The Peculiar Market for The Peculiar Market for Academic Journals Academic Journals

Ted BergstromUCSB

A curious market structure A curious market structure

• 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.

Pricing of Paper EditionsPricing of Paper Editions

• 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.

Table 1: Costs of Table 1: Costs of Economics Journals Economics Journals

Publisher Publisher TypeType

Number of Number of JournalsJournals

Price Price per per PagePage

Price Price per Citeper Cite

Non-ProfitNon-Profit 9191 $0.18$0.18 $0.15$0.15

For-ProfitFor-Profit 206206 $0.82$0.82 $2.40$2.40

Table 2: JournalTable 2: Journal Prices by Prices by DisciplineDiscipline

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 $)

Table 3: Costs of a Table 3: Costs of a Complete Economics Complete Economics

CollectionCollectionPublisher Publisher

TypeTypePercent of Percent of CostCost

Percent of Percent of CitesCites

Non-ProfitNon-Profit 9% 62%

For-ProfitFor-Profit 91% 38%

Table 4: Costs of a Table 4: Costs of a Complete Optics Complete Optics

CollectionCollectionPublisher Publisher

TypeTypePercent of Percent of CostCost

Percent of Percent of CitesCites

Non-ProfitNon-Profit 46% 87%

For-ProfitFor-Profit 54% 13%

Table 5: Costs of a Physics Table 5: Costs of a Physics Collection: Heinz Collection: Heinz Barshall’s SampleBarshall’s Sample

Publisher Publisher

TypeTypePercent of Percent of CostCost

Percent of Percent of CitesCites

Non-ProfitNon-Profit 39% 79%

For-ProfitFor-Profit 61% 21%

Division of LaborDivision of Labor • The greatest improvements in the productive The greatest improvements in the productive

powers of labour… seem to have been the powers of labour… seem to have been the effects of the division of labour…. Adam effects of the division of labour…. Adam Smith, Smith, Wealth of NationsWealth of Nations

• Illustrated by scholarly publishing:Illustrated by scholarly publishing:• 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.

Which kind of journal do you think is more costly to libraries?

___Non-profit journals___They cost about the same

___For-profit journals

*Replies received from 69 librarians and 26 physics chairs.

Survey of Physics Chairs and Survey of Physics Chairs and Librarians*---Optical Society of Librarians*---Optical Society of

AmericaAmerica

Which costs more?Which costs more?

Physics Dept Chairs say:

Non-profits 8%

About same 38%

For-profits 53%

Non-profits 0%

About same 4%

For-profits 96%

Librarians say:

What do we conclude?What do we conclude?

• Librarians are brighter than physics Librarians are brighter than physics chairs?chairs?

• Overpricing arises when users don’t Overpricing arises when users don’t know the costs of what they demand. know the costs of what they demand. (also true of textbooks, medicine)(also true of textbooks, medicine)

• Scholars who donate their articles and Scholars who donate their articles and referee services to overpriced referee services to overpriced commercial journals don’t realize that commercial journals don’t realize that they are being exploited.they are being exploited.

• Libraries and societies should publicize Libraries and societies should publicize the facts of pricing.the facts of pricing.

Monopoly Profits in Academic Monopoly Profits in Academic Publishing?Publishing?

• Hint: University press and Hint: University press and professional society journals are professional society journals are usually usually notnot subsidized subsidized

• They charge 1/5 as much per They charge 1/5 as much per page as for-profit journals.page as for-profit journals.

Elsevier Financial Elsevier Financial StatementStatement

• Elsevier reports revenue 2 billion Elsevier reports revenue 2 billion Euros in 2002. Euros in 2002.

• Claims to have 3d biggest internet Claims to have 3d biggest internet revenues, behind AOL and Amazon.revenues, behind AOL and Amazon.

• Reported profits equal 33.6% of Reported profits equal 33.6% of revenuerevenue. .

Why “only” 33 % profit Why “only” 33 % profit margin?margin?

• If they charge 5 times as much as non-profits, If they charge 5 times as much as non-profits, why aren’t Elsevier’s profits even greater?why aren’t Elsevier’s profits even greater?

• Smaller subscription bases, due to high priceSmaller subscription bases, due to high price• Rent dissipationRent dissipation

– Elsevier CEO got ~$2 million pay and $8 million in Elsevier CEO got ~$2 million pay and $8 million in shares this year.shares this year.

– New stock options of ~$32 million for top execs.New stock options of ~$32 million for top execs.

– Armies of lobbyists Armies of lobbyists

If there is free entry, how can If there is free entry, how can there be monopoly?there be monopoly?

• Unlike market for shoes or groceries, Unlike market for shoes or groceries, competitors are prevented by copyright competitors are prevented by copyright from offering perfect substitutes.from offering perfect substitutes.

• Coordination and reputation makes it Coordination and reputation makes it hard for new entrant to attract top hard for new entrant to attract top quality articles. quality articles.

Fable of the Anarchists’ Fable of the Anarchists’ Annual meetingAnnual meeting

• Once upon a time a bunch of anarchists Once upon a time a bunch of anarchists happened to get together on January 3 in happened to get together on January 3 in a hotel in Kansas City a hotel in Kansas City

• They had a grand time.They had a grand time.• Next year more anarchists came and Next year more anarchists came and

they had even more fun.they had even more fun.• The tradition grew and meetings got The tradition grew and meetings got

bigger and more enjoyable. bigger and more enjoyable.

Trouble in Kansas CityTrouble in Kansas City• One year, the hotel owner raised his One year, the hotel owner raised his

rates at conference time.rates at conference time.• Attendance fell a little and owner’s Attendance fell a little and owner’s

revenue rose a lot. revenue rose a lot. • Next year owner did it again.Next year owner did it again.• Anarchists groused, had less fun with the Anarchists groused, had less fun with the

smaller crowd and higher prices. smaller crowd and higher prices. • Why didn’t they move to another hotel?Why didn’t they move to another hotel?• They are anarchists!They are anarchists!

The strange economics of The strange economics of academic journalsacademic journals

• If one brand of car cost 6-15 times as If one brand of car cost 6-15 times as

much as others of the same quality, much as others of the same quality, how many would be sold?how many would be sold?

• Almost zero, because people would Almost zero, because people would substitute low priced for high priced.substitute low priced for high priced.

• Why then do commercial journals that Why then do commercial journals that cost 6-15 times as much per cite as cost 6-15 times as much per cite as nonprofits continue to sell? nonprofits continue to sell?

Journals as Complements Journals as Complements

• Academic journals tend to be Academic journals tend to be

complements, not substitutes. complements, not substitutes. • Two copies of cheap society journal will Two copies of cheap society journal will

not replace a subscription to Elsevier not replace a subscription to Elsevier journal that costs 10 times as much per journal that costs 10 times as much per cite. cite.

• Many scientists want to read all Many scientists want to read all significant research in their area, not significant research in their area, not just the top papers.just the top papers.

More strange economics More strange economics

• With most goods, middleman pays With most goods, middleman pays

producer, consumer pays producer, consumer pays middleman.middleman.

• With journals, producer pays With journals, producer pays middleman (often not much), middleman (often not much), consumer pays middleman consumer pays middleman

Open Access Model Open Access Model

• Producer pays middleman, Producer pays middleman,

consumer pays nobody. consumer pays nobody. • Would this work for nonprofits?Would this work for nonprofits?• Would this work for profit-Would this work for profit-

maximizers?maximizers?

Non-profit open access? Non-profit open access? • To succeed an open access journal must To succeed an open access journal must

attract authors.attract authors.• Are authors and their universities willing to Are authors and their universities willing to

pay to have their work read and cited? pay to have their work read and cited? – Evidence that open access articles are more Evidence that open access articles are more

cited.cited.– Economic study: avg citation worth $40 per Economic study: avg citation worth $40 per

year.year.

• But will they pay $1500 as for PLOS.But will they pay $1500 as for PLOS.• Remains to be seen. Remains to be seen.

Partial open access Partial open access models models

• Authors of accepted articles can pay a Authors of accepted articles can pay a

surcharge for their paper to be open surcharge for their paper to be open access.access.

• Journal still sells subscriptions to entire Journal still sells subscriptions to entire journal. journal.

• OUP’s Nucleic Acids Research—90% of OUP’s Nucleic Acids Research—90% of authors chose to pay $530.authors chose to pay $530.

• PNAS survey 40% would pay $500 to PNAS survey 40% would pay $500 to make their PNAS articles open access.make their PNAS articles open access.

Open access and Open access and competitioncompetition

• With for-profits, competition on the author With for-profits, competition on the author

side is likely to be much stiffer than on side is likely to be much stiffer than on reader side.reader side.

• Would any author submit papers to a journal Would any author submit papers to a journal that had submission fees 6-15 times as high that had submission fees 6-15 times as high as equivalent competitor?as equivalent competitor?

• Not likely. Why?Not likely. Why?• From authors view, journals are substitutes From authors view, journals are substitutes

not complements.not complements.

Libraries as toll collectors?Libraries as toll collectors?

• In PNAS article, CB and I argue that library In PNAS article, CB and I argue that library purchase of site licenses from profit-maximizers purchase of site licenses from profit-maximizers reduces well-being of academic community. reduces well-being of academic community.

• Better outcome if Elseviers of world are forced Better outcome if Elseviers of world are forced to deal with individuals. to deal with individuals.

• For nonprofit journals, the conclusion is For nonprofit journals, the conclusion is opposite.opposite.

• For these site licenses enhance efficiency by For these site licenses enhance efficiency by improving access without increasing cost. improving access without increasing cost.

What should libraries do?What should libraries do?

• Decentralize some decision-making to Decentralize some decision-making to academic departments. academic departments.

• Replace “allocation by whining” with real Replace “allocation by whining” with real money tradeoffs.money tradeoffs.

• Subsidize new journals, submission fees Subsidize new journals, submission fees for open access, or even pay-per-views.for open access, or even pay-per-views.

• Where does money come from?Where does money come from?

How to deal with the Big How to deal with the Big Deal: A modest proposalDeal: A modest proposal

• Stop being gatekeeper and revenue collector for Stop being gatekeeper and revenue collector for overpriced journals.overpriced journals.

• Set a maximum price/citation a little higher than Set a maximum price/citation a little higher than that of non-profits in the same field and refuse to that of non-profits in the same field and refuse to buy electronic subscriptions at any higher price. buy electronic subscriptions at any higher price.

• Let journals that charge more sell to individual Let journals that charge more sell to individual subscribers, subscriptions or pay-per-view.subscribers, subscriptions or pay-per-view.

Had enough?Had enough?

• OK, then, I’ll quitOK, then, I’ll quit

Want more?Want more?

• Check outCheck out

www.econ.ucsb.edu/~tedbwww.econ.ucsb.edu/~tedb

… …papers, statistics, weasel’s papers, statistics, weasel’s manual, etc manual, etc

Data Sources:Data Sources:

• Tables 1 and 3 are from Free Labor for Costly Journals, by T. Bergstrom— J Tables 1 and 3 are from Free Labor for Costly Journals, by T. Bergstrom— J

Economic Perspectives, Fall 2001. Economic Perspectives, Fall 2001. • Table 2 appears in C. Bergstrom and T. Bergstrom, The benefits and costs of Table 2 appears in C. Bergstrom and T. Bergstrom, The benefits and costs of

academic site licenses—Proceedings of the National Academy of Sciences, academic site licenses—Proceedings of the National Academy of Sciences, January, 2004January, 2004

• The raw data from which Tables 4 and 5 were compiled appears in Excel The raw data from which Tables 4 and 5 were compiled appears in Excel spreadsheets compiled for me by my research assistant, Beth Dhuey and spreadsheets compiled for me by my research assistant, Beth Dhuey and appearing at appearing at

• http://www.econ.ucsb.edu/~tedb/Journals/barshallupdate.xls

http://www.econ.ucsb.edu/~tedb/Journals/bethanalysis.xls