Elsevier is a librarys best friend

Elsevier is a librarys best friend

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Joseph Esposito / scholarlykitchen.sspnet.org

Have I got your attention? Good. Let’s start with a thought experiment.

Elsevier publishes or helps to publish (through arrangements with society publishers) about 2,500 journals. Let’s imagine a world where Elsevier does not exist. In this hypothetical world every one of these journals is independently published. Thus 2,500 journals means 2,500 publishers. In that world, would the cost of these journals be higher or lower  than the cost today (IRL — in real life), where Elsevier indubitably does exist and publishes a huge portfolio?

Fuente original: Elsevier is a librarys best friend.

A related question:  Elsevier (or its parent, whose formal name is the unspeakable abstraction RELX) is often attacked for its high profit margins. They are over 30% — you can look these figures up, as RELX is a publicly traded company that perforce must release a great deal of information about its operations. Is it immoral that RELX makes so much money? As a matter of context I would note that 30% is a high figure if you run a shop or a services business, but not out of line with many companies in finance, media, and technology. Indeed, a fair number of not-for-profit publishers have margins that come close to 50%.

In the hypothetical world where RELX is broken into 2,500 different entities, the aggregate profitability of the publishers would come nowhere near 30%. Most of those one-journal publishers would lose money, as do most one-journal publishers IRL. I spend a great deal of time working with small publishers, who may publish anywhere from one to a dozen journals, and they mostly struggle to keep their heads above the water. It’s not that they don’t want to make money. They are not losing money because of the pursuit of their mission (though they will engage in some unprofitable activities on the basis of mission). The problem is that they just don’t have the scale to break into profitability. Of course, there are exceptions to the rule:  the most highly ranked journals (measured by Journal Impact Factor) tend to be the ones that can survive outside of a large portfolio of publications, but, by definition, something can only be highly ranked if it is not the norm. We often hear that the monopoly in copyrights is what makes companies so profitable, but even publishers that lose money have full control of their copyrights. It is scale, not monopoly copyrights, that drives a high level of profitability.

Why would the 30% profit margin (in the aggregate) come down? Because scale brings many, many economic benefits. Large companies, not just RELX, have the benefit of spreading costs over a relatively large revenue base. As John McAfee, the software entrepreneur, once said to me, it’s very hard to build and manage a Web site, but it’s trivial to manage a thousand. With a thousand you can hire skilled professionals and negotiate with suppliers for better pricing. This is what RELX does. On a per-unit basis RELX is probably paying less than the average publisher for the materials and services it needs. Only its peers in scale (Springer Nature, John Wiley, and Taylor & Francis) have the same purchasing clout in the marketplace. The effects of scale extend to personnel, where the biggest companies can afford to pay handsomely for the top people in the industry, whose every decision has an impact across the huge product portfolio.

RELX’s shareholders have benefited from the company’s scale, but so have its customers — and, for that matter, the research community at large. Let’s imagine the cost of working with 2,500 individual publishers. The administrative cost of doing so would be prohibitive. The aggregations of Elsevier and its ilk reduce the cost of assessing and purchasing publications for libraries. This means libraries need a smaller staff in acquisitions and all the support services that go with it. It is simply remarkable how much libraries accomplish nowadays because of their intelligent focus on workflow planning. But if you were to add 2,500 individual publishers to the mix, libraries would lose their internal efficiencies and also, as an unintended consequence, face higher prices, as the lack of efficiencies on the part of these tiny publishers would force them to charge more.

I see a hand go up in the back of the room: Whenever a small publisher partners with Elsevier and its kin, the prices go up, so how can I say that Elsevier keeps prices down? What this question misses is that the price goes up for individual subscriptions, but when the journal is folded into an aggregation or “Big Deal,” the cost per article drops, as price increases for aggregations are for the aggregation as a whole. Of course, large publishers, whose interest is in selling those aggregations, increase the price of individual subscriptions in order to drive customers to renew aggregations (publishers naturally deny this). This is also how many consumer services work; think, for example, of your cable TV bill. It is a structural property of the marketing of media in a digital age, and in this Elsevier should not be singled out either for praise or opprobrium. Misunderstanding this point leads to the uninformed pieces we regularly see in The Guardian and The Chronicle of Higher Education wailing about the increase in journal prices. What these lamentations overlook is that fewer and fewer libraries pay retail any more.

This is the basic trade-off: libraries have won administrative efficiencies in exchange for the negotiating leverage of the largest publishers. It sounds crazy, but it’s a win-win situation. The losers? Small publishers, who cannot operate at the scale of Elsevier and its peers and that have trouble getting libraries’ attention. And many librarians recognize this in their heads even as their hearts resist. As the head of one of the larger library consortia told me, We don’t have time to meet with small publishers. 

This is not to suggest that librarians should not fight Elsevier’s pricing — or anyone else’s for that matter. That is what purchasing agents do: they negotiate as hard as they can and they seek alternatives. Nor is this an argument to defend Elsevier’s trading practices. Elsevier does what it does because this is what companies do — when they are well managed. We would do the same if we sat in Elsevier’s chair (and if we were as bright). It is reasonable to object to Elsevier’s scale because of the asymmetry of power in negotiations. I would add that the pursuit of customer lock-in that my colleague Roger Schonfeld has written about is something that all libraries should be on the alert for. There is a case to be made that a company can be a publisher or a data analytics and workflow company, but not both. It is within universities’ power to insist that Elsevier be one or the other.

Which brings us back to the notorious 30% margins. It’s a bogus number. It’s real insofar as it reflects the profits Elsevier reports to the tax authorities every year, but it’s meaningless without putting it into context. Elsevier has saved libraries millions of dollars, perhaps more. It is churlish to resent them for being good at what they do.




Dear Joseph,
1. You know perfectly well that it’s not a viable alternative to split Elsevier in 2500 one-journal-publishers. Between five and fifty pieces with 50-500 journals each would be something to think about.
2. You think Elsevier is cheap as compared to other publishers? My numbers tell a much different story if I compare the spendings per published article (of corresponding authors from my institution) to that from other publishers.
Best reagrds,

You write:
“Let’s imagine a world where Elsevier does not exist”
Ok, I imagine a world where Elsevier is replaced by SciELO which provides exactly the same services (only better: OA) for about US$100 per article (and has been doing so for nearly 20 years now), while Elsevier charges about US$5k on average. 2500 journals publish, say, 100 articles per year, each. So for my world we are talking about 250,000 articles per year at the following cost to the tax payer:
Elsevier: US$1,250,000,000
SciELO: US$25,000,000
In my fantasy world, Elsevier would have ripped of the global tax payer to the tune of one billion and twohundredtwentyfive million US$. As a tax payer myself, who happens to be fortunate enough to live in a country where I like paying taxes, I could think of a better use of this billion.
Bottom line: in its current form, Elsevier (and organizations like them) is nothing more than a parasite, living off of subsidies that would be of better use elsewhere.

“But if you were to add 2,500 individual publishers to the mix, libraries would lose their internal efficiencies …”
I wouldn’t be afraid of it. That’s why there are subscription agencies. They can make us forget which journal comes from which publisher.

Buranyi’s article on Robert Maxwell in the Guardian provides an interesting context:

The issue here is that, like college athletes who are called amateurs and aren’t “paid” generate large sums of cash for the sports commissions, institutions and those employed in the various sports, the same holds for editors, academics and those who “moil” in the pub/perish mines for a commodity which the publishing industry maintains as critical for their survival.

You are talking about taxpayers money being used to publish research results funded by taxpayers money resulting in a profit margin of over 30% for some publishers – and it sounds like you feel it is unfair that the public get to know about this just because we are talking about publicly traded companies. Sorry, but I would be surprised if the scientific community feel they are getting value for money. Just posted a twitter poll to find out.

I think this is something of a misconception. Taxpayer funds are not used to pay to publish research results (except in cases where grant funds are used for open access APCs or page charges). Most frequently, such funds pay for the research itself, and then the researcher then chooses to pass along the costs of publication to the readers of the papers about the research.

Depending on how your university system is funded, taxpayer funds may indeed be used to pay for that access, but at least in the US, I’m told the majority comes from student fees and tuitions.

Also, your Twitter poll may suffer from sampling bias:

The premise that the 2,500 journals would automatically be broken into individual entities is faulty. If these journals were published by their interrelated universities and or professional associations, the necessary economies of scale can be attained. This is possible as I have once helped this to be realised, removing journals from the Elsevier claws (given that the association retained ownership rights), partnering with sister organisations and publishing independently with long term success.

The author’s repeated defense and apparent sympathy for a business model that is morally and economically undefendable cannot but make one wonder about the ulterior motives of the author.

“Ulterior motives of the author”? Sheesh. How about simply getting the numbers right. Incidentally, most of my business activity is working with independent not-for-profit scholarly societies.

While this post is obviously written to be provocative, it will hopefully start an interesting conversation around scale. Scale is the primary driver in not just the scholarly publishing market (https://scholarlykitchen.sspnet.org/2015/06/25/the-changing-nature-of-scale-in-stm-and-scholarly-publishing/), but in all media and many other markets in the digital era. Digital seems to focus markets down to one property — one Facebook, one Google, etc. Amazon is doing everything it can to become the world’s only “everything store”. There are only a handful of major music companies left, very few movie studios (now that Disney is swallowing Fox). Newspapers, radio and television stations are increasingly owned by a small number of conglomerates. This is the current way of the world.

As Joe points out, there are tremendous business advantages to scale, so all these mergers and acquisitions make business sense. We’ve also moved from an era where startups were deliberately trying to be disruptive and take over markets to one where any promising startup is rapidly purchased by the incumbents in the market to further cement their leadership position.

And there are benefits to the customer. Librarians have tied up much of their budgets in big deals in return for cheaper access to more material. The convenience and low prices (easier to do when you’re a company that doesn’t have to turn a profit) of Amazon are enticing.

But with those benefits come problems. Libraries have lost bargaining power and flexibility. Many areas have seen their downtowns dwindle as local stores close, forfeiting tax revenue and local employment (unless you happen to have an Amazon warehouse nearby).

Where do we as a society draw the line? What are we willing to give away in order to save a few $ and a few minutes?

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