Thursday, October 21, 2010

Is Textbook Rental The Way to go?

The TV show "Dragon's Den" is a reality show where 5 entrepreneurs listen to business pitches and decide if they want to invest their own money in the latest business idea pitched to them. The show started in the UK and has been widely popular. Across the pond in Canada, "Dragon's Den" has been a success for the CBC, and spawned a less than successful US Version called "Shark Tank"

The premise is simple. Everyday people pitch their new product or service and look for investment from the "Dragons". Sometimes the Dragons invest, many times they don't, pointing out the problems withe products or service, or more likely, the individuals high company financial valuation.

A recent episode of the Canadian show, included a pitch for a Textbook Rental Service. The individual who started the service, pitches the dragons asking for money to expand the operation to include more Universities and Colleges. His business model is like all other textbook rental schemes. The student goes to his website, enters in the course information and then pays to rent the textbook for a semester.

The whole process is web based, with the books mailed back and forth between the student and company, bypassing the campus store. The owner of this company sees real saving for the student, and of course profit for him. His pitch is no different than the hundreds of text rental ideas that are floating around right now.

So, do the Dragons bite? not in the least. These venture capitalists, far removed from the economics of Higher Education and the textbook business don't take long to point out the flaws in the business model. One Dragon does the math, realizing quickly that buying and reselling used copies is a better deal for the typical student. Another dragon sees the textbook rental business as a limited time success story - ebooks is where to put the attention.

The clip is a sober wake up call to the textbook rental business model. When venture capitalists such as these five Dragon's can't seem to see how text rentals will make any profits and be financially successful, it should give any store pause when considering this idea on campus.

You can view the clip HERE, where you can also enjoy watching the presenter dress up as a Lion / Sunflower; illustrating how not to make a business pitch.

No comments: