The economics of open access publishing

Nature has a long and interesting article about the costs of open access scientific journals, exploring both the difference in publication costs between different journals, and the allocation of costs between funders/institutions employing scientists, researchers publishing papers, and subscribers. It’s well worth reading for the figures on costs and charges alone – I’d not seen them gathered together before. Coincidentally, I also met up this week with a friend who publishes journals for one of the big publishers (not Elsevier).

The open access case is intuitive: research is funded publicly by taxpayers, so it should be free to read. The Nature article shows that the charges open access science journals make to researchers vary widely, as do the cost bases and profit margins of the different journals. The publication fees are also the only revenue stream, in most cases. Not surprisingly, existing journal publishers see it differently, arguing that they provide other services – peer review, editorial judgement, curation, marketing and the delivery of attention to articles, hosting technology, and no doubt more. There are counter-arguments to some of these points. For example, peer review and editorial work is normally done by other researchers, who are not paid for these tasks – again, taxpayers fund the work via their financing of academic salaries.

It’s clear that journal publishers were, like other traditional media providers, slow to adapt their offer to the online world and one or two well-known ones have tried to hang on to excessive monopoly profits. But the average profit margins cited by Nature for the scientific journals don’t seem outlandish, and it is very likely that some traditional journals are hampered by a higher cost base than newer online journals, hence a partial reason for high subscription charges.

Still, there does seem to me to be a need for clarity about the bundle of services being discussed in this debate. It is not just a question of providing an online platform for researchers to report on their work, the bit that is taxpayer funded. If academics only needed to get their work out there, they could publish it on their own websites – as many do. But journals obviously do play an important role in organising peer review to give research a kite mark, in selecting and curating papers, and in marketing to draw attention to research. The importance of editorial objectivity in these services makes me tilt slightly towards preferring the old-fashioned subscription model, especially now non-academics like me can legitimately access research via JSTOR. If only the old model hadn’t been discredited by the greedy minority of publishers hiking subscription charges so much, or lumbered with its inherited high cost base.

It’s probably too late, even though there are, ironically, signs that the subscription model may be starting to function for other online publications. The new RCUK open access policy came into effect this month, & states: “Free and open access to publicly-funded research offers significant social and economic benefits. The Government, in line with its overarching commitment to transparency and open data, is committed to ensuring that such research should be freely accessible. As major bodies charged with investing public money in research, the Research Councils take very seriously their responsibilities in making the outputs from this research publicly available – not just to other researchers, but also to potential users in business, charitable and public sectors, and to the general public.” RCUK will in future fund eligible research institutes and universities to pay submission fees to open access journals.

My friend is bitter about the Government casually torpedoing the commercial business model, and predicts that academic journals of the future will increasingly be hosted and part-funded by universities, research funders and learned societies, as the business is becoming decreasingly attractive for commercial publishers. I’m not sure the future landscape for the publication of academic research is at all predictable.

Valuing books

There’s a fascinating, provocative article, What is the business of literature, by Richard Nash trailing the next issue of the Virginia Quarterly Review. In it he poses the question troubling man in the publishing world: what’s the business model for books’ enduring contribution to culture? His argument is essentially against “book fetishism”, the product-centric obsession of publishing: “[T]he business of literature is the business of making culture, not just the business of manufacturing bound books.” Book publishers and retailers need to move towards the provision of “cultural hubs”, arrays of services and products, he argues – much, I suppose, as the music industry is having to shift from an LP or CD-centric model to one combining online sales with merchandise and live tours and films.

The essay starts by noting that books are themselves a technology, and have been at the forefront of consumer capitalism. He cites Rachel Bowlby’s demonstration (in [amazon_link id=”0571193072″ target=”_blank” ]Carried Away: The Invention of Modern Shopping[/amazon_link]) that early department stores were modelled on bookshops. “[B]ooks aren’t sitting grumpily in economy class on the airplane to the future. They’re in the cockpit.” I’ve posted here a couple of times about the impressive degree of innovation in publishing (and also here, a post featuring dwarsliggers), rather a contrast to the music businesses’s early response to the digital disruption. But Nash continues: “For the most part, however, the technical and business-model innovations in literature were one-sided, far better at supplying the means to read a book than to write one.”

[amazon_image id=”0571193072″ link=”true” target=”_blank” size=”medium” ]Carried Away: The Invention of Modern Shopping[/amazon_image]

The innovation in writing books is now under way. The rapid increase in the number of titles is one sign. The article dates this to: “July 1985, when a company called Aldus, naming itself after the great Venetian printer Aldus Manutius, releases PageMaker. You put PageMaker on a Mac, put the Mac in a new chain of photocopy shops called Kinkos, you rent them for six bucks an hour, and you’ve got Publishing 2.0. Exhibit A: Soft Skull Press, a publisher founded in a Kinkos in 1993, and which I ran from 2001 to 2009. Further exhibits: the hundreds of thousands of zines, chapbooks, and books produced since, many of which begat small media businesses, magazines, and book publishers. The number of U.S. titles created by traditional print publishers, whether of the indie variety like Soft Skull or the large corporate publishers, increased from about 80,000 per year in the 1980s to 328,259 in 2010.”

He argues, too, that copyright law as it stands is a law for the analogue world: “Until recently, it was more expensive to make a copy of a book than it was to simply buy the book. So when society agreed to grant authors and publishers the monopoly, it was a good bargain. Now …. the public has proceeded to make copies anyway, regardless of the previous bargain… As with any law that loses the consent of the governed because it no longer reflects the logic of society, the law is not overturned, just ignored. It recedes into the past, like laws forbidding pigs to enter saloons or alcohol sold on Sundays or adultery or interracial marriage.”

The existing value chain (agent-publisher-wholesaler-retailer) will be disrupted, he concludes. It will not be saved by gimmicks like video embedded in e-books: “The lack of video, the lack of audio, the lack of ways to change the forking outcomes of plot (what is rather crudely referred to as “interactivity”) is a feature of literature, not a bug. And, as it turns out, books are interactive. They’re recipes for the imagination. Conversely, video is restrictive—it tells you what things look like, what they sound like.” Rather, the innovation will be in the value chain – he cites Kickstarter, a subscription model (like the one prevailing in the 18th century), tie-ins with fashion designers, links between book retailers and galleries, and so on.

On the whole I agree with the argument – although I’m a serious “book fetishist” myself, in love with the physical artefact (favourite website to relax by: Bookshelf Porn). Nash underestimates the value of innovations to the object, I think. However, I entirely agree that the disintegration of incumbents’ business models does not mean books have no value. The digitally-driven innovation is rather exhilarating, as long as you’re not one of those anxious incumbents.

I’ve skated over the surface of the article – well worth a read.

 

Random penguins and platforms

In an interesting article about the Random Penguin publishing merger, John Naughton describes the dynamic of gigantism in publishing that paved the way for the clash of the Titans between publishers and Amazon. High street book retailers consolidated, causing publishers in turn to develop mass market blockbusters, which prompted agents to seek mega-advances for star writers, such that the publishers and retailers had to sweat those expensive assets….

As Naughton writes: “Thus publishing turned into an industry that was inordinately reliant on blockbuster products to deliver the results that Wall Street demanded. The result was a market characterised by what statisticians call a power law distribution – ie one in which a relatively small number of products sell in enormous volume while a “long tail” of other products sell in relatively modest quantities. The physical world of high street shops can’t handle a long tail for the simple reason that shelf-space costs money. Every book has to earn its rent. But internet outfits such as Amazon don’t have any problem handling the long tail; in fact, the company probably makes more from selling non-bestsellers than it does from blockbusters.”

He cites [amazon_link id=”0745661068″ target=”_blank” ]Merchants of Culture[/amazon_link] by John Thompson as a good sociological description of how publishing and bookselling have changed.

[amazon_image id=”0745661068″ link=”true” target=”_blank” size=”medium” ]Merchants of Culture[/amazon_image]

As I noted in a previous post about the publishing merger, though, Amazon is also interesting as a platform for smaller publishers, who would never be able to get shelf space in a high street store. I’m no fan of the Kindle, including because – as John Naughton and others have pointed out – you’re only renting the book. No doubt other already big publishers will also start to discuss mergers, so it will be intriguing to see whether Amazon does become a genuine platform for small publishers. Platforms are inherently few in number, so the acid test will be the terms on which it continues to deal with them will be the acid test, and one the competition authorities will no doubt be thinking about.

e-mergers

There’s obviously much excitement in the publishing world about the Random House-Penguin merger. It’s the kind of merger that makes me wish I was still on the Competition Commission, as the issues are fascinating. The justification given by the parties is that they will be able to invest on a larger scale in e-books. Clearly, all publishers are anxious about Amazon’s market power – 40% of all retail book sales in the UK according to one figure I saw. But this is complicated territory, competition-wise.

I was a member of the Competition Commission group that gave the 2006 go-ahead for Waterstones and Ottakar’s (remember them?) to merge on the grounds that online book sales offered vigorous competition to high street booksellers. Since then, Borders/Books Etc has also gone from British high streets, although Daunts and Blackwells seem to be more than holding their own. Ironically, the publishers – including Penguin – were vociferously opposed to the Waterstone’s merger, saying online sales would not pose an effective competitive threat to a single big high street chain.

What a lot of today’s commentary is not discussing in detail is the question of which markets along the whole value chain need to be assessed. There’s a transaction between author and publisher – mega-publishers look bad for most authors but on the other hand there seem to be quite a few reasonably successful small publishers springing up. Then the wholesale transaction between publishers and retailers – and here there is growing concentration on both sides, with the intriguing wrinkle that Amazon can act as a platform for smaller publishers to reach readers.

Finally, there is the retail market, both in its physical and e-book manifestations. Amazon is clearly dominant, and seems to be pricing Kindle devices at cost to hook customers in, but is not blatantly using its market power to raise prices to consumers, as opposed to squeezing the publishers’ margins – although given that the price of an e-book is a rental rather than a purchase price, that is a hypothesis to be tested. Anyway, one would need a two-sided market model to assess the competitive impact of changes in the two separate margins, as there is no reason these would be the same under perfect competition. Besides, any competition regulator would want to see a standardised e-book format emerge.

All in all, it would be a terrific case to be on! I’m not sure it will be referred – Penguin seems confident it can avert that with sufficient undertakings and disposals – but if there is an inquiry, the report will make a cracking good read.

The joy of books

Joe Queenan has written an essay in the Wall Street Journal (based on his new book, [amazon_link id=”0670025828″ target=”_blank” ]One For The Books[/amazon_link]) about how he became addicted to books.

[amazon_image id=”0670025828″ link=”true” target=”_blank” size=”medium” ]One for the Books[/amazon_image]

Books, books, books. I love them too. I always read books about books: Susan Hill’s [amazon_link id=”1846682665″ target=”_blank” ]Howard’s End is On The Landing[/amazon_link]; Francis Spufford’s [amazon_link id=”0571214673″ target=”_blank” ]The Child That Books Built[/amazon_link]; Ann Fadiman’s[amazon_link id=”0140283706″ target=”_blank” ] Ex Libris[/amazon_link], and so on.

The best bit of Queenan’s very funny essay is his defence of the need for books, the physical objects. He writes:

“Books as physical objects matter to me, because they evoke the past. A Métro ticket falls out of a book I bought 40 years ago, and I am transported back to the Rue Saint-Jacques on Sept. 12, 1972, where I am waiting for someone named Annie LeCombe. A telephone message from a friend who died too young falls out of a book, and I find myself back in the Chateau Marmont on a balmy September day in 1995. ….

None of this will work with a Kindle. People who need to possess the physical copy of a book, not merely an electronic version, believe that the objects themselves are sacred. Some people may find this attitude baffling, arguing that books are merely objects that take up space. This is true, but so are Prague and your kids and the Sistine Chapel. Think it through, bozos. …. There is no e-reader or Kindle in my future.”

I read this inwardly shouting, ‘Yes! Yes!” I too use travel tickets as bookmarks and leave them in the book, the better to remember reading them the cafe in Verona or on the flight to Belfast.

Flying back from Belfast

The part Queenan misses out it the joy of second hand books and bookshops. On my flight back from Belfast I finished reading a beaten-up old Leo Malet story about his detective Nestor Burma, [amazon_link id=”B003BPT2L4″ target=”_blank” ]L’homme au sang bleu[/amazon_link].

L’homme au sang bleu

I bought it on our summer holiday in Brittany in this marvellous warren-like bookstore, open only in the afternoons, seducing tourists as they drive past towards Cap Frehel.

Bouquinerie

I have many objections to e-readers, but perhaps the biggest is that they prevent the sharing of books. I can’t read the same books as my husband, who has a dreadful e-book habit, so I can’t talk to him about them. I couldn’t put e-thrillers I’ve read on the book-swap shelf at the local station. I wouldn’t be able to take them to the charity shop or sell them to a second hand bookstore. But what kind of civilisation would we be without second hand bookstores?