What is the plan behind this massive discount and what makes them okay with it? The answer is volume in sales, notes McGraw. Normally the publisher sells $75 textbooks that schools keep for five years. The new model would have students purchasing $15 textbooks each year, and keep buying books each year:
So Terry McGraw figures that over five years he’ll generate the same total sales selling $15 e-books as he would selling $75 books. It’s not a total push, because in this model, Apple will take an undisclosed cut of sales — McGraw-Hill execs wouldn’t go into details, so let’s assume for now that it’s Apple’s standard 30 percent — but presumably McGraw-Hill can make some of that up by forgoing the costs of print and distribution.
Could these prices ever change? McGraw noted it’s ‘pilot pricing’ and the publishers have control over their future pricing; but when Kafka asked Apple executive Eddy Cue about this issue he had a totally different answer:
But when I posed the same question to Apple media boss Eddy Cue just now, I got a much different response. “This isn’t pilot pricing,” he said. “All of our books will be $14.99.”
I wonder what the cut works out to be for Apple with their role in distributing these textbooks. Kafka notes we could assume it would be the normal 30%, but we probably will never know. Either way, Apple was able to entice Pearson, McGraw-Hill, and Houghton Mifflin Harcourt to come on board.
This all sounds great–but when will the Textbooks category come to Canada?
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