Education and the Rental Economy

March 21, 2013 — Leave a comment

In the past few years, particularly in the wake of the Great Recession, many commentators have noticed a trend all across the economy: consumers have been eschewing the idea of owning things in favor of renting them. This so-called rental economy can be seen in a host of areas, from home rental instead of ownership to car-sharing services like ZipCar to entertainment options like Netflix and Spotify.

Even in the education industry, particularly educational materials, this trend has become evident. Chegg was one of the first companies to seize on the idea of textbook rentals, and now they’ve been joined by players such as Cengage and Amazon.com.

The demand for rental options from consumers has been clear. In many areas, lots of people clearly prefer renting access rather than paying to own it outright. The reason may differ depending on whether the item is a house or a movie, but there is no denying the impetus. I myself am a prime exhibit, at least in some areas of my life: I happily subscribe to Netflix and Spotify, having decided that I don’t much care (except on occasion) to own movies or music outright. Even in the case of books—and my partner and I own a gazillion books—I’ve started doing all my reading on my iPad via the Kindle app. Now it may appear that I am “purchasing” these books on my Kindle, but I know better: Amazon could take them away at any time. This doesn’t overly concern me.

What about price? I may well spend more money on movies, music, and books now than I used to in The Olde Days. However, I am happy with the shift. I don’t need or want to own more stuff, and the flexibility and convenience offered by those various services is worth the money, at least to me, and apparently to a lot of other people, too.

My Company’s Rental Service

As it happens, I am the owner of a rental service: Milestone Documents, a product for history classrooms that is part textbook, part primary source reader, and part LMS (learning management system). When we launched the service a couple of years ago, there was never any question of offering it via sale as opposed to rental. It is so rich with content, with instructor customization baked so deeply into the design, that it could exist only in the digital realm. In this scenario, a subscription/rental offering was the logical choice. At the same time, one of my motivating factors was the high cost of traditional textbooks, which I thought had grown outrageous. We set our price at $19.95/student/semester, which we thought was eminently fair and a big improvement over existing history course materials.

How do the students using our site feel about this pricing? In fact, they seem quite happy, presumably because they compare it with their other (generally more expensive) textbooks. One of the professors who assigns our site said that on the first day of class last fall, when she told her students that they would use a digital service costing $20 instead of a normal “textbook,” they broke into applause. Whether this is because they hate their textbooks in general, their size/weight, or just their price, I’m not sure. What about the fact that they lose their access to our site after the semester ends? Not one student has complained.

In the realm of educational materials, as in so many other areas, the shift toward rental has happened in concert with—and in some cases has depended on—the shift to digital. Part of the transformation is price: rental is succeeding with college students because it offers a lower price. We are now seeing universities attempting to support this shift. Witness the Cal State University system’s “Rent Digital” program, which we are delighted to be joining this fall. CSU has set up a system in which its students agree to rent their course materials in digital form instead of purchasing them outright, and for a much lower price. (Participating publishers must price the digital versions at least 60% lower than the corresponding print version.)

Benefit or Bondage?

While I think the advent of the rental economy in educational materials is extremely positive, not everyone agrees. In a post at OpenContent.org, David Wiley argues that the next-generation digital textbook offerings (specifically, “adaptive learning services”) are in fact a naked attempt by educational publishers to push back against the downward pressure on prices and, in addition, to exert “complete and perfect control over you and the use of their content.”

David is a pioneer in the field of open educational resources (OER). Among other endeavors, he worked closely with and for Flat World Knowledge, which rocked the industry with its free and open textbooks before abandoning that model last year. He is a respected and passionate advocate for OER, and in his post he makes a valid point about textbook publishers hoping to forestall lower prices by switching to a model that bundles content and services. I think he’s right about that.

However, I don’t agree with his view on the driving force of the rental economy—both in the larger world and in education in particular—and the motivations that he ascribes to educational publishers. In my opinion, the shift toward a rental economy has been driven by consumers, not by corporations “engaged in an active campaign to undermine the idea of ownership of private property.” In sector after sector, many consumers have happily traded this idea for the benefits they see in the idea of renting instead. And in education, our informal surveys of students at least have shown that very few of them care a whit about owning their textbooks. (Otherwise, the used-textbook market would never have flourished.) They want access when they need it, and they want to pay a lot less.

As for the motivations of educational publishers, again I should reiterate that David writes specifically about “adaptive learning services,” the newfangled technology solutions being developed mainly by tech startups as well as the giant LMS and textbook companies. And no doubt it’s those latter behemoths, not niche players like us, that David has in mind when he talks about the drive to control all content, take away rights of students and institutions, and lock in high prices. Although I am no fan of these large companies—and, in fact, am competing against them in offering what I think is a better service at a lower price—even I don’t think they’re quite as craven and cynical as all that. Granted, I may be naive. It wouldn’t be the first time.

A Diverse Ecosystem

Still, I am optimistic about those motivations and about the industry in general because of the diversity of organizations that are active within it. There are the big established conglomerates, but there are also tech startups, bootstrapped mom-and-pops (like us), and foundations and nonprofits (some with very substantial resources), not to mention heavyweights like Google and Amazon. I am hardly the type to wax poetic about the virtues of “the free market,” but I see a very dynamic sector with forces that can be and are focused on building better learning solutions. I use that phrase without ironic quote marks, because I don’t think it’s a hollow promise.

We can already see the effects of this turbulent market sector with the downward pressure on textbook prices, a fact that David himself has helped to bring about. I think the same pressure can and will be seen in other aspects of the new learning systems. Let’s take the issue of student highlights and notes. David is not the only person to sound the alarm about students not retaining ownership of the highlights and notes they create in these digital platforms; Audrey Watters has repeatedly warned about this same problem. I agree with both of them. We launched our own native highlighting and note-taking option only a few months ago. We do already let students print out all such content, but we need to do more to make it easier for the student to save and export this content when the semester is over—or even a couple of years later, if need be. Those enhancements will be coming on our service by the fall. Will the bigger companies follow suit? My guess is that they will over time, although this will depend on the amount of faculty and student pressure that is placed on them about this issue.

My friend Jonathan Rees is always quick to champion the right of faculty to select their own resources. Based on my experience trying to sell an upstart product in the higher ed market, this component of academic freedom is very much alive and well, at least in the United States. Because of that freedom, and because of the myriad companies and organizations working in the educational materials sector, I think there is cause for optimism.

On the other hand, don’t get me started about MOOCs.

Neil Schlager

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