RE: Wiley-Blackwell 2009 Subscription and Licensing Options

["Richards,Robert" <Robert.C.Richards@drexel.edu>]

I believe Dr. Esposito describes pricing in a competitive market.
Many, though not all, markets for copyrighted scholarly works are
characterized by monopoly, however: the publisher exercises
market power, and so can raise prices above a competitive level.
The monopolist indeed sets the price, at the point at which its
marginal revenue equals its marginal cost:

"Monopoly exists when one firm controls all or the bulk of a
product's output, and no other firm can enter the market, or
expand output, at comparable costs. Such a monopolist has the
power to raise price above competitive levels by restricting its
output, because the output reduction cannot be offset by expanded
output by others. . . . [A]llocative efficiency results when
price equals marginal cost in all markets. Perfect competition
insures this result because firms in competitive markets that are
individually too small for their output decisions to affect price
maximize their net returns by producing up to the point that the
market price just covers the cost of the last unit of output. For
them, the added or marginal revenue from an additional sale is
the same as the cost at which it is made. This is not so for the
monopoly firm. Unless it can discriminate in price among
different customers, the monopoly firm can expand sales only by
lowering the price for all. Consequently, its marginal revenue
from selling an additional unit is less than the price it can
obtain for that unit, for it had to reduce price on all of its
volume in order to sell that additional unit. The monopolist
maximizes profits at that output at which its marginal revenue
equals its marginal cost. At that point its price exceeds
marginal cost and its output is less than it would be when
competition forces price down to marginal cost."

4A Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law: An
Analysis of Antitrust Principles and Their Application para.
403a-403b (2006 & Supp. 2008) (citations omitted).

Robert C. Richards, Jr., J.D.*, M.S.L.I.S., M.A.
Head of Technical Services
Drexel University Earle Mack School of Law
Legal Research Center
Philadelphia, PA 19104
rcr38@drexel.edu

* Admitted to practice in New York only.

The opinions expressed above are solely mine, and do not
necessarily represent the views of Drexel University.

-----Original Message-----
From: [mailto:owner-liblicense-l@lists.yale.edu] On Behalf Of Joseph Esposito
Sent: Thursday, October 02, 2008 12:29 PM
To: liblicense-l@lists.yale.edu
Subject: Re: Wiley-Blackwell 2009 Subscription and Licensing Options

I suppose there are some publishers who justify prices based on
the costs incurred, but I have never met any of them. Publishers
typically justify prices (if they feel the need to justify them)
based on the value of the products.  The justification is the
mechanisms of the marketplace itself. When the marketplace
believes appropriate value is delivered for the price, the
product is purchased.  When the market believes the value is not
up to snuff, there is no purchase.  The publisher does not set
the prices; the market does.

Joe Esposito

On 10/1/08, FrederickFriend <ucylfjf@ucl.ac.uk> wrote:

> Emily,
>
> I am grateful to you for providing this information. I could not
> find the FAQs to which you referred; the page
> http://www.blackwellpublishing.com/librarians/faq.asp came up
> with "Error: the page you have requested cannot be found", and
> the closest I could find to a "Transition" site, viz.
> http://eu.wiley.com/WileyCDA/Brand/id-35.html does not have any
> FAQs.
>
> Of course I accept that the cost of producing the content will be
> the same whether the delivery is print or electronic, because you
> will be producing print copies from an electronic base. You
> appear then to be saying that the cost of delivering the content
> is the same whether it is electronic or print. This contradicts a
> view I have heard from a number of distinguished publishers over
> the years, that maintaining a print production line adds between
> 20% and 30% to the cost of a journal. The argument put to me has
> always been that for customers to see the cost benefit from
> cancelling print, the print production line would have to be
> closed down completely, which is an argument I can understand.
> What Wiley-Blackwell appear to be doing now is including part of
> the cost for delivering print (i.e. the cost above the cost of
> producing the content) into the price paid by online only
> customers. This may make some customers think twice about moving
> to e-only.
>
> The justification you put forward for the pricing of the online
> version is that the online version provides added value. I accept
> that the online version does provide features not available in
> the print version, but I am surprised that the cost of providing
> these features is equivalent to the cost of providing a print
> copy. And one of the added benefits included in the online
> version, i.e. perpetual access rights, appears to customers not
> to be an added benefit at all, because it is included
> automatically in the print copy.
>
> Thomas Krichel wrote in response to my earlier post to Liblicense
> that "the issue for a publisher is to maximise profits, not align
> prices to costs". He may well be right. However, when publishers
> justify the prices they charge, they do so on the basis of costs.
> So what I am calling for from publishers is honesty: either be
> open about your costs, or else stop talking about costs and admit
> that all that matters to you is the "bottom-line".
>
> Fred Friend
> JISC Scholarly Communication Consultant
> Honorary Director Scholarly Communication UCL