NYTime: As Publishers Perish, Libraries Feel the Pain

[Ann Okerson <ann.okerson@yale.edu>]

In today's New York Times, find a piece about the Harcourt purchase.  URL
is given for the full text.  Note some (what seem to me) to be
inaccuracies in the piece, includuing the statement that journal
publishing costs are very low!  There is a statement that Harcourt
publishes 500 journals, but the current STM collection that is offered as
part of AP's IDEAL is under 250 titles.  What are the other 250?

FYI, Ann Okerson

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As Publishers Perish, Libraries Feel the Pain
http://www.nytimes.com/2000/11/03/business/03PUBL.html

November 3, 2000

By DAVID D. KIRKPATRICK

[SNIP]

Science and technical journals have become a case study in the publishing
industry's growing consolidation. Until the 1960's, scores of smaller
companies and nonprofit organizations published the vast majority of
journals. Since then, a handful of companies led by Reed Elsevier have
acquired the bulk of them and have aggressively raised subscription
prices.

Publishers say that owning hundreds of journals enables them to serve
scholars better because the publishers have the financial resources to
invest in digital technology. But their power has attracted new attention
in the last week after Reed Elsevier agreed to pay about $3.5 billion for
the textbook business and roughly 500 journals owned by the publisher
Harcourt General.

The deal, one of the biggest in publishing's recent history, immediately
drew fire from librarians' groups, which have railed for years against the
industry's consolidation. "The one thing we can be certain will occur if
this deal goes through is that the prices of Harcourt's journals will go
up," said Mary Case, a program officer at the Association of Research
Libraries. The association's 122 members spend $900 million a year on
books and journals.

In letters to the Justice Department's antitrust office, the association
argues that journals compete against one another for dollars from
librarians seeking to offer patrons the most useful publications. So when
publishers own large numbers of journals, they can effectively raise the
average price, librarians say. If a publisher owns many of the top
journals in a field, as Reed Elsevier does in inorganic chemistry or
Harcourt General does in some medical fields, for example, its leverage is
especially strong.

But publishers say the rising prices simply reflect growing demand, not
consolidation, as companies and universities invest more in research.
Publishers argue that individual journals compete only in very narrow
niches like membrane biology or neural transmission and that because no
publisher owns all the journals in one niche there is no monopoly. Their
strength, they say, comes from their journals' prestige, not the number of
journals that they own.

Antitrust regulators have tended to agree. Announcing the acquisition of
Harcourt last week, Reed Elsevier's chief executive, Crispin Davis, called
the potential antitrust issues "very handleable," requiring only the
disposition of a few overlapping titles.

But some analysts are not so sure. "I am not thinking this is going to be
a slam dunk with regulators at all," said Michael Nathanson, an analyst at
Sanford Bernstein & Company.

Although the legal issues remain to be settled, virtually everyone in the
industry agrees that journal prices have risen precipitously over the last
15 years as the number of publishers dwindled. The 11 percent average
annual increase in journal prices in the last 10 years has even exceeded
the 6 percent annual price increases in brand-name cigarettes, Mr.
Nathanson said.

[SNIP]

Journal prices often rise most steeply after mergers, said Mark McCabe, an
economist at the Georgia Institute of Technology who previously worked at
the Justice Department's antitrust division. For example, he calculates
that since Pergamon was acquired in 1991, the price of Reed Elsevier's
journals has risen an average of 27 percent above the roughly 9 percent
average annual increase in journal prices over all.

Reed Elsevier is by far the largest journal publisher, with a list of
about 1,200 titles and $1.1 billion in annual revenue from its science
publishing unit. Harcourt publishes roughly 500 journals, with about $700
million in revenue from scientific, technical and medical publishing. The
combined companies would have about $1.8 billion in revenue out of a
worldwide market that analysts estimate at about $6 billion.

Their merger would bolster Reed Elsevier's power most in medicine. The
combined companies would publish more than a third of the 1,400
established medical journals, and the majority of the important ones, Mr.
McCabe said. As recently as 1998, the average price of a Harcourt title
was one-third the average price of Elsevier's titles, even though the
Harcourt titles were more widely used, Mr. McCabe added.

[SNIP]

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