The UK government’s Business, Innovation, and Skills (BIS) Committee issued a report this week that offers a harsh rebuke to the RCUK’s proposed plans to drive the adoption of open access (OA) publishing in scholarly journals.
The RCUK’s policy has been controversial from the start. It has resulted in multiple hearings in Parliament and a general consensus that the key stakeholders — researchers, research institutions, libraries and publishers — were not adequately consulted before the plans were issued. The policy has already seen significant revision, and this latest salvo from Parliament will likely mean an even more profound course change for the RCUK.
A reversal in strategy from the RCUK’s preferred Gold OA route to a Green OA dominant policy seemed inevitable. The RCUK’s policy was something of a bold gamble, an attempt to stake a leadership claim that would inspire other nations to follow suit. The RCUK was willing to significantly increase spending to pay article processing charges (APCs) for immediate Gold OA for articles under an assumption that this investment would pay off in eventual savings — that is, if other nations did the same, the UK would ultimately come out ahead and its outlay for OA articles would be returned in free access to articles funded by other countries, allowing savings by cutting subscription journal spending.
But things didn’t work out that way. Rather than increase spending like the UK proposed, most other governments instead chose a different route to increasing access to funded research articles. Policies like that of the Australian Research Council or the US White House Office of Science and Technology Policy essentially torpedoed the RCUK’s plans. The RCUK was left with a controversial and expensive policy that did not provide adequate return on investment.
That’s the major point made by the BIS report — that the RCUK’s policy is out of line with the rest of the world and that the focus on Gold rather than Green is “mistaken” and must be corrected. The report takes both the RCUK and the Finch Report to task for basing decisions on incomplete data and recommendations that lack both qualitative and quantitative evidence.
Despite recognizing the problems with setting policy based on incomplete (or nonexistent data), the BIS recommendations are frequently guilty of the same sin. Rather than basing policy on evidence or calling for collection of meaningful facts, numbers seem to be randomly pulled out of a hat. Some numbers within the report do not match from paragraph to paragraph, and urges for more international perspectives are followed by UK-centric observations.
The report regularly calls out the excessive profit margins of publishers, yet mentions only one such publisher, Elsevier, who due to its size likely represents an edge case. No attempt is made to get a broader view of margins of the publishing industry as a whole, and no thought seems given to understanding whether OA really does anything to help reduce those margins (Hindawi’s OA profit margins, after all, exceed those of Elsevier).
Throwing things against a wall and hoping you’ll be able to clean up the mess later on seems a poor substitute for evidence-based reasoning.
Analysis of increases in journal pricing is limited to one flawed comparison — total spend versus the rate of inflation. No attention is paid whatsoever to the increasing quantities of articles and journals that are being purchased, nor the obvious flaws in this sort of approach.
The BIS Report suggests that the Finch analysis of costs assumes far too high a price for APCs. This assumption seems to be based mostly on the rate charged by PLOS ONE — again, perhaps something of an outlier as no other journal has been able to come close to replicating their business model and success. Even worse, there’s no recognition that current APC levels are likely far lower than what could be expected in an all Gold OA world, because most rates are subsidized in some manner. Any rate charged by a hybrid journal is subsidized by the subscription revenues of that journal, and does not reflect the amount that would need to be charged should this subsidy disappear. Rates charged for fully OA journals from larger publishers are similarly subsidized by the publishers’ stables of subscription journals which are contributing to covering, if not entirely covering, editorial and production costs. PLOS suffers from these same issues–their high end journals are all priced at unsustainably low levels because they’re subsidized by the profits made from PLOS ONE authors. And that’s not even getting into the subsidy most journals receive from secondary licensing rights.
Embargo periods are another worrisome area. The BIS Report calls for a move back to 6 months for STEM journals and 12 months for everything else. The rationale for this is that no evidence of harm from short embargo periods has been presented. Such reasoning falls prey to the logical fallacy that absence of evidence is evidence of absence. No attempt is made to factually justify the 6 month figure. No attempt is made to create a logical framework for setting embargoes for different fields. The OSTP Policy at least started with some data, using the 12 month embargo that had already long been in effect for the NIH, and then offering a framework for using evidence-based arguments for changing embargo periods.
Setting an embargo period that is too short is the equivalent of an unfunded Gold OA requirement. As has happened for 6 month policies like that of the Wellcome Trust, many journals response may be that if a shorter embargo is required, then the author must pay an APC and make the article available immediately. There seems little incentive for journals to make a major shift here, given that much of the rest of the world seems to be setting at least a 12 month standard. And since BIS also recommends against allowing RCUK funds to be used to pay for APCs in hybrid journals, this may result in a reduction in academic freedom, as researchers would be limited to a subset of journals and may have to pay for compliance out of their own pockets. What alternative will a UK scholar have if his journal of choice refuses to play ball?
On the positive side, it’s nice to see someone listening to researchers and pulling back on demands for the use of CC-BY licenses. These blunt instruments create more problems than they solve. Researchers have made it clear that in a reputation-based economy, they want at least some level of control over the use and reuse of their names and work. The ultimate solution, which the BIS Report doesn’t get into, is to find better licensing terms that offer the advantages sought from CC-BY without all the concurrent negatives. The text- and data-mining friendly licensing terms of Rockefeller University Press seem a good starting point. One has to wonder though, if the guardians of the term “open access” will object to its use by the RCUK if a CC-BY license is not used, thus contradicting the sacrosanct definition that has been set in stone.
Despite the flaws listed above, the BIS Report is probably good news for OA progress. These are just recommendations, and it’s unclear how they will be implemented (or whether they will be implemented at all). But the UK government has spoken, and spoken quite clearly on the direction it wants to take.
Simplifying requirements and setting common global standards makes compliance easier for researchers. Ideal policies are those that find ways to expand access without unduly burdening the researcher, both in terms of effort and in terms of diverting funds away from conducting research. The Green route seems much more likely to succeed, and the growing consensus supporting it can only help move things forward. Common policies can lead to common tools and reduced development and support costs for all involved. It seems likely that if CHORUS can adequately meet the needs of US funding agencies, it could be fairly quickly expanded internationally, offering additional savings and allowing research funds to be spent where they should be — on research.
Update: Having spoken with my UK colleagues, some further information on what this report means, if anything, in terms of actual changes to RCUK policy: BIS is a committee of a department of the government, led by a member of the opposition (Adrian Bailey). It is not official government policy and directly contradicts the agenda of David Willets’ government. Presumably the next steps are that the government, and Willets will respond to this report. The report may be so damning that it causes the government’s OA policy to be re-opened and re-formulated, but then again, it may not. Stay tuned…
91 Thoughts on "Rolling Back Gold Open Access in the UK"
“The report regularly calls out the excessive profit margins of publishers, yet mentions only one such publisher, Elsevier, who due to its size likely represents an edge case.”
As most readers will be aware, this is not true. Elsevier’s profit margin — 37.3% for 2011 — is right in the middle of those for the Big Four publishers. Springer took 33.9% in 2010, WIley too 42% and the academic division of Informa too 32.4%. Details here. For comparison, Apple’s best ever reported profit margin was 24%. Exxon makes 6.5%.
Can you provide specific figures on what percentage margins were made specifically from academic journals? Those are all large, diverse companies with wide product ranges.
Also, there’s more to the world of publishing than just the big corporate houses. Should not-for-profits and academically-owned publishers be considered at all in setting policy?
“Can you provide specific figures on what percentage margins were made specifically from academic journals? Those are all large, diverse companies with wide product ranges.”
No. I have tried several times to obtain such figures, but been consistently rebuffed by representatives of the publishers in question. They evidently don’t want to the world to know the numbers: it’s hard not to conclude that that’s because they know they would look even worse than the ones we have.
“Also, there’s more to the world of publishing than just the big corporate houses. Should not-for-profits and academically-owned publishers be considered at all in setting policy?”
They should be considered as much as big publishers, yes; but as is well known, independent and academic publishers provide much better value, so the profit-margin argument doesn’t really apply to them.
By the way, although profit margin (as a percentage) is much quoted in these discussions, I do agree that it’s not a very good measure. Much more important is the absolute amount of money that is taken out of the research world by each publication. In the case of (say) a 35% profit-margin on a $3000 APC, that represents $1050 that can’t be spent on equipment, museum visits or what have you; whereas a 50% profit-margin on a £250 APC (such as Ubiquity Press typically charges) represents only £125, less than a fifth as much.
I agree fully that there is a big difference between those that take money out of the research community and those that return it, so much so that it’s terribly disappointing when policies like this ignore it altogether. If a research institute owns a journal and every penny it makes is turned back into funding more research, that’s likely a better outcome for the research community than the money going into some VC’s pockets. Policies could be set to try to drive researchers to publications that have these benefits, rather than just assuming everyone is Elsevier.
There’s also no evidence offered whatsoever that OA will make anything different in terms of profit margins of publishers. Why is this assumption made and where is the support for it? Hindawi makes higher profits than Elsevier. And speaking of a lack of transparency in reporting, I’d love to know what the profit margins are for PLOS ONE. Their reports tie everything together, with PLOS ONE’s profits covering the losses from the other journals and other expenditures.
Also, Richard Van Noorden explains why the numbers you’re using are inaccurate and misleading here:
Like I said: we use the numbers that we can get. When better numbers become available (and by better I don’t mean “massaged by the publishers to tell the story they want us to believe” but “better reflecting reality”) I will switch over to them immediately.
And that still leaves us with the problem BIS notes–policies are being set using incomplete and faulty data. Instead of you and I trying to become experts in corporate finance, why not put together a team of forensic accountants and do an actual study to understand what’s really going on here rather than just making guesses?
Yes, I’d be in favour of that.
But not of waiting till it’s finished its work before changing the current evidently-broken status quo.
But why implement a solution that doesn’t fit the problem? As noted above, where’s the evidence that OA leads to lower profit margins? What happens if you charge ahead and all of publishing consolidates with the big corporate players and they end up with even larger profit margins?
The BIS committee needed to decide what’s best to do now. Leaving things as they are was one of the options on the table, but there’s no reason it should have been a special privileged option, and absolutely no reason to think the current approach is working well. Leaving aside all matters of profit-margin and so on, OA is fundamentally better. Economic benefits are a side-issue.
Also: we really need to stop getting too sidetracked by profit-margins. They are a symptom, but not the actual issue. The real issue is what it costs the research community to get publication done. If you can do it for £250 and you keep half of that, then that’s a better deal than if I do it for $3000 and keep 35%.The problem with our old friends Elsevier isn’t the 35%, it’s the $3000. (And even if they sliced their profits to zero, and contented themselves with breaking even, $2000 would still be a silly price when we know it can be done so much cheaper.)
Yes, which is why OA inherently favors the larger publishers. Economies of scale mean they can do everything cheaper, meaning more market consolidation.
“Yes, which is why OA inherently favors the larger publishers.”
You would think. Yet Ubiquity’s £250 APC and PeerJ’s $99/$199/$299 memberships suggest otherwise. I’ve not used Ubiquity myself yet, so I can’t comment on their service. But I can tell you that PeerJ’s service was in every respect superior to what I’ve experiences at journals run by Blackwell, Wiley and Taylor & Francis.
How can this be explained? I really don’t know, and would like to hear thoughts. One that won’t fly is “they’re running off investment”. AFAIK that’s not true at all of Ubiquity; and while PeerJ has some investment their current pricing is what their ongoing business model is based on.
My best bet is that the legacy publishers are weighed down by legacy stuff, so that only a small proportion of their costs are directly involved with actually getting stuff published, whereas the likes of PeerJ just don’t bother with any of that stuff. If I’m right, then the implications are (A) that a new-wave OA publisher that gets really big will be able to drop prices yet further; and (B) PLOS has somehow brought a certain amount of legacy deadweight along with it.
Is PeerJ sustainable? Is their goal to run a long term journal business or to return a short term profit to their Venture Capitalist investors by staying afloat for a few years then selling the whole thing off (see Mendeley)? I’m not privy to their internal plans, so I can’t say for sure, and I certainly haven’t seen any public financial reporting from PeerJ nor their business modeling to judge. Are we willing to roll the dice by relying solely on unproven risks like this? And if we want to keep the funds in the research community, why not fund and encourage more experimentation from within, rather than shifting research funds into the pockets of VC’s?
I suspect you don’t see this level of pricing from the big companies not because they can’t do it, but because they don’t have to do it. If any of these methodologies prove to be particularly effective and offers a real threat to business as usual, expect the big publishers to adopt them, just as everyone has made their own PLOS ONE clone. If things really get into a price war, I’m betting that the big companies with lower per-journal and lower per-article costs, along with very deep pockets to withstand a period of low earnings, can outcompete the startups who at some point need to bring in profit to keep the lights on.
I question the claim that “OA is fundamentally better.” First it is wildly vague and ambiguous, there being so many kinds of OA. Second it is unsupported from a policy standpoint. One should not restructure entire industries on philosophical grounds.
“One should not restructure entire industries on philosophical grounds.”
On the contrary. That is exactly what industries, and everything else, should be structured on. What else is there to base them on?
“Is PeerJ sustainable?”
Well, who knows? Now, no-one does, not even Pete Binfield. In five or ten years, we’ll all know, one way or the other. But we know it’s intended to be sustainable.
“Is their goal to run a long term journal business or to return a short term profit to their Venture Capitalist investors by staying afloat for a few years then selling the whole thing off (see Mendeley)?”
“Are we willing to roll the dice by relying solely on unproven risks like this?”
No, of course not! I don’t think anyone wants to bet the farm on any given startup. The significance of PeerJ isn’t that it will necessarily come swinging in and save us all, but that it recalibrates the sense of what’s possible. Anyone who’s been looking at PeerJ articles and publishing hybrid Gold with a Big-Four publisher should now be asking themselves whey the heck they are paying 10-30 times as much as they need to.
The point about PeerJ-like “unproven risks” is that they are very cheap experiments. The investment from O’Reilly ventures is $1M. For that, we get a completely new perspective on what scholarly publishing can be. Let a thousand flowers grow: bring on more publishing experiments. And if any given one of them ultimately fails, then so bit. The work they publish is safe, so we’re all good.
“And if we want to keep the funds in the research community, why not fund and encourage more experimentation from within, rather than shifting research funds into the pockets of VC’s?”
There’s no either-or about it. We can, and should, do both. And we are doing. PeerJ was kicked off with seed funding. Ubiquity started as an in-house UCL press, which has spun off into an independent venture. No doubt other university OA presses will spring up, and some of them will stay in house. So long as they do a good job of making research actually available, and provide authors with a good service, and do it at a good price, it’s all good.
“If things really get into a price war, I’m betting that the big companies with lower per-journal and lower per-article costs, along with very deep pockets to withstand a period of low earnings, can outcompete the startups who at some point need to bring in profit to keep the lights on.”
I’d be happy with that outcome.
I’d be happy with that outcome.
Unless, of course, it was part of an Amazon-like strategy to put the competition out of business by driving down prices to an unsustainable level, followed by a rapid rise in price once a monopoly is achieved. Remember which sorts of companies we’re talking about here…
Indeed. I certainly don’t want to advocate a monopoly, and I’m on record as having worried in the pre-PeerJ days that PLOS was encompassing too much of the OA thought-space.
Structuring industries on philosophical grounds sounds like Plato’s Republic, Mike, and may explain a lot of OA political thinking. Industries usually structure themselves based on competition to deliver value that people will pay for, while also constrained by law. It is called free enterprise. Governments do not structure industries based on philosophical grounds, although a few have tried, with well known bad results. I wonder what philosophical grounds you would use to structure the shoe industry? Or tourism? Or newspapers?
The status quo is broken? What seems to have “broken” it is this:
Universities became very dependent on research grants and budgets, and trained a lot of scientists in response. Emerging economies also trained a lot of scientists. These scientists do a lot of research. This research should be published. Lots of journals were created in response. Meanwhile, the same administrators structuring their academic centers to become research centers and to train a lot of scientists started squeezing library budgets (going back into the 1980s), not raising them at the same rate as the overall university budget. This left librarians with a smaller share of the pie to spend on a growing number of research outputs. Publishers became the targets of the antipathy this created, probably wrongly so, as new data indicate overall price increases have been modest — the real driver of budget woes has been the increase in the VOLUME of published research, not the price. Therefore, what “broke” the status quo was a lack of funding from universities, which still generate lots of money in technology transfer from government-funded research, but which won’t fund libraries at a sufficient level.
Current result? Everyone’s looking for some less expensive way to get this all done. What we’re finding is that cost-savings come at the expense of important things readers value, or they are illusions created by subsidies.
What may be broken is our commitment to support researchers with information and careers, while academic centers exploit them through tuition, grant funding, and technology transfer.
Kent: I would add to your analysis regarding library funding the Reagan Administration’s removal of federal money set aside within grants for enhancing library holdings.
This quick analysis isn’t quite right. What you call squeezing library budgets was/is, in large part, reining in unsustainable increases. If libraries funding had been increased at the rates the large commercial publishers demanded just to keep up, their would have been even larger profit margins than we saw in the ’90’s and see now as there would be no limiting power to balance such growth. If publishing had stayed with the societies and the like, your explanation would be closer to reality.
There is increasing evidence that these “unsustainable increases” in university library budgets were self-inflicted, in the sense that universities trained more scientists, took more research grants, thus leading to more research and more need for publication outlets. Government cutbacks compounded the problem.
A full 81% of scientific, technical, and medical publishers make less than $25 million per year, so most of the outlets are not in “large commercial publishers.” This also means that a lot of them are with societies still. Even at the large commercial publishers, contracts with societies make up a good proportion of the business.
I don’t think your version ties out with reality at all. Where are your data and facts?
This sounds like a nice modeling problem. To begin with these are not simple price increases, as the OA folks seem to claim. It sounds like the research system grew faster overall than the library component. The mismatch shows up at the library and publisher interface so the publishers get the blame. A very interesting hypothesis that calls for analysis.
“Like I said: we use the numbers that we can get.”
If only there were some way of performing experiments or doing studies to get meaningful data….
But, since that’s apparently an impossibility, probably best to just use guesses and wishes…
David, I don’t expect this kind of deliberate obtuseness from you. I’ve already agreed with you that it would be good to get more accurate figures and that we would like BIS to commission a group to determine them. The question is what we’re going to do during the several years that it takes such a group to do its work. I reject your (implied) stance that doing nothing is the correct approach.
The scientific way is to use the best data we have now and try to obtain better data for future work.
I’m not being obtuse (at least not deliberately). I don’t think it will take several years to have a team of accountants do a study using the last few years of public financial reports from the industry. It seems a pretty straightforward process that would yield useful data to help set appropriate policies. And I do think there are areas where action can be taken using evidence-based approaches where we actually have some evidence to base things on. I just think it’s foolish to implement sweeping changes that cost hundreds of millions of dollars annually based on faulty data when obtaining better data is not that difficult.
And as repeatedly noted, the actions being suggested don’t seem in line with the perceived problem. OA does not automatically change anything as far as publisher margins go. If this is indeed a problem (and the preliminary data is accurate), then why not a well-planned solution that actually addresses it?
Well, I agree if it was possible to obtain better profit-margin figures within a month or so, so that they could be added to the evidence that the BIS committee had to consider in writing its recommendations, then that should have been done. My worry is that this would become a delaying tactic — especially when the exact level of profit margins is so far from being the core issue anyway.
“OA does not automatically change anything as far as publisher margins go.”
Actually, I think it does — because OA publication services are fungible, but journal subscriptions are not. The reason we have the current dysfunctional marketplace in scholarly publishing (BIS’s word, not mine) is that each barrier-based publisher has a monopoloy on each of the journals it publishes, so there can be no competition and therefore no downward pressure on price. But if I seek OA publication with one publisher and conclude that their price is too high, I can just go elsewhere. OA will tend to produce an efficient market.
I do think that it is pretty much a red herring and has no place in the report (or the argument for OA). There is a lot of anger over the subject and it seems like it keeps getting thrown into these discussions and policies more as a way of venting than as actually something that OA is meant to solve.
That said, if you’re the UK government and you’re committing more than £30 million per year on this policy, you’d think you could spare a small percentage of that to do some actual background research, rather than hoping someone else will bring it to your attention via public hearings.
And I’m not sure things become completely liquid in an OA environment. If the OA journal from Nature offers services and career rewards that are different from the OA journal from the Society for Neuroscience, then the two aren’t immediate replacements for one another. You’re just switching the pressures from readers to authors.
The real cost of publishing in old-school paywalled and hybrid journals is totally obscure, which is why upfront article fees are important. At least then we can see the costs and push them down.
As a PhD student my experience is that most researchers don’t like paywalls and are happy with CC-BY when they understand what it means.
If you hadn’t told me it was a long time ago, I would have guessed.
Your PhD student acquaintances may not line up opinion-wise with others in the research community. For example, authors in Nature’s Scientific Reports journal nearly always choose more restrictive licenses (CC-BY-NC-ND and CC-BY-NC-SA over CC-BY):
This (somewhat unscientific) survey done by Rosie Redfield reports a significant level of concern:
From my point of view as a publisher, many of the journals I work with bring in significant amounts of revenue from secondary licensing rights and advertising. CC-BY threatens both of these revenue streams, and this is important, because it’s money that’s coming in from outside of the research community. If you take away this support, then the financial burden shifts over to the researcher, and more funds have to come from research budgets, rather than getting them from pharma and other commercial entities.
And that’s not even getting into the privacy and patient consent issues for medical research…
There are alternatives like CC-BY-NC that do away with paywalls without the negative effects caused by CC-BY.
It is hypocritical to lean on a ‘somewhat unscientific’ study when you’ve just mocked someone for doing similar, but I’ll let that go!
“And that’s not even getting into the privacy and patient consent issues for medical research…”
I’m not familiar with this argument. How does it relate to publication of an article in a free to view journal versus a paywalled journal?
If it’s as thorny an issue as you suggest, I’m surprised that biomedicine leads the way in OA.
You’ll note that I said “may”, rather than “it is an established fact” and that I did not commit to spending hundreds of millions of pounds on a policy based on that one unscientific study.
Patient Consent Issues: The problem has nothing to do with articles being freely available versus articles that are behind paywalls. What matters is the licensing terms under which the articles are released, and what re-use of those articles is permitted, and what requires further permission. CC-BY allows anyone to essentially do anything they want with your content (provided they attribute it to you https://creativecommons.org/licenses/by/3.0/). It would, as Heather Morrison has argued, allow a shady weight loss company to take the photographs of patients that you used in your obesity study and plaster them on the side of buses and on billboards in ads for their new lose-weight-quick product.
Morrison has written at great length about the issues with CC-BY here:
and in a series of blog posts here:
We have written about it quite a bit on The Scholarly Kitchen as well:
Rockefeller University Press discussed it here, offering a way to provide some of the positive things the license offers without all the negative baggage:
“More scientific than using number that we can’t get.”
So, as a palaeontologist you feel it would be better to group any bones together, rather than the right bones?
A margin of 6.5% for Exxon is US$16 billion in profits. Elsevier is a $3.3 billion company overall — journals, databases, books, legal, etc, etc. At 1/5 the profit margin, Exxon makes 5x the size of Elsevier in its entirety in profit. Given the common 5x valuation for publications as an assumption, Exxon could buy Elsevier with one year’s profit. These comparisons aren’t informative.
The problem with the BIS report is that it tries to extrapolate from an edge case (Elsevier) to an industry in which 81% of the companies make less than $25 million in revenues per year. Clearly, the vast majority of the market consists of small publishers, most of which are society or academic in nature.
Companies like Elsevier and Wiley comprise 0.4% of the STM market. Using them as examples is clearly misleading.
“Companies like Elsevier and Wiley comprise 0.4% of the STM market.”
I don’t understand how this can be so. Elsevier’s annual revenue is on the order of £2 billion, in a market which the STM report estimates as being worth about £8 billion in total. Even if only half of Elsevier’s revenue is from journals (which seems likely to be a significant underestimate), its £1 billion in journal revenue surely constitutes 12.5% of the market on its own.
Indeed and the report does say that small and medium sized enterprises were not adequately considered. (But as David C. Points out, the report is choppy, probably because it was written by a committee of politicians.) Ironically a six month embargo is probably worse than gold OA for these enterprises.
I fail to see how a publisher’s profit margins should have any bearing on this discussion. They could decide to double their spending on R&D or G&A and become less profitable. Would that end the debate? I believe the attention on publisher financials is an emotional distraction and detracts from the OA mission.
By the way, I notice than nine people took the time to vote this comment down. It’s nice to be noticed, but I’m a bit perplexed that people should be so outraged by a simple statement of fact that they feel the need to express their unhappiness publicly.
In general, any comment supportive of legacy publishers gets voted up, and anything critical gets voted down — quite independent of whether any useful information is being provided or an interesting argument being made. (Anyone who doubts this is invited to skim through the votes for comments on this very article.) It really doesn’t help to dispel the widespread perception that there’s an element of echo-chamber to this blog and its audience.
I’m not sure how much I’d read into the thumbs up or down ratings on any given comment on any given post here. I tend to watch these over the long haul, and they vary wildly from article to article, depending on the subject, how well the article was publicized and whether it was a slow or busy news day. For today’s article, the subject was one that has been widely covered elsewhere, so I suspect we didn’t draw much beyond our set of usual readers (looking at the usage stats from today it is about average or slightly below average).
But go look at the comments on posts like this one:
Here, the pro-OA comments are rated vastly higher than the comments that oppose them.
Kent’s most recent post on PMC seems to have drawn a mixed audience, with votes going fairly evenly both ways:
You can dig around and find examples where things swing to extremes in a lot of different ways. Remember that most people who read blogs don’t read the comments, and of those who do read the comments, only a small number bother to rate them (9 rankings on a post that has as of this moment drawn 1,514 views may not tell you much about the audience).
And as always, just because a group of people disagree with you or your reasoning, that doesn’t make them an “echo chamber”.
Good to see that the votes are indeed very different on different articles. Not sure what to make of that — perhaps the different titles attract different constituencies. Still seems strange to me that people would vote down a comment offering facts, but there it is.
“Companies like Elsevier and Wiley comprise 0.4% of the STM market”. Was that a typo ??
On the layout of the STM market:-
Peter Hendriks, President, Global Publishing and Marketing Springer
Might be worth pointing out that this is a Parliamentary Committee rebuke of a UK Government policy rather than a change in UK Government policy – there is a difference between the UK Government BIS department and the BIS parliamentary committee. Just because the BIS parliamentary committee disagrees with the Government approach on OA doesn’t mean the Government is going to change its policy.
Profit margins can be very misleading. I suggest one looks at:
There is no moral right or wrong in publisher profit margins. It’s just an economic issue. An efficient publisher will charge whatever rate maximizes their profits. Econ 101.
It makes a lot more sense to look at a university’s total expenditures in obtaining access for their researchers and students, and including OA fees in this mix. Also, as pointed out, consider the growing number of papers to which researchers need access. (Or do they?) This, not some moral imperative, is the bottom line we should be examining when we consider open access.
Isn’t PeerJ a cheaper alternative partly because it doesn’t provide all the services that other publishers do, like copyediting?
I believe you’re correct that PeerJ doesn’t do copy-editing. But I am also dead-certain that the papers I’ve had in Wiley, Springer, Taylor & Francis ad Blackwell were also not copy-edited. I’m inclined to wonder whether copy-editing is a myth.
I have just this moment seen this tweet: speaking at the ALPSP conference, Jason Hoyt of PeerJ has said that they spend $600 per month (i.e. $20 per day) on IT services. That’s astonishingly cheap, given the huge scalability and redundancy they’ve built in.
Would love to see that itemized. $7200 a year isn’t much of a salary for technicians, customer service reps, etc.
Indeed. I think the point is that, as a born-digital company, they’ve been able to discard all of that human infrastructure and just rely on cloud services like Amazon’s ECC. The blog post that I linked to has a lot of useful technical detail, but the TL;DR is that there are scalable infrastructure options available today that are orders of magnitude more cost-efficient than what the older publishers had to invest in back in the day.
So $600 per month for electricity and bandwidth?
It is an interesting question though, the balance between a lean organization willing to outsource as much of its technology as possible, and a larger organization that can gain economies of scale, customization and better control through building its own resources. For the smaller publisher, the former may be the best route, but for the larger, established publisher, adding a new journal is a minimal expense compared to starting from scratch.
There’s also the risk question of relying on others for your mission critical needs, thinking of things like Apple Maps, trying to move everything in-house rather than letting anyone else have any say in your fate.
Sadly PeerJ doesn’t pass the sniff test. Not even close.
$600 per month on IT services, wow, that’s great. What a headline. That’ll get a retweet from @miketaylor.
Now let’s talk about Alf Eaton, Patrick McAndrew, Jackie Thai, Dave Harrington, and Janos Toth. Who are they you ask? That’s the operations team that runs the PeerJ. How much do you think they cost a month? Let’s average it at an extremely modest $80k each pa, that’s 400k per year, before you house them in one of PeerJ’s two offices, that need to be rented, lit, supplied, managed. And let’s not talk about benefits, or bonuses, or take into account marketing, or the CEO’s salary, or HR, travel expenses, taxes…
Now, let’s talk about incomes. Peer J so far this year has published 157 articles.Let’s average it at 7 authors each, and they all adopt the highest plan of $299. That’s $330k. All they’ll ever get out of these authors. And they can publish as much as they want. BUT they could have bought the cheapest plan, so revenues could be as low as $110k.
Now I’m not a mathematician, but I can tell you this, if I was their accountant, I would be telling Peter to go look for some more venture capital pretty quick.
Does no one ever read annual reports? Elsevier is a publicly traded company, it therefore provides annual financial reports. According to the 2011 Elsevier Annual report, the company is broken down into the following divisions: Elsevier, LexisNexis Risk Solutions, LexisNexis Legal and Professional, Reed Exhibitions and Reed Business Information.
According to their annual report, the Elsevier Division…”is the world’s leading provider of scientific and medical information and serves scientists, health professionals and students worldwide. Its objective is to help its customers advance science and improve healthcare by providing world class information and innovative solutions that enable customers to make critical decisions, enhance productivity and improve outcomes.” This division produces 1,250 journals and 700 books. The total revenues (2011) for the Elsevier division were £2.058bn with an adjusted operating profit of £768mn resulting in an operating profit margin of 37.3%.
Yes, Mark, we read annual reports: they are the source of the Elsevier profit-margin figures in my blog post: from 2006 onwards: 30.57%, 31.65%, 33.41%, 34.91%, 35.74% and 37.3%. David feels that these annual reports are insufficiently informative because they don’t break down the revenue and profit between books and journal subscriptions.
That breakdown would be helpful–often books are less profitable than journals, so the effective margin on journals may even be higher than you suppose. But the margin numbers themselves can be deceptive as others have pointed out in this thread and here:
More importantly though, is whether this figure is reflective of the industry as a whole. Are profits on this level the norm for all publishers? Does the University of California Press earn the same margins? Or is it an extreme case used more for rhetorical purposes than a statistically significant data point representing the industry as a whole.
And most important of all, what does any of this have to do with open access?
“And most important of all, what does any of this have to do with open access?”
Not a great deal. As I’ve said before, I care much more about price than about profit.
Then why does your first comment take all of 12 words to bring up the tword profit? In fact you appear to be fixated on one company’s profits.
I think if you look further you will find a lot of corporate level expenses that are not allocated to the operating divisions, especially payments to bondholders, which is debt coverage. I once heard it said that after debt service Elsevier’s profit was more like 3% but have never checked this out. Likewise the operating divisions may not pay for the buildings they operate in, but the corporation does. The people who actually deal with these accounting issues are trying to say that they are not simple, but those who use the big numbers as a political club prefer to ignore them. It is an old trick.
To be fair, it’s Elsevier themselves who have put those big numbers out there, presumably because the numbers serve some part of their agenda — attracting investors, maybe? I think it’s a little disingenous to tell investors “Look, we make loads of profit”, then turn around and tell customers “No, we don’t make much profit”.
In 2011 Elsevier’s net profit (after interest, and tax) was £767mn on sales of £6.002bn giving a total corporate profit margin of 12.8%
In 2010 the same figures were £648mn, £6.055bn and 10.7%
But the really important number in business is not profit on sales but return on capital. The return on capital for Elsevier in 2011 was 34.9%.
David, since academic institutions are the sole market for journals and books does it matter which of the two is more profitable? The more important point is that the profit margin from the academic market segment is 37.3%.
I disagree that these numbers are not readily available. The big publicly traded publishers publish their results because it is required by law. The same is true of societies (at least in the US). If you dig hard enough, you can find the numbers you need.
David, you asked about the Univeristy of California Press; here are their numbers according to their annual report:
Books Sales $17.322mn; Operating Profit (before overhead) $9.11mn; Operating margin 52.6%
Journals Sales $5.401mn; Operating Profit (before overhead) $2.257mn; Operating margin 41.7%
Overhead expenses $15.375mn
Operating Loss -$2.805mn
UC System $2,611mn
UC Press Foundation $888k
TOTAL NET PROFIT $694k (including subsidies) Net Profit Margin 4%
They do not provide balance sheet information so it is impossible to calculate their return on capital.
David, since academic institutions are the sole market for journals and books does it matter which of the two is more profitable?
Your description of this division above is that it serves “scientists, health professionals and students.” The majority of two of those three are concentrated outside of academic institutions.
And if you’re creating a policy to directly address journal profit margins, then yes, it is indeed important to separate those out from book profit margins if you want to understand the issue you’re addressing.
And yes, most of these numbers can be found in one way or another (Kent Anderson makes a similar point above). That’s why it’s incredibly sloppy and lazy to try to draw conclusions without actually digging them up and doing a thorough study of the industry as a whole. If you just use one data point, Elsevier, then the entire industry is wallowing in profits. If you use another, UC Press, then the entire industry runs at a loss. Setting policy based either way on such limited information is foolish at best.
Elsevier owns Saunders and Mosby and that is not small change. Those companies have the lions share of the medical/nursing market.
PLOS is a not-for-profit entity, so they use different accounting rules than those used by publicly traded companies such as Elsevier. So it is a bit harder to compare financial results (but not impossible).
According to PLoS financial reports here are their results for 2011:
Total revenues $22.276mn (roughly 95% of this comes from publication fees).
Their publication costs were $13.922mn meaning that their equivalent of operating profit is $8.354mn or 37.5% (almost exactly the same as Elsevier).
Their G&A expenses are $4.4mn, leaving them with a surplus (since they are not-for-profit, it cannot be called profit) of $3.954mn or 17.8% – a bit better than Elsevier.
As a not-for-profit, they do not have contributed capital but PLoS had total net assets (assets minus liabilities) of $8.72 at the end of 2011. Therefore their rate of return on net assets (which can be roughly compared to contributed capital in a publicly traded company) was 45.3% (which is considerably better than Elsevier).
You are right David, you cannot extrapolate the results from one company to an entire industry. As my brief and incomplete analysis shows, some companies perform better than others.
The estimated annual business sales for Mosby-Year Book Inc is More than $1B.
That figure does not include WB Saunders.
David W. What you say is so true. Most do not understand what the word profit means unless it is in context.
For instance is that profit before interest, taxes and overhead?
An astute investor does due diligence and is seldom wowed by some number like a profit of X.
The comments got a bit sidetracked yesterday with a discussion of profit margins, but I wanted to raise a couple perhaps more important questions, areas where I’m confused by the BIS response, and was hoping others could perhaps help enlighten me.
1) The BIS Report clearly states that the ultimate goal is to move to an all Gold-OA world, but that they now see Green OA as the route to get there. How is this supposed to work? From what I’ve seen from the OSTP, Green is the end goal, not a stop on the way to Gold. How would Green requirements eventually turn things Gold?
2) The BIS Report calls for a ban on APC payments to hybrid journals, declaring that only fully Gold OA journals should be eligible. Their rationale for this is a fear of double-dipping. Many publishers have worked hard to eliminate double-dipping and take this very seriously. Why not instead set requirements for how APC revenue offsets subscription revenue that eliminate double-dipping and then let the researchers choose their venue for publication, rather than strictly limiting things?
Re 1 the government might ratchet the embargo periods down to the point that going APC gold was the only way to survive, forcing the transition. Market manipulation is a strange beast.
I won’t attempt to guess an answer to the first part of this. But since I’ve written before about problems with Hybrid, I’ll comment on that.
Wiley’s document Subscription Pricing for Hybrid Journals (to pick a representative example at random) says: “We will adjust the variable portion of each title’s price (and of our collection as a whole) proportionately for any shift from subscription-funded articles to gold open access articles. We will calculate this adjustment using the most recent full calendar year data at the time we set prices, and will make available details of the numbers of articles published under each model.”
The problem here is a complete lack of transparency. No-one knows how subscription prices are calculated in the first place; the obscure numbers are made wholly impenetrable by Big Deal bunding, so it’s literally impossible to know what a given journal costs; and non-disclosure agreements prevent customers from comparing notes. Against such a backdrop, how can anyone possibly know whether and to what degree individual journal subscription fees are being reduced? (Knowing the number of OA articles is interesting, but not at all the same thing.) Frankly I’d be amazed if the publishers themselves could know this in any meaningful way.
In the absence of any actual data on pricing, all we can do is take it on trust from the publishers that they’re playing fair. And unfortunately, rightly or wrongly, there’s not much trust left for the big legacy publishers. On the occasions when they do play fair, they have to show the world that they’re playing fair. That means truly transparent pricing, which no-one believes we’re going to get any time soon.
Hope that doesn’t seem unfair.
For what it’s worth, I’d be happy to contribute to an all-OA journal published by an otherwise-barrier-based publisher, other things being equal. But not to a hybrid journal.
Thanks Mike, that’s really helpful.
So it seems the problem is more with transparency, and given the myriad ways that journals are sold (and the non-disclosure many demand on pricing), there’s no way to verify that hybrid journals are indeed reducing their prices based on OA fees received. Interesting, will have to think about ways this could be solved…
Tom the APC charge has nothing to do with the cost of publishing the article. Most of the OA journals are subsidized (including PloS). What happens when these subsidies are removed?
Just a point of information: PLOS was started with the aid of subsidies, but has been operating at a profit for the last two years. It took off before it reached the end of its runway.
Very true, it’s still early days for PeerJ, and who knows, they may catch lightning in a bottle in the same way PLOS did.
It should be noted though, that the motivations behind the backers of each are quite different. The charitable foundations behind PLOS just needed them to break even to be considered a success, while the venture capitalists behind PeerJ are looking for a substantial return on their investment.
Although PLoS One does not receive a subsidy PLoS Biology and PloS Medicine do. I would be curious to learn if the initial subsidies PLoS One received are or were used up. In short, did they receive enough to create a kind of endowment.
Lastly, Kent is it time for an update of your article regarding PLoS 2010.
It’s true, but misleading, that PLOS Biology and PLOS Medicine receive subsidies: they receive them from their sister publiction PLOS ONE. Surely you don’t think it’s unusual for a publisher’s different title to have different profit/loss levels?
It is somewhat unusual actually in the world of OA. The idea of OA is that the author pays the fee to cover the costs of publication so that their work can be seen by everyone free of charge. The idea isn’t that they pay more than the cost to publish and the additional money subsidises another article, in another journal, in another field.