What if the Internet doesn’t disrupt scientific publishing, but merely leads to incremental changes in how it functions? What if there were a clear and strong practical link between achieving widespread open access (OA) and maintaining robust subscription businesses? What if a market containing both fresh young upstarts and strong incumbents thrived? And what if the large incumbents ultimately absorbed the upstarts?
What if the trade-offs many have been portending between big:small, old:new, and open:closed actually were dependencies?
A recent analysis of the scientific publishing marketplace focusing on the financial implications of OA policies and business practices presents these issues in between the lines, concluding that commercial publishers have weathered the storm and adapted to changes, making it unlikely OA would be much of a problem for them going forward, while suggesting that the ultimate solution to providing OA on a widespread and sustainable basis will depend upon a robust subscription market much like the one we have today.
The analysis, by HSBC’s Global Research division, is thorough and interesting, even if they do get some things wrong when it comes to market awareness. HSBC’s analysts surveyed funders, not publishers or librarians or authors, in making their assessment of the marketplace, which likely skewed the results somewhat and obscured some issues.
Their rationale for focusing on funders is stated toward the beginning:
. . . ultimately the Funders will foot the bill for Open Access and, although we regard it as improbably, the Funders also have the power to disintermediate the Publishers. In our view, this makes them the most important constituent in assessing the impact of Open Access on the publishers.
This assessment is purely a short-term financial assessment, not a long-term market assessment, which would likely focus on scientists and users of the literature, not on the funders. I’ll discuss the implications of this limited view below. The report also does not list which funders were surveyed, and provides no details about the survey instrument or methodology.
The analysis focuses on two publishers — Informa and Elsevier — while taking into account broader market trends, as well. Overall, the financial calculations make sense, and HSBC’s investment assessment is stated succinctly at the outset:
. . . journal profitability under OA should not be materially different to existing profitability, with a negligible probable impact on estimates.
Valuation anomaly has largely corrected: Although we continue to gain evidence that supports our view of a benign transition to Open Access, we note that the market’s concerns have also receded. From a short-term peak of risk aversion in January 2012 when researchers were petitioning to boycott publishers, the publishers’ shares have re-rated significantly. We find that valuations no longer reflect an “open access discount.”
Throughout the report, there are interesting summary lists and potent paragraphs. Here are a few of the highlights from the lists:
OA will not be introduced in a way that puts existing journal publishers out of business.
We found no appetite for regulation of APCs.
There is a risk that libraries lose more in funding than they save in subscriptions, intensifying the confrontation between libraries and publishers.
And here are a few highlight paragraphs:
“Open” access does not mean “free” access. The principle that taxpayers should not have to pay twice for research and that research should therefore be free at the point of use does not mean that publishers lose the ability to charge for their product.
Whether OA is achieved through Gold, or Green with embargoes, the publisher retains a revenue stream with negligible probable impact on estimates . . .
All of the funders in our survey agreed that APCs would be unregulated and set by the market.
Open access is hard for funders to enforce because they lack visibility on how many articles their grants are funding.
There are two points made I wish to highlight — the first, because I think the information is outdated; and the second, because I think their analysts are correct, and the implications of their statements are significant.
The first point comes from one of the lists in the report:
No funders foresaw that the role of publishers would or could be fulfilled by universities or funders.
The data in this report may have been gathered before the launch of eLife, a publication that has been created by funders. As noted above, there’s no way to know whether Wellcome Trust, Howard Hughes Medical Institute, or Max Planck were surveyed, but it would seem bizarre if they were not. If they were, and this statement reflects their responses, I can see only two reasons for this:
- Because eLife had not yet launched, they decided not to mention it.
- Because the funders believe eLife to be independent of them, they felt they themselves were not becoming publishers.
In either case, the truth isn’t as absolute as what the HSBC analysis states. As we’ve seen, eLife has been an extension of Wellcome, is competing as a publisher, and has prevailed upon another major funder (the NIH) for launch assistance. This is a wedge of disintermediation if I’ve ever seen one.
The second point I wanted to emphasize came from HSBC’s analysis of where OA is likely headed, given all the political, financial, and taxpayer pressures it faces:
In practice we believe that the majority of these mixed mandates are likely to be met through [embargo-based] Green rather than Gold, as Green is the path of least resistance and lowest cost for universities. . . . The length of embargoes proposed under Green OA ensures, in our view, that Open Access will be funded primarily by subscriptions.
This last point is one I’ve had on my mind for a while, ever since some conversations with a few OA publishers who acknowledge that, for selective OA journals, there is a fair amount of subsidization going on. In the larger publishing houses, the subsidies come from the subscription-based journals. In OA businesses, subsidies come from mega-journals like PLoS ONE, which do not have the same criteria as a traditional selective journal.
So, why might it be that “Open Access will be funded primarily by subscriptions”?
The first of these reasons stems from financial and political willingness, as in, How willing are funders or governments to be seen as supporting multi-billion-dollar publishing businesses directly? In this analysis, HSBC conducted an analysis of Elsevier’s business, hypothesizing that all of Elsevier might go to Gold OA. In their model, if Elsevier’s journals can command a 35% price premium on the market — that is, charge $4,050 instead of $3,000 for its APCs, on average — then it grows slightly. If it can charge 50% more — a $4,500 APC — then Elsevier would experience a 6.5% growth in revenues. If APCs are unregulated, and Gold OA is mandated, someone has to pay the bills. How will we get from here to there? And who will pay the bills? Right now, it would seem that Elsevier will do fine, and that APCs will be coming from funders and governments. Is that politically acceptable for anyone involved? Is it plausible in this marketplace? I think it’s difficult to imagine that Wellcome and the NIH would want to become known in the market as the primary funders of Elsevier, Springer, Nature Publishing Group, and Wolters-Kluwer, among others.
The second of these reasons comes from the cost:benefit proposition of Gold OA, which still seems weaker to me than advocates care to admit. That is, Are taxpayers willing to shoulder increased taxes to have immediate access to research papers? At least in America, we’re having trouble getting taxes raised on 1% of our population in order to pay for bridge repairs, food for poor children, health care coverage for the disadvantaged, and deficit reduction, I don’t see how something like this gets any floor time, much less gets knitted into the tax code. The benefits are too amorphous, and the trade-offs with research dollars too unpalatable.
The third reason is that I don’t believe anyone — funders, governments, or users of the literature — really want scientific publishers to be funded by the same people who funded the research. This has a “third rail” aura about it for most of the entities involved, and carries risks to reputation and legitimacy.
This report suggests a few interesting possibilities — that OA and subscriptions are linked in a very practical and long-term way; that big publishers have adapted to the incremental (not revolutionary) changes OA has introduced; and that the market and financial realities ultimately have a lot left to say about how things play out.