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Free Textbooks Spell Disruption for College Publishers

Startup companies offering knockoff textbooks are attracting students, and lawsuits.
November 19, 2012

Ask Ariel Diaz why he’s taking on the college textbook industry and he’ll tell you, “Quaternions.”

Quaternions are a number system used for calculating three-dimensional motion, popular in computer graphics. And Diaz needed a crash course to help him with a consulting gig after his online video platform startup, Youcastr, had failed. He started with Wikipedia and found it was surprisingly good at explaining this complicated mathematics.

Diaz, who still resents how much he’d paid for textbooks in college and graduate school, realized he’d hit on his next business idea. In 2011, he started Boundless Learning, a Boston company that has begun giving away free electronic textbooks covering college subjects like American history, anatomy and physiology, economics, and psychology.

What’s controversial is how Boundless creates these texts. The company trawls for public material on sites like Wikipedia and then crafts it into online books whose chapters track closely to those of top-selling college titles. In April, Boundless was sued by several large publishers who accused the startup of engaging in “the business model of theft.”

Theft or not, the college textbook industry is ripe for a disruptive shock from the Internet. Publishers today operate using what Mark Perry, a professor at the University of Michigan, calls a “cartel-style” model: students are required to buy specific texts at high prices. Perry has calculated that prices for textbooks have been rising at three times the rate of inflation since the 1980s.

On average, college students spend around $1,200 each year on books and supplies. Those costs, which sometimes exceed the tuition at a community college, are prompting a wider rebellion against commercial publishers. In February, California legislators passed a law directing the state to produce free versions of texts used in the state’s 50 most popular college courses. In October, Secretary of Education Arne Duncan said printed textbooks, a $6 billion industry in the United States (when sales of both used and new books are tallied), should be made “obsolete.”

Unlike publishers, who market their books to professors, Diaz’s company is aiming directly at students. Starting in the summer of 2011, Boundless sent marketers to hand out flyers on four campuses, including Boston University and Florida State University. Diaz says that within weeks the company had students signing up from 1,000 campuses, although he declines to say how many students have downloaded Boundless textbooks.

In their lawsuit, filed in March, publishers Cengage Learning, Pearson Education, and MacMillan Higher Education accused Boundless of copyright infringement, false advertising, and unfair competition. Diaz denies all the charges. He says his company uses only public information and doesn’t actually make or sell textbooks. “We don’t look at ourselves as an e-book or an online textbook or even textbook 2.0,” he says. “We see it as how do you create the next-generation content platform, which is much more than a textbook.”

For now, however, replacing textbooks like N. Gregory Mankiw’s Principles of Economics (which retails for $294 new) or Campbell and Reece’s Biology ($208) does appear to be Boundless’s primary activity. When students type in the name of either text on Boundless’s website, they are greeted by a flashing message that says, “Aligning your book.” Soon, a table of contents pops up on the screen.

In the case of Mankiw’s Principles, Boundless offers a stripped-down text covering the same core economic concepts. Mankiw is a snappy writer who starts off his chapter on taxes with an anecdote about Al Capone. Boundless’s version reads more like a reference text, but its organization closely apes that of Mankiw’s. Both have 36 chapters and even share the same first sentence: “The word economy comes from the Greek word oikonomos, which means one who manages a household.”

Boundless’s replacement books are appealing to students like Heather Haygood, in her third year at Pikes Peak Community College in Colorado Springs, Colorado. She is using the Boundless version of Biology, which her school sells for $178. “I just refuse to spend that much on a book,” Haygood said in an e-mail interview. “It’s a known fact that college kids are generally poor/broke so why are you charging us so much for books??? … lucky me i found it for free!!” She calls the Boundless edition a “pretty dead-on” copy.

Aaron White, Boundless’s cofounder and CTO, says the company uses a mix of human editors and technology to create its texts. It employs editors to locate public content from sources like Wikipedia, government websites, and Connextions, a repository of open-source academic material. That information goes into a content management system, which lets the company reuse explanations—say, of how DNA replicates—in multiple texts.

Commercial publishers are moving as fast as they can toward digital formats. Most now sell lower-cost electronic books through sites such as CourseMate, Kno, and Apple’s iTunes. “We are in the heart of disruption now,” says Bethlam Forsa, a vice president at Houghton Mifflin Harcourt, the largest K–12 textbook publisher in the United States.

Publishers of paper textbooks still enjoy some advantages. In K–12 education, states can’t demand that poor students buy a computer or tablet, so they continue to distribute paper books. At the collegiate level, professors are reluctant to switch texts because they would have to revamp their courses.

Such barriers help explain why the open-source textbook movement, which has been around for a decade, has never gotten very far. “The marketing realities of distribution have a lot to do with why there hasn’t been disruption,” says Sanford Forte, founder and director of the 11-year-old California Open Source Textbook Project. “The resources and skills to do that don’t lie within the academic sector.”

Now some companies think they can make money with free books. Diaz says Boundless’s strategy is to use free books to amass a large audience to which it can later sell other “freemium” services, such as tutoring. Diaz is vague about the paid products, which might not be introduced for another year or two.

Though no one has said publicly how Boundless might make money, the company was able to raise $8 million in venture capital in February. Mike Tyrrell, a partner at Venrock, which led the investment, says he was attracted by the idea that education in the United States is a $750 billion business still operating much as it did in the 1960s.

“The combination of what’s available with online content, online tools, and the variety of devices being applied against an industry that hasn’t really changed and clearly hasn’t been disrupted—that makes for an interesting area to invest in,” Tyrrell says.

Apparently, you don’t need quaternions to do that math.

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