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Every year publishers of high school textbooks raise their prices, a chronic issue which has attracted much criticism. Parents have been complaining for years about the high prices. On average, an entire set of high school textbooks costs between HK$2,000 and HK$3,000. Worse still, the prices keep increasing, placing big burdens on many parents.

This year is no exception. Publishers recently announced there will be a 3.2 percent increase in textbook prices. With inflation now above 4 percent, this increase does not seem excessive. Nevertheless, many organizations and commentators have denounced the plan. Some accuse publishers of ignoring corporate social responsibility, while others say the publishers do not work hard enough to bring prices down.

Given the fact that everything is getting more expensive these days, the increase in textbook prices somehow is acceptable. In a free market, we cannot expect publishers to make a loss.

This protracted debate on textbook pricing also conveys much social sentiment, which makes it difficult to analyze objectively. There are occasions when publishers try to influence the schools' decisions on their choice of textbooks. In the past, publishers used to provide free-teaching materials to schools. Some publishers may even sponsor campus renovation projects. Furthermore, some publishers make editions of textbooks obsolete by making minor revisions.

Such "marketing" tools have created a negative image for publishers. Society has adopted the view that publishers are making excessive profits. This is more social sentiment than a fact, but, as mentioned above, the objection is strong this year even though the price increase seems reasonable.

One reason for this phenomenon is the market structure of high school textbooks. The high school market is limited. As the population of high school students shrinks, the size of the market is getting smaller. But, to develop a set of high school textbooks is expensive. There are many development costs publishers need to recover. With a smaller market, the average cost per book will be higher. To compound the problem, there are many changes to the curriculum and syllabi of subjects in high school education. To publishers, if a textbook needs to survive in this dynamic market condition, they will try to recover development costs as quickly as possible. Textbook prices will therefore not be low.

There is also a comprehensive and rigorous referee process in textbook production. Publishers cannot just produce a textbook at will. Publishers need to submit the textbooks to the government for formal approval, and this process can be lengthy and expensive. Of course, publishers will factor in these costs.

One often neglected point is that writers' fees are included in textbook prices as royalty payments. If the textbook is welcomed by the market, then the writer can obtain handsome royalty payments. The downside, however, is that royalty payment can constitute substantial amounts of a textbook's price. Very often royalty payments range from 10 percent to 20 percent. Together with a direct production cost of 30 percent, heavy portions of textbook prices are merely fixed in nature and cannot be further reduced. From this perspective, if society really hopes to see a reduction in textbook prices, the current system will disappoint them.

One way to change the system is to have official material provided by the government as textbook input. This way the costs of approval and textbook writing can be substantially reduced. Publishers can concentrate on the presentation and the pedagogical support. However, if the government is to provide official materials for textbooks, it is probable that a wave of strong debate will emerge. The government can easily produce "propaganda". Nevertheless, if nothing is done, the system will remain as is and complaints over textbook prices will occur every year.

The author is dean of the School of Business at Hang Seng Management College.

(HK Edition 05/09/2013 page1)