“Students frequently rent DVDs to watch in their dorm rooms, but soon they may start checking out something much heavier and pricier: textbooks.

Saying they offer an alternative to the textbook industry's bloated prices, a growing number of companies are renting new and used titles at reduced prices. Among them are Chegg , BookRenter and the Follett Higher Education Group, which will test drive a rental service at campus bookstores this fall. They join a number of colleges that have already started their own on-campus programs .”

-Inside Higher Ed, July 31, 2009, http://www.insidehighered.com/news/2009/07/31/textbooks#

The previous is an excerpt from just one of the many articles on textbook rentals I’ve seen recently.  I'm struggling to understand why textbook rentals are suddenly news worthy.  This isn't a new concept - some schools have been doing this for 15-20 years. And the business model, other than the use of a website instead of a campus bookstore, hasn't changed. So why all the buzz now?  

  I know, it's the economy stupid, however is a rental model really the best option?  Or just media hype? This new buzz around an old model is lacking a contrarian viewpoint that I think is critical.

1.     Cost of Ownership (or lack of ownership as the case may be)
What is the true cost of ownership for a new textbooks that a student could sell back into the used market; a custom book that also as a secondary market; an ebook; or a rental?  

Without getting too deep into the math on this, other than the cost of a new book, the numbers are not terribly significant.  In fact, custom textbooks still provide the lowest cost of ownership assuming the ability to sell the book after use ($50, 30, 50, 42 for new, custom, ebook, and rental respectively on a $100 book).  These are generic numbers and I’m sure some rental companies would argue the $42, however, these are average values across all models so arguments on lower custom and ebook costs are just as valid.  

Some may argue that there isn’t a consistent secondary market for custom books.  While I would counter that there are very effective strategies an institution could use to ensure students had a viable secondary market, let’s assume resale isn’t an option. In removing the resale assumption, we have $100, 60, 50, and 42 respectively (new, custom, ebook, and rental).  In this case, and assuming no additional fees for late returns or excessive use are incurred, the rental model provides an $8 savings over an ebook.  What this comparison doesn’t show is relative value.  

2.     Limitations of Use
When considering value, the primary factors are limitations on use and length of ownership.  The fine print on rental models varies, but for the most part highlighting is restricted and note taking forbidden.  Conversely, highlighting and note taking (in addition to powerful search capabilities) are features of ebooks.  Length of ownership (or technically license) for a $42 rental is 3 months on average. However, you can keep a $50 ebook in perpetuity.  Given the restrictions and limitations of rental books, an $8 difference in price doesn’t seem like such a bargain anymore.

3.     Sustainability
There are clear trends (and significant benefits) in digital content aggregation.  In other words, transforming a digital representation of a textbook into a truly interactive and engaging collection of content, media and applications that becomes an integral part of a course. This is no longer pie-in-the-sky thinking.  The capabilities exist today.  

More importantly, students are increasingly demanding content that better aligns with the way they now consume information and communicate.  

As this approach grows, the traditional print market (including used and rental models) will become obsolete.

4.     Impact on publishing industry
How does increased popularity of rental programs impact the publishing industry?  While I’m not trying to speak for them, I would imagine that a significant drop in textbook sales would ultimately lead to pricing increases.  Publishers are often maligned in the media for the cost of textbooks, but the simple fact is they have significant fixed costs associated with developing and marketing high-quality textbooks.  With fixed costs and a decrease in volume, either price must increase or a new strategy must be developed (see previous section).

Returning to my original question, is a rental model the best option?  Based upon a weak value proposition and restrictive use and access, I’d focus my attention on ebooks or custom textbooks. Add the cost and challenges of migrating an institution to a new course material model combined with a dependence on dated technology (that would be books), and the rental model looks even less attractive.  While ebooks are not currently the digital aggregation of content that will make them such a powerful learning tool, they will be.  Institutions that make the transition now will not only provide their students with the same cost reduction benefits of the rental model, but will be better positioned to leverage the increasing benefits of ebooks in the future.

  This is certainly a topic that can go much deeper than the summary I’ve provided here, however for those not in the textbook and publishing business, I hope I’ve highlighted some important considerations you should be aware of before jumping on the rental bandwagon.