The Profit Motive and The Profit Motive and Academic JournalsAcademic Journals

Ted

Bergstrom

UCSB

The curious market structure of The curious market structure of academic publishingacademic publishing

• Private profit-maximizing firms and Private profit-maximizing firms and non-profit societies and academic non-profit societies and academic presses presses bothboth are significant are significant players. players.

• Most of the workforce--authors and Most of the workforce--authors and referees--work for free.referees--work for free.

Research Team

A Research Team in ActionA Research Team in Action

Market PerformanceMarket Performance

• The 6 most-cited journals in economics The 6 most-cited journals in economics are owned by non-profit groups.are owned by non-profit groups.• Average price to libraries is $180 per year.Average price to libraries is $180 per year.

• Only 5 of the 20 most-cited journals are Only 5 of the 20 most-cited journals are owned by commercial publishers.owned by commercial publishers.• Average price to libraries is $1660 per year. Average price to libraries is $1660 per year.

Costs of a Complete Costs of a Complete Economics CollectionEconomics Collection

Publisher Publisher

TypeTypePercent of Percent of CostCost

Percent of Percent of CitesCites

Non-ProfitNon-Profit 9% 62%

For-ProfitFor-Profit 91% 38%

Each type plays a major role Each type plays a major role

• Non-profits supply most of the Non-profits supply most of the citations. citations.

• For-profits collect most of the For-profits collect most of the money.money.

A bit of history A bit of history • In 1960 there were ~30 econ journals, In 1960 there were ~30 econ journals,

all non-profit, all cheap. all non-profit, all cheap. • In 1980,~120 econ journals, half for-In 1980,~120 econ journals, half for-

profit, half non-profit.profit, half non-profit.• In 2000,~300 econ journals, 2/3 for-In 2000,~300 econ journals, 2/3 for-

profit.profit.• Between 1985 and 2000, top ten for-Between 1985 and 2000, top ten for-

profits almost doubled their pages, top profits almost doubled their pages, top ten non-profits increased ~20%.ten non-profits increased ~20%.

EntrepreneurshipEntrepreneurship• In the 1970’s the economics profession was In the 1970’s the economics profession was

growing rapidly and society journals were growing rapidly and society journals were not growing as fast.not growing as fast.

• Specialized field journals were not common.Specialized field journals were not common.• North-Holland (and other companies now North-Holland (and other companies now

merged into Elsevier) started about 30 new merged into Elsevier) started about 30 new journals.journals.

• About 12 of these could now be called About 12 of these could now be called leading field journals.leading field journals.

Rewards to innovationRewards to innovation• In 1985, the new commercial journals cost In 1985, the new commercial journals cost

about 3 times as much per page as their non-about 3 times as much per page as their non-profit counterparts. profit counterparts.

• Now about 6 times as much and increasing by Now about 6 times as much and increasing by 6.5% per year.6.5% per year.

• Elsevier reports 33% profits on sales in Elsevier reports 33% profits on sales in science and health division.science and health division.

Why didn’t economics Why didn’t economics societies start more journals societies start more journals

and add more pages?and add more pages?

• Confidence that private sector Confidence that private sector would do as well as non-profit.would do as well as non-profit.

• Elitist views of old-guard leadership.Elitist views of old-guard leadership.

Pages published by U.S. SocietiesPages published by U.S. Societies

Discipline Society members

Pages published

Microbiology 42,000 53,000

Physics-APS 40,000 96,600

Math-AMS 30,000 12,000

Optics-OSA 13,000 19,000

Econ-AEA 18,800 4,300

Entomology 6,500 4,100

Polit. Science 14,000 2,000

Favorable signsFavorable signs

• Journal of European Econ Assoc Journal of European Econ Assoc • Economic BulletinEconomic Bulletin• Journal of Public Economic TheoryJournal of Public Economic Theory• ELSSS Review of Economic TheoryELSSS Review of Economic Theory• BE PressBE Press• Review Economic Studies plans to increase Review Economic Studies plans to increase

pages by 50%.pages by 50%.• AER increased by ~25% in 2002AER increased by ~25% in 2002

Profit-Readership tradeoff Profit-Readership tradeoff

• Academic societies want to maximize Academic societies want to maximize readers, subject to making some small readers, subject to making some small profit.profit.

• Authors want readers. Readers want Authors want readers. Readers want access.access.

• Commercial publishers want to Commercial publishers want to maximize profits.maximize profits.

Profit-Readers Frontier

Profits

# of readers

c

A

B

Commercial Pub

D

Society pub

Short of the Frontier? Short of the Frontier?

• Price discriminate by institution Price discriminate by institution size?size?

• Free access to public libraries?Free access to public libraries?• Make some material open access?Make some material open access?• Bundle journal with other Bundle journal with other

nonprofits?nonprofits?

Social cost of overpriced Social cost of overpriced journals?journals?

• Large wealth transfer from universities to Large wealth transfer from universities to executives and stockholders.executives and stockholders.– UC $20 million journals budget. Half goes to UC $20 million journals budget. Half goes to

Elsevier, who provide ¼ of the usage.Elsevier, who provide ¼ of the usage.– Elsevier Science & Medical $2 billion in sales Elsevier Science & Medical $2 billion in sales

(overpriced by factor of 5?).(overpriced by factor of 5?).

• Excess burden from reduced access. Excess burden from reduced access. – Typical journal costs 5 times as much, has half as many Typical journal costs 5 times as much, has half as many

subscriptions.subscriptions.

• Rent dissipationRent dissipation– Huge lobbying staffs, executive bonusesHuge lobbying staffs, executive bonuses

Bundling and Entry Bundling and Entry DeterrenceDeterrence

• Elsevier’s bundling policy deters potential entrants.Elsevier’s bundling policy deters potential entrants.• Elsevier prices rise about 7% per year. Library Elsevier prices rise about 7% per year. Library

budgets grow less rapidly. budgets grow less rapidly. • This leaves no room in budget for new cheaper This leaves no room in budget for new cheaper

journals unless library drops journals unless library drops entireentire Elsevier collection. Elsevier collection.

What should scholars do?What should scholars do?

• Refuse to referee for overpriced journals.Refuse to referee for overpriced journals.• Encourage cheap journals. Encourage cheap journals.

– Referee for them.Referee for them.– Cite them. Cite them. – Publish in them.Publish in them.

• Encourage professional societies to expand their Encourage professional societies to expand their journals and start new ones.journals and start new ones.

• Keep copyright on your own work and keep your Keep copyright on your own work and keep your papers on the web.papers on the web.

Enough for now.

Pricing of Electronic Pricing of Electronic Journals Journals

• Electronic distribution allows new Electronic distribution allows new pricing methods not available with pricing methods not available with paper.paper.– University-wide site licensesUniversity-wide site licenses– Price discrimination by size of Price discrimination by size of

universityuniversity– Bundling of Journals with all-or-Bundling of Journals with all-or-

nothing pricingnothing pricing– Consortium pricingConsortium pricing

A Publisher’s View A Publisher’s View

““So, we should have models where we make a deal with So, we should have models where we make a deal with

the university, the consortia or the whole country, where the university, the consortia or the whole country, where for for

this amount we will allow all your people to use our this amount we will allow all your people to use our

material, unlimited… And, basically the price then depends material, unlimited… And, basically the price then depends

on a rough estimate of how useful is that product for you; on a rough estimate of how useful is that product for you;

and we can adjust it over time. It is a principle, which, and we can adjust it over time. It is a principle, which,

in my view, is not immoral.” in my view, is not immoral.”

From a speech by Derk Haank, CEO, Elsevier ScienceFrom a speech by Derk Haank, CEO, Elsevier Science

A Librarian’s ViewA Librarian’s View““In the Big Deal, libraries agree to buy electronic access to In the Big Deal, libraries agree to buy electronic access to all of a commercial publisher's journals for a price basedall of a commercial publisher's journals for a price basedon current payments to that publisher, plus some on current payments to that publisher, plus some

increment.increment.Academic library directors should not sign on to the Academic library directors should not sign on to the Big Deal or any comprehensive licensing agreementsBig Deal or any comprehensive licensing agreementswith commercial publishers…with commercial publishers…You read that right. You read that right. Don't buy the Big DealDon't buy the Big Deal……the Bigthe Big Deal serves only the Big Publishers.Deal serves only the Big Publishers. “ “

Ken Frazier, head librarian, University of Wisconsin.Ken Frazier, head librarian, University of Wisconsin.

An Economists ViewAn Economists View

• ““Morality” of price discrimination and Morality” of price discrimination and bundling is not the issue. bundling is not the issue.

• Benefits and costs to the academic Benefits and costs to the academic community is what concerns us.community is what concerns us.

• Profitability is what concerns Profitability is what concerns

commercial publishers.commercial publishers.

Benefits of Price Benefits of Price Discrimination and Discrimination and

BundlingBundling• Price discrimination allows more access for Price discrimination allows more access for

small colleges and poor countries.small colleges and poor countries.• Bundling allows big universities to get Bundling allows big universities to get

everythingeverything a publisher produces. a publisher produces.• Since cost of access for an extra subscriber Since cost of access for an extra subscriber

is nearly zero, this raises efficiency.is nearly zero, this raises efficiency.

Benefits for Whom?Benefits for Whom?

• Price discrimination allows publishers to raise Price discrimination allows publishers to raise price to big universities—releases the restraint price to big universities—releases the restraint previously imposed by threat of losing previously imposed by threat of losing subscriptions at midsize universities.subscriptions at midsize universities.

• Publishers can charge close to total willingness to Publishers can charge close to total willingness to pay of users at universities, leaving no net pay of users at universities, leaving no net benefit to subscribers.benefit to subscribers.

• This is worse for the academic community than This is worse for the academic community than the outcome if libraries refused to deal buy site the outcome if libraries refused to deal buy site licenses at monopoly prices.licenses at monopoly prices.

What should libraries do?What should libraries do?

• Pay attention to prices per page and per cite Pay attention to prices per page and per cite when deciding what to subscribe to.when deciding what to subscribe to.

• Encourage departments to trade overpriced Encourage departments to trade overpriced journals for cheaper new ones.journals for cheaper new ones.

• Encourage or start new electronic journals. Encourage or start new electronic journals. • Resist the Big Deal for overpriced journals. If you Resist the Big Deal for overpriced journals. If you

can’t resist, bargain hard and be “ready to walk”.can’t resist, bargain hard and be “ready to walk”.

ReferencesReferences• Free Labor for Costly Journals, by Ted Bergstrom—J Economic

Perspectives, Fall 2001. (at • Comments on above article JEP Fall 2002. • At http://www.econ.ucsb.edu/~tedb/Journals/sitelicense.html

– Do university site licenses benefit the academic Community? by Carl Bergstrom and me

– The Librarian’s Dilemma, by Kenneth Frazier, from D-Lib Magazine

– Is Electronic Publishing Being Used in the Best Interest of Science: The Publisher's view Speech by Derk Haank.

JournalJournal Prices by DisciplinePrices by Discipline

Ecology 1.01 0.19 0.73 0.05Economics 0.83 0.17 2.33 0.15Atmosph. Sci 0.95 0.15 0.88 0.07Mathematics 0.70 0.27 1.32 0.28Neuroscience 0.89 0.10 0.23 0.04Physics 0.63 0.19 0.38 0.05

CostCost per pageper pageFor-profitFor-profit NonNon-profitprofit For-profitFor-profit Non-profitNon-profit

Cost per citeCost per cite(In US $)(In US $)