By JOHN HECHINGER
July 10, 2008; Page D1
College students, already struggling with soaring tuition bills and expenses, are encountering yet another financial hit: Publishers and schools are working together to produce "custom" textbooks that can limit students' use of the money-saving trade in used books. And in a controversial twist, some academic departments are sharing in the profits from these texts.
TAILOR-MADE FOR SCHOOL
Publishers are pushing "custom" textbooks designed to be unique for each school.
• The special texts make it harder for students to buy and sell in the used-book market, so they often end up spending more for course materials.
• Schools often receive a royalty payment on each book sold.
The University of Alabama, for instance, requires freshman composition students at its main campus to buy a $59.35 writing textbook titled "A Writer's Reference," by Diana Hacker.
The spiral-bound book is nearly identical to the same "A Writer's Reference" that goes for $30 in the used-book market and costs about $54 new. The only difference in the Alabama version: a 32-page section describing the school's writing program -- which is available for free on the university's Web site. This version also has the University of Alabama's name printed across the top of the front cover, and a notice on the back that reads: "This book may not be bought or sold used."
Custom textbooks like this one are proliferating on U.S. college campuses, guaranteeing hefty sales for publishers -- and payments to colleges that are generally undisclosed to students. The publisher of the Alabama book -- Bedford/St. Martin's, based in Boston -- pays the Tuscaloosa school's English department a $3 royalty on each of the 4,000 copies sold each year. And though the prohibition on selling the book used can't be legally enforced, the college bookstore won't buy the books back, making it more difficult for students to find used copies.
![[photo]](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_swsyf-I3Adgt5mMEkseM34KA6WiyxcoTqyIrJVEan-VkDaY1zUiGlA3QZDwMzfIb7i1ujvoergE665OV3pdkGu4sLzkuXNGA8cW7cWSAjTDcjOfDiujnAoGmSMXov3wZX6XAMobLVn3MTW-zNTXg=s0-d) |
| Sergio Capursi/WSJ |
| The cover of the University of Alabama custom version of 'A Writer's Reference' is nearly identical to the standard version. |
Textbook companies and college officials involved in such deals say custom textbooks provide needed resources for academic departments and more-useful materials for students.
But Ann Marie Wagoner, a 19-year-old University of Alabama freshman who pays $1,200 a year for textbooks, calls the cost of new custom books "ridiculous" and complains that students aren't told about the royalties. "They're hiding it so there isn't a huge uproar," she says.
The custom-textbook business has become the fastest-growing segment of the $3.5 billion market for U.S. new college texts, comprising 12% of sales for 2006, the latest year for which data is available. Royalty deals generate tens of thousands of dollars for some big academic departments. The arrangements have drawn little attention, despite increasing legislative and regulatory scrutiny of the spiraling price of textbooks, which have been rising at twice the rate of inflation over the past two decades.
In 2005, a report by the U.S. Government Accountability Office criticized several textbook industry practices -- including frequent new editions and the "bundling" of books with extras like CDs and workbooks -- that discourage the purchase of used books and inflate prices for students.
The agency found that college students spend an average of about $900 a year on textbooks. That's the equivalent of 8% of tuition and fees at the average private four-year college, 26% at a state university and 72% at a community college.
Controlling Textbook Costs
In recent years, 34 states have proposed or passed legislation to control textbook costs, including measures to prohibit inducements to professors for adopting textbooks, according to a May 2007 congressional study. A bill pending in Congress would require more disclosure of textbook pricing, in part by requiring publishers to sell textbooks separately from the bundles of extras with which they are now often packaged.
The book-royalty arrangements resemble a practice exposed during last year's student-loan scandal, when some universities steered students to particular lending firms and received a secret cut of the loans. New York Attorney General Andrew Cuomo called those payments "kickbacks" and forced universities, many of which said they used the money to fund scholarships, to halt the practice. Mr. Cuomo recently launched a broad conflict-of-interest investigation of the relationship between colleges and vendors, including book publishers.
For publishers, the custom market is a way to thwart used-book sales, which cut deeply into their profits. Though used books have been around for decades, they have become a much bigger industry threat in the Internet age. Web sites for used books, such as Amazon.com1 and eBay, have transformed fragmented, campus-by-campus dealings in old texts into a national market, where discounts of 50% off the new-book price are common. Because of their limited audience, custom books are difficult to resell -- and they sometimes aren't eligible for authorized campus book-buyback programs.
James V. Koch, former president of Old Dominion University and the University of Montana, says that colleges, rather than requiring students to buy custom texts, should post exclusive material free on university Web sites. Prof. Koch, an economist who studied textbook costs for a Congressional advisory committee last year, says royalty arrangements involving specially made books may violate colleges' conflict-of-interest rules because they appear to benefit universities more than students.
'Unethical Behavior'
"It treads right on the edge of what I would call unethical behavior," he says. "I'm not sure it passes the smell test." Many colleges forbid professors from personally accepting royalties when they assign their own books for classes; others have no rules.
At the University of Alabama, Carolyn Handa, who until recently directed the school's writing program, acknowledges that students can save money if they buy used standard editions or sell their books at the end of the term. But Prof. Handa says the university edition is designed as a long-term reference. "You don't sell back your dictionary after your first year of college," she says. "It should be a resource they have on their shelf."
The writing program so far has collected about $20,000 in royalties in the two years since it started requiring custom textbooks, Prof. Handa says. She adds that she regularly declines pitches from other publishers offering even higher royalties. "I feel bad enough getting $3," she says.
Prof. Handa says the royalty money helps pay for trips to conferences for graduate students and will underwrite teaching awards. This year, three graduate students received about $500 apiece to attend the April convention of the Conference on College Composition and Communication in New Orleans.
Bedford/St. Martin's is a unit of Macmillan, which is owned by German publishing giant Verlagsgruppe Georg von Holtzbrinck GmbH. Brian Napack, president of Macmillan, says university departments deserve royalties because of the time they spend putting together custom texts. "We didn't come to the market to give departments royalties," he says. "We think there's a decent argument to be made for it. It's a nice bonus for colleges to have a couple of extra bucks to use for education."
Attracted to 15% annual sales growth, big players such as Pearson PLC, McGraw-Hill Cos. and Macmillan are all making major pushes into the custom-book field. In part, that's because technology has made it cost-effective for customers to create specialized books for relatively few students. Proponents say students often complain that professors use only a few chapters of standard texts, whereas custom books can follow a course precisely.
Searching Facebook
Nicole Allen, textbooks advocate for U.S. Public Interest Research Groups -- a consumer organization -- says students, faced with buying a custom textbook, should ask the professor whether they can instead make do with a used standard version. If a custom text is required, students can try to find it used through local book exchanges or by searching social-networking sites such as Facebook for students who have recently taken the course and may want to sell a copy, Ms. Allen says.
Some custom books involve more than just little tweaks of established texts. At Virginia Tech, about 3,000 first-year students annually buy a required composition guide created by its faculty. The school distributes a new edition each year featuring student work. At the university bookstore, the text, published by Pearson, sells for about $50. Carolyn Rude, who chairs the English department, says the book helps provide consistency across more than 100 sections of freshman composition by ensuring a standard curriculum. She wouldn't disclose the precise amount of the royalty but said it was "several dollars" per book and generated about $20,000 annually. The university uses the money to bring in expert speakers and pay for $600 research and travel stipends for instructors, Prof. Rude says.
A $10 Royalty per Book
Pennsylvania State University recently ended a contract with Pearson for the roughly 10,000 students taking introductory economics courses. The economics department received a $10 royalty for each custom textbook students purchased, generating about $50,000 a year for the program, says Susan Welch, dean of the college of liberal arts. But, Prof. Welch says, the school was uncomfortable "making money on students like that," and the arrangement discouraged students from buying cheaper, used books. Under a new contract with Pearson, Penn State now uses standard texts with no royalties, as well as custom course packs.
Don Kilburn, chief executive of Pearson's custom-publishing division, says royalties are justified when professors and others "put in a fair amount of time and effort." Pearson says it pays royalties on 300 of roughly 9,000 custom projects. Mr. Kilburn acknowledged that custom books have lower resale value for students. But with custom books, he says, students "get something better suited for their needs."
