RE: FTE-based pricing

[<Toby.GREEN@oecd.org>]

Chuck,

1. From our experience we also see it takes a year or three for 
usage to build and mature at newly subscribing institutions. So 
why not agree an introductory price and planned increases in 
years two and three (albeit subject to limitations) as a new 
service beds in? The key is to get a long-term partnership going 
and if both sides are thinking along those lines it shouldn't be 
difficult.

2. Clearly, if usage drops off the price would fall. I don't see 
this as a problem. Publishers may not like this scenario, but 
then they need to be honest with themselves about their content 
and how it meets the needs of their subscribers. They could 
respond by re-thinking their portfolio of publications and/or do 
more to promote their content to the end-users. In my opinion it 
would be better to reduce the price, keep the client and figure 
out what we were doing wrong than to try and tough it out on 
price only to see the client cancel. In the latter case both 
parties lose out. Of course, a good publisher will fix their 
service so that usage builds again, and then they would re-coup 
that investment through a rising price that a librarian would be 
willing to pay because it would be justified.

Toby

-----Original Message-----
[mailto:owner-liblicense-l@lists.yale.edu] On Behalf Of Hamaker, Charles
Sent: 19 October, 2006 1:16 AM
To: liblicense-l@lists.yale.edu
Subject: RE: FTE-based pricing

Toby: Two questions

1. Usage for most of our electronic resources tends to take about
3 years to level off, so there is growth than a period of
relative stability. This is a generalization, and of course we
see some other patterns as well. But it seems to take a few years
to reach some sort of upper level, though some resources continue
adding significant downloads over time.

2. What about underutilization?  Or decline in usage? What
happens in that situation?

Thanks for these innovative ideas.

Chuck Hamaker
Associate University Librarian Collections and Technical Services Atkins
Library University of North Carolina Charlotte Charlotte, NC 28223 phone 704
687-2825


-----Original Message----- [mailto:owner-liblicense-l@lists.yale.edu] On
Behalf Of Toby.GREEN@oecd.org
Sent: Tuesday, October 17, 2006 6:15 PM
To: liblicense-l@lists.yale.edu
Subject: RE: FTE-based pricing

We've been thinking about usage-based pricing for some time as a
means to meet the needs of smaller institutions who can't afford
to pay the same as larger institutions. We don't think FTE-based
pricing is the solution because determining the size of a user
population does not necessarily help determine a fair price
because you might get very high usage from a small population -
or vice versa.

The challenge is to come up with a pricing model that fixes a
price for a subscription period (because no-one can afford to
sign a blank cheque) but at the same time reflects the actual
usage of a resource in the long run.

We think the solution comes more readily if one thinks about the
long run rather than just about one subscription period.

Our thoughts are gelling around this idea:

1. establish an entry price, that everyone would pay. This would guarantee a
certain level of income for the publisher and would be affordable even for
the smallest institution. It's possible that this entry level price could be
tiered to institution size.

2. when discussing a new sale, the publisher and librarian would agree on a
likely level of usage - based on free trial access and experience of other
cases - and use this to agree the subscription price for the first year. (The
publisher would probably have a price list tiered by usage level.)

3. After six months, the publisher and librarian would review the usage level
and agree the first renewal price. At this time new content acquired by the
publisher could be offered into the package (and vice versa if they've lost
content!)

4. Six months into year 2, the publisher and librarian would review the usage
level again, and agree the second renewal price.

5. and so on. Once usage levels have settled down, the review process could
be more automatic.

By having an entry price the publisher has some guaranteed income and the
librarian is making a level of ongoing commitment. Reviewing six months ahead
of renewal would give the librarian time to manage their budget. Publishers
and librarians may agree that price rises and falls would be capped from one
year to the next - to help prevent budget problems on either side. Over time,
the relationship would develop so that unexpected spikes and troughs of usage
would be ignored, because the goal is to work together over the long-term.

Of course, defining 'usage' would become critical and Counter will be helpful
in doing this, as will systems like MPS's PublisherStats.

Toby Green
Head of Dissemination and Marketing
OECD Publishing