Re: universities experiment with paying OA fees

["Joseph J. Esposito" <espositoj@gmail.com>]

Toby has this exactly right.  Kudos.  Note the central economic 
issue:  lowering the administrative cost of effecting a sale.

Joe Esposito

----- Original Message -----
From: Toby.GREEN@oecd.org
To: liblicense-l@lists.yale.edu
Sent: Thursday, June 19, 2008 3:29 PM
Subject: RE: universities experiment with paying OA fees

Adam,

Thanks for your posting and for introducing me to your platform. 
I've looked at the Lessig books. It's a nice, clean interface. I 
like the clip feature. I didn't like that I can only print off 
pages one-by-one - this would be very tedious if I wanted to read 
a chapter on the train home tonight.

I disagree with your view that selling subscriptions is 
increasingly inefficient. In my experience, it is quite the 
reverse. Selling books by the one, whether in print or online, is 
inefficient.

Think about the costs involved in deciding to buy a book on a 
one-by-one basis and then the transaction costs involved in 
making the purchase. According to ALA data from around 2000, the 
administrative cost of buying a single printed book is around 
$50. I guess it might be a little lower for a digital copy today, 
for the sake of argument let's say it is half - that's still $25 
per book. The administrative cost of subscribing to a multi-issue 
print journal was around $75 c.2000, it's probably lower for 
online-only journals, but for the sake of argument, let's stick 
with $75.

Let's say I've got ten books. On a one-by-one basis how many 
would I really sell to a library? Two, three? Maybe five? If the 
books sell for $50 each then my potential income from the library 
might be five times fifty (250) less trade discount and my 
one-by-one marketing and admin costs. The library has spent $375 
(5x50)+(5X25).

Now let's think from the publisher's viewpoint. If I can reduce 
my trade discount to subscription terms (we all know they are 
lower than bookseller terms) and if I can reduce my marketing and 
admin costs by bundling my books together, I can pass some of 
these savings onto the librarian in the form of a lower, bundle, 
subscription price. How about all ten books for $250? The total 
cost to the librarian is now 250 + 75 =3D $325. This is a $50 
saving on buying five books on a one-by-one basis and they've got 
twice as many books. My net income is going to be higher because 
I've reduced my transaction and admin costs. So we're both 
happier. I've also provided a better service to the librarian's 
reader community because they now have access to all ten books. 
Half my authors will be happier because all ten books are now 
being exposed to potential readers at that library.

This model works when a library needs a good number of all the 
titles published - in this example, when they need half the 
books. If they only need one or two titles, then they're better 
off buying by-the-one. For this reason, we offer librarians the 
choice of bundles of books and books by-the-one. Of course, if I 
can lower my costs still further, then I can make the point at 
which it's better value to subscribe to a bundle lower.

The numbers point to one clear conclusion: it is better value for 
both librarians and publishers to offer bundles of books on 
subscription. It is also better for readers (more stuff to choose 
from) and authors (more potential readers with access). I don't 
know what this says about the 'value and quality of individual 
copyrights' but I think it says a lot about the value a publisher 
can add to the process of making authors' works accessible to as 
many readers as possible in a cost-efficient and sustainable 
manner. I also know that we're just as stringent about quality as 
we were before we went digital - the last thing we want to do is 
to spend money publishing a book which no-one wants to read 
because if we publish titles no-one reads the librarians will 
stop subscribing.

This isn't a business model just for the big publishers and 
aggregators. We publish 250 books annually which makes us 
mid-sized, I guess. We offer a bundle with all 250, but also 
smaller, thematic, bundles - some with just ten books. We've got 
more than a thousand libraries subscribing to our book bundles 
and the number is growing nicely. The bigger boys might be having 
trouble getting their deals to 'stick' but I bet that's because 
they haven't got the value proposition right (i.e. they're asking 
for too much money). But this doesn't invalidate the inherent 
efficiency of bundling over a one-by-one business model for 
librarians, publishers, readers and authors.

Toby Green
OECD Publishing