UC V. NPG

["Albert Prior" <aprior@scrpublishing.com>]

Reed Elsevier achieved an overall group Adjusted Operating Margin 
of 25.9% in its 2009 accounts. The Elsevier division (STM) 
however, had an Adjusted Operating Margin of 34.9%. Elsevier 
represents 33% of the Reed Elsevier revenues but 44% of Reed 
Elsevier's Adjusted Operating Profit. Lexis Nexis is 42% of group 
revenues, but with an Adjusted Operating Margin of 26%. Reed 
Exhibitions and Reed Business are smaller parts of the Group's 
overall business and have lower margins.

One would expect therefore that Reed Elsevier would be keen to 
remain in the STM business as long as possible, in the light of 
the profitability.  The 2009 Adjusted Operating Margin in fact 
increased from 33.4% in 2008.

Reed Elsevier is aware of course of the potential impact of Open 
Access publishing and includes the risk in its 2009 annual 
report: "There has been debate in the government, academic and 
library communities, which are the principal customers for our 
STM publications, regarding whether such publications should be 
funded instead through fees charged to authors and from 
governmental and other subsidies or made freely available after a 
period following publication. If these methods of STM publishing 
are widely adopted or mandated, it could adversely affect our 
revenue from paid subscription publications."

They may well be pleased therefore by the findings from Oxford 
University and feel that the risk is still not that great at this 
point in time.

Reed Elsevier appears to be actively developing the nature of its 
business in the STM field, for example by introducing new 
services that aim to help universities worldwide in their 
competitiveness and research strategies, as well as tools for 
scholars. It's also acquiring specialist companies that will help 
its strategy, a recent one being a developer of nursing education 
software.

Albert Prior

____________________
Sandy Thatcher wrote:

Fascinating!  Maybe we are getting close to the "tipping point" 
that I projected would eventually come when I wrote "The 
Challenge of Open Access for University Presses" (Learned 
Publishing, July 2007): Here are some pertinent excerpts:

****

Commercial, and indeed society, publishers might well decide 
against remaining in the educational market with reduced profits 
or surpluses - as envisioned by open access advocates. In these 
circumstances, universities without presses would have to decide 
which of the journals abandoned by these publishers they could 
afford to assume responsibility for continuing and to subsidize 
by creating a mechanism for publishing them online and paying the 
staff to run it; universities with presses would need to 
determine how much they could increase the output of their 
presses to accommodate additional journals and monographs. These 
decisions could involve very significant new capital investments 
in their presses' infrastructure; commercial and society 
publishers now publish many thousands of scholarly journals and 
books annually.

... Change in the marketplace may well not come gradually, as 
many supporters of open access believe, but suddenly, as a result 
of the 'tipping point' (which the FRPAA could be, particularly 
for society and commercial STM journal publishers), leaving the 
system of scholarly communication in at least a temporary state 
of chaos.25 Universities should prepare themselves as best they 
can for this 'worst-case' scenario, and not simply assume that 
change will be slow and steady.

*****

Joe Esposito has suggested that commercial publishers like 
Elsevier might mutate from content providers to service 
providers, which thisd equity analyst envisions as one 
possibility for Elsevier's staying in the business. but the 
question, as he notes, is whether Elsevier could manage to 
sustain the kind of profit margins as a service provider that its 
stockholders have come to expect from its role as a content 
provider.

####