NEWSLETTER ON SERIALS PRICING ISSUES

NO 185 - June 13, 1997

Editor: Marcia Tuttle

ISSN: 1046-3410


CONTENTS

185.1 "GIVE THEM THE MONEY" REVISITED, Richard H. Ellis
185.2 CASS GLODEK REPLIES TO ROBERT SIMONI, Cass Glodek
185.3 MAKING MONEY INSTEAD OF HEALING ULCERS, Subbiah Arunachalam
185.4 TO JOHN TAGLER, Carol Hutchins


185.1 "GIVE THEM THE MONEY" REVISITED
Richard H. Ellis, Memorial University of Newfoundland, rhellis@morgan.ucs.mun.ca

I am not a subscriber to the newsletter on prices, but receive issues forwarded by the serials librarian here. Ann Okerson's recent article was brought to my attention, and I do have a comment which may be of interest to the readership.

In issue NO 182, Ann Okerson comments:

It has been said that the average expenditure per faculty member in ARL institutions overall is about $12,000. Could it be that averages lie? The average of course depends on the school you are in. A few of the ARL schools have high faculty to budget ratios and large acquisitions $$$. However, I was in one of the southern states (state research university) recently. There with a faculty group we discussed exactly the "give them the money" scenario. In that institution, the amount of money per faculty member would have been under $2,000 and every one in the room to a person agreed that this money simply would not get them very far. That idea had the shortest life of any I've seen!

I should point out that, using the 1994/95 ARL Statistics, $603M in total materials expenditures (p. 36) are spread over 149,000 faculty (p. 49) for an average of $4,000. Ken Rouse, in his article in no. 177, was speaking in the context of serials, for which the per faculty expenditure (same source) would seem to be $2,400.00. This is much closer to the $2,000 which Ann Okerson reports from her visit with southern colleagues. I note that the total library expenditure (same source) averages $11,500 per faculty member.

I suspect that there are institutions in which the science and engineering disciplines consume three times the amount of the serials budget that the humanities and social sciences get. Devolving some considerable portion of the serials budget in such a way as to include this differential will take some clever planning, in my view (unless one has a kinky preference for tar and feathers) as will devolving it without.

185.2 CASS GLODEK REPLIES TO ROBERT SIMONI
Cass Glodek, Karmanos Cancer Institute, glodekc@kci.wayne.edu

Robert Simoni's comments in no. 182 are certainly well articulated and call for further discussion.

With respect to his observation concerning the restraint shown by non-profit publishers in journal pricing, I would be the first to agree. Their dedication to reasonable prices is most impressive while a continuous resolve to hold to such a course of action in the face of prolonged, relentless profit accumulation by their neighbors is nearly of heroic dimensions.

With regard to his comments about monopoly in scientific publishing, it is inappropriate to equivocate my term "monopolistic advantages" to his term "monopolistic practices." The distinction between these terms is quite fundamental. I don't believe that the scientific publishers utilize practices in virtue of which they control their markets. What I do see is the presence of certain latent factors in the organization of formal scientific communication that establish perfect conditions for runaway pricing. These permit the firms to exploit the conditions under which they operate and this is what is tantamount to monopoly advantages in my opinion. In other words, in this business one merely has to be a significant player to gain the opportunity for exploiting the existing arrangements in such a way, as if de facto monopoly was in place.

This is due to a plethora of factors which economists might do well to help us examine in depth. I can cite a few observations here. One is the problem of vertical integration. In the scientific journal publishing field, the roles of production, wholesale, and retail are controlled completely under any one roof. Even the book trade across all its categories shows a far greater degree of mixture of product distribution channels.

Secondly, there is no product equivalency or substitution which would allow for price competition. I cannot purchase from another source a product substantively like Science or Nature; nor can I find similar products that my patrons would be willing to accept as substitutes. This situation of course is no one's fault but it does create de facto control over the market for that product (read journal). Another aspect is the near identity of ultimate consumers -- scientists as readers -- and of producers -- scientists as writers. A natural outgrowth of the need to communicate new results, in an economic arena however, this very constructive arrangement deforms the market forces that should be operating. I think these few instances alone intimate how the fragile structure of the scientific publishing enterprise can be quickly impaired by injudicious pricing strategies.

Lastly, why ought we consider that at some point it would be well to have congressional hearings on this crisis, or is it too trivial for Congress to look at the problem? To say that scientific journal publishing is too insignificant is to understate the case. For the foreseeable future the journal will remain the basic mode of formal scientific communication and the mode of establishing the scientific record. The United States expends billions of dollars each year on scientific research in all disciplines and the threat of a major attenuation in the transmission of this productivity should not be taken lightly. And should such cost spirals go as far as appropriating funds for exclusively mainline journals to the detriment and possible demise of secondary tier journals then we may be facing the prospect of an eventual meltdown in a major segment of the scientific communications system. I wonder if Congress wouldn't be interested in that or even in preventing such a thing from occurring.

The bottom line is that the application of a classical commodity pricing model (which means raising prices until a breakpoint is reached where total revenues begin to decline) to an environment where the consumers are likewise principal producers of the output creates deformities in the market. This can translate into a breakdown of the purposes for which the market was created in the first place. Where such a market does not affect other sectors of national productivity it might well be assigned to its fate whatever, but certainly the journals market aligned as it is with scientific communication and consequently national innovation is much more critical to US economic strategy.

Perhaps, it is time to recognize on the part of all participants that only a process of sharing production cost data and awareness of the unique dynamics of journal creation and usage allows us the climate within which to deal with the precipitously poised quandary that our journals market faces.

185.3 MAKING MONEY INSTEAD OF HEALING ULCERS
Subbiah Arunachalam, IIT Madras, arun@indy.iitm.ernet.in

Some days ago I read Ken Rouse's article in Newsletter no. 177. I circulated that article to a group of Indian librarians and information professionals through an Indian listserve called lis-forum.

The latest issue of Fortune carries an article on peptic ulcers. It says that an Australian researcher had found that ulcers are mostly caused by a bacterium called H.pylori, but the medical establishment and pharmaceutical companies mocked at him and merrily went on to make money prescribing (in the case of doctors) and making (in the case of companies) antacids! So ulcer patients did not get the right treatment for more than twenty years even after the cause of the condition became known. Financial considerations of doctors and companies made them do what could be called unethical things. Similarly, commercial publishers may do what is profitable to them in the matter of bringing out new titles, choosing to deliver it on paper or electronically, and so on, rather than be guided by altruistic and idealistic considerations of disseminating information to the largest number of potential users at the lowest possible costs. On the other hand, academic and society publishers may not have the best managerial and administrative talent to run the journals.

In India, the better journals -- at least many of them -- are run by either an Academy or a Government agency, but none of them has a decent subscription base outside India. Unfortunately, not many of these journals are noticed.

185.4 TO JOHN TAGLER
Carol Hutchins, New York University, hutchins@cmcl2.nyu.edu

In speaking of Elsevier's Science Direct in newsletter no. 181, John Tagler says:

These percentages are guaranteed, regardless of the growth in the number of pages published in these journals or currency fluctuations. Most librarians would consider an annual cap of 9.5% reasonable based on historical increases industry-wide.

While it is interesting to read more details of Elsevier's offering, I'd be even more interested to see a survey in which a large number of librarians thought that annual increases of 9.5% in cost of journals was "reasonable." Whatever the individual librarians may have thought, the fact remains that budgets are flat or increasing at maybe 4 or 5%. I think a plan from a publisher which pegs increases at 9 to 10% is near suicidal. See Odlyzko in no. 181 for more details.

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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.
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The Newsletter on Serials Pricing Issues (ISSN: 1046-3410) is published by the editor through Academic and Networking 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: 919 962-8047; FAX: 919 962-4450. Editorial Board: Deana Astle (Clemson University), Christian Boissonnas (Cornell University), Jerry Curtis (Springer Verlag New York), Isabel Czech (Institute for Scientific Information), 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.

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