Rational and irrational economics, was , Elsevier ...

[David Goodman <dgoodman@princeton.edu>]

Anthony, I want to challenge the general statement running though your
discussion that publishers act according to the same economic motives as
libraries. Publishers try to maximize profit. The greater their net
returns, the more money the owners (corporate or individual) have for
their private purposes. Libraries must stay within their allocated
budgets, but do not benefit institutionally or personally from any savings
beyond that point. Indeed, if we do not spend all our money we are almost
certain to receive a proportionately lower allocation the following year,
so we normally try to spend it all. Optimum economic behavior for us is to
spend all our money, but to spend it so as to maximize the satisfaction of
the users.  However, our success at meeting user needs has only a very
limited effect on our personal careers. Our actions affect the quality of
the institution, but they are rarely critical to its survival. .

The economic status of a journal depends primarily upon the number of
subscribers at full institutional price, because of the high first copy
costs and low incremental per-copy costs. The number of institutional
subscribers depends upon price, and quality (and a number of less rational
factors, such as prestige and tradition).  Their subscription decisions,
as has been discussed here and elsewhere, are relatively insensitive to
price, but much more sensitive to quality (which they judge primarily by
user demand).  This is a consequence of the Bradford distribution: the
small number of highest quality journals are the ones that receive most of
the use.  A journal of sufficiently high quality can charge a high price
and not lose subscribers. Recent complaints of journal pricing on this
list and elsewhere have addressed not high priced journals per se, but
journals whose high price is not matched by their present quality. In
these discussions, the general publishers response is: but look at the
very large number of articles the journal publishes.  This is of no
concern to a library or a user: both want the journals with the best
articles, not the ones with the most.

A journal of very high quality does not need to charge a very high price
to survive and make a profit--because of its quality it will sell a
reasonably large number of subscriptions, and thus enjoy the benefits of
the low marginal costs that apply.  In the past, this has permitted
smaller libraries to afford a useful collection of high-quality academic
journals, and permitted larger libraries to collect the best journals in a
very wide range of fields.  What we have seen in the last two years is an
proportionately greater increase in the prices of the best journals. The
American Society for Microbiology comes to mind as the most dramatic
example; a less drastic but more significant one is the much greater
percentage increases for Elsevier's Current Trends group than the rest of
their list. This will indeed maximize short term revenue--as long as the
journals I have mentioned retain their superlative quality, we will all
buy them. We will buy them, of course, at the expense of the titles of
lower quality--and all major commercial publishers have many of these.
This will accentuate even further the positive feedback that Anthony
discusses. This may and should drive such journals to extinction.

The traditional way for a publisher to escape from this dilemma is by
subsidizing these journals with the more successful ones. This is of
course the motive behind all-inclusive subscription plans; by denying to
libraries the opportunity to choose titles, they force us to continue
these subsidies. This removes the normal competitive forces promoting
higher quality higher profit journals, and I anticipate that it will
depress both quality and economic efficiency.  If this drives the total
costs too high, the entire package may fail. Unlike the selective loss of
minor titles, I do not consider this a desirable result.

David Goodman
Biology Librarian, and
Co-Chair, Electronic Journals Task Force
Princeton University Library
dgoodman@princeton.edu         http://www.princeton.edu/~biolib/
phone: 609-258-3235            fax: 609-258-2627


Anthony Watkinson wrote:
> 
> I suppose it is genetic as Ken Slagle says. He also is a human being and
> wants to be paid by NMSU. If NMSU decided to pay him less on the grounds
> that in the electronic environment researchers could reach content without
> his help, maybe he would be unhappy. Maybe he would be unhappy if those who
> actually run NMSU lost money through not acting in a businesslike way and
> the university closed down
> 
> The businessmen (and businesswomen) who run publishing companies (many of
> them non-profits) face a whole range of difficulties in the economic
> environment. They want to maintain their profits (or surpluses). The
> nightmare for publishers is that networking in the end results in only one
> copy only of a publication being sold - the obverse of a librarian's
> nightmare that all content their users need is locked up by one publisher.
> These are nightmares of course.
...
> 
> The great majority of librarians do recognise that publishers do have a role
> to play, that there is a publishing function. ARL do with SPARC. They also
> recognise that payment is necessary to support this role/function.
> 
> What publishers have to do is regard the problem as a challenge and work
> with libraries to find an equitable solution. Fortunately, as liblicense
> shows if you look at the files, an amazing amount of progress has been made
> on licensing and an equal amount of goodwill has made this possible. Ros
> knows very well that in the UK the PA/JISC licences have brought both
> publishers and librarians together to deal jointly with these sort of
> problems/challenges.