Wall Street is in a tizzy over the upcoming IPO of Springer Nature. I have been taking calls from analysts about this and have found the conversations to be stimulating. This is a good opportunity to see how scholarly communications looks to the people who invest in it. It’s worth remembering that if you add up the big for-profit companies’ revenues (Elsevier, Springer Nature, Wiley, Taylor & Francis, Wolters Kluwer, and SAGE) you get something close to half of all publishing revenues generated from academic research. That’s not half of all money spent on research (a much, much bigger number) but half of the sales for publications. Nor do sales figures fairly represent all research activity, as some fields (literary study, philosophy, etc.) generate small numbers even as these disciplines play a large and vital role in higher education; nor do these figures represent the relative weight of open access (OA) publications, which typically bear less revenue than their paywalled counterparts. But you get the idea: there is money flowing into this sector from investors looking for a return on their money, so the very presence of these investors says something about the prospects for scholarly publishing. Would you buy a stock if you thought it was going down?

Monopoly Man grafitti
Image courtesy of Lord Jim (CC BY 2.0).

As a business guy who spends a majority of his time with not-for-profit organizations, I am amused by the schizophrenia of how the two parts of the ecosystem for scholarly communications look at the same situation. To use the blog posts on the Scholarly Kitchen as a sample, we find great interest in this community in peer review, libraries, demographic diversity, the quality of research outputs, the metrics that are intended to be a proxy for quality, and privacy and the so-called surveillance economy. I have never heard a Wall Street type raise any of these issues except with regard to potential liability (A hypothetical example: If they have a “Me Too” problem, will they end up in court and have to pay damages?). A prospective investor does not seek to know the answers to every question but only to those that bear on the value of an investment and the attendant risks. A successful investor must pass through the eye of a needle, leaving behind anything that does not lead to a return on investment. This is significant because Wall Street is ultimately behind the biggest companies, whether selling stocks or bonds, and thus has a bearing on who gets to lead these companies and the priorities these executives set.

Of course, anyone who listens to the chatter about scholarly publishing would run away from investing in this sector. The prevailing narrative would have it that publishing is about to slide beneath the waves, punished at last for its greed, its alienation from the scholarly community, the disruptive implications of digital technology, the ability of universities and other players in the not-for-profit sector to replace commercial services with community-based solutions, and the OA movement, which will bring power back to the researchers themselves at the expense of the neoliberal organizations that attempt to dominate them. And thus a phone call with a financial analyst usually begins with this question: Is this industry doomed?

To this question I always respond with an anecdote. Some years ago I was given a copy of a financial reference work published by the investment bank Veronis Suhler (now Veronis Suhler Stevenson). This reference included detailed financial profiles for all segments of the media industries: movies, music, magazines, publishing, television, advertising, etc. Each profile included several years of trailing revenue and profitability and a forecast for several years more. Flipping through the pages I saw what was growing, what was not growing. And then this gem on the section on book publishing: “Book publishing continues to outperform perception.” It was a mature business then, but it continued to eke out gains, despite the conviction among pundits and technologists, and even within the industry itself, that publishing was sliding into the abyss. (In one of the many ironies of this business, my partner at STM Advisers, David Lamb, was the original editor of this reference work.)

With its strong position in OA publishing, Springer Nature gives the lie to this narrative. This does not mean that there aren’t challenges to the business, but publishers have shown themselves to be resourceful, navigating troubled waters to growth and profitability. It’s also easy to forget that a challenging environment is not equally challenging to all participants. In an earthquake or hurricane, it is the poor that suffer most; in a hostile economic environment, it is the less advantageously positioned organizations that are likely to lag behind the rest of the industry and even to be driven to its margins. Thus, for example, ubiquitous OA publication hurts not-for-profit professional societies, which often are too small to develop strong cascading publishing programs, far more than they impact the big commercial houses. The rifle that is OA advocacy misfired, missing the targets of Elsevier, Wiley, et al., and hitting the not-for-profit professional societies instead.

What then should investors be on the lookout for?

  • The gap between revenue per toll-access article and OA APCs. The industry average for revenue per article published is in the vicinity of $5,000. If APCs are set lower than that, whether by market forces or the funding agencies that bankroll most APCs, then many publishers will come under margin pressure. As a point of reference, PLOS ONE charges $1,495 and Scientific Reports, which is owned by Springer Nature, charges $1,760.
  • Piracy and other unauthorized uses. Whether Sci-Hub will survive in the coming years, I do not know, but there is at this time no clear path to restricting piracy and hosting sites of questionable legitimacy, as we see with ResearchGate. This enables librarians to be much harder-nosed in their negotiations with publishers, as it is pointless for publishers to deny access to libraries’ constituencies if those constituencies can simply find copies somewhere on the bad side of town. I hasten to add that I am not suggesting that librarians are cynical but that the cynical environment helps them without their asking for or even welcoming such help.
  • Involvement by funding agencies, including governments, in publishing. This is the big one and, speaking only for myself, it is the factor that was largely unanticipated. If research dollars are tied to forms of publishing and even to the fees publishing services may charge authors, then scholarly publishing is moved outside a market economy to a matter of social policy.

What all this means is that a successful investor is going to be one who chooses an organization that is adroit in wending its way through the environment. Such an organization weeds out irrelevant or unnecessary information in its decision-making, understands the implications of social policy, outperforms other publishers facing the same environment (who thus yield market share to the better managed), and displays creativity in developing new products and marketing programs. Such an organization will continue to outperform perception. Thus it is management that makes the difference. Oddly, no analyst has ever asked me about the quality or resourcefulness of any management team.

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.


45 Thoughts on "Publishing Continues to Outperform Perception"

“The industry average for revenue per article published is in the vicinity of $5,000”. That’s the problem – in addition to this notional article being largely unavailable to the public behind a firewall and the author prevented from putting the final version online, such a figure is too high for higher education libraries subscribing to the journal. Sourcing 2-3 referees who are unpaid, handling the review process, and feeding the final version (5,000-8,000 words) into a pre-prepared template [the ones for Elsevier are all the same] , proofing and publishing and indexing cannot possibly cost the price of a used car or the price a decent family holiday. What do the commercial publishers take us for? There is, obviously, movements against this and I am happy to be part of them. Moderate reform includes price reductions – and more radical solutions include bypassing the major commercial publishers and using smaller ones, or self-publishing within the academic fraternity. That still means jobs for publishers. The flotation of $1.95 billion SN shares is not a cause for celebration in the university library or in academic departments right now, where we hope to see a reduction in the power of companies like this, and the prices they charge.

One thing to remember is that $5K figure is an average. Some journals bring in a tiny bit of revenue, others bring in tens of thousands of dollars per article. So it’s a very blunt brush to tar all publishers with.

Second, you’re ignoring the costs of rejection. If a journal rejects 90% of what gets submitted, then the accepted articles have to pay for the rejected ones.

SK has a list of what publishers do. Take a good look at it. Each item has a very real cost. Thus, as David points out revenue is not profit.

This comment reveals profound ignorance of how publishing works. The $5,000 figure is not what is paid by an individual library; it represents the average per article across all customers. Thus you can divide the number of customers into $5,000 and get the imputed average cost per article per library. The figure of $1.67 is a fraction compared to (for example) the $1,495 charged per article per author by PLOS ONE. Note that most publishers make articles available on a pay per view basis for a fee in the range of $25-$75.

Dropped a sentence, alas. For my arithmetic I assumed 3,000 customers. Hence the $1.67 figure.

“Ignorance” is a word that means, (https://en.oxforddictionaries.com/definition/ignorance) “Lack of knowledge or information.” As a descriptor, it is apt when you’re commenting on a statement that is not well-informed.

But it does also seem to cause very defensive reactions, and is taken as a deliberate insult, whether it is meant as one or not. I know that I was taken to task a while back when I stated the the founder of Sci-Hub was ignorant of how not-for-profit and society publishing works. My statement wasn’t meant to be insulting or question her intelligence, but to point out that her statements showed a clear lack of understanding of the businesses she was potentially destroying.

Given its loaded nature, we’ll try to keep an eye on the use of the word “ignorance” in our comments to try to keep things more civil. What suggestions would you have used instead? Would you have perceived it as “insulting” if it said, “this comment shows a lack of detailed information on how publishing works”, or “this comment shows a misunderstanding of…”?

[I am not RF] I also apologized below somewhere for getting ahead of myself on the Springer financial model, even if the sentiment of my remarks is exactly what I wanted to say. Anyway, the share offer folded, so does this mean S-N is now saddled with its debt repayments for the foreseeable future and might start charging customers more to compensate? That is what most companies would do. Being in a predominantly STEM department, that is really going to hurt my colleagues. The new Nature Sustainability journal is hitting twice – firewalled so subscription based, and fees for OA. Why anybody would start a subscription journal in this world of internet readership is beyond me, but now I understand – it makes them more money.

While the discussion around Open Access has turned into one of applied business models etc, there has always been more than a hint of “First, kill all the publishers” within the Open Access motivational manifestos. And this ‘ad publisher’ environment (continued in the comments section here) – is frequently based on statements/claims absent citable fact, demonstrated experience or nuance.

I wonder is an OA journal published by Elsevier better, worse or the same as one published by someone like PLos

hi Harvey

That is a question to address to funders such as the Aussie government, institutions that evaluate for promotion and tenure and others who use publications for decisions on the value of the work or the author. More importantly is how the OA article is ranked against one in a conventional “journal”

I was asking more in the moral sense and in light of your comment regarding the goal of OA being the demise of commercial publishers, etc.

Hi Harvey
This thread is interwoven, so my comment is in response to this post of yours:

I was asking more in the moral sense and in light of your comment regarding the goal of OA being the demise of commercial publishers, etc.
I don’t believe, unless one is far left of center, that anyone wishes for the demise of the commercial publishers. They have adapted well to OA as seen by their adoption, in part, of the OA model in their fee structure.

My concern is more with what was pointed out earlier, that those who evaluate academics and institutions for promotions/tenure and grant awards often are expedient in making evaluations by a default to Impact Factors and journal rankings and thus the authors of these articles default to conforming to the same values. Thus the current design of journals by publishers feeds this logic in the same manner that drug dealers hook and keep their client base, a situation admitted by many on both the production and evaluation sides. I believe that when OA is examined, it will be seen like methadone but not sufficiently powerful to replace the current addiction. If the addiction symbiosis were broken then it would not eliminate the commercial publishers but rather create a competitive marketplace and pricing. Currently publishers have their unique journals and hence the consolidation to capture the market which only leads to concentration and not elimination, the same in any industry.

I published a suite of 14 journals of which 5 were the lead IF journals in their field. I and my company never priced because of the IF. In fact we and the journal editors worked very hard to maintain the IF for many reasons that included: 1) easier to get authors, 2) paperflow meant meeting periodicity, 3)sterling authorship meant easier to get reviewers, and 4) very few author complaints, etc.
I do not believe journal publishers set standards for tenure. Thus, in my mind those who do not like the methods for getting tenure should complain to the administration.
Lastly, I worked in both the commercial world and in the society world and in both worlds I had to perform to keep my job – there was no tenure! Every year I was evaluated and if I did not meet my budget – well there were lots of folks who wanted my job!

Another area of both social policy and management decision that will affect academic publishing in the long term is in the realm of higher education. That $5,000 profit per article depends on academics not only producing the research and writing it up but also serving as unpaid peer reviewers. As tenure-line faculty are reduced in number, paid less, and pushed to teach more, the intellectual “workers” (the authors and reviewers) who produce that publishing industry product are increasingly forced to seek alternative means of publication because they can’t afford the time or the publishing costs, nor can they afford to let Springer Nature (and others) take the copyright so that they cannot even use materials from their earlier publications in their later ones. The academic publishing industry is no different than the rest of the capitalist economy: the inequalities are getting wider and more and more of those doing the actual intellectual production are barely getting by. There are signs of discontent that foreshadow much-needed change: graduate students are beginning to unionize. When these students are faculty, will we get collective bargaining of academics with publishers?

Thanks for the correction. But the point is the same: the industry depends on production by authors and reviewers that they do not pay. That system worked when most universities paid lots of faculty and allotted time to write and review, but universities have been squeezing faculty for decades, and that squeeze has direct implications for academic publishing.

Publishing (at least the journal side of things) is a service industry. Academic researchers need services performed in order to meet their funding and career advancement requirements. Publishers and journals provide these services (more on these services here: https://scholarlykitchen.sspnet.org/2010/01/04/why-hasnt-scientific-publishing-been-disrupted-already/).

Each researcher then has the choice — to pay for those services directly (e.g. Gold open access APC charges) or to push the costs of those services off onto other academics, namely the readers of their article. One could make a counter argument that authors are reliant on publishers for services for which those same authors do not pay.

The future you’re pointing to suggests that the costs will no longer be widely distributed, but instead focused on the individual researcher. This is good in that it makes it a much more straightforward transaction, rather than creating the illusion that journals are a product-based industry rather than a service industry. The downside is that authors that don’t have funding may be shut out of the publication process, or at least have their options limited.

Peer review has generally been seen as a “community service” activity — I will need this performed for my paper, so I’m willing to perform it on your paper in return. If peer reviewers are to be paid, again, the costs to the author (or subscriber) are going to go up.

I was tenure-line faculty for 14 years and now edit an academic journal. I’m commenting based on personal experience and those of friends and colleagues of the increasing difficulty for people not in tenure-line positions to afford to publish as well as the increasing difficulty in finding people to agree to review manuscripts. When a tenure-line faculty position is not possible/realistic, publishing looks different to the producer of those articles: less like a service being given and more like the taking of a product that one should get paid for. What I’m saying is that the trend in higher education–to reduce numbers of tenure-track faculty in favor of adjuncts and lecturers and to reduce pay and increase teaching and in-house service loads–is having an impact in the trenches. And I think there are new signs of a critical mass demanding change (grad student unionization).

Sorry for my mistake about the $, but the big issue is the same – most of the big 5 (or 6) are doing quite OK financially. The cost of purchasing their ‘products’ is crippling if you talk to libraries – and their APCs are some of the highest. Also the service you receive from a big company as an author is not always good – I speak with experience having published many articles and chapters. The main issues are inflexibility over 1) word length restrictions 2) ability to alter an OA article in a small way, post-publication 3) editorial help or lack thereof . Academics don’t see why their work should be used to support a company, publicly traded or not, when profit levels escalate to the heights of Elsevier et al. SN sits on operating profit margins of 22.9% (https://global.handelsblatt.com/finance/publishing-house-springer-nature-announces-billion-euro-ipo-910643).

The Springer Nature IPO has been a long time coming and it will occur without any major problem. The only reason that Nature got into this relationship was for this long awaited flotation. Nature was a highly profitable publisher and Springer with its checkered balance sheet with significant debt needed a blue ribbon partner to put the lipstick on this pig. Springer still receives 90% of it revenue and nearly 95% of its profitability from its tradional journals business which is alive and well. Site license renewals are still at 98% and manuscript submissions are stronger than ever.

The top 10 STM publishers still are strong, profitable, and growing. They are well managed and have successfully navigated the stormy waters of OA, avoided the budget cuts from the research libraries, and changes in scholarly communications.
Springer Nature is a major publisher that produces quality material. While the library community may not rejoice with this flotation, the owners of Nature and the driving force behind this flotation, the venture firm that owns a significant share of Springer all stand to see a huge financial payday.

It’s kind of amazing that not a single person responded to this comment.

From Wikipedia’s entry for Eugene Garfield, the founder of ISI and the creator of Impact Factors and their variance:
Writing in Physiology News, No. 69, Winter 2007, David Colquhoun of the Department of Pharmacology, University College London, described the “impact factor,” a method for comparing scholarly journals, as “the invention of Eugene Garfield, a man who has done enormous harm to true science.” Colquhoun ridiculed C. Hoeffel’s assertion that Garfield’s impact factor “has the advantage of already being in existence and is therefore a good technique for scientific evaluation” by saying, “you can’t get much dumber than that. It is a ‘good technique’ because it is already in existence? There is something better. Read the papers.”

If funding agencies, personnel reviewers in academia and researchers who deliberately use citations to increase the virtuous Impact Factor, then there might be change. As Joseph and Phil note, the investors in the offering look at the reported profit, not the 10-15% that is oft quoted in SK but the 40+% bordering on the returns of the Silicon Valley unicorns such as Google and FB. Maxwell lives.

There are harsh consequences should it be discovered that an author is “padding” his/her list of citations. No one wins when one cheats and the cheater loses the most.

If the IF is so terrible why isn’t there something better? Perhaps there will be and I do hope so but in the meantime if the ship sinks it is best to get a seat on the lifeboat rather than swim for it!
Investors look at worth (both material and human), potential growth, and then profit margin.
I worked in both the for and non profit worlds, and in each the CEO always had the same question at the end of the year: What are you going to do for me next year? BTW the chairperson or dean asks the same question of each faculty member!

“The rifle that is OA advocacy misfired, missing the targets of Elsevier, Wiley, et al., and hitting the not-for-profit professional societies instead.”

well said. & to some of us, despite the rhetoric, this was always what was intended (along with a series of other destructive impacts on higher ed, & shifting of more resources toward large corporations), even if some of the loudest advocates do not understand their own role in what is happening because they believe the hype.

That is not what I said. You have quoted me out of context. Do you not understand or is this simply cynicism?

A great article that really synthesizes how those on Wall Street see STM publishing. It’s the bottom line that matters period. Not for profit publishers (societies and university presses) put the needs of their members first and generally speaking what is good for the community as a whole. For profit entities put the shareholder or investor first. Wall Street could probably care less about high quality publishing and research unless it impacts the bottom line.
Many of us in the industry are
much more idealistic than those on Wall Street thank heavens! I enjoy my work and am pleased to be in an industry where for the most part, we care about our customers (librarians, researchers, academics and students). As you point out to those on the outside looking in, things look pretty good!

Obviously you have never worked for a not for profit! They are like any business and do not enjoy the free lunch you think they do! If you think not, then why have many turned their journal and book programs over to for profits in return for royalties or increased products not for free but for a price.

On the other hand, colleges and universities are increasing tuition in order to meet the salary needs of the faculty, new buildings, and other such noble causes.

Very few want social science journals. The money was and still is in the sciences.

Social sciences are stitched up by the big 5 who control 70% or so of the WoS listed journals (source, the 2015 plos study).The pie may be smaller but the profits are being made by the same companies. Our job is to get more diversity in this field. Not to send articles to the same commercial outlets and to provide more flexible and cheaper alternatives.

And how will that be done, by passing on the costs to the author or to a funding agency. Do funding agencies even fund social science publishing? I just looked at the NIH funding announcement for 2018 and they are supporting 25 grant areas each of which is concerned with health.

I suggest you look at The American Historical Association position on OA

I was for many years a book publisher and our sciences list supported our humanities list. I think the state of University Presses and the pressures they are under to stay afloat only illustrate the weakness of your argument.
Nevertheless, I wish you luck.
As I have said in the past: There is no free lunch!

Harvey Kane: your argument simply does not stand up to evidence. Not to crow, but here is what you can produced with no budget and no professional anybody at all. Could use improvement of course. https://journals.uair.arizona.edu/index.php/JPE/index . Or choose any of the free journals off the hundreds here https://simonbatterbury.wordpress.com/2015/10/25/list-of-decent-open-access-journals/ , or indeed about 70% of those in the the DOAJ. We simply do not need large corporations with shareholders to run journals anymore. They cost us [libraries/scholars] too much and are not even responsive to the sector’s needs, which are about more flexibility and less cost. I know of emergency meetings going on between dissatisfied editorial boards and large publishers this month about profit-sharing, or lack of. I will let you know if there is ever a press release. One of the journals concerned was written about on this blog, earlier.

If you consider your time valueless then the journals are free to produce and use. But, what happens when the volunteers dry up. BTW free gold journals are not free! They are free to the user but not to the creator!

I am curious who is archiving the journals? Who is maintaining the archive?

Not surprised. I cannot see how they came up with that valuation.

I wonder if an IPO counts as an “Impact Factor” for corporations

Never did in any company I worked for. The IF was basically a marketing point used to attract authors.

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