Editor’s Note: Copyright Clearance Center’s (CCC) Roy Kaufman returns for a second guest post. Roy is the CCC’s Managing Director of New Ventures and is responsible for expanding service capabilities as CCC moves into new markets and services. Full disclosure: as noted below CCC does have product offerings in some the areas discussed.
Whatever you choose to call the ever-evolving open access (OA) marketplace, you can’t call it easy.
In a 2014 post in The Scholarly Kitchen, consultant Michael Clarke talked about expanding the OA business as a response to “peak subscriptions”— addressing some of the challenges publishers face as they try to increase their subscription-journal businesses. The OA market, too, is challenging for publishers now. “It’s not a fully-functioning market. For example, publishers can’t count on the ability to raise prices on a regular basis,” said Rob Johnson, director of UK-based Research Consulting, which specializes in the OA marketplace. The prices for article publication charges (APCs) speak for themselves. A recent comparison of APCs by Wellcome Trust shows that average APC fees rose by less than one percent from 2013 to 2014. In this way, the OA market reflects larger trends in journal publishing, and, in particular, the downward pressure on prices.
As library budgets have shrunk for the past few years (and profits from subscription journals have shrunk along with them), so-called gold road OA remains a potential growth area for publishers. The gold road is based on the willingness of authors to pay publishing charges — APCs — for which they often use grant money. However, for a variety of reasons, APC prices likely will not be rising any time soon.
One reason is that pure OA publishers like PLOS have set the pricing bar relatively low. “They make it work for them through economies of scale, by having a less labor-intensive standard of peer review, and by avoiding the costs of a legacy print business,” said Johnson. Perhaps even more important, they have set a benchmark for what the market believes APC fees should be. He observed, “People look at what is already going on in the market, price-wise, and don’t want to be a million miles away from that,” Johnson observed. In a world where fees are completely transparent, many of the newer, pure OA market entrants are pushing prices down even further.
The challenges inherent in raising prices can best be seen in the reaction to a price increase instituted by PLOS this September (see, Phil Davis, “When Pragmatism Collides With Fundamentalism-PLOS Hikes Publication Fees”). PLOS raised its prices for its PLOS ONE journal for the first time in six years by $145, to $1,495 — still well below a typical APC for a hybrid journal. Did the reaction from the community note how long it had been since prices last went up, comment on inflation over the last 6 years, or note all of the improvements in PLOS ONE over the time period? Of course not. Community reaction simply focused on the fact that Ubiquity Press and PeerJ are cheaper. If this is the community reaction to price increases by PLOS ONE, the darling of the OA movement, imagine the reaction to price increases from traditional STM publishers.
Funders like the European Union are also constantly keeping an eye on APCs and even capping the fees that can be paid, a practice that makes it tough for publishers of scientific journals to raise prices. Publishers’ costs of publication for single articles in high-impact journals can exceed $10,000. In the traditional revenues-from-subscriptions-plus-rights-plus-reprints model, publishers were able to sustain themselves by keeping revenues above costs. In contrast, with maximum APCs so far below costs (at least for those high-impact journals), sustainable publishing is a challenge for the gold road, especially for hybrid journals. Publishers are going to need something other than price increases if the dominant business model continues to move toward OA.
Fortunately, there are alternatives. In order to grow a business, there are three major components: revenues, costs and price. Taken together, they contribute to overall profitability. Broadly, there are three ways publishers can increase profitability for OA:
- Cut costs to the bone. This is what the purely OA journals do, and the strategy may also be behind the latest round of publisher consolidation. This route has its limits, however. For one thing, in the short term, publishers may be able to increase profitability by slashing costs, but cutting costs typically means less money for matters such as marketing and editorial. Cutting expenditures in these areas come with consequences of their own, such as less attractive journals, which in turn cause further downward pressure on revenues.
- Launch new journals and publish more articles. Once a publisher has an existing publishing infrastructure, especially in an OA world unbound by print, revenues can go up along with profits simply by publishing more articles at even lower costs. This has been a common strategy for growing OA businesses. With publishers increasingly publishing more OA articles, however, especially in new “mega-journals,” the market will inevitably become saturated, if it has not already. In fact, market observers have questioned whether we have now reached a period of “peak OA” in terms of the number of articles published each year. In a December 2014 blog post in The Scholarly Kitchen, for instance, Phil Davis points out that article output in PLOS ONE had fallen nearly 25% since peak output in December 2013, and had yet to recover.
- Increase product offerings to authors. If publishers cannot raise APC and subscription prices, nor further cut their costs or publish more articles, they can offer authors various extras as part of the publishing package. Additional fee-generating options might include reprints, language-polishing services, continuing education and certifications, article-level analytics, submission charges, or color- and page-charges, to name just a few. By selling more products, revenues can increase, costs can be amortized across a bigger business, and profits can go up.
A time to experiment
In a world of multiple peaks — peak subscriptions, peak APCs, and peak OA—option 3 holds the most promise. With the author as a customer, publishers can fuel growth by bundling various offers with existing high-value services. For example, authors who pay an APC can get a discount for meeting attendance, and vice versa. The time is right for publishers to experiment with a broader array of offerings to OA authors.
However, a recent July 2015 post in The Scholarly Kitchen, by Roger Schonfeld, makes the excellent point that academics, like everyone else groomed by the Internet, have come to expect a seamless, easy user experience. As Schonfeld writes: “Academics’ expectations for user experience are set not by reference to improvements relative to the past but, increasingly, in comparison with their experiences on consumer Internet services and mobile devices.” In other words, if you want to sell products and services to this market, you need to make ordering easy and, in the best case, add it to existing workflows.
No subscription offsets necessary
Adding new author products can help in a variety of ways. With the collection of APCs, especially in hybrid journals, comes the allegation that publishers are double-dipping — that is, charging twice for the same thing; making the article available to the user only after both the author and the user pay. This perspective ignores the fact that APCs generally cost less to the author than the full amount the publisher would have otherwise received for the article (in terms of a percentage of subscription value and money for rights licenses), and second, that the APC collected for high-impact journals in particular is often below the out-of-pocket cost of producing the article. Nevertheless, in an effort to head off this criticism, publishers have been devising creative models to credit customers with APC payments on institutional subscriptions. Of course, these offsets create yet more downward pressure on subscription revenues.
The good news is that offering the aforementioned extra services to authors (for extra fees) avoids that kind of complication, with the added benefit that authors for both OA and traditional subscription journals can use the services. That said, this strategy is not free of complexity. While managing OA publications can, at times, be fairly cut-and-dried (for example, every author pays $3,000 per article, no discussion), more commonly the amount an author pays for an article varies widely based on a number of factors, including an author’s location, choice of license, and membership status, to name a few. As publishers experiment with more offerings to authors, this kind of complexity is bound to increase, which can be a headache for publishers who want to avoid putting more time and resources into tracking all these extras.
How to make things simpler in an increasingly complex author-services market
Given the incentives for publishers to experiment with new revenue sources and the inevitable complexity this will bring to the process, what are they to do? Whether publishers choose to use a workflow and transaction engine like Copyright Clearance Center’s RightsLink for Open Access, a third-party alternative, or opt to develop an engine of their own, relying on this kind of system — with built in flexibility for future business models — offers distinct advantages for those keen on staying ahead.
These engines are about more than the ability to manage transactions themselves; they also allow publishers to easily see and track various charges, and to monitor who is paying and who is not. They also allow publishers to experiment with discounts and to explore a variety of price optimization techniques. Finally, there is a vast amount of data that can be shared between different stakeholders, including publishers, authors, institutions and funders, and this data can yield important insights.
Ultimately, in a market where the boundaries are constantly shifting, publishers need to be able to easily try out different pricing strategies, promotions, and ways of tailoring their prices and services to an author’s needs. And they need to be able to easily keep track of what works and what doesn’t. As the OA market and related author-based businesses continue to expand, for publishers to grow revenues and profits in the years to come, they need to adopt a robust, aggressive strategy that allows for flexibility and experimentation.