Re: Usage-based pricing, a view

[Phil Davis <pmd8@cornell.edu>]

There has been some really constructive discussion about price
discrimination and usage-based pricing.  I will attempt a short summary of
several posts to liblicense plus a proposal that the benefits may outweigh
the consequences.

Pricing based on use is a great "equalizer" among academic libraries,
allowing institutions to pay different amounts for what they use (David
Goodman).  While it may be more cost-effective, the uncertainty of moving
to a cost/use economy may be resisted by librarians (Rick Anderson, and
ex-publisher), even though there may be more efficient models out there
(like simultaneous users) (Stefan Kramer).  The reason?  Library budgets
are meant to be completely spent on an annual basis, and publishers work
toward getting a % of that budget (Joe Esposito).

Price discrimination can provide for access to less affluent institutions
and developing countries who have never had access (Heather Morrison and
Ann Okerson), although there is belief that this benefit will only come
from the exploitation of large university library budgets (Sue Martin).  
Anthony Watkinson reiterated that it is not in the best interest of
publishers to try to squeeze every last cent out of the libraries.

Carl Anderson describes that use-based pricing is basically the same
economic model to an FTE pricing model.  Earlier I posed the question, "is
paying for actual use, any better than paying for potential use?" The FTE
model (or Carnegie classification model in the US) is basically an
estimate of potential use.  In an analysis I did last year with Academic
Press data (using 30 NERL libraries and about 70 OhioLink libraries), I
discovered that FTE was a very accurate predictor of use (medical
institutions were in a class of their own).

What are the consequences of moving to a usage-based model?  There appear
to be several pros and cons (as already described on liblicense).

Negative

1.      The model is antithetical to the mission of both librarians and 
	publishers (punishing libraries by promoting resources).
2.      Accurate prediction of costs (if usage is highly variable)
3.      Needing to define "use" and implied value of "use" (ie. the value 
	of a browse, print, by whom)
4.      Marginal costs to libraries may far exceed marginal costs to publisher.

Positive
1.      A more accurate and fair way to divide up the market than FTE or 
	other estimate
2.      The ability to compare the cost/use across publishers (extending 
	the pioneering work of Henry Barschall)

While this may be a difficult model for libraries to adapt to, I can
imagine that this last point (comparing relative value) may be worth the
risk.  It may allow us to keep relatively comparative titles in check i.e.  
comparing cost/use for Science with Nature, or Science Direct with
Blackwell Science.

--Phil Davis
Life Sciences Bibliographer
Cornell University