The open access publishing model was initially based on the notion that a single payment from an author or an author’s funder just prior to an article’s publication could allow for ongoing no-cost access. A major assumption in the business model was that marginal costs for electronic distribution approached zero (over above repaying the publisher for editing, peer-review administration, and composition), so a price that absorbed what would be less than a rounding error should prove sufficient.
Under the initial model, an author or funder paying a few hundred dollars a few months before an article was published was covering the expenses of editorial processing, composition, XML conversion, and other costs involved in creating the article, as well as hosting fees. It was essentially a reimbursement to the copy editor, managing editor, composition staff, etc. Because the marginal cost of online publication was posited as virtually zero, the open access model could presume that once the costs of article production were paid, the article could be purveyed online at virtually no cost.
Essentially, if the model had worked from inception, there would have been no need to modify it. But things have changed, and the initial model requires supplemental revenues to achieve its goals. After all, the financial model was created before concepts like the long-tail were commonly acknowledged; during a time when the desktop computer was the main interface to information; and prior to the interactivity expectations that arrived with Web 2.0.
Once an article is created and published, do the expenses end?
In the print world, they pretty much did. In the digital age, they most certainly do not.
In the 1950s, Lewis Strauss, the former head of the Atomic Energy Commission, predicted that electricity would be “too cheap to meter” within a generation due to how cheap electrical production would become with atomic energy. Not only did his optimism about nuclear energy prove to be misguided, but he forgot about the distribution costs, as Gordon Dean, a former colleague, pointed out at the time:
Even if coal were mined and distributed free to electric generating plants today, the reduction in your monthly electricity bill would amount to but twenty per cent, so great is the cost of the plant itself and the distribution system.
The premise that now distribution is virtually free gets it wrong in the exact opposite way. The problem now is that information production is becoming more expensive as more value has to be added upstream by publishers in the digital age; that same value has to be maintained and enhanced for a longer period and constantly; and that same value has to be migrated to an increasingly diverse and demanding digital infrastructure.
The likelihood that fixed costs — editorial salaries, internal systems, and software licenses in the small scale; redesigns, content migrations, and device support in the large scale — will only increase for digital publishers is driving expenses in much the same way interest charges drive the cost of a loan. Over time, the costs add up. If you’ve ever taken out a mortgage or refinanced, you know that statement lenders are required to give you — the total cost calculation, how much you’re actually going to pay in principle and interest. It’s always a soul-wrenching moment when you see it, but it’s reality for interest-bearing loans, one that’s analogous to growing, dynamic, expense-laden online publishing programs. The full cost of sustaining, migrating, enriching, propagating, and storing any article is going to grow over a 30-year period. Just think how much you spend now on your digital platforms, staff, and systems compared to 10 years ago.
You see the reality we’re entering.
This reality applies to traditional publishers as well, especially those levying color and page charges. Paying a little up-front may defray some costs, but the timeframes and expectations of content publishing have changed.
For established publishers, cross-subsidization of online publishing’s fixed costs flowed relatively easily from ongoing operations. Established publishers could borrow staff from what had been a purely print operation; draw from print revenues (advertising, reprints) to make up the gap online publishing expenses created; or create new revenue sources that, while small, proved sufficient to cover the relatively small costs initially allocated to online publishing.
Open access publishers had no established revenues to rely on, beyond a few major grants like those that started the Public Library of Science. Also, OA publishers are essentially digital-born publishers, with little or no print legacy or infrastructure. So, it’s no surprise that the OA model has quickly gone beyond article-level payments. As analyst Eric Shafelt recently said, “If you were an online startup, with the added bonus of having all of the assets that your publishing business has, how would you build a business online?” More dramatically, what if you were really an online startup like most OA publishers? How would you adapt to online publishing realities?
This is why looking at the changes in OA financing can be instructive.
The Public Library of Science (PLoS) is the most prominent OA publisher, and has been not only increasing article-publication fees in an effort to reach financial sustainability and independence, but has also introduced institutional memberships and individual memberships in recent years, in addition to supplementing revenues with advertising and merchandising. In fact, in May 2010, an article in PLoS Biology, co-authored by a member of PLoS’ Board of Directors, argued for increasing reliance on institutional OA funds:
Now is the time for research institutions (including libraries) to establish new fund flows in support of open-access publishing. . . . We believe that institutions (and the sub-institutional units that manage collection funds) should be open to exploring alternative funding models for scholarly communication.
PLoS’ institutional memberships are worth contemplating from a financial perspective, because their construction contains a fair amount of risk. Under the PLoS institutional model, each member institution is able to offer its faculty discounted publication fees at PLoS, apparently a discount of 50%. This discounting affects revenues unpredictably from PLoS’ perspective. Sometimes, an institution will publish a lot of discounted papers during a year, other times only a few or maybe none. That unpredictability could be a virtue or a burden on the books — it’s unpredictable. Because many member institutions are large, it only takes 3-5 discounted papers ($2,250-3,750 in total discounts) to more than cancel out the revenues associated with an institutional membership. This is a risky financial proposition for PLoS, but they have to offer institutions a clear incentive for membership, and a reduction of author fees is a natural extension of their main value proposition. They can’t charge for access after publication, so they have to charge for access to their pre-publication services.
PLoS isn’t alone in this approach, and actually has a less risky approach than other OA publishers. For example, Hindawi Publishing has much lower per-article charges and institutional membership pricing based on research output (you have to get a quote from Hindawi to know your charges). However, the riskier aspect for Hindawi is the fact that authors at member institutions can publish at no cost. Now, I can’t gauge the risk since I’d have to get a quote from Hindawi to know how much an institution would stake against the potential lost revenue or expense, but knowing how institutional pricing hews to a community standard, I can’t imagine it being any more than an average site license. So, on a per-institution basis, it can’t be more than a few thousand dollars. That’s a handful of papers on average for Hindawi, so I think the risk is pretty high. The “debt” incurred with the copy editors, compositors, etc., has to be paid from these membership fees, which might be exhausted at some point.
The fixed costs of digital publishing are something I’ve argued need to come front and center for today’s publishers. We’re becoming much more like service providers and software companies than manufacturing companies, and our financial models need to change accordingly. It’s pretty clear that the OA movement’s basic premise was based on how digital publishing rearranged some manufacturing assumptions (once the production costs are paid, distribution is free). The problem is that the initial model didn’t account for the new service and software expectations.
What they didn’t know at the time was that the long-tail, Web 2.0, and device proliferation would all come to alter expectations and create new layers of online publication costs.
Remaining an interesting digital publisher today means creating new, potentially expensive fixed-cost services like PLoS’ article-level metrics. And what fixed costs do these incur? Partnerships, data manipulation and maintenance, tool development and maintenance, and user support — or, as PLoS puts it:
First, we intend to expand the number of third parties from whom we receive data; over time, we will add these sources to each article. The next phase of development will be to provide filtering and sorting tools to allow users to navigate our content using these metrics. We also hope to provide tools to allow users to analyze the metrics on their own behalf.
PLoS is like many other publishers learning the lessons of online expenses, with interactive curation and publicity of its content requiring talented people you have to pay. Again, nothing unusual, but definitely something that increases the marginal cost of online publishing.
From a revenue standpoint, PLoS has recently added Individual Memberships. How these work isn’t entirely clear to me. They seem like donations, but I can’t tell if they’re intended to be annual donations, one-time donations, or if PLoS just hasn’t quite thought this through. In any event, the value exchange is simple — donate, get some swag, and have your name listed on the PLoS site as a donor at a certain nicely named level. How lucrative this new membership level proves remains to be seen, but NPR and others certainly make it work.
My observation is that the changes dictated by online publishing are creating a new financial reality for publishers of all types, OA publishers most obviously. The financial realities of online publishing will require continued modifications to the OA business model, some of which are force-fits into the basic OA premise, and some of which carry some sizable risks. Also, in a broader sense, thinking anew about the fundamental economic bargain of OA publishing — that authors pay a debt to the publisher upon publication — may reveal this manufacturing-era conceit as unsustainable. So, for the ideal of open access publishing to be maintained, a different path may need to be found if OA publishers are to flourish in an era of increased, long-term fixed costs.
Like a mortgage, the author’s down payment is really only the beginning of a much larger commitment.