Editor’s Note: The trends toward consolidation, mergers and acquisitions in the scholarly publishing sphere have continued apace, and as Roger Schonfeld has pointed out, publishers are widening their scope, branching out into services impacting every aspect of the research process. This prescient 2014 post by Joe Esposito discussed the effects this market consolidation is having on libraries as well as on publishers themselves, as they compete for partnerships with research societies.

One form that the sharp competition in journals publishing takes is spirited auctions for the rights to the publications of professional societies. The head of a scientific society sometimes stumbles into this situation like a yokel coming into the big city for the first time. “They are really proposing to pay us that much? And with all these guarantees????” Yes, it is surprising to see what the commercial value of highly specialized research publications has become. The reason for this is that the largest publishers know very well what the prize is and how to get it: access to the collections budget of academic libraries, whose door opens widest for the biggest entrants. How better to bulk up a publishing portfolio than by acquiring the publishing rights to established scientific societies?

resort

It’s useful to recall how we got where we are today. Libraries have done an outstanding job of lowering their administrative costs through various measures. For example, several decades ago the acquisition of library books was made much more efficient by the introduction of approval plans, in which wholesalers preselected the titles a library would acquire. More recently books have become subject to demand-driven acquisition programs, in which the selection of titles is in part influenced by actual usage by library patrons. Another way to reduce handling costs is to reduce the number of vendors. This leads vendors to gobble up other vendors; bigger is better because with scale comes efficiency. This in turn leads us to the Big Deal and libraries’ response to it in the form of consortial purchasing. There is a hidden, or at least unanticipated, cost in reducing the number of vendors, however, in that fewer vendors means bigger vendors and bigger vendors mean greater economic clout. In my experience many librarians remain unaware that they have been complicit in the creation of Elsevier, Springer, Wiley, Taylor & Francis, and the other large firms. The savings in costs today can lead to unwelcome market dominance tomorrow. Librarians may wish to ponder the long-term implications of insisting that more and more publications be made available through GOBI. From such small beginnings do towering giants grow.

These giants face off and fight to get even larger shares of the academic library budget, but now they have come up against a formidable obstacle, the flattening-out of library budgets, which means that any increase in the revenue of one publisher comes at the expense of another. This is the key point and is worth repeating: for one publisher to gain, another must lose. Hence the arms race:  I will pay top dollar to obtain the rights to the Journal of Highly Specialized Science and then I will use the inclusion of that publication to justify the price of the aggregations I sell to libraries. But if I will pay top dollar, what will you pay? And if this competition has a half-dozen bidders, how big can the numbers get?

There is a natural limit to the size of the numbers, though, in that you can’t squeeze water from a stone. A library cannot pay whatever the cost even for the finest material if the money has run out. So it’s a big fight for a pie of finite, and perhaps shrinking, size. And if a library has limits on what it can spend, that imposes limits on the publishers that service libraries on what they can invest.

It is sometimes asserted in the world of scholarly communications that big companies can afford to pay more than little companies. If that’s the case, Elsevier, Springer, and Wiley could simply take out their checkbooks and sign up any journal that wanders into their gravitational field. But it’s not really true that Elsevier can pay more than, say, a university press. It’s not a matter of how much you can spend; it’s not a matter of cost: it’s a matter of what kind of return you can get on your investment.  So Elsevier can “afford” to spend a million bucks on the Journal of Highly Specialized Science, but if the return on that investment is 5% or even 10%, it may simply not be worth it; and if the return is negative, then the Elsevier management will be scratching their heads, wondering why they are competing for this particular journal in the first place. A bad investment is a bad investment, regardless of how rich the balance sheet is.

This may be where we are getting in the journals auctions: they can’t get much richer without some players dropping out, complaining that the market is overheated. And if more players drop out, then the cost of acquiring these journals will not be subject to bidding wars, suppressing the price paid. Which raises the question:  If paying big money is no longer the determinant of how a big publisher will acquire the rights to the publications of a professional society, what will drive the outcome? This doesn’t mean that paying top dollar is not important but that being among the highest bidders is simply the cost of admission.

The competing publishers do of course offer a lot more than simply money. They offer full publishing services, both print and electronic; manuscript submission tools; participation and often the underwriting of editorial conferences; guidance on open access policies; and most importantly, a global footprint to ensure that the content of the journal has maximum distribution. (The global marketing of the biggest players is so effective that the difference in dissemination between them and OA services is marginal.) They also say nice things to the representatives of professional societies–no ego left unstroked–and guarantee editorial independence. But here again, this has now become the cost of admission. To be competitive in the next few years, the bidding publishers will have to do more.

It will be interesting to see what the acquiring publishers come up with now that simply paying more may have reach its limit. It seems probable that eventually all the publishers will seek to bind professional societies more closely to them. And so the board of the Journal of Highly Specialized Science may find that their group has been invited to join Club Elsevier–or Club Wiley or Sage or whatever. As a club member the society will have a new set of benefits, which will serve to tie the members of the society more closely to the society even as the society itself and its publications are more deeply integrated into the hosting parent publisher.

What will those new membership benefits be? And equally important: What benefits can a publisher offer that the competition cannot–what, in other words, will give one company a sustainable competitive advantage? These benefits may be hard or soft. A soft benefit may be to appeal to the nature of the large publisher’s ownership, the thesis being that not-for-profit scientific societies prefer to work with not-for-profit partners. This is one of the reasons that HighWire was so successful over the years (“We would rather work with a unit of Stanford University than the purely commercial firms such as Atypon, Silverchair, and Publishing Technology”). Now that control of Highwire has passed to a venture capital firm, that selling point is gone. But we will continue to see this card played by OUP and Cambridge in their areas of activity and perhaps some of the larger professional societies, which are incorporated as not-for-profits.

A library cannot pay whatever the cost even for the finest material if the money has run out. So it’s a big fight for a pie of finite, and perhaps shrinking, size. And if a library has limits on what it can spend, that imposes limits on the publishers that service libraries on what they can invest.

Another benefit would be to make selected data analyses of the hosting publisher’s entire portfolio available to the professional societies. This is the opposite of how the information flows today. When a society joins the ranks of Cambridge or Springer, all the activity of that society’s publications is known to the hosting company, but only limited data is passed back to the society. Astute leadership of a society may begin to ask for, even demand more. How does the usage of our publications map to the usage of the portfolio overall? How can that information be used to solicit new members? Can piggybacking on the infrastructure of a large publisher enable a professional society to grow, perhaps at the expense of a society that has no such relationship?

New membership benefits are always a good selling point; societies look for these all the time.  Some hosting publishers provide special deals to their participating professional societies–deals such as discounted access to publications. This could go a lot further. Although the analysis that would have to go into such a program is not trivial, we may eventually see a hosting publisher make all its properties available to the membership of the societies that work with it. In effect, by being a member of a society, a researcher would have direct access to a wide range of publications, many of which are not available through that researcher’s individual library. (Libraries, now seeing the large publishers as competing with them, may then feel pressure to make sure all of that publisher’s materials are available through institutional subscriptions.) The law of increasing returns may come to play a role here: If the rich get richer, than the largest publishers will have a better offering for the simple reason that they can make more journals available. This would bring an advantage to the likes of Elsevier and Wiley over their smaller rivals.

Some people may read these musings and respond with moral outrage. That is to no purpose. The economy is impersonal and operates outside judgments about right and wrong; to be amoral is not to be immoral. Understanding how it works, however, can enable an organization to further its aims. Libraries could disrupt these trends tomorrow by insisting that no single vendor provide more than a defined percentage of total expenditures, a percentage that would drop year by year. That would greatly increase costs in the short term, but it would reduce the market power of a small number of publishers (assuming that is deemed to be desirable). There is a reason we call these things trade-offs.

Meanwhile, Welcome to Club Elsevier! We are pleased to host the board of our new partners, the society that publishes The Journal of Highly Specialized Science.  After you take a dip in the pool and slip into the Jacuzzi, we will be serving drinks on the veranda.

Joseph Esposito

Joseph Esposito

Joe Esposito is a management consultant for the publishing and digital services industries. Joe focuses on organizational strategy and new business development. He is active in both the for-profit and not-for-profit areas.

View All Posts by Joseph Esposito

Discussion

2 Thoughts on "Revisiting: The Arms Race in Journals Publishing Heats Up"

A wonderful and indeed prescient essay. One minor nit-pick: the “Big Deals” and their marketing of journal publishers may approach the dissemination achieved by Open Access to most libraries, but not to the smallest ones nor to
individual users who do not have library privileges. To the best of my knowledge most “Big Deals” have a floor price
(minimum price). I’m not certain if academic journal Big Deals are offered to school or small public libraries. Perhaps some are, or segments specialized sections of the publisher’s journal collection are. Certainly no Big Deal offers perpetual free access to individuals, who must resort to increasingly expensive pay-per view or less legitimate means of access. But again this is tiny nit-pick. Hats off to Prescient Joe!

At least university presses are relatively immune to buyouts and takeovers. I say “relatively” because Iowa State sold its press in 2000 to Blackwell Science, which of course subsequently became part of Wiley’s portfolio.

Comments are closed.