As printed books get more expensive, electronic versions are on the rise as a popular, cost-saving alternative

It's a time-honored college tradition to spend big at the bookstore. Since the mid-1980s, textbook prices have nearly tripled; now they set students back an average of $900 per year, or 14% of annual tuition at an average public school (BusinessWeek, 10/20/08). But in growing numbers, the college crowd is demanding a cheaper alternative: the digital textbook.

Within the last year or so, traffic has surged at Web stores like CourseSmart and iChapters, where students can download $100 textbooks for as little as $50. CourseSmart, which launched last August, has already lured "hundreds of thousands" of users from 2,500 campuses, says CEO Sean Devine. From July through September, iChapters averaged two million hits per month, up 63% over the same period last year. "This is a natural evolution," says Devine, who spent six years heading Safari Books Online, a provider of computer and business e-books. "Every other form of media—movies, music, TV shows—is available electronically. Why not textbooks?"

Both sites are backed by publishing titans, who are vying for shares of the $5.5 billion textbook industry. Cengage Learning launched iChapters in early 2007. CourseSmart, which touts 4,486 available titles, is supported by six textbook publishers, including Cengage, Pearson, Wiley and McGraw-Hill, (publisher of BusinessWeek). "We're all about choice," says Stephen Hochheiser, a VP at Cengage. "If students want to buy books in a certain way, we'll make it happen."

Better Than Print

Content-wise, most e-books mirror their print predecessors: The authors, text, and page numbers remain the same. What sets them apart is their use of "rich media," or embedded video clips, audio tracks, and hyperlinks. Geology students can read about erosion, then watch it happen; aspiring chemists can manipulate 3D atom models. And since all e-books have a search feature, it's easy to find specific terms. "It's a lot more convenient than I expected," says Elizabeth Popp, a 29-year-old CourseSmart user at Webster University in St. Louis.

Mary Hughes Stone, a psychology professor at San Francisco State, often directs her students to iChapters. Stone says it's an "optimal system" for visual learners and she sees "definite value" in the multimedia components. Because the e-books are distributed on the Internet, they also have the advantage of being weightless and easily accessible from any computer.

But they're not as cost-effective as they appear. At most college bookstores, often-used titles can be sold back for a percentage of the purchase price (usually about 50%). Not so with iChapters and CourseSmart: Initial prices are low, but there's no rebate potential. Depending on the book, Stone warns, "you could lose money in the long run." Plus, buying a used book in the first place has long been a cost-saving option.

Still, e-books are meeting a need. On Facebook, disgruntled students have formed more than 20 protest groups including Textbooks are too Expensive!!, which has 433 members, and I Got Robbed by the Bookstore and I will get Robbed Again, which has 185. "Students are rubbing their eyes in disbelief as they leave college bookstores," reads one group description. "And publishers are laughing all the way to the bank." (That's not entirely true: According to the National Association of College Stores, publishers only make 7 cents on every dollar that's spent on a new textbook. The rest goes to authors, marketers, printers, college stores, and shipping companies.)

Illegal Textbooks

Some group message boards contain links to free textbook-downloading sites, which illegally distribute copyrighted content. One of the biggest domains, TextbookTorrents.com, was recently shuttered due to "concern of legal action," according to a statement by "Geekman," the site's moderator. Yet similar hubs have risen to take its place, which irks Stacy Skelly, director of higher education at the American Association of Publishers, whose membership includes McGraw-Hill. "You don't go into a bookstore and rip a book off the shelf because it's too expensive," she says. "[People who use] these Web sites are stealing."

Such textbook thieves might prefer taking a class with Noel Capon. Copping a play from British pop group Radiohead—which let fans set the price of their last album, "In Rainbows"—the Columbia Business School professor is letting people download his marketing textbook, Managing Marketing in the 21st Century (Wessex Press, 2008), for free. It's available on his Web site, www.mm21c.com, which lures 100 unique visitors each day. Early next year, Capon will ask students to pay however much they think it's worth, and profit (or not) accordingly.

He's not the only one skewering the status quo. R. Preston McAfee, an economics professor at California Institute of Technology, also put his textbook, Introduction to Economic Analysis, online for free. And next spring, Flat World Knowledge, a Nyack (N.Y.)-based publishing firm, will upload 10 open-source college textbooks to its Web site. "Authors, professors, students—people are screaming about the status of our industry," says Jeff Shelsted, the co-founder and CEO of Flat World and a former editorial director at Prentice Hall. "We're trying to address the pain points."

In July, Congress passed the Higher Education Opportunity Act, a provision of which requires publishers to release more information about textbook prices. It also restricts "bundling," or selling a textbook packaged with supplemental materials, which has been a principal cause of price inflation. Thirty-four states have proposed or passed similar legislation.

The Congressional changes, which are designed to help students, will take effect in 2010. Capon, for one, is glad he's starting now. "Textbook prices are out of sight," he says. "It's time to shake things up."