Felix Breuer's Blog

Here is how to fund Open Textbooks and MOOCs

Open textbooks and MOOCs are the way of the future. Yet, traditional business models, from donations to sales, do not suffice to make the full breadth of educational content open to everyone. Fund I/O is the business model to fill this gap.

It is simple, really: the more people have access to an educational resource, the more can benefit from it. In an age where copying has almost zero cost and education becomes increasingly important, open textbooks and open online courses seem like the obvious way to go. However, the question how open educational resources can be funded remains unanswered.

The classical approach is to sell educational resources for profit. However, the price of textbooks is skyrocketing, instead of going down. Reasons are publishers’ profit interests, market failure (professors choose textbooks, but students pay), high production costs (both for content and for printing hardcopies) and the increase in the number of students’ buying used textbooks, renting textbooks and downloading unlicensed digital copies (aka “piracy”) to avoid paying the full price. These trends lead to publishers pricing their textbook out of the market and are thus self-reinforcing. Clearly, the traditional business model is not sustainable.

The alternative way to fund educational resources is through donations. This can take many forms. Professors may choose to devote their time to write a book (or produce an online course) for free. Governmental agencies or private foundations may provide grant money. Companies may sponsor a course (in exchange for some form of advertising). Or a fundraising campaign could gather donations from the interested public. If donations suffice to fund an open textbook, that is great. However, except for a few high-profile examples, donations won’t suffice to support high-quality educational publishing in its full breadth. (In fact, there is a theorem which, roughly, says that, if people behave rationally, the amount of money that can be raised for open content through donations is just the square root of the amount that can be raised through sales, i.e., \$1.000 instead of \$1.000.000.)

Crowdfunding is a new funding model that is working spectacularly well in the entertainment industry. While crowdfunding has yet to be tried at scale for funding open textbooks, there are two reasons why current reward-based crowdfunding models will not be a viable option for educational publishing in general. First, most successful crowdfunding projects do not promise the creation of open content. Instead, their success is critically tied to the exclusivity of rewards. Second, crowdfunding projects are typically carried by high-tier backers who pay exorbitant amounts for token rewards. While it stands to reason that the hard-core fans of an artist will happily donate large amounts of money in exchange for a casual meet-and-greet, it is hard to imagine students paying huge sums to meet their textbook authors.

Enter Fund I/O. Fund I/O is a new kind of business model that can provide access to textbooks to as many people as possible while at the same time covering the cost of production. The model is independent of donations and maximizes access instead of publisher profits. Moreover, Fund I/O provides a smooth transition towards making the textbooks open to everyone, according to a transparent mechanism.

An illustrated introduction to the Fund I/O model is given here. In a nutshell, the idea is this:

  • The more students buy the textbook, the lower the price.
  • As the price drops, early buyers receive a full refund for the price difference. So nobody has an incentive to wait with their purchase.
  • When the price reaches a minimum value, the textbook is made free for everyone.

In particular, students (or universities, or libraries) can pledge how much they are able to pay for the content. If enough students pledge that amount, the price will drop automatically. In this way, students can determine the price of educational content.

From the publishers’ point of view, the deal looks like this: Publishers limit their profits to a fixed maximum amount, right from the outset. In return, they greatly reduce their financial risks and give their customers a rational incentive to reveal how much they are truly willing to pay for the content. By giving publishers and their readers a mechanism to communicate rationally about price, Fund I/O resolves the vicious cycle of publishers charging ever more and customers finding new ways to avoid paying.

In short, whenever donations or ads do not suffice to cover costs, Fund I/O is the business model to use for funding content that serves a common good.