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Are University Presses Better off Now than They Were Four Years Ago?

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Clifford Lynch recently wrote a piece in which he describes the broken promises to libraries surrounding the introduction of ebooks.  Instead of a cornucopia of books that would be available at lower prices than print and with various new features enabled by digital technology, we have a peculiar situation where many publishers are refusing to sell books to libraries at all, and often when they do indeed sell them, the books are priced higher than their print counterparts and with various new usage restrictions imposed upon them.  So the promises of ebooks for libraries remain unfulfilled.

Putting aside the question of who made those promises and how they proposed to hold themselves accountable for their fulfillment, Lynch’s comments lead me to wonder if the advent of ebooks has been a good or bad thing for university press publishing, a segment for which I have long had a special interest.  On balance I would have to say that as dramatic as the introduction of ebooks to the academic sector has been, by and large the fortunes of the press world are not appreciably better than they were four years ago–or six years ago, to begin the count with the launch of the Amazon Kindle, with apologies to Ronald Reagan and his famous (if misleading) four-year formulation.  Indeed, university presses seem to be operating under snugger strategic conditions than even a few years ago.  Ebooks haven’t made all that much difference.

Before saying another word, I must make the qualifying remark that there is great diversity among university presses and that generalizations inevitably introduce distortions.  The university presses at Cambridge and Oxford are as large as many commercial firms, possess a global footprint, and manage a broad product portfolio.  American presses range from under $1 million in revenue to tens of millions; some publish journals while others do not; and some, despite their small size, are healthily profitable.  My comments here put Oxford and Cambridge to the side and talk of the other presss in the aggregate–that is, there may have been winners and losers among them, but what have their fortunes been as a whole?

University presses have a complex business model, unique in the university world as far as I know, that combines earned revenue with various forms of funding that is not derived from the marketplace.  The earned revenue of these publishers is something of a three-legged stool:  books, journals, and services.  Services can take many forms, but the largest service by far is in the distribution of physical goods on behalf of other, smaller presses.  Let’s dig into the earned revenue one leg at a time, putting books last.

1.  Services.  A number of presses distribute books on behalf of other academic publishers, both domestic and international.  Historically this has been a good business, as distribution is a game of scale and a small press has anything but scale. This service lowers the cost of distribution to the small-press client (that is, in comparison to having to provide this service for themselves) and provides a profit for the larger press providing the service.

Unfortunately, this activity is now under stress.  Sales of printed books are not growing and in many instances are declining.  This leads to excess capacity at warehouses and slow-moving inventory (partially offset by the introduction of digital SRP–short-run printing).  On top of this is the entrance into the sector of commercial players, who change the competitive landscape.  It is difficult to be optimistic about the long-term prospects for this service.

Presses are also seeking to provide other services, especially digital services, but this will be a steep hill to climb.  The problem here is that the competition is everywhere.  Do you want to provide print-on-demand services for third parties?  Well, you and a dozen other outfits.  How about digital asset management, where the provider warehouses digital files that can be accessed and manipulated by clients?  Well, you and two dozen other outfits.  We needn’t get into file conversion, the creation of ebook apps, or pretty much anything digital.  The competition is too keen.

Some presses attempt to provide publishing services to other departments within their institutions.  This is a good idea (there is no point in having 20 different people trying to figure out how to convert a PDF to an EPUB file), but the scale is small.  Overall, it’s hard to escape the conclusion that income from third-party services will not be an ensured source of funding for presses in the future.  And this problem has intensified over the past 4 years–or 6–as print books migrate to digital formats.

2.  Journals.  Journals publishing overall is a very good business for certain large publishers, and it is still a good business for many university presses.  By my estimate, the American presses, taken together, publish about 200 journals; adding Oxford and Cambridge to the mix would add perhaps 600 more.  This is out of a universe of approximately 25,000.  There is a clear hierarchy in journals publishing.  The commercial firms Elsevier, Springer, and John Wiley sit at the top, followed by such firms as Taylor & Francis, Wolters Kluwer, and Sage and the major not-for-profits (e.g., ACS)—and of course Oxford and Cambridge.  Below that group are many university presses and professional societies (e.g., AIP, APS).  Smaller still are many other professional societies, which may have a tiny portfolio of journals.

The problem for university presses is that the journals business is all about scale and the one thing the presses do not have is scale.  Scale permits a publisher to establish a global footprint, to invest in technology, to pay large guarantees to attract professional societies to the roster, and to market the publications into every corner of the marketplace.  The journals market is not growing as rapidly as it once did outside of a few notable Gold OA publishers (e.g., PLoS), which in turn has put even greater pressure on publishers to achieve a greater and greater scale, the better to dominate academic library budgets and squeeze out the publications of smaller firms (which are likely in turn to sell out to the larger publishers, thereby increasing the latter publishers’ scale still further, a cycle that is vicious or virtuous depending on which side of the table you sit on).

The race for scale has resulted in the larger publishers poaching the journals formerly handled by many university presses.  Thus we have seen a collection of anthropology journals leave The Unviversity of California Press for John Wiley and Elsevier come bidding for a journal formerly managed by Chicago.  Even Oxford is big enough to act as a poacher, sometimes bidding for the publications handled by the smaller presses.  Thus the journals segment for university presses (always excepting Oxford and Cambridge) is a less reliable source of income today than it was even a few years ago.  Barring a bold new strategy for journals, it is difficult to make a case for growth for any but the largest publishers.

3.  Books.  What university presses mostly do is publish books.  They publish outstanding books and they publish them well.  While the book segment is still primarily a print business (about 90%), electronic revenue is growing rapidly.  There are no presses to my knowledge that are not now publishing ebooks.  This is a growth segment, and the presses are understandably proud of it.

Unfortunately, the book business, whether for print or digital works, is a tough one, especially in a segment where some titles may sell as few as 300 copies and a sale of 10,000 copies is a matter of astonishment.  The fixed costs of book publishing are simply too high for the small market for scholarly books, and the introduction of ebooks does nothing to whittle away at those fixed costs.  Many presses lose money on the sale of books, which in turn puts more pressure to find revenue in the already challenged segments of journals and services.

Another problem for the presses’ foray into ebooks is the dominance of Amazon, which exacts a significant toll from the presses for distribution.  Amazon gets more powerful every day and the demands made on tiny scholarly publishers are becoming strident.  A dollar taken from the operating margin of a university press is handed over to the shareholders of Amazon, a trend that shows no sign of slowing down.  While exceptional editorial talent always finds a way to punch its way through a hostile distribution environment, not all editorial work is exceptional and the energy behind every punch has a cost.  Ebooks, in other words, are a good and necessary move for the university press world, but they are not likely by themselves to provide financial stability.

And so all three legs of the three-legged stool are rickety, making the prospects for university press publishing not particularly bright.  On the other hand, the prospects are not bleak; the presses continue to earn the bulk of their income from the marketplace (over 90% of press budgets are covered by earned income).  This contradicts the prevailing narrative, which suggests that university press publishing is doomed, that the presses are losing tons of money, and that only a radical overhaul of the business model can “save” university press publishing.  This very point was made to me by a university librarian, who noted that her institution’s press had lost several hundred thousand dollars in the prior year.  Good lord, what are we to do? But contrast this with the librarian’s own budget, which entailed a cost to the university of over $30 million.  People, some perspective, please!  This bring us back to the point that presses are set up as subsidized profit centers, whereas most university functions are set up as cost centers.  Which is the bigger burden to the parent institution, the small subsidy of a profit center or the large budget of a cost center?

Using a yardstick of 4 years—or 6, or 10—we would have to say that the presses’ overall situation has gotten tighter; and we would conclude that the “promise” of ebooks (though here again I have to ask who is making these promises) has not meaningfully changed the fortunes of the university press world.  This is because electronics is not a strategy; electronics is an enabling technology that has to be put in service to a strategy.  If we want to meet Clifford Lynch’s challenge, let’s stand up in front of the white board and do some serious thinking.

About Joseph Esposito

I am a management consultant working primarily in the world of digital media, software, and publishing. My clients include both for-profits and not-for-profits. A good deal of my activity concerns research publishing, especially when the matter at issue has to do with the migration to digital services from a print background. Prior to setting up my consulting business, I served as CEO of three companies (Encyclopaedia Britannica, Tribal Voice, and SRI Consulting), all of which I led to successful exits. Typically I work on strategy issues, advising CEOs and Boards of Directors on direction; I also have managed a number of sticky turnarounds. Among other things, I have been the recipient of grants from the Mellon, MacArthur, and Hewlett Foundations, all concerning research into new aspects of publishing.

Discussion

19 thoughts on “Are University Presses Better off Now than They Were Four Years Ago?

  1. With, according to ARL, 65% and more, up to 70% of academic library materials expenditures going for electronic resources, I have to disagree with both you and Clifford Lynch. It’s never been a better time to be selling content to academic libraries if that’s your target market.. Nor a better time to be buying if you are an academic library. On the e-book side of the equation, Elsevier and Springer and Oxford and Harvard and Project Muse UPCC and over a hundred university presses associated with Oxford and Muse are putting out offers of thousands of their front list books, most simultaneous with print, or ahead of it, with few exclusions to libraries. In doing so they cut out vendors from primary sales. offer no DRM or simultaneous users limits, offer discounts and archival rights. Wiley is offering significant front list discounts. Harvard is below the price of a trade paperback and of course this, cuts out distribution and printing costs. If that isn’t a new model, and an exciting one at that what is it? Its a renaissance for books and a tsunami of e-resources for academic libraries and their users. It’s an energizing time to be in libraries and I would guess in university presses as well. If 50% of my frontlist purchases are ebooks without DRM or simultatneous use limits and with discounts and timely access, that’s a sea change university and scholarly presses are making that, are leading the wave. If half or more of my current list purchases for books are electronic, that’s a new model for libraries, for users and I would argue, for presses as well.

    Posted by chuck hamaker | Jun 12, 2013, 5:58 am
    • My point is that a “new” model is not necessarily a “better” model, at least in economic terms. And in those terms, ebooks have not improved the fortunes of university presses in a meaningful way. They may have helped libraries (I think Lynch’s focus was really on public libraries) and certain vendors (Amazon, Aptara), but for the presses, ebooks have largely substituted one revenue stream for another; they have not been additive.

      Posted by Joseph Esposito | Jun 12, 2013, 6:28 am
      • with the exception that presses are holding on to more of the money by selling more directly to academic libraries, cutting out the middle, like Yankee. Most offers I’ve seen through the ARL licensing efforts are oversubscribed, i.e. up to the top discount level and above the number of customers needed for the highest discount offered. Admin costs for consortia or other groups handling the sales are about 4%.

        Posted by chuck hamaker | Jun 12, 2013, 6:40 am
        • Project Muse does not work for free. Also, the sale of aggregations is offset by the loss of sales for course adoptions. Shifting to electronic form for academic book publishers is a necessity, but it has not to date provided significantly augmented economic opportunity.

          Posted by Joseph Esposito | Jun 12, 2013, 7:13 am
          • In other words it is just a transition not a growth opportunity. The community may be better off but not the producers. Change is not always growth, sometimes it is just change.

            Posted by David Wojick | Jun 12, 2013, 7:43 am
  2. “A dollar taken from the operating margin of a university press is handed over to the shareholders of Amazon.”

    This isn’t entirely accurate. A dollar taken from the margin of any Amazon supplier is typically handed over to the customer in the guise of a greater discount, and maybe a few pennies go to the shareholder. Amazon is where it is because of its customer-centric strategy. Amazon gives very little back to their shareholders, and instead invests in growing infrastructure and marketshare (also known as selling at a loss). As I’ve heard Amazon described by market analysts, Amazon is a charity run for the benefit and aid of its customers.

    Posted by Tony Sanfilippo | Jun 12, 2013, 8:02 am
    • I thought that was a great description of Amazon as well, but likely a fleeting one. There’s probably a limit to how long a company is willing to suppress profits in order to gain marketshare and achieve market dominance. At some point the switch will be flipped, presumably once the competition has been obliterated.

      Posted by David Crotty | Jun 12, 2013, 9:09 am
  3. I applaud Joseph for this insightful overview. It’s hard not to agree with his basic conclusion that, on balance, the movement to eBooks has not *improved* their lot economically speaking. They used to sell books/journals to libraries and bookstores; now, increasingly (as Chuck points out), they are selling to middlemen like Oxford and MUSE/UPCC. This may be good for the mid-level presses (or better than continuing to lose money in the print channel), but it’s especially good for libraries (again, as Chuck points out).

    Two (perhaps silly) questions:

    1) Why not cut out the middlemen entirely? If the UPs–or rather the universities that host them– agreed to exchange ebooks/journals among themselves, the costs of acquisition for university libraries would (I think) make up for any loss in revenue from Oxford, MUSE, etc. Moreover, they’d still be able to sell books on Amazon to those who didn’t have access via this super-consortium. (Or maybe they should all throw in with MUSE/UPCC, as they seem to be building this super-consortium themselves).

    2) Why aren’t UPs using their primary asset–access to ideas and research–to make money outside print? It’s not hard to make good videos of good monographs cheaply and post them on YouTube. If ads are run on these videos, then YouTube will pay the UP via Adsense. This is, I think, an entirely new revenue stream. Moreover, it would enable the UPs to reach more people with their ideas. Why not, for example, a UP channel distributed on, say, ROKU? Again, ads mean ad revenue.

    Doing these two things would necessitate a re-think of what UPs do. But maybe that’s what necessary for *growth.*

    Posted by Marshall Poe | Jun 12, 2013, 8:54 am
    • I’m not sure there isn’t growth opportunity in the current offerings.. I”m buying all the output from Harvard that’s available, likewise MIT press computer science and engineering titles. Previously it was selected titles through an approval program.

      Posted by chuck hamaker | Jun 12, 2013, 9:15 am
    • MUSE, by the way, is operated by Johns Hopkins University Press, and thus is a nonprofit university-based entity. As is Oxford University Press. They ARE universities. Related point: UPs did not “used to” sell books directly to libraries; libraries have been choosing to buy via commercial middlemen (YPB, B&T, Ingram, and other wholesalers) for many decades. Also, bookstores ARE middlemen, but most booksellers also choose to buy from wholesalers. Whenever publishers sell to wholesalers, we have to discount more than half off the list price. So in selling through MUSE we do a little better on discount. But by making online access to monographs easier we probably steadily lose classroom sales and sales to individual scholars (coincidentally furthering endangering the last remaining scholarly bookstores in campus neighborhoods). As a university press publisher for more than thirty years, I can say Mr. Esposito’s analysis is deeply informed about actual UP publishing.

      Posted by Sheila Leary | Jun 25, 2013, 1:03 am
  4. Most important, Clifford Lynch posits, “The real crisis will come when we see substantial amounts of important material published only as ebooks, when ebook-only publications become a significant component of the cultural and intellectual record.”

    The economic incentives (savings of inventory, handling, etc.) are huge for financially stressed academic publishers who, if and when they chose, could charge one-tenth the price of a hardcover edition and thus possibly earn profits by selling more copies.

    Posted by Albert Henderson | Jun 12, 2013, 9:07 am
    • Can you give further detail on your proposed pricing scheme? In my experience, paper, print, binding, shipping and warehousing of physical books makes up only a small percentage of overall costs (estimates range from 20-30% max). Most of the costs, particularly for academic book publishers, is tied up in the development and editing of the material. These costs don’t go away with a format change.

      Furthermore, the likelihood of cheaper ebooks reaching a wider audience is also probably worth challenging. Many, if not most academic presses are creating high level books for a highly specialized audience. For many of these books, a wider audience simply does not exist, regardless of price.

      Posted by David Crotty | Jun 12, 2013, 9:19 am
      • First, the development costs — including image permissions, etc. — are borne largely by the authors who depend on their books to leverage their careers. It is true that the paper and binding costs of an edition of 300 copies is almost insignificant. The marginal costs that remain high involve storage, handling, postage, and administrative tracking of ever-growing inventories. How else does a press justify a price exceeding $100 for a 324-page case-bound monograph?

        Second, the larger market historically remains academic libraries that brutally cut monograph purchases after 1970 and turned to interlibrary borrowing and other consortium strategies. Faced with lower prices, will libraries buy more ebooks and reduce interlibrary borrowing, or will they cut spending?

        Posted by Albert Henderson | Jun 12, 2013, 10:00 am
        • Postage is a “cost” that is passed on to customers, hence no drain on a university press’s income. All of the costs associated with print publishing together amount to no more than 30% of the overall cost of publishing. I’m not sure what Albert means to include in “development” costs besides permissions, but the development done both by acquiring and copy editors is significant and one of the most expensive parts of the process.

          Posted by Sandy Thatcher | Jun 12, 2013, 10:54 am
          • I disagree. “Postage” is a cost counted by the customers who must pay it. It is just as much drag on sales and drain on the press’s income as Amazon’s discounts are gifts to whoever.

            Posted by Albert Henderson | Jun 12, 2013, 2:57 pm
  5. I don’t think Joe gives enough credit to how Project Muse saved many university press journals programs. At Penn State, with a dozen journals in 2000 (the year that Project Muse began accepting journals from presses other than Johns Hopkins into its program), there was no way our Press could have feasibly made the transition to e-publishing without Muse. And while print subscriptions continued to decline steadily, the income from Muse more than made up for the difference, turning our journals program into even more of a moneymaker than it had been before, providing a very substantial internal subsidy to the book side of the operation. I suspect that is the reason that my successor as director has expanded the size of the journals program, almost tripling it since I retired in miod-2009.

    The hope, of course, is that Muse can do for ebooks what it did for e-journals. Muse/UPCC, JSTOR, and the other ebook aggregations have not been around long enough for any firm conclusions to be drawn yet. It is true, as Joe notes, that the ebook schemes potentially can undercut course adoptions and thus contribute to a very significant erosion of an important sector of print sales, viz., paperbacks. So some books are being withheld from the aggregations because of that concern. Again, time will tell what the financial tradeoffs here are.

    For services, Joe misses one important development, for presses that have joined forces with the libraries at their institutions. It is not the sale of services that is key here so much as it is the exchange of services. E.g., at Penn State we benefited greatly from having access to far more IT support than we could ever afford on our own (just one IT staff person at the Press) and to large-scale digitization (which enabled the Press to have its backlist digitized at no cost). These are significant synergies that the 2007 Ithaka Report highlighted, and I’m surprised Joe didn’t mention them because he spoke at the plenary session of the 2007 AAUP annual meeting where the Ithaka Report was the central focus of discussion.

    Posted by Sandy Thatcher | Jun 12, 2013, 11:05 am
  6. Why not become your own “vendor”, and leave Amazon out?

    Posted by Richard Preti | Jun 13, 2013, 8:36 am
    • Richard, you can buy a book directly from almost any university press’s website. But if you don’t know that, you are probably buying directly from Amazon, as nearly everyone else does.

      Posted by Sheila Leary | Jun 25, 2013, 12:20 am
  7. There’s a confusion about exactly which types of e-books are available to libraries and which are not. It seems to be well understood and appreciated that academic and research e-books are increasingly available, under fairly decent terms, to libraries — at least from a growing number of university presses and also from the Big For-Profits (Elsevier, Wiley, Springer, etc.) and others. When I read Cliff’s article, I thought he was addressing mainly the trade and popular books situation, where the situation remains terribly vexed and complicated. At the same time, even that side of book publishing shows promise of slowly opening up; at least there’s been some movement in that direction. It will take time to find the right business models. All this is aside from Joe’s argument that university presses are not better off than before — an area about which I don’t know enough to comment.

    Posted by Ann Okerson | Jun 14, 2013, 2:17 pm

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