education) 
Integrated Postsecondary Data System (IPEDS) to determine the 
proportion of tuition and fees that expenditures for textbooks and 
supplies represent.[Footnote 17] Specifically, postsecondary 
institutions estimate the amount first-time, full-time, degree-seeking 
students will spend for an entire academic year on textbooks and 
supplies and report on the amount of tuition and fees. IPEDS defines 
books and supplies as the average cost of books and supplies for a 
typical student for an entire academic year (or program). Supplies are 
to include usual costs that are incurred by a majority of students. 
Supplies required of special groups of students, such as engineering or 
art majors, would not be counted unless they constituted a majority of 
students at the institution. The Department of Education has not 
established a comprehensive definition of what supplies are. However, 
an Education official told us that supplies can include such things as 
allowances for personal computers, but such expenses should be reported 
only if they are required for a majority of students at the 
institution. 

To assess the completeness of the IPEDS data, we reviewed the National 
Center for Education Statistics' documentation on how the data were 
collected and performed electronic tests to look for missing or out-of- 
range values. On the basis of these reviews and tests, we found the 
data sufficiently reliable for our purposes. We did not validate the 
methodology the institutions used to derive their estimates for the 
cost of books and supplies, and there has been no review of how well 
these institutional estimates actually predict student spending on 
textbooks and supplies. 

There are other sources available that provide estimates of student 
spending on college textbooks that we considered, but we did not find 
these sources to be as complete or reliable as IPEDS. The College Board 
collects estimates from postsecondary institutions on spending for 
books and supplies for full-time undergraduate students as part of its 
Annual Survey of Colleges. While the methodology employed was similar 
to that used for IPEDS, the survey included responses from a smaller 
population of institutions than IPEDS. Another source, Student Monitor, 
estimates spending on college textbooks based on student-reported 
expenditures. Student Monitor provides market research for those 
targeting college students as a consumer group. Student Monitor employs 
a nonprobabilistic sampling methodology using an intercept-based quota 
sample of 1,200 students covering 100 colleges and universities. 
Because of the sample selection process used, it cannot be used to 
estimate to the college student population as a whole for the purpose 
of addressing a key finding. 

To determine what factors have contributed to the change in college 
textbook prices, we interviewed executives from five of the largest 
textbook publishers, representing more than 80 percent of new textbook 
sales; the three national used textbook wholesalers; three companies 
that operate over 1,300 college textbook retail stores, or 29 percent 
of stores nationwide; the National Association of College Stores; the 
Association of American Publishers; and various other industry experts. 

To determine what factors have led to differences in the price of some 
U.S. textbooks in non-U.S. markets, we conducted a review of economic 
theory and relevant GAO work on differential pricing. We interviewed 
representatives from textbook publishers, operators of textbook retail 
stores, and used book wholesalers to determine the extent to which 
books may be available in other countries at lower prices, their 
analysis of the reasons behind these price discrepancies, and their 
concerns about pricing differences. 

[End of section]

Appendix II: Consumer Price Index Average Annual Percentage Growth, 
Academic Years 1987-1988 to 2003-2004: 

Academic year, September-August: 1987-1988[B]; 
CPI average annual percent increase[A]: College textbooks: 7.8%; 
CPI average annual percent increase[A]: Tuition and fees: 7.3%; 
CPI average annual percent increase[A]: Overall prices: 4.0%. 

Academic year, September-August: 1988-1989; 
CPI average annual percent increase[A]: College textbooks: 6.9%; 
CPI average annual percent increase[A]: Tuition and fees: 8.0%; 
CPI average annual percent increase[A]: Overall prices: 4.7%. 

Academic year, September-August: 1989-1990; 
CPI average annual percent increase[A]: College textbooks: 9.3%; 
CPI average annual percent increase[A]: Tuition and fees: 8.0%; 
CPI average annual percent increase[A]: Overall prices: 4.8%. 

Academic year, September-August: 1990-1991; 
CPI average annual percent increase[A]: College textbooks: 5.8%; 
CPI average annual percent increase[A]: Tuition and fees: 8.8%; 
CPI average annual percent increase[A]: Overall prices: 5.3%. 

Academic year, September-August: 1991-1992; 
CPI average annual percent increase[A]: College textbooks: 6.7%; 
CPI average annual percent increase[A]: Tuition and fees: 11.6%; 
CPI average annual percent increase[A]: Overall prices: 3.0%. 

Academic year, September-August: 1992-1993; 
CPI average annual percent increase[A]: College textbooks: 4.5%; 
CPI average annual percent increase[A]: Tuition and fees: 9.8%; 
CPI average annual percent increase[A]: Overall prices: 3.1%. 

Academic year, September-August: 1993-1994; 
CPI average annual percent increase[A]: College textbooks: 4.2%; 
CPI average annual percent increase[A]: Tuition and fees: 7.6%; 
CPI average annual percent increase[A]: Overall prices: 2.6%. 

Academic year, September-August: 1994-1995; 
CPI average annual percent increase[A]: College textbooks: 4.4%; 
CPI average annual percent increase[A]: Tuition and fees: 6.3%; 
CPI average annual percent increase[A]: Overall prices: 2.8%. 

Academic year, September-August: 1995-1996; 
CPI average annual percent increase[A]: College textbooks: 5.5%; 
CPI average annual percent increase[A]: Tuition and fees: 5.8%; 
CPI average annual percent increase[A]: Overall prices: 2.8%. 

Academic year, September-August: 1996-1997; 
CPI average annual percent increase[A]: College textbooks: 5.2%; 
CPI average annual percent increase[A]: Tuition and fees: 5.3%; 
CPI average annual percent increase[A]: Overall prices: 2.7%. 

Academic year, September-August: 1997-1998; 
CPI average annual percent increase[A]: College textbooks: 5.1%; 
CPI average annual percent increase[A]: Tuition and fees: 4.5%; 
CPI average annual percent increase[A]: Overall prices: 1.7%. 

Academic year, September-August: 1998-1999; 
CPI average annual percent increase[A]: College textbooks: 6.5%; 
CPI average annual percent increase[A]: Tuition and fees: 3.9%; 
CPI average annual percent increase[A]: Overall prices: 1.8%. 

Academic year, September-August: 1999-2000; 
CPI average annual percent increase[A]: College textbooks: 5.8%; 
CPI average annual percent increase[A]: Tuition and fees: 4.0%; 
CPI average annual percent increase[A]: Overall prices: 3.1%. 

Academic year, September-August: 2000-2001; 
CPI average annual percent increase[A]: College textbooks: 6.2%; 
CPI average annual percent increase[A]: Tuition and fees: 4.6%; 
CPI average annual percent increase[A]: Overall prices: 3.3%. 

Academic year, September-August: 2001-2002; 
CPI average annual percent increase[A]: College textbooks: 8.1%; 
CPI average annual percent increase[A]: Tuition and fees: 6.5%; 
CPI average annual percent increase[A]: Overall prices: 1.6%. 

Academic year, September-August: 2002-2003; 
CPI average annual percent increase[A]: College textbooks: 6.7%; 
CPI average annual percent increase[A]: Tuition and fees: 7.5%; 
CPI average annual percent increase[A]: Overall prices: 2.3%. 

Academic year, September-August: 2003-2004; 
CPI average annual percent increase[A]: College textbooks: 5.2%; 
CPI average annual percent increase[A]: Tuition and fees: 9.8%; 
CPI average annual percent increase[A]: Overall prices: 2.3%. 

Academic year, September-August: Average per year, 1987-2004; 
CPI average annual percent increase[A]: College textbooks: 6.0%; 
CPI average annual percent increase[A]: Tuition and fees: 7.0%; 
CPI average annual percent increase[A]: Overall prices: 3.0%. 

Source: BLS published Tuition and Fees CPI and overall CPI, unpublished 
College Textbook CPI research series. 

[A] Data are not seasonally adjusted.

[B] Academic year 1987-1988 shows the growth in prices over the 
previous academic year, 1986-1987. Data for the 1986-1987 estimate lack 
the months of September through November, as data became available in 
December of 1986. As a result, the average price level in 1986-1987 is 
based on 9 months of data rather than 12. 

[End of table]

[End of section]

Appendix III: Comments from the National Association of College Stores: 

NACS: 

July 18, 2005: 

Brian E. Cartier, CAE:
Chief Executive Officer: 

Cornelia M. Ashby:
Director, Education, Workforce, and Income Security Issues: 
US Government Accountability Office:
441 G Street, N.W.: 
Washington, DC 20548: 

Dear Ms. Ashby,

I am writing in response to your request for comments on the Government 
Accountability Office (GAO) draft report (GAO-5-806) "College 
Textbooks." On behalf of the National Association of College Stores, I 
want to thank you for the opportunity to review and comment on the 
draft report. 

Generally, we believe the report accurately portrays the post-secondary 
course material industry, and captures many of the key factors 
affecting course material pricing and costs for college stores and the 
U.S. students they serve. We appreciate the professional job performed 
by your staff. 

College, stores support the goal of making a college education more 
affordable. It is for this reason that college stores work every day to 
find ways to reduce cost for students through such activities as buying 
and selling used books; enhancing the adoption process for faculty 
through the use of technology; supporting improved communications 
between faculty and students on the course material requirements of a 
course; sponsoring student book exchanges; and many other approaches to 
help students. 

With respect to the findings in the report on international 
differential pricing, NACS supports a "one price" system in which U.S. 
students are not paying more than non-U.S. students, particularly those 
in developed countries. U.S. students should not, by themselves, bear 
the sole burden of course material development costs as the report has 
found or suffer the consequences of underdeveloped countries' inability 
or unwillingness to enforce copyright laws. All segments of the 
textbook industry should be working together to see how we can best 
maintain the extraordinary high quality of U.S. higher education-which 
is the envy of the world-without making the price of that education 
prohibitive to many Americans. 

In regard to the critical role of faculty, NACS believes the selection 
of course materials should rest with faculty who can best determine 
what textbooks and materials contribute to the learning experience and 
academic success of their students. While we recognize an extensive 
study on the role faculty plays in course material development, 
adoption, and utilization was beyond the scope of this study, we 
believe faculty roles should be considered as an integral part of any 
future discussions regarding the availability and accessibility of 
course materials. 

We have noted some technical issues in the report that we would like to 
clarify or correct and have enclosed these comments. 

The National Association of College Stores supports efforts to enhance 
affordable and equitable access to quality course materials, and will 
continue to work with all parties concerned as an ally for student 
interests. 

Sincerely,

Signed by: 

Brian E. Cartier, CAE: 
Chief Executive Officer: 

Attachment: 

[End of section]

Appendix IV: Comments from the Association of American Publishers: 

Association of American Publishers, Inc.
50 F Street, N.W., 4th Floor: 
Washington, D.C. 20001: 
Telephone: (202) 347-3375: 
Fax: (202) 347-3690: 

July 20, 2005: 

Ms. Cornelia Ashby:
Government Accountability Office:
Director, Education Workforce and Income Security Issues: 
441 G Street, NW:
Washington, DC 20548: 

Dear Ms. Ashby: 

The Association of American Publishers, the national trade association 
of the U.S. publishing industry, appreciates the opportunity to provide 
comments on the Government Accountability Office draft report on 
college textbook pricing (GAO-05-806). While we found some aspects of 
the report to be insightful, we are seriously concerned about the 
accuracy and overall tone and balance of the draft report. The 
publishers provided solid evidence that corrected the GAO data, and 
they shared with you their concerns regarding misrepresentative 
statements, as well as the assumptive conclusions that the draft report 
included. 

Specifically, the AAP has provided analyses and corrections of two data 
sources employed by GAO: the U.S. Department of Education's Integrated 
Postsecondary Education Data System (IPEDS) report of what students 
spend on books and supplies, and a Bureau of Labor Statistics (BLS) 
review of college textbook pricing data. 

The GAO intended to use the IPEDS "to gain an understanding of the 
annual cost of textbooks and supplies for students as estimated by 
postsecondary institutions." However, as the publishers demonstrated to 
the GAO, the IPEDS data aggregates school administrator estimates of 
books and "supplies," which may include computers, calculators, lab 
equipment, and other materials that represent about 27% of total 
student spending on books and supplies. Publishers do not produce or 
market supplies. Independently derived estimates confirm that the 
average full-time equivalent student spends about $580 per year on 
textbooks, far less than the $898 figure used repeatedly in the GAO 
draft. GAO has chosen not to use this independent data. Detailed 
analyses of student spending can be found at the end of this letter. 

The second metric the report uses is the BLS data to track textbook 
price increases. By its own disclaimer, before 2001, BLS data did not 
accurately reflect the increasing penetration of lower-cost 
alternatives that are replacing unabridged, hardcover texts. 
Consequently, BLS data exaggerates textbook price increases over the 
course of the reporting period. BLS acknowledges "textbooks are 
increasingly wrapped in packages along ,with additional materials, 
making it difficult to collect all of the qualitative characteristics 
of the textbooks. As a result, it is difficult for BLS to obtain the 
information necessary for quality adjustment, and other times the price 
recorded as the textbook price may also include ancillary materials."

Our third critical concern is the tone and objectivity employed by GAO 
in the titles and subheadings of the draft report. There are frequent 
instances where conclusion statements and the narrative of the report 
are judgmental, and include unsubstantiated statements from single 
sources that create an unbalanced view. We believe the editorial style 
of the draft report suggests GAO advocacy for used books and used 
booksellers rather than providing a factual analysis of the industries. 

The report does describe in accurate fashion some - but not all, or 
even most, - of the choices publishers offer faculty for text 
selection. As our members have shown, and as could be confirmed by 
looking at the books available for any college course, there is always 
a broad range of titles that an instructor can choose for his or her 
students, and these titles are often at very different price points. 
The instructors, of course, select what they believe best serves the 
educational needs of their students. 

In sum, we are disappointed to be writing this letter since there is 
nothing present here that AAP and its members did not present to the 
GAO during the writing of the report. We believe that this report is 
being rushed to completion due to deadline pressures, and that with 
thorough consideration of these comments a more balanced and 
representative report can be produced. 

We recognize that some of our comments may be moot if the GAO chose to 
incorporate them in their final report, but because we have not had 
access to that report, we felt it necessary to make our position part 
of the record. We're proud of our products and services and our 
expanding role in Higher Education, and we believe our efforts aid in 
opening opportunities to all aspiring students. 

Our more detailed comments address three key issues: (1) Accuracy of 
Data, (2) Tone of the Draft report, and (3) Draft report's Valuable 
Insights. 

Accuracy of Data: 

The report's first data source on text price increases, provided by the 
Bureau of Labor Statistics (BLS), compares dissimilar factors and leads 
to an incorrect set of conclusions that persist throughout the report. 
As the report notes, BLS price data does not accurately reflect the 
increasing penetration of lower-cost alternatives that are replacing 
the traditional unabridged, hardcover texts, a significant trend over 
the last 10 years. 

Further, as noted in the appendix (page 29 of the report), the BLS 
price index imputes prices based on comparable textbook prices when 
data is not available and has a higher margin of error prior to 2001. 
In regard to post-2001 price analyses, BLS acknowledges (page 29) that 
"textbooks are increasingly wrapped in packages along with additional 
materials, making it difficult to collect all of the qualitative 
characteristics of the textbook .. As a result .. it is sometimes 
difficult for BLS to obtain the information necessary for quality 
adjustment, and other times the price recorded as the textbook price 
may also include ancillary materials." The standard practice of 
including quality adjustments in measures of inflation was not done 
here. As a result, the BLS data exaggerates textbook price increases 
over the course of the reporting period. 

The presentation of the data is misleading because BLS data includes 
supplements and textbooks, but chart labels and dialogue consistently 
refer only to textbooks. The Draft report must clarify its data in 
every case. Finally, BLS numbers, based on the Producer Price Index, do 
not reflect the labor-intensive nature of the textbook development 
industry, which relies on intellectual capital. 

Other independent research sources. including Student Monitor, LLC, 
measure student spending on new and used textbooks. Student Monitor 
data has been included in other GAO reports, but was excluded from this 
report. Student Monitor research shows that per-capita spending 
increases for new and used books increased at roughly the rate of 
inflation in recent years. 

Student Spending Increase On Textbooks Per Student Monitor: 

2000/2001: +3.5%; 
2001/2002: +5.4%;
2003/2003: + 21%;
2003/2004: +0.8%. 

[End of table] 

Since the BLS data and the Student Monitor data are so different, we 
remain very concerned that using BLS as a sole source, while making 
mild note of its limitations, has the effect of fairly dramatically 
exaggerating textbook price increases over the data series. Using the 
BLS data alone, misleads the reader into believing that the price index 
and the draft report's analysis results are significantly more precise, 
and more generally accepted, than they are. 

Finally, there is no mention at any point in this section that students 
can recoup up to 50 percent of their costs by reselling their course 
materials, so any measure of spending overstates how much a student may 
spend. 

The draft report's other source of data, provided by the Department of 
Education's Integrated Postsecondary Education Data System (WEDS), 
employs methodology to report on costs that GAO acknowledges they "did 
not validate." This is curious because the GAO chose to ignore other 
data on the basis that they could not validate it. 

IPEDS pricing information on textbooks and supplies is based on the 
estimated guess of college administrators, with no instructions from 
the Department of Education or any attempts to standardize the 
information. "Supplies," in this case, are not just inconsequential 
items such as pencils and notebooks but, according to WEDS, may include 
computers, calculators, lab equipment, and other materials that 
represent about 27% of total student spending on books and supplies, 
according to the National Association of College Stores. Publishers do 
not produce or market "supplies." To refer to materials other than 
textbooks is very misleading in the current context. 

In contrast to the GAO's use of inaccurate and misleading data, two 
independently derived estimates (see charts that follow) confirm that 
the average full-time equivalent student spends about $580 per year on 
textbooks, far less than the $898 figure used repeatedly in the GAO 
draft, even taking into account part-time students. In light of the 
admittedly misleading IPEDS data discussed above, the AAP has requested 
that GAO revise the Draft to include this independent and generally 
accepted research and also has asked that GAO use this data to provide 
the estimated cost to students of textbooks, without including 
supplies. As noted before, the total cost students spend on their 
textbooks is not qualified to include the amount they receive from the 
sale of their used textbooks. 

GAO also measures texts and course materials as a percentage of 
tuition. This is particularly misleading because tuition is independent 
of the cost of textbooks. This comparison creates the impression that 
students attending lower-cost institutions are being penalized, when, 
in fact, they benefit from a comparable educational experience, by 
virtue of their access to equivalent course materials at exactly the 
same price paid by any peer at any other higher educational 
institution. There is neither price discrimination nor dilution of 
quality based on which school a student attends-all students are 
treated equally in this respect. The draft states that two-year public 
institutions are places "where low-income students are more likely to 
pursue a degree program" - implying with no substantiation that the 
cost of textbooks is a barrier to access - but fails to acknowledge the 
diversity of the courses taken by students attending two-year schools, 
including allied sciences students studying courses that feature the 
most complex to produce, highly technical course materials such as 
dental hygiene, radiology and nursing, and students who work full time 
and do not conform to the draft report's chosen characterization. 

Tone of the Draft Report: 

Our third critical concern is the tone and objectivity of portions of 
the report. The draft, for example, presents concerns of used book 
distributors and advocates without complete balancing information or 
independent GAO analysis. This approach of citing "concerns" with a 
subsequent summary rebuttal from publishers leaves the reader with the 
impression that GAO is advocating a particular point of view in favor 
of the used book market and used booksellers rather than providing a 
factual analysis of the industries. 

This is especially true is cases where the cited concern is 
unsubstantiated or refuted by available data. For example, GAO notes 
that wholesalers, retailers and some public interest groups "..think 
some of the strategies employed by publishers, such as revising 
textbooks more frequently, limit the ability students have to decrease 
their costs by purchasing less expensive used textbooks." What GAO 
fails to point out is that available empirical data indicates that 
revisions have been very stable at 4 years since at least 1996, the 
last year of data to which publishers have ready access. 

Additionally, we find that the entire section of the report presented 
on pages 16 - 21 fails to acknowledge publisher efforts to address 
instructor and student needs and concerns by offering a variety of 
choices in educational materials at a variety of price points. This 
section contains conflicting "concerns" from competitors and others 
that create the impression that publishers efforts to offer low-cost 
alternatives for instructors and students is somehow wrong, especially 
when publishers offer particularly steep discounts. 

Generally, this section would be greatly improved by the recognition of 
the central role of the instructor in choosing selected materials, the 
reasons why publishers offer these choices, including significant cost 
savings and other benefits generated for students. For example: 

* On page 11, paragraph 2, the report states: "Additionally, 
wholesalers, retailers, and others have expressed concern about how 
certain publishing practices, such as .. increasing the availability of 
custom publishing options for-instructors, have affected their ability 
to help students save money by providing used textbooks and buyback 
services."

As presented, this statement provides no discussion of the benefits of 
custom publishing - such as the increased value to the student because 
the book is more often used in its entirety and the common up-front 
cost saving to students who would otherwise have to purchase multiple 
books for a single course - leaving the reader with the misperception 
that custom textbooks are inappropriate, not valued by students and 
increase overall costs to them. The fact is publishers offer 
instructors a wide range of choices in materials at a variety of price 
points. The extent to which those products offer increased value or 
discounted costs to every student up-front should be balanced with 
concerns that students may not be able to receive additional sums from 
reselling their textbook on the current national used book market. 

* Another example of a statement that lacks balance and appears to be 
inconsistent with other text in the draft report can be found on page 
16, paragraph 2 of the report. The report says, "Wholesalers, retailers 
and some public interest groups agree that there has been a 
proliferation of supplements in recent years, and they have expressed 
concern about the increasing practice of selling supplements and 
textbooks bundled together in a package. While wholesalers and 
retailers do not question the quality of these materials, they suggest 
the practice of combining these supplements with textbooks limits 
students' ability to reduce their costs by purchasing less expensive 
used books and choosing which, if any, supplements they want to 
purchase."

There is no mention that those objecting to bundled supplements on the 
grounds that potential student re-sale savings are reduced, are 
objecting even though bundled packages commonly result in a lower 
overall cost for students compared with buying the items separately. 
These savings are obtained by every purchasing student, up-front and 
can sometimes exceed the savings the student would receive from re-
selling their used textbook. 

The apparent concern that offering bundled packages "limits students' 
ability to reduce their costs by purchasing less expensive used books 
and choosing which, if any, supplements they want to purchase," appears 
to be in conflict with their subsequent concern on page 17, paragraph 
1, that "..retailers said that because publishers often discount 
bundles, most of the savings students could expect from purchasing a 
used textbook would be negated if they bought the supplements 
separately."

As written, the wording leaves the reader with the misimpression that 
publishers have done something wrong by offering instructors the choice 
of ordering textbooks and integrated materials in a discounted bundled 
package. and that publishers compound that transgression by offering 
discounts that are too steep. 

In summary, we believe the editorial style of the draft report suggests 
GAO advocacy for used books to reduce student costs without 
consideration of any other factors, such as the impact on the quality 
of a student's education, low-cost and technological alternatives to 
the traditional textbook, total cost of textbook ownership, the impact 
on the price of new books and compensation to authors. 

Draft Report's Valuable Insights: 

Those sections of the report AAP endorses are the Concluding 
Observations and the section entitled, The Price of Textbooks Sold in 
Other Countries Varies according to Local Market Conditions. 

We believe the Concluding Observations in the draft report correctly 
note a number of the more important factors that influence the college 
textbook sector, and acknowledge the expanded role of publishers in 
providing increasingly sophisticated learning tools to meet the demands 
of today's faculties and students. 

For example the report observed that: 

1) Price increases in textbooks "reflect a change in the 
characteristics of postsecondary education;"

2) "..as teaching and learning have changed with increasing reliance on 
technology, the nature of the college textbook has evolved from a stand-
alone text to the inclusion of a variety of ancillary products designed 
to enhance the educational experience for instructors and students;" 
and: 

3) "..publishers are assuming roles that have traditionally belong to 
postsecondary institutions."

The section of the report dealing with the economic factors that 
influence the price of textbooks sold overseas and the efforts 
publishers are making to limit the re-importation into the United 
States of those books is balanced and accurate. 

Specifically, GAO noted that: 

1) "Without the added revenues from international sales, [publishers] 
would feel more cost pressure and would have to .. increase U.S. prices;

2) Publishers price textbooks sold overseas on the basis of "local 
market conditions and the willingness and ability of students to 
purchase the textbook" and that they want to make their textbooks 
"affordable to students in developing countries because of the threat 
of piracy;"

3) Specific factors that publishers consider when making pricing 
decisions are "income levels, the cost of living, the role of the 
textbook in the classroom, intellectual property protections, the 
strength of the local currency, and the prices of competing textbooks 
sold in that marketplace."

We appreciate your consideration of these significant concerns and look 
forward to working with GAO to ensure the accuracy and balance of the 
final report. 

Sincerely,

Signed by: 

Patricia Schroeder:
President and Chief Executive Officer: 
Association of American Publishers: 

AAP analyses using independent data sources demonstrates that student 
spending on textbooks and supplemental educational materials was 
approximately $580 in 2003. 

Estimated per capita spending on course materials, 2003: 

[See PDF for image] 

[End of table] 

Estimated per capita spending on textbooks, 2003: 

[See PDF for image] 

[End of table] 

[End of section]

Appendix V: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Cornelia M. Ashby, Director, (202) 512-7215, ashbyc@gao.gov: 

Staff Acknowledgments: 

Bryon Gordon, Assistant Director Debra Prescott, Analyst-in-Charge 
Whitney Schott, Analyst: 

In addition to those named above, Stephen Brown, Jonathan McMurray, and 
John Mingus made significant contributions to this report. 

FOOTNOTES

[1] National Association of College Stores, 2005 College Store Industry 
Financial Report (Oberlin, Ohio: 2005). 

[2] An academic year is defined as September through August for this 
analysis. 

[3] The CPI measures the average change over time in the prices paid by 
urban consumers for consumer goods and services, and the CPI for 
college textbooks measures the average change over time of the price 
that students and their families pay for college textbooks. 

[4] Although only new textbook prices are collected, standard industry 
pricing practices generally result in used book prices tracking the 
movement of new book prices. Wholesalers and retailers agree that the 
standard pricing practice for used books is to assign a price that is 
equal to 75 percent of the new price of the same book, so that if the 
new book price increases by 3 percent, the used book also increases by 
3 percent. 

[5] We did not validate the methodology the institutions used to derive 
these estimates. These estimates are gross, that is, they do not 
estimate what students might receive if they resell their books. 
Because retailers may pay up to 50 percent of the retail price for used 
textbooks, students' net costs may be reduced substantially. Also, 
while these figures include the cost of supplies, we cannot 
disaggregate those cost from the totals. More detail on Education's 
definition of supplies is in appendix I. 

[6] Estimates for 2-year students are for students who are legal 
residents of the locality in which they attend school and thus receive 
any reduced tuition charges that may be offered by the institution. 

[7] Two terms, markup and margin, are commonly used to describe the 
difference between the net (or publisher) price and the retail price of 
textbooks. Publishers commonly refer to the markup, or the price 
increase relative to the publisher price, while college bookstores 
typically refer to the margin, the percentage of the retail price that 
they keep. 

[8] National Association of College Stores, 2005 College Store Industry 
Financial Report (Oberlin, Ohio: 2005). 

[9] For example, buying back books from students represents an 
inventory risk because it requires a substantial financial investment, 
which bookstores cannot recoup until they sell the books to another 
student or a wholesaler. 

[10] Zogby International, The Attitudes of College Faculty on the 
Textbooks Used in Their Courses (Utica, New York: December 2004). 

[11] As part of the state Public Research Interest Group's efforts to 
advocate for lower prices for students, a number of faculty members 
signed a letter dated April 2004 calling on one publisher to change 
certain practices. 

[12] GAO, Aviation Competition: Restricting Airline Ticketing Rules 
Unlikely to Help Consumers, GAO-01-831 (Washington, D.C.: Jul. 31, 
2001). 

[13] GAO, Prescription Drugs: Companies Typically Charge More in the 
United States than in Canada, GAO/HRD-92-110 (Washington, D.C.: Sept. 
30, 1992); and GAO, Prescription Drugs: Companies Typically Charge More 
in the United States than in the United Kingdom, GAO/HEHS-94-29 
(Washington, D.C.: Jan. 12, 1994). 

[14] Data for the college textbooks CPI have not been seasonally 
adjusted. Seasonal adjustment removes the effects of recurring seasonal 
influences from many economic series, including consumer prices. 

[15] Prices were compared only if the same book or a new edition of the 
same book was priced. 

[16] Since the CPI for college textbooks is not seasonally adjusted, we 
relied on nonseasonally adjusted data for the overall CPI as well as 
the CPI for tuition and fees. There are no long-term significant 
differences between the nonseasonally adjusted and seasonally adjusted 
indexes. 

[17] IPEDS is a system of surveys designed to collect data from all 
primary providers of postsecondary education. These surveys collect 
institution-level data in such areas as enrollments, program 
completions, faculty, staff, and finances. Data are collected annually 
from approximately 9,600 postsecondary institutions, including over 
6,000 institutions eligible for the federal student aid programs. 

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