Digital Textbooks Reaching the Tipping Point in the U.S. Higher Education — A Revised Five-Year Projection

The tipping point for digital textbooks is defined as that point on the industry/product continuum at which current financial variables and market factors make the eventual dominance of digital over print an inevitable outcome within 5-7 years. It is our argument in this report that the Higher Education textbook industry in the U.S. is now at that tipping point. In support of this argument, we will discuss both the current status of the Higher Education textbook market as well as the primary market/financial factors influencing its evolution.

Over the next 5 years, digital textbook sales in the United States will surpass 25% of combined new textbook sales for the Higher Education and Career Education markets. Moreover, we expect digital to be the dominant form factor in Higher Education textbooks inside of 7 years. This growth in digital textbooks will boost revenues in excess of $1.5 billion within 5 years. This growth will also create avenues for new digital product models, allow new content publishers to enter the textbook market, lead to fundamental shifts in purchasing patterns around learning materials, and expedite the formal adoption of open educational resources to augment premium digital content.

Our five-year projections assume a current market share of 1.5 for digital textbooks in the U.S. (as of February, 2011) and an end-of-year market share of 3% in 2011. We also assume an average yearly increase in sales growth of approximately 80%-100% over the following 4 years 2012-2015), and project that growth to taper to approximately 25%-40% annual growth for the ensuing 5 years (2016-2020, with the growth rate decelerating each year).

Within the general publishing, education, and technology markets, the growth of digital textbook sales will be influenced by the following factors:

  • The cost of textbooks and other learning materials
  • The availability of digital textbook content
  • Student buying and sharing trends
  • The continued growth of for-profit institutions and online learning
  • The increased popularity and availability of OER and open digital content
  • An increase in digital-first publishers and open textbook movements
  • The textbook rental market
  • The popularity of online retail and distribution options
  • The popularity and evolution of tablet devices and smartphones
  • The advance of e-reader software/hardware technology
  • Format standards for digital textbooks
  • The growth of e-books in trade publishing

This report is a revised version of our projections from last year and notes an upward escalation in the growth of the digital textbook market. This increase is related, in part, to new developments and higher-than-expected trending in recognized market variable areas. Specifically, we have factored in new variables based on:

The popularity of Apple’s iPad – Last year’s report was published before the impact of Apple’s iPad could be measured or predicted. The popularity of the device not only drove upward trending in digital content in general, but also introduced new textbook-specific development players such as Inkling into the mix.

Higher-than-expected e-reader sales – In addition, last year’s projections were based on e-reader sales projections of 6 million units across all devices. In actuality, Amazon alone shipped 7.1 million Kindles in 2010 and some have predicted the company will sell as many as 35 million by 2012.

The textbook rental market – Also, we did not factor the rental market into last year’s report and this trend is already having an impact on digital textbooks. We have revised our projections to account for rental.

EPUB 3 – One of the biggest barriers to the growth of digital textbooks at the time we released last year’s report was the lack of any standard that might provide efficiencies of scale in production and distribution to major publishers. The formal release of the EPUB 3 standard in May should provide all the necessary components to allow digital textbooks to overcome previous format obstacles.

OERs and open textbooks – There have also been significant announcements in the last year related to open education resources (OERs) and open textbooks. In particular, several state-specific and institutional initiatives are making OERs and open textbooks an increasingly viable option.

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