NO 163 -- July 26, 1996

NEWSLETTER ON SERIALS PRICING ISSUES

NO 163 -- July 26, 1996

Editor: Marcia Tuttle

ISSN: 1046-3410

CONTENTS

163.1 RESPONSES TO BILL MILLER'S QUESTIONS IN 162.3 ABOUT STM JOURNAL PRICE INFLATION, Richard Meyer and Albert Henderson

163.2 RESPONSES TO RICHARD MEYER'S COMMENTS ON IDENTIFYING OVERPRICED JOURNALS IN 162.1, Cass Glodek, Albert Henderson, and John Cox

163.1 RESPONSES TO BILL MILLER'S QUESTIONS ABOUT STM JOURNAL PRICE INFLATION (162.3)

Richard Meyer, Trinity University,rmeyer@trinity.edu, and Albert Henderson, Editor, _Publishing Research Quarterly_ 70244.1532@compuserve.com.

From Rich Meyer:

Bill, your questions emerge from the persistent assumption among librarians that costs of production drive the prices of journals. Setting this first question aside for last, the other questions can be answered by some tedious measurements of collections. We are currently gathering data along these lines in regard to the Mellon funded project referred to at the end of my contribution to this same issue of _Prices_. (See Richard Meyer "Identifying Over-Priced Journals," _Newsletter on Serials Pricing Issues_ No. 162.1) At this point, certifiable answers to these questions are some time away. But, regardless, these measures are likely to reflect trivial contributions to price. Preliminary data suggest that STM journals do not grow significantly faster than journals in other fields -- nor does paper cost more, etc.

Price is determined by demand; bigger increases in price are driven by increases in demand or extending monopoly power along an existing demand curve. The problem with STM journals derives from the existence of markets which are bigger and less responsive to price changes than academic libraries. Unfortunately for us, medical doctors, pharmaceutical firms, national laboratories, and the chemical industry in general (to name a few), all buy STM journals. Pharmaceutical firms have opportunities to pass their information costs along to consumers, which is something we cannot so easily afford to do. On the other hand, the market for humanities journals exists largely in the academic marketplace and almost nowhere else. Who do you know among your neighbors who subscribes to _Rhetorica_ at home for leisure reading? Or, what industrial firms rely on this journal? Journals in the social sciences may fall somewhere in between. There are likely to be quite a few subscribers to _American Economic Review_ among bankers and related industries.

Some reasonable estimates that look at the three large discipline groupings -- humanities, social sciences, and sciences -- appear in the book by Crawford and Gorman _Future libraries: dreams, madness & reality_ (Chicago: ALA, 1995). They note with some statistical reliance that prices in humanities and social sciences have not inflated as fast as the sciences. Intuitively, this corroborates the contention that multiplicity of markets drives prices more than production costs. Simply put, STM journals inflate in price because publishers have large diverse markets which tend to be very inelastic regarding price. Multipart pricing schemes abound, but do their most to extract profit in this environment.
----------

From Albert Henderson:

Bill Miller asks:

> Can anyone provide me with a rationale for why STM journals
> inflate in price more than other materials? Is it inherently
> more expensive to edit science articles than to edit articles
> in other areas?

It may be more expensive if preparation requires editors with a knowledge of calculus, nomenclature and/or holding advanced technical degrees.

> Do science journals use more expensive paper, or are they
> mailed from more exotic locales with classier and more
> expensive postal systems?

One of the major factors in serials price inflation has been the devaluation of the U.S. dollar which was worth DM 4 in 1969 and now is worth DM 1.53. Ron Akie will analyze this aspect of journals prices in the Summer issue of PUBLISHING RESEARCH QUARTERLY.

Over 60 percent of science articles are authored outside the United States according to the National Science Board.

> Do science journals increase in bulk by 10-25% per year?

The average increase in the numbers of articles has been about five per cent for 330 years. PHYSICAL REVIEW parts A-E not including the LETTERS is topping 80,000 pages, rising from 6800 pages in 1959.

Journals on hot subjects, such as AIDS, will increase faster. Some subjects or journals will not increase pages for a wide variety of reasons.

> These questions arise after trying to explain to a state
> legislator why our library's budget would have to increase by
> three times more than the rate of inflation in order to stay
> even.

The number of researchers and the amount of research -- which generates publications -- has increased. Many analysts feel that the library budget should keep up with the general and educational expenditures and/or research expenditures. Both of these categories have increased more than the rate of inflation and contribute directly to the requirements of research and instruction for an up-to-date library.

By the way, one of the other factors has been the impact of cancellations. The operating costs divided by falling sales requires a rising price even if all other factors remained the same.

163.2 RESPONSES TO RICHARD MEYER'S COMMENTS ON IDENTIFYING OVERPRICED JOURNALS IN 162.1

Cass Glodek, Barbara Ann Karmanos Cancer Institute, glodekc@kci.wayne.edu; Albert Henderson, Editor, _Publishing Research Quarterly_, 70244.1532@compuserve.com; and John Cox, Carfax Publishing Company, john.cox@carfax.co.uk.

From Cass Glodek:

In the Newsletter, No. 162.1 for July 15, 1996, Richard W. Meyer writes--

"As their article verifies, when price goes up, individuals are likely to cancel and substitute use of a library subscription."

This could be quite true when given the economist's assumption that consumer selection behavior is singularly impacted by marginal differences in prices of products or their substitutes. It gets more complicated when some of the products or their substitutes are part of a larger picture however. Many faculty receive journals together with membership in a society or pay for them according to some formula of membership status in the organization. Thus cancellations as prices go up are not simply related to elasticity as assumed but probably represent a much more complex internal dynamic. It is conceivable then that subscriptions related to membership in academic societies would remain inelastic at price points which would normally see precipitous drops under other conditions. Furthermore, collegial relationships among professionals working in the same discipline can make for a variety of subscription sharing arrangements that would also easily defy the validity of a strict elasticity model of journal subscription behavior.

I for one then would be most careful in applying a model from economic theory to the analysis of faculty journal subscriptions without thoroughly reviewing all the assumptions that a particular model asks me to accept.
----------

From Albert Henderson:

Richard W. Meyer makes some interesting points. He also demonstrates how misleading it can be to pile one assumption on top of another without having done sufficient preparation.

One major factor in the confusion is the tendency for publishers to simplify their policies. Individual prices are often set at an arbitrary percentage of the library price or vice versa. If the publisher has a contract with an association or, if the publisher IS an association, the library/individual rates are probably set by negotiation. Some publishers have no price differential.

While the theory of marginal-added cost justifies the individual price rationale, it does not actually come into play very often. Prices are set six months before renewal and other circulation figures are known and 18 to 24 months before costs are in. As a result, price decisions may be influenced by economic events one or two years past.

In short, if you wish to understand how a watch works, you really must look inside. "Simply dividing the price to libraries by the price to individuals" will not give anyone an index of or insight into "monopoly power" or "profit enhancement power" of publishers.

Moreover, the commodity model is not appropriate for science journal subscriptions. If it were, journal rates would have fallen in response to reduced circulation. Instead, they have risen....
----------

From John Cox:

Richard Meyer's piece (No 162.1) was thought-provoking, but based on a misconception about library and personal subscription rates.

Journals are, and always have been, published primarily for library usage. The library subscription is, in essence, a site licence that allows for multiple access, and covers the rights libraries and their readers enjoy under fair use. The personal subscription rate was established much later in response to demand from individual researchers who wanted a copy for their own personal and private use. Most publishers then set a rate that recognised the difference between access by one individual personally, and the unlimited access afforded by the library subscription.

Individual personal subscriptions come and go; they are a volatile part of the journal revenue, and their value to the financial health of a journal is often misunderstood and exaggerated. Most learned journal publishers consider that the foundation of their business is the library subscription base, both because it is relatively stable and because it represents the best way of providing widespread access to the published papers; that is, after all, what authors and editors want.

What individual subscriptions can do, if the price is right, is increase the number of copies the publisher prints, thereby reducing the unit cost and helping to keep library subscription rates down. The question every publisher faces in setting prices is how to maintain a balance between institutional and individual rates. This will be different for each title.

+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Statements of fact and opinion appearing in the _Newsletter on Serials Pricing Issues_ are made on the responsibility of the authors alone, and do not imply the endorsement of the editor, the editorial board, or the University of North Carolina at Chapel Hill.

+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Readers of the NEWSLETTER ON SERIALS PRICING ISSUES are encouraged to share the information in the newsletter by electronic or paper methods. We would appreciate credit if you quote from the newsletter.

+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

The NEWSLETTER ON SERIALS PRICING ISSUES (ISSN: 1046-3410) is published by the editor through the Office of Information Technology at the University of North Carolina at Chapel Hill, as news is available. Editor: Marcia Tuttle, Internet: tuttle@gibbs.oit.unc.edu; Paper mail: Serials Department, CB #3938 Davis Library, University of North Carolina at Chapel Hill, Chapel Hill NC 27515-8890; Telephone: 919 962-1067; FAX: 919 962-4450. Editorial Board: Deana Astle (Clemson University), Christian Boissonnas (Cornell University), Jerry Curtis (Springer Verlag New York), Janet Fisher (MIT Press), Fred Friend (University College, London), Charles Hamaker (Louisiana State University), Daniel Jones (University of Texas Health Science Center), Michael Markwith (Swets North America), James Mouw (University of Chicago), and Heather Steele (Blackwell's Periodicals Division). The Newsletter is available on the Internet, Blackwell's CONNECT, and Readmore's ROSS. EBSCO customers may receive the Newsletter in paper format.

To subscribe to the newsletter send a message to LISTPROC@UNC.EDU saying SUBSCRIBE PRICES [YOUR NAME]. Be sure to send that message to the listserver and not to Prices. You must include your name. To unsubscribe (no name required in message), you must send the message from the e-mail address by which you are subscribed. If you have problems, please contact the editor.

Back issues of the Newsletter are archived on the UNC-Chapel Hill World Wide Web site. The url is: http://www.lib.unc.edu/prices/prices.html. Issues are also archived on the listserver. To get a list of available issues send a message to LISTPROC@UNC.EDU saying INDEX PRICES. To retrieve a specific issue, follow instructions in the index message.

+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++