Re: Libraries Urge Justice Departmen to Block Cinven and Candover Purchase of BertelsmannSpringer

[Phil Davis <pmd8@cornell.edu>]

Anthony Watkinson argues that while Mark McCabe's research indicates that
mergers result in higher prices, he disputes that publishers see this as
cause and effect, and wonders why we have not asked publishers HOW they
decide to price journals.  With all due respect to Anthony -- in
philosophical terms -- this is a red herring.  It is not necessary to
prove intent in order to demonstrate that mergers in the publishing world
have resulted in higher prices.  Whether mergers directly cause higher
journal prices, or whether mergers cause changes in the publishing
environment which then cause higher prices is moot.  The research of
McCabe and others illustrate the relationship between mergers and price
increases, and that does not appear to be disputed.  If Anthony can find
contrary evidence that mergers cause prices to fall, or even price
stabilization, I would be very interested in seeing this research. --Phil
Davis, Cornell University

ANOTHER EXAMPLE OF MERGERS RESULTING IN HIGHER PRICES

"Briefly, our results for journals sold by commercial publishers indicate
that prices are indeed positively related to firm portfolio size, and that
mergers result in significant price increases. For one specific
transaction we investigatedWolters Kluwer and Waverly, the results
predicted an average price increase of between 20-30% for the affected
medical titles."

McCabe, M. J. (1998). The Impact of Publisher Mergers on Journal Prices: A
Preliminary Report. Bimonthly Newsletter of Research Library Issues and
Actions (200), http://www.arl.org/newsltr/200/mccabe.html.


At 07:35 PM 6/5/2003 -0400, Anthony Watkinson wrote:
>The argument of McCabe is that the mergers contributed to the price
>increases. As Phil points out McCabe has analysed the data and assumed
>cause and effect. As far as I can recall he has not extended his reseach
>to actually ask the people pricing the journals in these companies at this
>time why they increased prices in the way that they did.
>
>I have written before (in Marcia Tuttle's newsletter) on how publishers do
>their pricing. There are significant differences in the drivers from one
>company to another and from one period to another, though also one basic
>similarity in aim - the wish to maintain profit margins or surplus
>margins. I can say that with much more authority than McCabe because I
>have been involved in pricing journals in four major companies, one of
>them non-profit. He is looking at it from the outside.
>
>What I can tell the list from my own experience is that when I was the
>publishing director of Chapman & Hall during much of the period covered by
>McCabe is that, during this period, we bought a number of journal and book
>lists. Thomson wanted to increase the size of Chapman & Hall both by
>investment in staff etc leading to what publishers call organic growth and
>by purchase.
>
>I was of course involved in drawing up the business plans to justify the
>purchases, and, although I often thought that aspects of them were
>unrealistic, I can state categorically that none of them built in price
>increases as a way of paying for the cost of purchase. Publishers are
>optimistic. They have to be to start any new journals or keep a book list
>going. They always assume that they can achieve ecominies of scale and be
>more efficient (which does of course usually involve staff losses) in
>running any list they buy. Thomson top management was always worried about
>any price increases which were above average and were always insistent
>that the maintenance of the number of subscribers was paramount.
>
>I have no idea what Cinven + Candover policies are but no-one can assume
>that they involve serious price increases