Chuck Hamaker, Louisiana State University, NOTCAH@LSUVM.BITNET.
Springer Verlag has designated its New York office as the "exclusive" purchasing channel for all Springer Verlag, Physica Verlag, and Steinkopff Verlag journals and handbooks for US, Canadian and Mexican libraries.
In communications of the 2nd of September, Hans-Ulrich Daniel, President and CEO of Springer Verlag/Publishers, New York, announced:
Starting with subscription year 1993 and for all handbook releases 1993, please place your orders (dear agent) for all ship-to address in the US, Canada and Mexico with... (the New York Office address) (Dr. Daniel to Agent, Sept. 2, 1992)
Until this announcement, libraries had a choice of purchasing Springer journals and handbooks with agents who purchased from Germany or from the US office. The change makes this choice unavailable to American libraries. It has major implications for price control and carries with it the specter of differential pricing as well as loss of an important check on Springer's behavior for both vendors and libraries.
A brief review of ten years worth of Springer's New York office pricing demonstrates that this is a practice that has enormous potential to damage American libraries. I will explain in detail a bit of the history to illustrate that the new "level playing field" the New York office is planning is ultimately a minefield for American libraries. I suggest that immediate self-interest is getting in the way of market sense. Hopefully a historical briefing will help them see the error of their ways.
This is returning to a practice Springer attempted ten years ago. That it was a disaster for American libraries then and creates a disincentive for competitive pricing of Springer's products, is being ignored. For some reason Springer wants to set US dollar prices for America's libraries out of its New York office. This creates monopoly dollar based pricing of its serials, titles that have been available on a world-competitive price basis since the late Robert Maxwell lost his "exclusive" distribution rights for Springer products back in the late 50s. Does Springer believe that noncompetitive pricing will increase the number of units sold to the American market? Then I suggest they look at what exclusive distribution rights have done for them in Japan.
In a letter to Springer that perhaps expresses what I am saying better than I can say it, an answer was given to Springer's "exclusive" distribution decision. I quote, with permission from the author (who will remain anonymous):
Rather than continuing to insist that university libraries purchase Springer Verlag publications from North American sources, wouldn't it be in the best interest of Springer Verlag as well as academic libraries, to establish policies that provide for fast and efficient distribution of your publications at the lowest possible price, regardless of where the publications are purchased? At a time when university libraries are facing freezes on personnel hiring as well as dramatic budget cuts, they would be much more impressed by a publisher who is trying to cut costs and maintain or lower list prices, than one who offers them ever-increasing costs and higher list prices.
The date of the letter was July 5, 1982. Ten years ago Springer made the same decision they are making today and the same error they are making today.
What happened in 1982 to demonstrate the bankruptcy of the idea? In 1981 while setting 1982 prices, Springer Verlag entered into futures contracts setting 1982 rates that resulted in prices 30% above what European agents were able to charge American libraries. In that one year alone, libraries with access to international exchange rates paid 30% less for Springer titles than those who were locked into New York dollar prices. Springer itself provided the 30% figure in a letter dated May, 1982 to American librarians (signed by Janice E. Kuta, who was then Vice President, Director of Marketing).
To make up to American librarians for taking them to the cleaners, in May of 1982 Springer New York unabashedly invited a group of librarians, expenses paid, to come to New York to "discuss our policies and programs affecting North American libraries." In addition to an opening dinner to be held at Windows on the World at 7:00 pm on June 17th, 1982 and discussions with department managers, on the night of the 18th of June librarians were invited to enjoy a "lovely" evening with the Royal Danish Ballet.
The pricing fiasco was so embarrassing that to compensate somewhat for the 30% rip-off in 1982 prices, Springer New York even gave "its" libraries a 5% discount off the 1983 prices announced in August of 1982. After having the highest price in the world for Springer journals in 1982, the New York office undercut the world price by 5% for 1983 subscriptions. But the rollercoaster ride was not over.
By July of 1982 the situation and the loss of respect for the New York office's practices was so great that there was a change in the management of the New York office and Jolanda von Hagen was brought in to straighten up the mess. Although she was a tough manager and negotiator, she earned respect from both vendors and librarians because of her knowledge and experience. And she enjoyed an international view that seems to be missing right now. That fiasco was enough to teach Springer Verlag that they should not meddle with international market forces -- then. But ten years down the line and they are returning to the discredited practices of the past. They have forgotten Maxwell's lesson after World War II, they have forgotten 1982. American librarians have not.
It was not just in journals that the New York office wanted to maintain an "exclusive" in 1982, no, not at all. They wanted to have an exclusive for all handbook sales as well. And in that instance, perhaps, even vendors who applaud Springer's "new" decision in 1992 might understand how the interests of their customers are best served by international price competition and not by "exclusive" distribution.
In April of 1982, Janice Kuta wrote to librarians, trying to explain why Springer-Verlag New York prices for the major handbooks -- Beilstein, Gmelin and Landolt Boernstein -- were 10% above the European list price. If the only source is the New York office, the exclusive "American" distributor, there is no court of appeal. But if libraries can buy internationally, the international price prevails. In fact, whichever price is lower is available to libraries with international options. The difference in the prices for the exorbitantly expensive handbooks was so great that Springer New York changed its pricing policy.
The reason for the price differences (in 1982) are two fold: A. Springer-Verlag determines our prices of handbooks upon release in the United States; B. European wholesalers determine prices upon release of titles in Europe.... Effective June 1, 1982 we (Springer New York) will establish the list price of handbooks on the day of release in Europe as do all European wholesalers."
This is a very clear instance where an international practice ignored by the "American" office became the norm for American libraries due to competitive pricing. In fact, Springer actually got it wrong, and continues to get it wrong. My European agent guarantees under present market conditions THE LOWER PRICE of EITHER the European price OR the US price. In effect, my library cannot lose when Springer New York decides it is OK to play fast and loose with LIBRARY money because I am protected by international buying arrangements. The "new" Springer policy forces me to buy at the "fixed" rate established by the New York office, whatever that rate might be. And experience proves, again and again over the last decade, that the New York list price VARIES as to whether it is the best world-wide rate available. In fact, a review of Springer New York list prices for 1987 and 1988 shows that European agents routinely beat those prices by about 5%. In an era where cost is a measure used in making retention decisions on journals it is in Springer's best interest to let libraries find the best rate, not the "dictated" rate from the New York office.
Why would Springer want to force customers to pay whatever the New York office decides is today's price? Well there are lots of reasons, none of them having to do with what is best for their customers. The major one is a short term advantage. With Springer selling all of its journals and handbooks exclusively through New York for the American market, Springer Germany gets to "keep" the VAT. The Value Added Tax which companies purchasingin Germany and selling outside Germany claim as a tax credit comes to 7%. Instead of the 12% increase Germany is getting from 1993 prices of their journals, they "get" 19%. In addition, as of April 1, 1993 the discount to vendors drops from Springer's generous 10% to 5%. Are they trying to destroy the vendor system libraries rely on? The bottom line is these "hidden" price increases raise library prices as surely as if they were on the rate sheet.
But what does and has "today's" price meant to Springer New York. We have seen how in 1982 that meant a 30% surcharge to American libraries. For 1986 rates, Springer New York was at it again.
In the fall of 1985 prices for purchase through the New York Springer office were set, as usual, for 1986 subscriptions. But rather than honoring the summer 1985 rates for next year's subscriptions, Springer New York found itself unable to pay for American subscriptions when payment was due Germany. The dollar had dropped in value between July and December of 1985. What did Springer New York do? What you always do with a captive audience. Never give the sucker an even break. They REBILLED, INVOICED AGAIN raising the dollar price. So, in 1982 the dollar went up and American libraries using the New York office paid 30% more than European sourced libraries. In 1985 the dollar went down and they BILLED us again. Only libraries buying through New York paid the additional billings.
All of this just because Springer New York had such a large captive audience it didn't have to compete in the international market to offer its own customers a world-wide competitive rate. In fact, with a large "guaranteed" customer base, Springer's New York office doesn't have to give anybody a break. As many librarians know, some European agents guarantee the price they charge, when they charge it. The only "rebilling" comes from additional charges due to additional "volumes." This is another form of "insurance" the New York office has failed to provide. And vendors going through New York are tied to whatever practice of the moment the US office dictates.
For each year, up until 1988, Springer's New York price list carried a "note on exchange rates." The warning was similar each year. "The dollar prices quoted in this price list for all European Springer-Verlag journals are based on a (June or July or August) exchange rate. We will be reviewing the exchange rate periodically and revising our prices if necessary." Only in 1988 did they begin to offer to issue "refunds" if the dollar "increased" by more than 5% in value.
Probably the most telling quote I have from a letter from Springer's New York office also comes from 1982. "I doubt very much whether it is in the librarian's ... interest to tell Springer-Verlag how to run its business." The old attitude seems to have resurfaced, and with it Springer Verlag has once again declared war on its customers.
There is one major difference between 1982 and 1992, however, that is disastrous from a library perspective. I have learned from several sources that the Secaucus distribution system is being dismantled and that fulfillment for Springer journals out of the New York office is being handed over to a private operation. My experience has been that Springer's operation has been inefficient. It is why my library's business is with an agent who can ship directly from Germany. Does Springer even KNOW what academic libraries think of fulfillment agencies? We don't pay them, the publisher does. So who does a fulfillment agency get its orders from -- not the end customer, that's for sure. And that is even more reason for me not to want my business forced through Springer's New York office. There is some indication Springer may "permit" some agents to continue shipping directly from Germany. But with billing forced through New York, the agents lose the VAT and of course face a 50% drop in discount for 1994. I can't imagine how shipping as an agent service, can continue under these conditions.
To review some other "old" history, American librarians remember with real anger the price gouging of British publishers who sewed up the American market because no agents could buy abroad and re-ship. There were no checks and balances in the system. This "new" arrangement at Springer, through either ignorance or arrogance, promises nothing less than the highest prices (without recourse to the international market), the worst service (without recourse to the international market) and a monopoly that will only result in degradation of service and of respect. Ultimately, this will be converted into a reduction in unit sales, even more than the fiscal crisis is forcing. A librarian's role and duty is to select the best service and price for the library's individual situation. This "marketing" decision not only makes that impossible, it damages Springer itself and ultimately will accelerate cancellations. A short term "gain" for Springer is a long term loss to libraries.