Peak Subscription

Home-Thinking-PeakSubscription

Image created by Yael Fitzpatrick. Photo from jenni from the block via Flickr.

As the season turns to autumn I find myself looking back over what seems a long summer of bustle and enterprise, fueled by the energy of long days and luxuriously temperate weather. This summer also witnessed a commotion of travel, with holidays, client visits, and a whirlwind tour of professional conferences.

In sitting down to organize the jumble of notes from the many conferences, one phrase stuck out. At the 36th Annual Meeting of the Society for Scholarly Publishing, I moderated a session with Jan Velterop (CEO of Academic Concept Knowledge), Toby Green (Head of Publishing at OECD), and Susan Hezlet (Publisher of the London Mathematical Society) on using “freemium” business models as an alternative to the common “author-pays” (or Gold OA) model for open access publishing.

During this session, Jan Velterop used the term “peak subscription” (as in “peak oil”) to describe the current market context for STM and scholarly journal publishing. The phrase neatly captures what is arguably the most important trend – a sea change – in STM and scholarly publishing today.

Since the late 1990s there have been two drivers of growth in STM and scholarly publishing:

  • Site Licensing – Including converting institutional subscriptions to site licenses, optimizing pricing tiers, and rolling up content assets into the “Big Deal” and other packages.
  • Global Expansion – Selling the aforementioned site licenses to institutions throughout the world, expanding into regions such as China, India, Eastern Europe, the Middle East, and South America where STM and scholarly publishers, most of whom are based in North America and Western Europe, have heretofore had limited customer bases.

These activities have proven successful for publishers, driving growth (in some cases, double-digit growth) for nearly two decades. These activities have been good for institutions and their faculty and students as well, providing more people access to more content than ever before at ever-diminishing costs (when measured on a cost per use basis).

As successful as these activities have been, however, we appear to be nearing, if not a peak, at least a plateau. While per-use costs have decreased, absolute prices have increased. This increase is due to the ever-increasing volume of content being published. Institutional library budgets have not, however, kept pace with the growth in global research output. The institutional marketplace is perhaps becoming, as Joe Esposito argues, a zero-sum game.

At the same time, institutional market penetration is nearing saturation for many publishers. There are only so many institutions in the world to sell site licenses to, and the sales forces that publishers have built (or contracted with) have been effective. Yes, there will be some additional growth in emerging markets, but nothing like the global expansion in licensing that occurred over the last fifteen years.

This does not mean that the site license or the Big Deal is going anywhere – the benefits for all parties remain too great. The Big Deal will continue to be renewed, providing libraries with large volumes of content and (some) publishers with incremental revenue growth. The key word here being incremental. We have reached the point where site licensing is likely to cease being an engine of significant growth for most publishers.

So the question is, where is the growth going to come from?

In surveying the publishing landscape, publishers appear to be pursuing three growth strategies:

  1. Growing Market Share. With library budgets lagging research output and the global marketplace nearing saturation, increasing your revenues increasingly means taking revenues away from someone else. In this zero-sum landscape, the stakes are raised ever higher for the Big Deal. The biggest of the Big Deals captures the largest slice of revenue. Publishers offering such deals will continue to add content, especially must-have society titles. Along with society additions, publishers will continue to develop new “daughter” titles associated with their own premium brands and will increase their use of cascading peer review strategies to flow papers to these titles.
  1. Developing New Revenue Streams. The most notable new revenue stream is, of course, the article-processing charges (APCs) associated with Gold OA titles. APCs often come from sources other than the library, including other areas of the institution as well as research funders. Gold OA allows publishers to continue to grow a product category in which they have existing economies of scale (e.g. composition, workflow systems, platform hosting), while at the same time opening up revenues from new sources.
  1. New Product Development. By this I mean development of new product categories beyond journals and books. Most prominent here are digital workflow and data products as such products are often licensed using institutional budgets outside the library. Additionally, publishers can often make compelling business cases for licensing workflow and data products that either boost productivity or improve work quality (or ideally, both). Examples of such products, which often combine software and content, include clinical decision support tools (McGraw-Hill’s ClinicalAccess, Wolters Kluwer’s UptoDate, American College of Physicians’ Smart Medicine), document sharing tools (Colwiz, Elsevier’s Mendeley), analytics tools (Elsevier’s SciVal, JBJS’s SocialCite and PRE-val, Digital Science’s Altmetric), board review and maintenance of certification products (McGraw-Hill’s USMLE Easy, American Academy of Pediatrics’ PREP, American College of Chest Physicians’ SEEK), and many others.

The first strategy – growing market share – is a defensive one that any publisher with a strong market position must attend to. The vast majority of revenues in the STM and scholarly publishing industry are derived from subscription products – products and revenues that are not going away and, in fact, are likely to continue to grow at a modest clip. But revenue gains are likely to be unevenly distributed and advantages lie with those organizations with the largest portfolios and/or “must-have” brands.

The second strategy – developing new revenue streams – is (to use management consultant speak) a “no brainer.” Gold OA means new revenue sources without having to incur the risk of entering a new product category. Publishers can continue to leverage the economies of scale, workflows, technologies, and talent they have developed in publishing subscription products, bringing these to bear for Gold OA titles. This is essentially a product-extension strategy, employing existing capabilities and delivery systems to capture new revenues with relatively modest levels of investment.

It is important to note, however, that revenues from APCs are miniscule, accounting, according to Outsell, for approximately 1% of STM industry revenues or just over 2% of the journals market excluding society memberships (see Outsell’s Open Access: Market Size, Share, Forecast, and Trends report, which you can download free here courtesy of the Copyright Clearance Center). This figure should serve as a caution for those who assume APCs will replace or match subscription revenues in the foreseeable future. It also underscores how nascent open access publication models remain, with long-term funding for APCs uncertain. That said, the growth rate for Gold OA is much higher than that of subscription products (albeit starting from a much lower base). Outsell projects open access revenues to grow at a CAGR of 27% from 2012 to 2015 across the industry. Growth rates for subscription products are meanwhile hovering in the mid-to-low single digits. Given the low level of investment required, the ability to capture revenues from new sources, and the growth rate, this strategy is increasingly being viewed as an opportunity for many organizations.

The third strategy – new product development – is more complex, costly, and in many ways more risky, but the rewards are also potentially greatest. Successful workflow and data products can generate high margins, create deeper engagement with users, and often boast high rates of renewal. It is also difficult to compete with organizations with entrenched workflow or data products as such products are often integrated into other systems and processes. This strategy, however, requires making relatively substantial investments in products that may or may not prove successful. Such products may not be able to leverage any existing economies of scale and may require new approaches to marketing and new sales channels. Further, the techniques and skills required to be successful in forging new (to the organization if not the market) product categories are often different than those employed in product line extensions. Because of these complexities publishers are creating entirely new “innovation centers” focused on such products, the most prominent being Macmillan’s Digital Science.

These strategies are not mutually exclusive and in fact most publishers, large or small, will want to consider all three. Larger publishers, of course, have an advantage with regard to growing market share and they bring economies of scale to Gold OA publishing. But they do not hold all the cards with regard to OA publishing. Open access publishing is a competition for authors, and society publishers are often closer to their member authors than a commercial house might be. This area of the market (Gold OA) remains so nascent that it is too soon to tell which organizations and organizational strengths will result in long-term competitive advantage.

And while commercial publishers can often make larger investments in R&D related to the development of digital workflow and data products than society publishers, this should not dissuade society publishers from pursuing this strategy (and I say “often” not “always” as there are many examples of professional associations sitting on substantial reserves that can used to fund such investments). There are examples of successful workflow and data products from professional societies, who are in an excellent position to anticipate the workflow needs of their members. Being smaller can, in some cases, have advantages.

Each organization will need to assess their existing portfolios and determine the most appropriate path forward with regard to each of the above strategies. In some cases, product lines can even shift between strategies. Nature Communications, for example, was originally launched as a hybrid OA/subscription product in support of a market share growth strategy. Just last week, however, Nature Publishing Group announced it was shifting the publication (which has been successful in commanding relatively high APCs) to a Gold OA model supporting a new revenue sources strategy.

While there are certain to be examples of organizations that focus successfully on only one of these strategies, most publishing concerns will pursue diversification and the hedging of risk that comes with it. Managing the product pipeline and the level of investment associated with each of these strategies will be the great challenge of organizational leadership in the coming decade.

Note: Thanks to PH for thoughtful comments and edits and YF for graphics support.

The End of an Era for Academia.edu and Other Academic Networks?

Academia.edu screenshot

Academia.edu may need to change the second step in its sign-up process given publisher concerns regarding posting of research articles without rights holder permission

The Chronicle of Higher Education reports that Elsevier has issued a sweeping series of Digital Millennium Copyright Act (DMCA) take down notices regarding Elsevier-published content to Academia.edu, a file-sharing network for researchers and other academics.

This has prompted a storm in the Twittersphere, a response from Elsevier, a number of commentaries on blogs and list-serves, and a truly bizarre article from CNET that casts Academia.edu as a “new school” “digital era” “publisher” and rival to Elsevier (who is couched as an “old school” “traditional company” – which just incidentally owns and operates a platform very similar to Academia.edu). Academia.edu for its part is reportedly encouraging authors of affected papers to sign this Elsevier boycott petition despite the fact that their own terms of use prohibit the posting of content that infringes on the copyright or license of publishers such as Elsevier.

Is this a footnote or the end of a chapter in the annals of digital science publishing? While it is too soon to know to what extent this incident will have broader implications, it does bring some important and long-simmering issues to the fore regarding sharing on professional networks, most of which the Chronicle article manages to miss.

Fortunately, the industry’s many pundits rode to the Chronicle’s rescue in the article’s comment section, which is worth reading in its entirety, and which better frames many of the issues involved. One particular exchange in the comments gets to the heart of the matter, but before we get to that a bit of background is in order.

It perhaps goes without saying that authors who publish with Elsevier and most other publishers sign publication agreements that transfer copyright or an exclusive publication license to the publisher and specify clearly what authors can and cannot do with their paper after publication. Generally speaking, publishers tend to frown upon systemic distribution and commercial reuse as such activities undermine their business models. Most publishers explicitly permit one-to-one or private group sharing, which may include emailing a paper to a colleague, using a paper in the classroom or a conference presentation, or other similar uses. Given that this is academic publishing, most publishers’ policies delineate educational or other noncommercial uses from commercial uses, allowing many of the former and restricting the latter without explicit permissions.

One can argue that authors should not sign such publications agreements. One can further argue that all researchers should publish only in journals that use CC-BY agreements, allowing unfettered systemic distribution and even commercial reuse. At some point in the future such arguments may win the day, but the reality today is that most researchers do sign such agreements and are legally bound to honor them.

Despite the fact that it is a form of (noncommercial) systemic distribution, publishers have, for the most part, become increasingly accepting (to greater or lesser degrees and up to a point) of Green Open Access (Green OA), whereby authors post PDFs of their papers on personal websites, institutional archives, or central subject archives such as PubMed Central or the arXiv. In many cases, publishers explicitly grant such permission or else do not enforce copyright or exclusive license provisions. In some cases publishers allow the final article of record to be deposited in such archives; in other cases only the accepted manuscript can be deposited. In some cases a delay of up to 12 months is required before repositories can make articles publicly available (though there is at least one proposed work-around for that which creates a one-to-one distribution model for such repositories), in other cases such deposits can be made public immediately.

Academia.edu, however, is not an institutional repository. Nor is it a subject-based repository like PubMed Central. Nor is it a noncommercial pre-print server like the arXiv or the new bioRxiv. Nor, despite its “.edu” domain address, is it a not-for-profit academic initiative of any kind. Academia.edu is a venture capital-backed software company that seeks to derive revenue by selling analytics about the activities of its installed user base, much like Facebook, LinkedIn, Mendeley, and many others. Central to its success, however, is the sharing of papers and the metrics around that activity. Or at least one might suppose it is central given this activity is enshrined in the organization’s tag line: “Share Research.”

Academia.edu, however, likely does not have the legal right to host much of the research that is being shared, both systemically and for its own commercial purposes, on its network. So how has Academia.edu managed to attract funding when its business model hinges on being able to share content that it may not have the right to share? Part of the answer lies in the “safe harbor” provision of the Digital Millennium Copyright Act that limits the liability of companies like Academia.edu (and YouTube, Facebook, etc.) that often host content under copyright to third parties (like publishers) provided the content was posted by their users and provided they respond to take down notices from rights holders.

So why did Academia.edu and their funders think that publishers would not aggressively issue such take down notices? One possible explanation might be found in the exchange from the comments section of the Chronicle article mentioned above. The exchange takes place between a commenter named “N.W.J.”, Amanda French of George Mason University, and William Gunn (a.k.a. “Mr. Gunn”) of Mendeley. I have reposted the comments below:

Chronicle_Screen_Shot

William Gunn puts forth an argument that Mendeley has long used for hosting content they do not have explicit permission from rights holders to host: that an individual’s profile page on Mendeley (or by extension, Academia.edu) is that individual’s “personal website” and therefore covered under the exemption that many publishers provide to authors in both copyright and exclusive licensing agreements, allowing authors to post PDFs of their work to their own personal or institutional (e.g. their laboratory or departmental) website. Since papers are loaded to both Mendeley and Academia.edu by authors, the argument is that the paper is “self-archived” to the author’s personal website.

Leaving aside the fact that many publishers permit only the author’s accepted manuscript (and not the final PDF) to be self-archived, were one to accept this argument, by logical extension this would mean any commercial site (Academia.edu, ResearchGate, Facebook, LinkedIn, Scribd, Google, etc.) that sets up a profile page would have the right to host any research loaded to the site by an author. The distinction between a profile page on an academic or professional network and a personal or institutional website does not strike me as difficult to make and if it were ever an open question, as Mr. Gunn asserts, the question seems to have just been answered by the legal department of his own employer.

Many publishers, including Elsevier, have let this argument slide (or at least have not aggressively issued take down notices) for many years now because academic networks, including Mendeley, Academia.edu, ResearchGate, and others were nascent and publishers wanted to see how they would grow and mature, whether viable business models would emerge, and whether the networks would ultimately have anything to offer publishers (user intelligence, licensing revenues, marketing channels, etc.).

With Elsevier’s acquisition of Mendeley earlier this year and recent escalation of take down notices to Academia.edu, we appear to have moved beyond the nascent phase (a more cynical observer might call it the “Napster phase”) of such networks and into a phase where they must be more rigorous with regard to content rights. This also means Elsevier’s own Mendeley will need to do same or face take down notices from the rest of the world’s STM publishers.

Of course this could just be a business tactic of Elsevier to create friction for competitors of Mendeley. Elsevier publishes a vast amount of content and I do not imagine they will issue take down notices to themselves if authors upload their own Elsevier-published papers to Mendeley. Academia.edu by contrast (and despite what CNET’s reporter seems to think) is not a publisher and therefore can’t retaliate in kind giving a potential advantage to Mendeley.

And while perhaps at a competitive disadvantage, this does not mean Academia.edu and ResearchGate will have to close up shop. First, Academia.edu are savvy enough that they could easily employ safeguards that enable the posting of PDFs where authors have systemic distribution rights (such as those published under CC-BY licenses or from publishers with liberal sharing policies). For those papers that are under copyright protection by a publisher, there are a number of options for sharing articles that do not involve uploading illicit PDFs.

Instead of hosting article PDF files themselves, such networks can instead link, via OpenURL and an integration with institutional libraries, to the publisher’s website, thereby providing seamless access to full-text content via the user’s institution. Indeed, and to its credit, Mendeley appears to already be doing this (though I have not seen evidence of their also scrubbing the site of previously posted PDFs nor of preventing users from posting PDFs they do not hold rights to). This may even lead to services and business models designed around institutional customers with workflow solutions tailored to departments, laboratories, classrooms, and other workgroups. Such solutions may actually be more lucrative than selling analytics about the activities of a self-selected user base to third parties.

In cases where a paper is under third-party copyright protection, instead of hosting PDF files themselves, academic networks might provide links to institutional repositories. Authors can self-archive whichever version of the article (final or accepted manuscript) is stipulated in their publishing agreement to a bona fide personal website or to an institutional or subject matter repository and then provide links from the academic network directly to the archived PDF (from a user perspective, there is no difference as to whose server hosts the file). Granted in many cases these would be accepted manuscripts and not the final version of record – though the final version could also be linked to via the publisher’s website (DOIs should make this fairly easy to do).

Academic networks might work out licensing agreements or other in-kind arrangements with publishers. They might, for instance, trade analytics in exchange for rights to serve publisher content to those without institutional access. Alternately, academic networks could limit access to PDFs to those directly connected with the researcher or individuals who explicity request such content – thereby changing from a systemic to a one-to-one distribution model.

Academic networks might further work out a deal with publishers that enables authors to “upgrade” their papers to Gold OA on the fly by paying an author publication fee (APC) at the point of sharing. The academic network might retain a commission for such transactions. Or, they might work out an integration with an article-rental service such as DeepDyve (or set up their own), which would provide another revenue source.

Despite the criticism Elsevier has received from OA advocates, there may be more than one silver lining here for the OA movement. If Academia.edu et al. begin linking to institutional and subject repositories instead of hosting PDFs, this will likely increase rates of self-archiving if such archiving becomes a necessary preliminary step for some forms of sharing. Such archives are more stable than the servers of a start-up and are likewise more readily indexed. The inability to systemically distribute their published research papers with no restrictions may also prompt authors who value such rights to seek out Gold OA titles or journals with Gold OA options, thereby providing a market-based solution that respects intellectual property rights while providing authors with clear choices. If enough authors value systemic and unfettered distribution rights, this will in turn increase the prevalence and profile of titles that offer such rights. In other words, were more publishers to enforce their intellectual property rights with respect to academic networks, it may well lead, over the longer term and if the market wants it, to more uptake of both institutional self-archiving and Gold OA publication.

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