College Fraternities vs. the Textbook Industry

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If you were
an executive with a large book publishing company, and you were
in charge of the college textbook division, how would you deal with
this multi-phase problem?

(1) The
bid/ask arbitrage opportunity
: College students must pay 10
to 15 cents per page to buy new textbooks that cost a penny a page
to print and deliver. College bookstores receive a mere 10% to 15%
discount. This is the most captive market in publishing. It is the
ultimate cash cow, and has been since 1946. Cash cows are tempting
to milk.

(2) The
technological revolution
: A scanner costs $70. A copy of Adobe
Acrobat Pro costs $450, but about $250 in a campus bookstore. With
these two products, you can make a clear digital copy of any book:
a PDF file.

(3) The
World Wide Web
: A document can be posted on-line, anywhere on
earth, and can be accessed in seconds from anywhere on earth. Server
space is cheap. For example, I have almost 100 books on-line, which
costs me $5/month (www.freebooks.com). I could have 500
or 1,000 books on-line for that price. My server is in Germany,
I think: www.1and1.com. All it takes for a search engine to find
a searchable PDF file is an HTML link to the file. This can be posted
anywhere on the site.

(4) The
division of labor
: A fraternity member could scan in a textbook
in about 8 hours, depending on the speed of the scanner. Recently
initiated members could be required to do this as part of initiation
week. There are lots of campuses and lots of fraternities. They
are bound by oaths of silence.

(6) Off-shore
mail drops
: Arrangements could be made by anonymous mail through
an off-shore mail drop:
an offer of $200 in currency to register a site and upload the contents
of a forthcoming CD-ROM, plus a promise of $200 per year in currency
when the site is on-line. RSVP.

(7) CD-ROM
technology
: All of the PDF files of textbooks could be put on
one CD-ROM. A local fraternity’s in-house programmer could design
the site to have the textbooks filed (linked) under course categories.
This CD-ROM could be mailed — leaving no Internet trail of
digits — to the cooperating web hosting service in a non-cooperating
country.

(8) Proliferation:
This could be done with half a dozen hosts in half a dozen non-cooperating
countries. This sends a message: “Hire a lot of lawyers.”

(9) Self-justification:
The web hosts’ owners could justify this psychologically —
if they wanted justification — on the basis of bringing the
latest textbooks to their poverty- stricken people. It’s called
doing well by doing good.

(10) Cost-benefit
analysis
: The cost of litigation in a foreign nation is high.
The cost of setting up a new website off-shore is (say) $400 in
year one, plus $200 a year thereafter. The perpetrators are unknown.
Their country of origin is unknown. It would be difficult to prove
damages. It would be even more difficult to collect damages. This
is what economists call an asymmetric cost-benefit relationship.

My estimation:
It will take longer to litigate a case than it will take to publish
the next edition of a textbook. Win the case, and three weeks later,
the site is back on line in another country.

At the top
of the site is this message: Steal this site!

Call it an
initiation ritual. It’s more academic than a panty raid. It is a
lot safer than hazing the newly initiated brethren. Haze the publishers
instead.

If taken to
court, the brethren could adopt this defense: “We thought we were
helping third world economic growth, your honor — giving third
world students a helping hand.”

There are about
15 million full-time college students in the United States. They
would no longer be a captive audience. How long would it take for
word to get out? There would be blog sites monitoring the appearance
of new sites, updated sites, moved sites, and the latest textbooks.

As a book-publishing
executive, what could you do to stop this?

If companies
are not forthright with investors about a practical counter-strategy,
investors should conclude that the stocks of these firms are likely
candidates for shorting.

There
would be one great winner. Hewlett-Packard’s toner cartridge division
would become even more profitable.

CONCLUSION

March
19, 2007

Gary
North [send him mail] is the
author of Mises
on Money
. Visit http://www.garynorth.com.
He is also the author of a free 19-volume series, An
Economic Commentary on the Bible
.

Gary
North Archives

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