MediaFile

A new business model for a new generation of consumers

Editor’s note: This piece first appeared on PandoDaily.com. It is being republished with permission.

There’s a reason that healthcare and public education are the least functional parts of our economy. In neither is the person receiving the treatment the one actually paying the bill.

First off — calm down, crazy Libertarians — I’m not suggesting we abolish either. But it’s certainly a problem that in both healthcare and public education there’s inherent confusion over who the customer actually is.

Think about how much the battle over public education doesn’t revolve around the students. The fact that teachers aren’t able to be fired for poor performance, for instance. That has to do with political officials allocating money and making rules, and basing those rules on what messages well to parents and the unions that support their campaigns. The kids themselves literally and figuratively don’t get a vote.

Healthcare is even more convoluted. We have a system where the doctors sell treatments to patients who don’t pay for them. For people with generous insurance, doctors are economically incentivized to order excess tests and treatments a patient doesn’t need, and the patients have no economic incentive to push back. For those with lousy insurance, they frequently can’t get the care they need, because the system is priced for a deep pocketing third party to pay steep medical fees that few individuals can absorb and avoid bankruptcy.

Netflix model spreads to college textbooks

E-textbooks may be the way of the future for college campuses, but some scrappy companies are banking on the here and now by offering a solution to bring low-cost textbooks to students, and in some ways they’re taking a page out of movie rental company Netflix Inc’s playbook.Reader

New college textbooks are a $4.5 billion business for dominant players such as Pearson PLC, privately held Cengage Learning and McGraw-Hill Companies Inc.  But upstart companies such as Chegg and BookRenter.com are gaining momentum by offering used books at a discount on their websites, and shipping them to students, who later ship the books back when they are done with them.

If that sounds a little like Netflix’s business model, it may not be that much of a coincidence. Marc Randolph, who was a co-founder of Netflix, is a board member on the privately-held BookRenter.com.