Last week, BusinessWeek published a themed issue entitled, “The Year Ahead: 2014.” It’s a fascinating compilation of interviews, data, projections, and ideas. I will be reviewing my copy of this superbly useful print publication for weeks to come.
One article in particular caught my attention: “The Year of the Paywall.” In a single page, it neatly summarizes the problems facing newspaper, entertainment, and magazine publishers, while touching on problems facing scientific and scholarly publishers by extension.
The major premise? Publishers were demonized for having paywalls for individual subscribers, but now are finding that every alternative is either too unreliable or simply insufficient, and are returning to individual paywalls with a vengeance.
If you’ve toured many content sites over the past few years, you’ve seen this trend developing. Television and media companies have taken the lead. These companies know how to commercialize content already — a chart in the same issue of BusinessWeek breaks down your average cable bill by content provider. (You’d be surprised how much each of us is paying for ESPN, for example.) They are bringing this same savvy to the Internet. The BBC and various Viacom entities have it down to a science, imposing nation-level controls that make their sites feel like DVDs with regional encoding.
New paywalls and subscription approaches have started retraining users into a paying mode. It’s not an alien concept for any segment of the population — subscriptions dominate many other parts of life (cable, satellite, cell phones). So it’s not surprising that success stories are emerging:
The New York Times, for one, started charging online viewers of its content in March 2011 and now makes more money from readers than advertisers. It gets 53¢ from readers for every 47¢ it gets from marketers. That ratio used to be 80-20 in favor of advertising.
Why might the individual paywall become more of a factor in the future of scientific and scholarly publishing, even in this age dominated by institutional subscriptions and conversations and mandates about open access (OA) and open data? The answer is simple — there may be no viable alternative.
Institutional paywalls (i.e., site licenses) set our industry apart, but library budgets are not keeping pace with the production of scientific and scholarly information. A major trend driving a move to more individual paywalls in our industry is the long-term decline of library budgets relative to university budgets. While library budgets are still fairly robust, the gap between trained scientists, soft money from research funding, and failure to support paid access to research reports via library funding remains a fundamental market failure. That is, the market for research outputs is growing (both supply and demand), but universities and corporations, which benefit otherwise by the supply and demand, are unwilling to support it adequately. This problem seems intractable, so attention is turning back to the individual purchaser.
There are very few other places to look.
Advertising won’t save the day. Most academic publishers are small and don’t have a lot of advertising revenues to begin with. Even if they did, promotional spending is down across the board, for a variety of reasons. There is the macroeconomic problem of the Great Recession, which continues to drag on as US political gamesmanship and European austerity contribute to ongoing paralysis. There are particular market trends, such as the decline in pharmaceutical promotion driven by a lack of new therapeutic entities to promote. There is the increasing trend of companies catering to the stock market, which has many firms hoarding cash instead of investing in new initiatives. And there is the shift from print to digital, with punishing economics facing anyone rushing the transition. Digital advertising does not scale as well as online, and the price points are too low. In short, advertising and promotional spending in academic publishing provides some relief, but it is under pressure and facing problematic trends.
Reprints won’t come to the rescue. In addition to structural changes in the purchasing and distribution of reprints caused by the Internet, now there is the Sunshine Act and similar state-level and national initiatives intended to blunt the effects of drug and device company influence on physician prescribing habits. The unintended consequences are significant for many businesses, especially medical publishers. Pharmaceutical companies are now reluctant to distribute reprints, a change that has cut reprint business off at the knees in the US, taking away a major revenue offset that allowed other prices to remain low.
Suffice to say that nearly every revenue stream that publishers have depended upon to spare individuals from paying is soft or under pressure. Even Gold OA is not a solution, as the margins on these business models are low (with some exceptions, such as the mega-journal at PLOS, where high volumes are achieved) and many approaches eschew long-term content sales strategies (i.e., CC-BY doesn’t help you sell the content again later or into different markets). For smaller publishers, dabbling with Gold OA was possible because some of the other revenue streams were sufficient to offset the cost of doing so. As these dry up, they can no longer subsidize Gold OA experiments.
Finally, publishing businesses have never been more complicated to run, and complexity generates expenses. Social media doesn’t run itself. Publishers balancing both print and online have to run two businesses where one formerly existed. Investments in infrastructure are increasingly important, and sizable. Staff need new skills. Mandates drive policies, which are time-consuming and expensive to implement seamlessly. New business options take time to scale up, and have to be managed. Every publishing event is a multimedia event. The bottom line is that available revenues are spread across even more initiatives than ever, as audiences expect fulsome print, online, and integrated media experiences.
Currently, publishers are responding to these financial pressures with a certain degree of fatalism, which I’ve seen represented recently in major shakeups and reorganizations, the hiring of digital gurus who bring buzzword-laden philosophies and no audience-centric discipline, and attempts to do more of the same with such speed that some advantages are at least possible. There is an acceptance that digital is here to stay, but a grim realization that it might not be sufficiently robust to sustain the level of activity, cooperation, objectivity, and service we’ve become accustomed to providing as part of the academic, scholarly, and scientific community.
Ultimately, all these contortions only delay the inevitable. There are only so many sources of revenues for publishers. Either the suppliers pay (authors) or the consumers pay (readers). Proxies like institutions and advertisers are no longer going to be able to carry the load themselves. This leaves the direct approach — asking readers to pay, without pretense.
Will 2014 be the Year of the Paywall? Our industry runs on its own clock, so while the year may or may not be correct, the trends indicating a strong future for the individual paywall are hard to ignore.