Re[2]: Science Online and general e-journal pricing models

[mspinell@aaas.org (MSPINELL)]

David and listserv participants,

I've been away for a while, so haven't had a chance to respond to David's
message from earlier this month.

David, I appreciate the respect you declare for my views. Albeit a rather
narrow and qualified form of respect, I'll take it wherever I can get it!
In any case, I certainly find your comments both instructive and
stimulating, so by all means let's keep the conversation going, even if we
descend into disrespectful brawls from time to time!

Here are point by point reactions to your comments below, but I want to
address your point 5 first, because it seems most important for me to
clarify.

5. I agree that cutting price is a typical way to stimulate sales, though
by no means as universal as you suggest (IMHO). But -- despite the manner
in which I have written about this, which you are correct to point out --
I want to assure you that I have not (and will not)  confuse 'how many I
sell' with 'the size of the market'.

What I'm trying to ascertain is whether there is in fact a deeper market
(i.e. more demand/interest) than I have been assuming. If so, a price
adjustment may well be in order to see if we can capture that larger
market. Of course such price adjustments would precede the increase in the
market size, just as David notes. The question is, is there greater demand
than anticipated?

The pricing challenge is to estimate how many buyers there might be at any
price, then try to strike a price that will attract the maximum number (or
percentage) of those buyers. In fact, no product I know of achieves 100%
market coverage. ANY price is too high for SOMEBODY that might have been
counted in the market. Science in print, for example, does not reach every
library, or even every university library. But I wouldn't deny that those
libraries are all 'in our market', just because I haven't sold Science to
them.

I realize you may have only been speaking rhetorically, but your
suggestion of cutting price to one/tenth the current price seems to imply
that price cuts automatically result in market size increases commensurate
with the size of the cut. That is certainly not an inevitable outcome of
price cuts (perhaps not even a typical outcome...). In order for your
suggested price to be revenue neutral for us, we would have to sell to ten
times as many buyers (and of course this ignores any effect on costs for
serving this tenfold increase in accounts -- so it's still not necessarily
NET revenue neutral).

Anyway, while I wish to be as humble as possible about my market
projections, I can tell you I have no hope whatsoever that the market is
that much bigger than my estimates. It would require that there be MORE
libraries interested in Science Online than are presently even buying
Science itself -- a highly dubious prospect, since that number includes
high schools, multiple copies, and all sorts of entities clearly NOT
countable in the online site-wide subscription market...  Enough on this
topic; on to other quibbles.

You write: "I accept neither his model nor his prices". What exactly is
the problem you have with 'my' model, other than price? Science Online
site-wide subscriptions offer site-wide, desktop access, with allowances
for remote access and for walk-in users, no passwords required of users,
few restrictions on use, PDFs for research articles, HTML for ALL
articles, including research, and no requirement of maintaining print
subscriptions. Geez, what was it you were looking for that we aren't
providing?

Now onto your other numbered points:

1) Cost - I agree with your (and Peter's) comments, but would note that it
doesn't answer the pricing question.

2) Profit Maximization - I more or less agree with what you're saying, but
would note that, over the long haul, if commercial publishers persistently
take greater margins out of the market than non-profits do, then it is
they who will have the bucks to continue innovating.

Maybe in a stabilized marketplace it's not such a big deal, but in this
exciting time, it seems to me that if non-profits -- particularly those
which compete directly with for-profits -- only produce razor thin margins
(enough to fund their altruistic activities) then they are taking a
sizeable gamble with their future relevance.

Obviously, you are still right that if non-profits do no more than act
exactly like for-profits, then they've made another sort of error. I would
suggest that the most important difference between non- and for-profits is
not the SIZE of their margins, but what happens to those margins. If they
go into someone's pocket, I guess you'd have every reason to want to force
them to accept the smallest margin possible; if they go into improving
quality, and developing new valuable information products, then maybe
squeezing out the margin isn't such a great goal. Still, I recognize that
library budgets are not infinitely expandable, so perhaps you would say
there is a limit even to how much great quality information you can stand
to have produced! Again, I have no answer for this dilemma.

3) I don't really disagree, but have no idea what to make of the 10%
valuation. I can't see how to apply it in a practical way to our current
situation.

4) Your point here is well-taken.

Now I'm certain I've tried everyone's patience with this long tedious
response, and worst of all, right during the holiday season. I can only
beg your forebearance, and wish you all the best in the new year.  As a
small gift to you all--only a gesture really--I'll try to be quiet until
after the holidays!

Mike Spinella

______________________________ Reply Separator _________________________________
Subject: Re: Science Online and general e-journal pricing models
Author:  David Goodman <dgoodman@Princeton.EDU> at Internet 
Date:    12/4/98 9:29 PM


Although I have respect for Mike Spinell's views on journal pricing, I 
accept neither his model nor his prices. I have given my reasons before, 
here and elsewhere; instead of repeating, I will use this excuse to talk 
about the problem in a more general sense:

1/ Cost. Here I have no particular expertise, and I generally refer to 
Peter B. Boyces's contributions to this list and elsewhere, where he gives 
his personal experience that it should not cost much more to publish a 
journal in electronic format as well as print than it does to publish it 
in print only.

2/ Profit maximization. This should not be a consideration for a 
non-commercial publisher, which should only be concerned with recovering 
costs, or at most making a small surplus to support other activities of 
the society.  (As for the commercial publishers, it seems obvious that 
many have left the path where any stable equilibrium can be found, and are 
caught in the spiral of positive feedback.)

3/ Value. I am not aware of any adequate treatment of this. But, with 
respect to research journals, we have been paying for:

        preparation and distribution of the material 
        copyright permission
        availability on campus;

we are now considering paying additional for:

        greater availability on and off campus 
        higher quality printing and graphics 
        links and other features. 

>From a research library perspective, what is the relative value of the 
basic availability of the journal versus its greater convenience?  When I 
ask faculty whether we should consider canceling 1/3 of our titles to pay 
for electronic access to the other 2/3, they say,

        Certainly not!

When I ask them if it is reasonable to consider canceling 10% of the 
titles to pay for electronic access to the other 90%, they say,

        Quite possibly. 

And that's the value users put on the increased availability and links for 
research journals: 10%.

Now, this is approximate--it depends on the journal, and the general 
adequacy of the current collection. There are also additional factors the 
users customarily do not consider, such as networking, archiving, and 
alternative ways of paying for access. There is also the likelihood that 
when links improve so all journal articles are interconnected regardless 
of publisher, and all are actually available at an institution, then the 
value of the links will be considerably higher. (I will attempt to be more 
precise about all this elsewhere.)

Science also has a newletter/review component, which needs to be 
separately considered. I agree with Mike that availability and convenience 
is relatively more important here. I disagree with him that electronic is 
necessarily a better format than print for this component; what users seem 
to prefer is printed copies--to the extent that I think they will still 
want personal subscriptions where possible.

4. There is the related question of what the library community can afford.  
I know that publishers hope that the society as a whole will increase the 
money spent on academic information resources. Librarians may hope so too, 
but they know academic institutions pretty well, and just don't think it 
very likely! Therefore, with a finite sum of money, which will undoubtedly 
continue to increase much less than the cost of printed materials, there 
are only three possibilities for the system as a whole:

        fewer journals,
        cheaper journals, or  
        an alternative system altogether.

It is true that the share to a particular publisher can increase, but only 
at the expense of other publishers. I will gladly increase any publisher's 
share, but only on the basis of the quality of the journals.

5. As Mike says, number of users is crucial. Every industry in the world 
except scholarly publishing would meet the problem by cutting prices to 
increase sales. Mike offers the possibility, which he and I both think not 
very likely, of "a price decrease because we sold so many more than we 
expected"

I think it would be more successful to have a price decrease first, in 
order to sell more. Since the incremental price per user of an online 
service is extremely low, if Science were to charge 1/10 their current 
online price and every US college and university buys it, as I think they 
would at that figure, they would do very well financially.  The price 
sensitivity in deciding how many copies of a journal to buy, or whether to 
buy a supplementary access service, is considerably greater than for the 
basic subscription to an important individual research title.

--

David Goodman 
Biology Librarian, Princeton University Library 
dgoodman@princeton.edu         http://www.princeton.edu/~biolib/ 
phone: 609-258-3235            fax: 609-258-2627