Re: Usage-based pricing, a view

["Joseph J. Esposito" <espositoj@worldnet.att.net>]

Usage-based pricing will not prevail except in some highly exceptional
cases and where the publisher/disseminator operates with a subsidy, as is
common in the not-for-profit arena.  The reason for this is that
electronic publishing is a fixed-cost business--unlike trade book
publishing, say, where the variable costs of paper, printing, and binding
typically cost 20 percent or so of a publisher's receipts.  Electronic
publishing costs more at this time than print publishing by a huge amount
(a fact that few people seem to be willing to realize), but even worse
than the total cost is that costs are indeed fixed, which puts enormous
pressure on (a) pricing (b) locking customers into long-term relationships
(which customers understandably detest), and (c) increasing the absolute
number of customers (since the gross margin is effectively 100 percent).  
Fixed-cost businesses regularly evolve into subscription revenue models.  
Few organizations will put capital at risk in a fixed-cost business when
downstream revenue is usage-based.  The risks are too great.  Better to
invest in a restaurant or a T-shirt shop or anything with a better
return--because scholarly publishing competes for capital with ALL other
industries.  The problem is not Reed Elsevier.  The problem is Wall
Street.

But the debate is also irrelevant over the long run, in that usage logs
will obviate the problem.  The problem is buying things you don't want.  
Usage logs (not per-usage payments) will identify those publications that
are worth purchasing.  Thus, over time the content of the
subscription-based publications will come to look more and more like the
content that end-users want.

Joe Esposito