Controversial Topics, Research, Sociology

More Heat Than Light — The RWA Miscalculation May Have Burned More Than Elsevier

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Yesterday saw Elsevier withdraw support for the Research Works Act (RWA), and Darrell Issa (R-CA) call open access (OA) “the wave of the future.” It was a singular moment in the machinations over government policies related to scholarly publishing.

The lessons are many — politics are treacherous and prone to backfire; timing is everything; having the best talking point is vital; and timing is everything. Did I say that already?

However, judging from coverage, which generally tilted toward the blog equivalent of firing guns in the air, many misunderstandings of the scholarly publishing world have only become more severe and entrenched as a result of the rhetoric unleashed during this brief and painful interlude, as one article in TechDirt reveals:

. . . these journals . . . [with] their insane set up (free writing, free editing, full copyright ownership, and subscriptions that cost tens of thousands of dollars)

(Just to correct the misperception, the writing is part of reporting science and has indirect rewards; editing is not free; copyright transfer is a way of allowing researchers to return to the hunt; and subscriptions generally cost hundreds of dollars, not tens of thousands.)

Most scholarly publishers are not-for-profit, academic, or both, as we discussed here last year when the tenor of OA arguments ratcheted up. Most didn’t support the RWA. But these facts may get lost in the flame out.

The increases in misinformation and adamant stances from those supporting unfettered access to scholarly articles weren’t secret — they started last fall, and were pretty consistent. Elsevier should have sensed it wasn’t a propitious time to support something like the RWA, if there ever could be a time. Whether you agree with RWA or not, supporting the bill in the midst of an upswing in OA rhetoric was clearly a terrible misreading of the political winds. Unfortunately, because it generated more heat than light, we’re all getting singed by what was unleashed. Backing away was the only sensible move (as many AAP members sensed almost immediately), but there was a lot of smoke damage. And that stinks.

Elsevier, we’re putting the matches away now.

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About Kent Anderson

I am the Publisher at AAAS/Science. Previously, I have worked as CEO/Publisher of the STRIATUS/JBJS, Inc., a publishing executive at the New England Journal of Medicine, and Director of Medical Journals at the American Academy of Pediatrics. Opinions on social media or blogs are my own.

Discussion

35 thoughts on “More Heat Than Light — The RWA Miscalculation May Have Burned More Than Elsevier

  1. The average price per title is in the thousands and for that to be … a fair number are beyond $10,000. See: http://www.libraryjournal.com/lj/home/890009-264/periodicals_price_survey_2011_under.html.csp

    Matt Marsteller
    Head, Science Libraries
    Carnegie Mellon University

    Posted by Matt Marsteller | Feb 28, 2012, 10:16 am
    • Correct, driven mainly by chemistry, physics, and zoology. Below that, the prices drop off on average. And these are list prices, not the discounted prices often achieved through bundling. Even at full-price, these are an order of magnitude or two less than “tens of thousands of dollars.” Thanks for the additional data pointer.

      Posted by Kent Anderson | Feb 28, 2012, 10:22 am
      • Don’t get me going about bundling! Bundles just manage to acquire stuff you never would have purchased in the first place … as you spend more than you did in the past. I try not to let our university drink that kool-aid, but the publishers have a tremendous amount of clout.

        Posted by Matt Marsteller | Feb 28, 2012, 10:31 am
    • Matt, a few questions related to the article you’ve cited:

      1. What was the percentage of individual print subscriptions cancelled 2009-2010 by subscribers within institutions that provide institutional access?

      2. What is the average number of constituent users served by the institutional licenses cited in the article?

      3. What is the economic value derived by a university by providing access to any device anywhere on the university network (plus in many cases to remotely authenticated users), vs requiring a trip to the physical library to conduct research?

      4. What is the increase (decrease) in the number pf papers published 2009-2010 by users of these institutional licenses that cite the licensed journals in question?

      5. What is the increase (decrease) in usage of digital subscription content by users of these institutional licenses that cite the licensed journals in question?

      It seems only fair to consider the increase in value derived by users and customers when discussing increases in costs.

      Posted by Thane Kerner | Feb 28, 2012, 4:38 pm
      • 1. What was the percentage of individual print subscriptions cancelled 2009-2010 by subscribers within institutions that provide institutional access?

        This is typically closely kept information that is not divulged. In the past I’ve served on an advisory board for a publisher that asked that this type of information be kept confidential. Granted, a loss of personal subscriptions will occur when digital institutional access is enhanced. At the same time, this required large investments in technology by institutions in order to provide the access and a number of publishers priced this access far above print costs.

        2. What is the average number of constituent users served by the institutional licenses cited in the article?

        Pretty much the same as was served by the print copy in the library – the print copy was simply less convenient. Some larger universities were able to afford additional copies.

        3. What is the economic value derived by a university by providing access to any device anywhere on the university network (plus in many cases to remotely authenticated users), vs requiring a trip to the physical library to conduct research?

        Economic value isn’t always the ultimate goal. Often the goal is more effective scientific communication. If a private company can make a buck with artificial scarcity, more power to them, but don’t expect this model to hold up forever.

        4. What is the increase (decrease) in the number pf papers published 2009-2010 by users of these institutional licenses that cite the licensed journals in question?

        Increases in the number of papers or the periodicity of journals has typically resulted in corresponding price increases (often horrendous) – I’ve watched these for more than 20 years. That’s an economic wash – in the publisher’s view it’s more valuable and the price usually reflects it. The perceived increase in value is often not shared by the recipient.

        5. What is the increase (decrease) in usage of digital subscription content by users of these institutional licenses that cite the licensed journals in question?

        This is overstated … you still have humans needing to absorb the information. That ingestion rate remains the same for all practical purposes with the exception of the mechanics of retrieval. The intellectual heavy lifting is what really counts and that is usually only made more efficient by something like a speed-reading course.

        It seems only fair to consider the increase in value derived by users and customers when discussing increases in costs.

        — This is so only if you buy into the argument that artificial scarcity of scientific communication deserves to be maintained as a publishing model.

        Posted by Matt Marsteller | Feb 29, 2012, 2:28 am
        • To your comment on #3, universities derive value from providing information to faculty. Some faculty demand certain titles, or will not move to a new university without understanding what kind of information resources will be available. Also, if faculty are productive on the research front, the university’s reputation grows, it attracts more students and better faculty, and a virtuous cycle develops because of the value provided by better information resources. I think that was the gist of the question — not the value to the publisher but the value to the university.

          Posted by Kent Anderson | Feb 29, 2012, 8:04 am
        • #1 – You reference “large investments in technology by institutions to provide access,” but neglect to acknowledge large technology investments required of publishers to deliver the digital content.

          #1/2 – Re: the pricing of institutional access “far above print costs” — please clarify. Surely you mean a cost greater than the Library’s own print subscription, and not the cumulative cost of all displaced subscriptions in a given institution? It would be narrowly parochial, budgetarily, to consider only your own expenditures without regard to the expenditures of the entire university community for a given subscription. [I suspect some of your cost angst is indeed rooted in the cost-shifting from individuals and/or departments onto the library, typically overlooked by the university budgeting process.]

          #3 – There is nothing “artificial” about the difference between going to a library and accessing digital content from wherever one is. That is a genuine physical difference, one that provides a quite substantive efficiency advantage to users. It is the opposite of artificial scarcity–it is genuine increase in abundance. Efficiency for users delivers economic benefit to them. To create and maintain the infrastructure for delivering this benefit to users costs publishers money.

          You cannot seriously be arguing that the research experience, and in particular the discovery and retrieval of research documents, has not become more efficient, thorough, and productive by orders of magnitude in the web age.

          #4 – It sounds to me as if you’re arguing that additional publications have no value. A sort of Malthusian vision of knowledge. But of course the reductio ad absurdum of that attitude sends us back to the caves. In fact, knowledge – representations of our ever-increasing understanding of a near-infinitely complex world – is growing exponentially. (Perhaps a Zero-sum perspective on scholarship is one explanation for the existential threat to the role of librarian?)

          #5 – I’m afraid this simplistic view of user behavior is not supported by the evidence; c.f. Carol Tenopir’s research on article consumption, nicely summarized in this presentation [www.icsep.info/programa/docs/en/Chile-TenopirJan15.ppt]. Contrary to your assertion, per Tenopir’s title “Scientists read more in not much more time

          Posted by Thane Kerner | Feb 29, 2012, 10:45 am
          • #1 Yes, publishers have sunk large amounts of money into their operations as well, but as we all know, industry evolves and sunk costs sometimes need to be abandoned. Have we reached a point where services rendered by publishers no longer hold the value they once had? Has the industry changed so much that high priced operations are no longer necessary?

            #1/2 True, the ones that are far more expensive were the ones that had large numbers of personal subscriptions on any given campus. Nature, Science, The Chronicle of Higher Ed, etc. Unfortunately the cost shift to the libraries did impact other subscriptions instead of having the money follow the subscription effort. Some universities have gotten better about this and have done organized redirection of funds. Many other subscriptions, from both for profit and society publishers, soared in price – usually there was some reason (ballooning submissions forcing a review of periodicity, etc). In those cases … we just had to cut back on subscriptions. In some disciplines we’re down to the packages from a few society publishers and then a half dozen or so journals from for profit publishers. What used to be a list of ~150 subscriptions in one discipline is easily half that many today.

            #3 The scarcity is introduced by a pay wall … not the delivery mechanism. It’s great to publish something digitally, but that doesn’t guarantee its reach. Research has become selectively more efficient – in many research thrusts it has simply ceased to exist at a number of institutions.

            #4 If the big deals packed with no usage publications cost more than a university can muster, um … yeah … that really doesn’t add value. When universities try to be more nimble and cut titles no longer needed but have to wait until the next renegotiation of the contract, it actually hurts scientific progress. At a certain point, our scientists will simply stop publishing in works that not even their own university can afford because they become concerned about the reach of their article. I guess what I’m saying is that additional publications have to prove their value. I’ve been working in a situation where adding one journal necessitates canceling an equivalent amount of journal subscription dollars. Zero-sum does indeed reflect reality at many universities and for many of us it hasn’t been a recent phenomenon.

            As a former nuclear power plant operator, I can understand that librarians need to show their value in other ways … or expect that there will indeed be fewer of us … there already are! I believe that the overall drop in library positions over about the last six years has been about 40,000 positions. I had to look that up for a class that I’m teaching for a library school and the grim statistics were provided by the Bureau of Labor Statistics.

            #5 The volume of reading behavior doesn’t tell the entire story. A greater level of skim reading is what is taking place – I’m fairly sure Tenopir’s follow-on work delved into that. If you study which articles actually wind up being the next ‘set of shoulders to stand on’ … that would be something different. Hopefully Tenopir’s work isn’t behind a pay wall, but I’m fairly sure that it is.

            Posted by Matt Marsteller | Feb 29, 2012, 1:34 pm
          • #1-Publishers simply need to absorb digital delivery investments as a loss? not sustainable.

            #2-You admit that univeristy budgeters have failed to understand a key shift in payment patterns–but that’s the publishers’ problem?

            #3-scarcity has always existed: a print subscription fee is completely equivalent in form to a licensing fee

            –further, to quote you: “Research … in many research thrusts has simply ceased to exist at a number of institutions” (you must’ve meant something different?)

            #4-If scientists really stop publishing in these “expensive” journals you can be assured of a systemic change. Not holding my breath–sounds quixotic to me. [Luckily, in the real functioning world, scholarship and knowledge are NOT zero-sum; they are naturally expansive. I suggest if your stance opposes that tide, it is untenable in the long run.]

            #5-What the volume of reading DOES tell you is how much product is being used, and the answer is:more. And in every economy I know about, that means more cost for the user. My grocer does not sell me a pint of milk and a gallon of milk for the same price.

            [Now, to determine whether this usage provides a salutary pedagogical benefit to the user would require a far more expansive evaluation. Based on changes to my own information consumption practices, I suspect there are benefits elided by your summary dismissal of “skimming.” Indeed, the day scholars retreat to depending solely upon the classic papers is the day conformity puts science into reverse gear.]

            Posted by Thane Kerner | Feb 29, 2012, 2:54 pm
            • “Skimming” was used a term to describe the type of reading and it had absolutely no judgement on its merits whatsoever. If I’m remembering correctly, that’s the term that was used to simply describe the nature of the bulk of the reading that was taking place. I was just stating a fact as observed by a colleague. Now if one can look past outmoded librarian stereotypes long enough to realize that improvement of the human-computer interaction experience just might hold a value added that publishers could take advantage of, a savvy publisher just might make some headway in an increasingly difficult world. If skimming is of greater importance, perhaps one should consider how best to present a broader swath of information to users. I’m not convinced that serendipitous discovery is all that it can be in the digital environment.

              “#2-You admit that univeristy budgeters have failed to understand a key shift in payment patterns–but that’s the publishers’ problem?”

              It is only if publishers hold any value in library subscriptions. If you have income streams that dwarf library subscriptions, then by all means blow us off. The understanding of the budget was there … the political will to pool resources was missing. That can be quite difficult to overcome depending on the circumstances. It usually takes a masterful Dean/Director of Libraries to pull it off.

              “#3-scarcity has always existed: a print subscription fee is completely equivalent in form to a licensing fee

              –further, to quote you: “Research … in many research thrusts has simply ceased to exist at a number of institutions” (you must’ve meant something different?)”

              Nope! That’s pretty much what I meant. Faculty members move on or shift to a different line of research. Have you heard of the budget hemorrhaging that’s taking place? I thought we were turning the corner, but now state governments are slamming higher education with double digit cutbacks. And my point about scarcity … it doesn’t necessarily have to continue … and the way things are going, I doubt it will. I was shocked to hear from some for profit publishers in Dallas that they are completely shifting to OA for any new journal venture. That’s quite a statement.

              Posted by Matt Marsteller | Feb 29, 2012, 10:59 pm
          • @Thane

            As a citizen your statements are an excellent demonstration of why there is so little room for agreement with the outdated Toll-Access publishers and their promoters. Your views are simply fundamentally opposite of citizen-interests.

            #1 If publishers make poor investments citizens have no obligation to bail them out. If publishers offer an inferior product (Toll Access) we don’t need to sustain them at all. On the contrary, it would be better if they went out of business fast to make way for modern Open Access publishers.

            #2 It is the publishers problem if their business models are not alligned with citizen interests.

            #3 Claiming that “a print subscription fee is completely equivalent in form to a licensing fee” in this context is economically illiterate. Look up basic economic terms such as “rivalrous” and “marginal cost”.

            #4 It is silly to claim that scientists must change. It is to a much higher degree the funders who have an incentive to change the system. If funders can get rid of the inefficient creators of artificial scarcity (Toll Access publishers) they are much better able to promote science (more money for science, no artificial restrictions on the dispersion of the results).

            #5 “My grocer does not sell me a pint of milk and a gallon of milk for the same price.” Again, as pertaining to digital distribution, please brush up on your basic economics.

            Posted by Anders Norgaard | Mar 1, 2012, 4:24 pm
  2. You are being way too kind to Elsevier. They really screwed this up.

    The Open Access (OA) label (free to all at the point of use) is being mis-used by some to disguise a push for Government Access (GA) publishing. In the GA model the Government uses to power of research funding to become the monopoly publisher of almost all research information, with the expectation that crowed sourced comments will replace the value added by traditional publishing. Maybe GA is a better model, maybe it’s not; but GA needs to be clearly distinguished from OA and so that it can be openly debated as a matter of public policy.

    Posted by AnonToday | Feb 28, 2012, 10:55 am
  3. I’m not sure the situation is all that different than it was before the RWA/FRPPA/Elsevier Boycott uproar. Neither bill stood much chance of being passed, certainly not during an election year. And the die was already cast as far as OA mandates from federal agencies. Go back and read that White House RFI, which came out before any of this legislation came to light (or at least before the FRPPA arose from its slumber). Free access after-an-embargo mandates were already going to happen. The smart publisher should realize this and get out in front of the issue, to start proposing and supporting mandate terms that will work with sustainable business models. Perhaps the controversy has made this a bit more obvious.

    Elsevier’s withdrawal here is as clumsy as their support for the bill in the first place. As you note, the RWA was based on a terrible misreading of the situation described above. The withdrawal notice reads like a political non-apology. We continue to support all of the things in the RWA, but we withdraw our support for the RWA itself.

    As far as the misinformation and misconceptions that have arisen, again, I’m not sure things are any different than they were. Most scientists don’t pay a lot of attention to publishing industry business. They’re too busy doing science. Publishers tend to be navel-gazers. We get very caught up in the minutiae of our business. We like to obsess about the sky falling and we assume the details we work with every day are part of everyone’s worldview.

    In the last week alone I’ve met with four top researchers in four very different medical and life sciences fields. All were vaguely aware of the RWA but hadn’t thought much about it. Not a single one had heard of the Elsevier boycott. Anecdotal, to be sure, but I’m willing to bet fairly typical.

    All were much more concerned with the state of science funding. And that’s what matters here. We need to do more to cater to the needs of our readers and authors. Speed of decision and publication are obvious areas where we can help them in a time of difficult funding. Most researchers are more concerned with keeping the lights on and paying their employees’ salaries than they are with questions of access.

    If we see mandates for OA that have any effect, they’re going to come from the funding agencies. The research community itself is unlikely to be the driver here. They’ll respond to the mandates when funding is dependent on responding (much as PubMed Central participation was minimal when it was voluntary). And that’s why we need to work with the funding agencies to create mandates that we can actively support (mandates with reasonable embargo times and flexibility toward different fields for example).

    The situation has hopefully opened the eyes of the not-for-profit and society publisher that very few in the research community understand the nature of our business, the connection between the community and the journals which they own, and which directly fund their activities. We need to turn this realization into more work raising awareness, making it clear to the community owners of these journals that they can directly benefit themselves by supporting these types of journals and publishers.

    If we can respond in these two ways we can turn one company’s problematic approach into a net positive.

    Posted by David Crotty | Feb 28, 2012, 11:15 am
  4. What puzzles me is how so many smart people in publishing can end up so badly handling public relations in supporting their positions. Remember AAP/PSP’s PRISM fiasco of 2007 and the disaster of the advocacy for the Conyers bill in 2009? Every time, it seems, publishers have miscalculated and ended up retreating, with their tails between their legs, in the face of widespread if often misinformed opposition. Publishers are in the business of communication, so you’d think they would have done a better job of communicating their positions in ways that wouldn’t result in such embarrassing retreats. The industry needs to go back to the drawing board and relearn the lessons of strategic communication.

    Posted by Sandy Thatcher | Feb 28, 2012, 2:03 pm
  5. I’ve read in several sources that Elsevier’s profit margin is 36%. Even stipulating that the company adds value by its editorial and publishing work, that seems an awfully high profit margin, given the state of the economy, and given the fact that they do not pay the researchers who create the product they sell. If the profit margin were lower, perhaps there would be less anger directed at Elsevier.

    Posted by Kevin Mulcahy | Feb 28, 2012, 4:07 pm
    • Wikimedia’s 2009 profit margin was 38%. They don’t add much value to Wikipedia. In fact, journals certainly do more. Does that mean we should boycott Wikipedia?

      Posted by Kent Anderson | Feb 28, 2012, 4:46 pm
      • I wonder if that is a false equivalence. Wikipedia does not charge prices that have severely limited many academic libraries’ ability to buy books at all–thus hurting not only libraries but other publishers. That is, their high profit margin is detrimental to their customers and their competitors.
        I understand that as a publisher, you might have more insight into the publishing industry and more sympathy for that sector than I have as an acdemic librarian. But many of us, especially in state funded institutions, are facing difficult times–we’ll be cancelling journal packages, databases, and reducing our already low expenditure on books. I have great sympathy for publishers who are similarly struggling–rather less sympathy for Elsevier.

        Not a snark, but a serious question: do publishers, large and small, have business strategies that will sustain them as libraries collapse?

        Posted by Kevin Mulcahy | Feb 28, 2012, 5:22 pm
        • You’re facing diminished political importance in the academic center, as the recent study showing a 20+-year decline in your percentage of the university budget shows. It’s odd, because there are more researchers and there’s more research, so some administrators found a soft spot and have just kept pushing. As for state institutions, look at the race to the bottom we’re in around taxes. We’re the ultimate “want everything, don’t want to pay for it” generation. I sympathize to some extent, but we all need to portray the value we’re creating. I think libraries have a lot of devoted users who could be rallied to show administrators that budgets should increase — for staff, for facilities, for programs, for serials, for licenses.

          As for whether publishers have business strategies for when libraries collapse, I think there’s a two-part answer: 1) most of us like libraries and librarians, and respect what they represent and do, and are pained to see them struggling especially as tuitions rise and fees abound yet they get a smaller piece of the pie, so ultimately we hope their disappearance never becomes a reality; 2) because these budgets are so troubled, most publishers are looking elsewhere for revenues, and are finding new lines of business. So, yes, we’re dealing with reality, but hopeful that academia starts respecting the librarian again.

          Posted by Kent Anderson | Feb 28, 2012, 10:52 pm
          • Academics will only start respecting librarians again when librarians demonstrate that they add value to the research and teaching mission academics care about. Most academics don’t register that their click-through access to journals is achieved via the library – they think it’s all free online. they use Google Scholar rather than the library search tools. And since they do find so much without librarian mediation, they don’t think they need librarians. And who can blame them?

            What librarians need to do is reinvent themselves as research partners – by helping manage research data, finding and managing repositories for data and publications, helping with research metrics to demonstrate impact, getting DOIs for research datasets, helping data be seen so it can be cited and re-used, helping train researchers on new tools in their discipline or with skills like visualisation or data mining, helping win funding for infrastructure projects, helping develop methodologies for crowd-sourced projects, digitising manuscripts and letters, advising on licensing options for data.

            There is a ton of useful, relevant work librarians can do – if they look to the future and not to the past.

            Posted by Miranda Russell | Feb 29, 2012, 2:12 am
    • That profit margin is for the company as a whole, which includes non-journal businesses like Scopus and LexisNexis, both of which I’m told are highly profitable. It’s unclear what margin Elsevier are making on their journals.

      And as always, it’s important to note that Elsevier is an outlier, and at the high end as far as journal publishing profits go, due to the economies of scale generated by their size.

      Posted by David Crotty | Feb 28, 2012, 4:46 pm
    • Kevin,

      What is an appropriate profit margin?

      Posted by Thane Kerner | Feb 28, 2012, 5:34 pm
      • Thane,

        A reasonable question. An economist might answer it differently than I would, but I’d approach it from several angles. One–what is the industry mean? If one company’s profit margin is significantly higher than the mean, I’d wonder–especially if the margin did not seem to correlate with the quality of the product or service. Second, and related–Elsevier enjoys an effective monopoly over the information it publishes. If libraries do not buy those journals and the articles within from Elsevier, they cannot acquire them (except in limited bits, piecemeal, through interlibrary loan). You can point out that libraries do not have to deal with Elsevier, but right now that means depriving faculty and students. And I note that when faculty speak of boycotting Elsevier, they are regarded by some at least as being childish and silly. Third, leaving aside the implicitly moral arguments above, publishers enjoy a symbiotic relationship with subscribers. The Lord of the manor might have the power and the right to take ever larger shares from his peasants, but at some point the peasants might die, rebel, or flee. Elsevier’s reported margin is having arguably detrimental effects on its own consumers. A measure of moderation might be in Elsevier’s long term self interest.
        I readily concede, by the way, that Elsevier and scholarly publishing in general are only one part of the problem libraries face. If universities would give libraries increases to match inflation, if they’d see libraries as at least as important as big time sports, if libraries were able to make better cases for themselves (though most of us are already trying the approaches outlined in other comments), the practices of publishers would be less of an issue.

        Posted by Kevin Mulcahy | Feb 29, 2012, 12:18 pm
    • You know, about that profit margin… Google also has an operating margin (according to Wikipedia–that’s operating margin not final profit) of 30%.

      I find it interesting that this does not cause the same kind of outrage.

      (Especially considering that Tyler Neylon used to work at Google……….)

      (Opinions are solely my own.)

      Posted by Scott Epstein | Feb 29, 2012, 1:17 pm
  6. According to the Reed Elsevier Annual Report 2010 (2011 is not yet available). Reed Elsevier is divided into the following business divisions; Elsevier (academic publishing), Lexis/Nexis, Reed Exhibitions and Reed Business. In 2010 Reed Elsevier had total sales of £6,055,000,000 with an operating profit in that year of £1,555,000,000 or 25.7% for the entire company.

    The sales and operating profits for each division breakdown as follows:

    Elsevier: Sales £2,026,000,000 Profit £724,000,000 Operating Profit Margin 35.7%
    Lexis/Nexis Sales £2,618,000,000 Profit £592,000,000 Operating Profit Margin 22.6%
    Reed Exhibitions Sales £693,000,000 Profit £158,000,000 Operating Profit Margin 22.7%
    Reed Bus. Info. Sales £718,000,000 Profit £89,000,000 Operating Profit Margin 12.4%

    They do not report their net profit by division. The profit margins listed above are the operating profits for each division. There are further administrative and tax expenditures which reduced the company’s total net profit to £983,000,000 in 2010. These administrative and tax expenditures can be allocated to each individual division in a variety of ways so it is impossible to get a definitive net profit figure by division but the net profit margin for the company as a whole was 16.2% in 2010.

    The numbers above would indicate that the academic division is the most profitable division in the company. Allocating the administrative and tax costs equally (based on operating profits for each division) would lead to a net profit margin of 22.6% in 2010 for the Elsevier division.

    Posted by Mark Danderson | Feb 28, 2012, 8:54 pm
    • Mark,

      What is an appropriate profit margin?

      Posted by Thane Kerner | Feb 28, 2012, 9:49 pm
    • Mark, are these reports publicly available online? Is there a breakdown of what is meant by “academic publishing”? Does this encompass more than journals?

      Regardless, it’s nice to see some actual number and get better data here, rather than just taking the “all publishers make 40% profit margins” sorts of statements for granted.

      Posted by David Crotty | Feb 28, 2012, 10:02 pm
    • That’s about what PLoS made recently. Interesting.

      Posted by Kent Anderson | Feb 28, 2012, 10:53 pm
  7. Granted, the editors scholarly publishers employ are not always working for free (and certainly not on journals that can charge anywhere near tens of thousands of dollars per year per subscription), but I’m not sure how the facts that “the writing is part of reporting science and has indirect rewards” and “copyright transfer is a way of allowing researchers to return to the hunt” is correcting the idea that you are getting full-copyright ownership of content for free. Sure, authors get something out of publishing — they wouldn’t do it if they didn’t — but that hardly means you’re not getting a pretty sweet deal. It’s a rare industry that is provided with its basic raw materials with so few strings attached.

    Posted by Matthew Thomas | Feb 28, 2012, 9:54 pm
    • I always feel like these sorts of statements, that publishers get everything for free, need to be qualified to be a bit more accurate. It’s kind of like saying that solar energy is free, because the sun shines, without taking into account the tremendously expensive equipment needed to convert it into usable power.

      First, not all publishers require transfer of copyright from authors. More and more leave copyright with authors. This is likely a trend that will continue to grow.

      But to address the “free-ness” of it all, papers don’t just randomly show up at journals. Publishers spend enormous amounts of money and effort in attracting those papers. Money is spent in marketing, and more importantly in creating and maintaining journals that are attractive to potential authors. This means constantly building in new technologies, putting effort into things like SEO and working with indexing agencies, designing and redesigning interfaces and a constant level of experimentation.

      To physically obtain the manuscripts, publishers need to build and maintain complex article submission systems. Often these are licensed and require regular fees. Most publishers have extensive staffs in place to manage these systems and work with both authors and the programmers behind the systems.

      Then there’s the managing editors, who do the intake on those papers, who carefully check them to make sure they follow the journal’s format, that figures are created properly, and to weed out the off-the-wall submissions that don’t fit at all with the journal. These people work with the submitters to iron out the kinks, then coordinate the process of getting the papers out to the journal’s editors for peer review.

      None of these things come cheaply. And that’s just the intake process. While the authors don’t charge the journals for submissions, in a good journal, the vast majority of submissions are rejected. That means time and money spent on papers that are not going to be published. Often the peer review process gives the author help in improving their experiments and writing to better their chances of submission elsewhere. The cost of rejection must be accounted for when thinking about how everything is “free”.

      Perhaps a good analogy is a mining company. The ore is just sitting there in the ground, essentially free for the taking. But an enormous amount of infrastructure must be built and maintained to get to the ore and get it out of the ground. Once out of the ground, an enormous amount of money and time must be spent separating the ore from the dirt and other minerals. That makes for a very different business from just walking along, picking up gold nuggets by the side of the road and reselling them.

      Posted by David Crotty | Feb 29, 2012, 10:10 am
  8. Interesting. We are discussing an industry here and it is functioning in a market. Clearly markets should be able to regulate prices, as we leave them to do in other walks of life.

    But of course, markets need regulators to ensure some sanity. Where is the regulator here? Are monopoly suppliers free to determine prices? Who regulates academic publishing industry? Can we encourage competition somehow? BAA was asked to sell some airports recently from its portfolio. Should Elsevier be asked to sell a few journals?

    These are all extremely complicated issues and need a thorough thinking and collaborative approach involving all concerned parties.

    Kamal Mahawar
    CEO, WebmedCentral

    Posted by Kamal Mahawar | Feb 28, 2012, 10:44 pm
  9. David, Reed Elsevier is a publicly traded company, all its reports are readily available on the net. Many societies also list their financial information on the web as well. “Academic Publishing” was my shorthand for the description of the Elsevier division provided by Elsevier on its investor information website. David, I cannot say for sure what activities are included in the Elsevier division. Reading through their description, it seems to be only the academic publishing activities. But I cannot answer that question without reservation.

    Thane, there is no such thing as an “appropriate” profit. Profits are a function of the cost structure of the industry (in question) and the industry’s pricing power. Having said that, Elsevier’s overall profit margin does not strike me as horribly out of line. But it really does depend on the industry. Grocery chains and retail usually have profit margins in the single digits. However, profit magian is not the most important metric in business. The most important metric is return on capital.

    Posted by Mark Danderson | Feb 29, 2012, 12:30 am

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