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0098-7913/02$–see front matter © 2002 Elsevier Science Inc. All rights reserved.PII: S0098-7913(02)00187-9

Pricing Electronic Information: A Snapshot of New Serials Pricing Models

John Cox

Setting prices for serials has always been an art rather than a science. The traditionaljournal subscription has served both publishers and librarians well, but it is inflexibleand unresponsive to changes in the complex library environment in which the buyermay not be the real user. The advent of online information delivery has providedpublishers and librarians with the opportunity to remodel the way they do businesstogether. This article evaluates the impact that online publishing has had on the costsinvolved in publishing quality scholarship and reviews new pricing models that areemerging in a world in which many types of publication—monographs, referenceworks, journals, and magazines—are merely “content” on the Internet. Serials Re-

view 2002; 28:171–175. © 2002 Elsevier Science Inc. All Rights Reserved.

New Models and Variations on the Traditional Journal Subscription

This article can be no more than a personal report andview on the variety of pricing models that are beginningto emerge as publishers look for alternatives to the tra-ditional journal subscription price as the basis for sus-taining their publishing. There is no consensus on howpricing models will develop. Both U.S. antitrust and Eu-ropean competition laws are very strict about any discus-sion or collusion on any aspect of business that should bea matter for competition between suppliers. As a result,the law prohibits publishers from discussing prices witheach other. The environment is truly one of trial anderror and the search for competitive advantage.

The Cost Structure of Publishing Online

Scholarly journal publishing has always been character-ized by high fixed costs. In 1997, Carol Tenopir andDonald King reported that the average direct cost in-volved in publishing a printed journal article was about$2,000, to cover refereeing, subject editing, copy editing,typesetting, and preparation of illustrations. To this theyadded $2,000 of indirect costs such as contracting withauthors, marketing, subscription management, and aproportion of all the property, staff, and equipment costs

incurred by any organization. They concluded that eacharticle cost around $4,000 simply to produce the “firstcopy.”

1

These costs are incurred regardless of the me-dium of output—print or online. The costs of paper,printing, and distribution of the printed issue represent arelatively small proportion of the total cost of producingthe journal, so that the scope for rapid and substantial re-ductions in the price of the online version was always anillusion. In fact, the majority of publishers expect to haveto maintain output in both printed and online editionsfor the foreseeable future, with all its cost implications.

Making the digital product out of the author’s ideas isa more complex process than print publishing. Function-ality and context are as important as the content itself.Publishers have to understand the context in which thecontent is used by the reader and what further informa-tion or functionality is required in order to increase itsvalue to both the library’s and the reader’s activities anddecision making. This involves customer feedback as acrucial part of the publishing process and good customerservice on a round-the-clock basis. The costs that areeliminated from the print process are balanced by theequipment, software, retraining, and staffing costs thatpublishers are incurring.

It should be no surprise that journal pricing has notbeen transformed by online distribution. The costs inher-ent in the process of publishing the traditional peer-reviewed journal have not changed significantly. Thesupply chain—from author to editor to publisher to sub-scription agent to library to reader—has not changed.Nevertheless, the flexibility of the online delivery mech-anism has opened up the possibility to improve access to

Cox

established John Cox Associates (1998), Rookwood,Bradden, Towcester, Northants NN12 8ED United Kingdom;e-mail: john.e.cox@btinternet.com.

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the journal literature and to introduce a variety of newbusiness models that extend readership and improve theeconomic base upon which journal publishing rests.They are not limited to individual title subscription pric-ing, but they range from pay-per-view to package pricingfor what are effectively databases of the publisher’s com-plete journal program.

The Value of the Online Journal

Valuing the content of the journal literature is not aboutwhat publishers think it is worth or what it has cost toproduce. It is about the value placed on it by their cus-tomers in the communities they serve. The perception ofvalue depends both on the content and on the function-ality of the service provided online. It also depends onwhat institutional customers can afford.

Some of the most exciting opportunities to reach newreadership and provide an enriched experience for theuser involve working with other publishers and with spe-cialists in other markets. Linking mechanisms to take thereader both to and from the publisher’s site require alli-ances, through organizations like

CrossRef

, which pro-vide links between journal articles and references, andwith the major abstracting and indexing services. More-over, licensing the content to third parties in order toreach markets that would not have bought the printedproduct offers opportunities to enhance revenue.

The perception of the value of content depends onhow accessible and useable it is. Users in today’s univer-sities are not merely campus based. Both academics andstudents want access from home or when at an overseasconference. Many registered students are distance learn-ers, but they need the same information facilities as theiron-campus colleagues. The value of being granted coursepack and electronic reserve use of content should be setin the context of the permissions revenue lost, which usu-ally barely covers the cost of administration. Allowing li-braries to use the online files to generate copies for inter-library loan is a right that libraries require and that costspublishers little.

Beyond the Journal Subscription Price

The conventional pricing model for printed journals hasbeen the subscription to the individual title. It is inflexi-ble. It relates to a physical product that can have only oneuser at the printed issue level. It is a “one price fits all” so-lution that takes no account of library size. The advent ofonline publishing has provided the opportunity to de-velop pricing models that more closely fit the needs of li-braries and reflect functional value. The range of pricingoptions can be categorized as follows:

Derivatives of the Subscription Price

The first development in pricing online journal collec-tions was the APPEAL license created by

Academic Press,

which opens up access to all journals online for a price setat the prior year’s subscription revenue from the cus-tomer plus a premium. As a result, it maintains the pub-

lisher’s revenue and provides the library with certaintywithin its current pattern of spending. It has proved to bea durable and effective starting point for negotiation andhas been adopted by many of the largest publishers onthis basis. As a long-term pricing mechanism, however,the APPEAL license has the following limitations:

• Subscription revenues last year are relevant to thisyear, both for the library and for the publisher.Their relevance 5 or 8 years hence is highly ques-tionable. Moreover, the model makes little sensewhere journal subscriptions are tending to riserather than decline. This is precisely the situationthat social science publishers such as Taylor &Francis and Sage find themselves in.

• The APPEAL license is in itself inflexible. It makesno allowances for increases in frequency or extent—after all, a successful journal valued by its commu-nity attracts growth by attracting more high-qualitypapers. It makes no allowance for titles that are dis-continued by the publisher or that join the programfrom other publishers. It does not take newly startedjournals into consideration, and does not allow forselection by title, or even the exclusion of parts ofthe publisher’s list in subjects of no relevance to theinstitution.

Another approach has been simply to offer an “on-line-only” price.

Blackwell’s

online subscription price is90 percent of the equivalent print price. It provides on-line access to the entire journal list for a negotiated flatfee or will provide a discount on a scale related to thenumber of subscriptions.

Ingenta

has devised an online-only package price forlibrary consortia for publishers whose journals arehosted by Ingenta. The Ingenta/PCG Consortia SalesProgram offers a publisher’s journals as a single packageat a discount of 60 percent off the aggregate subscrip-tion price of the list. No account is taken of existingprint subscriptions. The discount increases according tothe size of the consortium: an extra 5 percent for twenty-five members, 10 percent for forty, and 15 percent forone hundred.

A further variation is to disengage the medium of out-put (print or online) from the content.

Wiley’s

EnhancedAccess license applies a “content fee” of 90 percent of thesubscription price and then adds: a) “print fee” of 10 per-cent for one copy, 20 percent for two, etc.; and b) an“electronic access fee” of 5 percent for one site, with asliding scale for multiple sites.

Simultaneous Users

This method is the traditional model for pricing data-bases, especially in business and financial markets. It isan attempt to relate price approximately to an assumedlevel of usage. It is probably inappropriate in the researchjournal environment, where usage is typically thinlyspread across a broad range of content. It presents bar-riers to academic libraries and their users that may proveto be unacceptable in the market.

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Population-Based Models

A model that attracts increasing attention is based onpopulation: full-time equivalents, or FTEs, which are de-fined as full-time enrollments in education or number ofemployees in corporate, government, and professionalorganizations.

Oxford University Press

has introduced a pricingscheme for the Oxford English Dictionary (OED) andthe American National Biography (ANB) online in theUnited States and Canada based on FTEs. What is inter-esting is not the price itself but the methodology of attrib-uting different weights to different types of institution:

Four-year academic institutions: 100 percent of FTEstaff faculty and students

Two-year academic institutions/specialized institutions/tribal colleges/universities: 50 percent of FTE staff,faculty and students

Middle/high schools: 15 percent of number of stu-dents in grades 9 through 12

Public and state libraries: 4 percent of the populationserved up to 1,000,000, 3 percent of the popula-tion 1,000,001–1,999,999, 2 percent of the popu-lation 2,000,000 and more

Corporations/government./military agencies: 100 per-cent of employees with network access

Non profit organizations: 50 percent of employeeswith network access

BMJ Publishing Group’s

institutional subscribers toprint no longer have free access to its specialist journalsonline (the

British Medical Journal

itself is available on-line free of charge). Institutional Online Access is basedon FTEs at the institution (including remote sites thathave online access to the journal). FTEs are calculated onthe following basis:

Educational institutions: Total number of medicalfaculty, researchers, and students

Hospitals: Total number of clinicians (excludingnurses), pharmacists, and researchers

Corporate: Total number of researchers, medical in-formation, and sales and marketing employees

Government: Total number of professionally quali-fied employees

Prices have been separated into two groups with com-mon pricing per journal for each group; institutionalsubscriptions that combine print and online receive asubstantial discount:

Group 1 Group 2

FTE band OnlinePrint and

online OnlinePrint and

onlineSmall (1–400 FTEs) $480 $545 $400 $450Medium (401–1,500) $720 $785 $600 $650Large (1,501–4,000) $840 $905 $705 $705Extra large (over 4,001) $895 $960 $750 $800

FTE-based schemes, including “FTE banding,” havebeen adopted by the

American Association of Immunol-ogy

(with five bands) and

Oxford University Press

for

JNCI Cancer Spectrum

(with three bands).

Usage-Based Pricing

One of the most interesting and challenging alternativesto the traditional subscription model is one that is basedwholly on usage. There is sufficient evidence from con-sortia and from individual libraries to indicate that inthose instances in which a package of journals is avail-able to users, the pattern of usage does not follow thejournals actually purchased by the library.

Over three years, OhioLINK found that:

• 85 percent of usage came from 40 percent of thetitles available online via OhioLINK

• 52 percent of usage was from titles not previouslyheld on subscription at the user’s campus.

2

This experience is supported by usage at institutions asvaried as the University of Toronto in Canada, MacquarieUniversity in Australia, and the University of Warwickin the United Kingdom. The evidence clearly indicatesthat providing access to a large package of material—but paying every time a reader (the real customer) uses anarticle—may lead to a democratized information servicein which choice is not mediated by the library.

There are two possible models:

• A subscription could be based on a number of “ar-ticle accesses” rather than on journal titles. Thiswas tested in Elsevier Science’s PEAK experimentwith the University of Michigan. Rather than buy-ing a journal, the library would purchase a set num-ber of articles from across the full list of titles. Oncean article had been accessed, it would remain openand accessible to all users at no further charge.

• alternatively, fees per use could be set on a slidingscale whereby the more articles used, the lower thefee per article at the margin. Implementation of thisvariant is difficult. Users may access far more arti-cles than they actually read when searching or ex-ploring links. “Usage” would need to be carefullydefined in order to recognize substantive use only,through printing or downloading. Publishers wouldneed a guaranteed minimum payment and librari-ans would require a cap on expenditure. Experi-ence will dictate the level of fee per use and how thesliding scale may be set. The benefits include wideraccess to a broad range of content, payment by re-sults, and no more worries about what constitutes asite or a user.

Document Delivery, Interlibrary Loan, and Pay-per-View

Online availability of a significant range of core journalsprovides the opportunity to both publishers and librariansto transform the speed at which readers’ requests can be

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John Cox Serials Review

filled. Both publishers and librarians have much to gain.Tenopir and King’s analysis reveals savings of betweentwelve and thirteen dollars in processing electronic arti-cles on demand compared with the cost of a paper-basedinterlibrary loan or document delivery transaction.

3

Thesavings on rush orders are much higher.

This opportunity is being seized both by document de-livery services and by publishers:

• Document delivery companies such as Infotrieveare actively seeking licenses from publishers todownload digital files online from the publisher’sserver and deliver the document online to the cus-tomer. The British Library Document Supply Cen-tre announced an agreement with Elsevier Scienceto host Elsevier journals on its own servers and de-liver articles online. Ingenta offers the same servicefor 5,400 journals that it hosts or provides onlineaccess.

• Many publishers are now providing access to on-line journal articles on a pay-per-view basis in ad-dition to the regular subscription-based service.The publisher has the advantage in that it can electto charge only a nominal amount in addition to thecopyright fee, whereas the document delivery ser-vices have to levy a service charge in addition to thecopyright fee in order to cover their costs. As a re-sult, the need to request copies of articles from doc-ument delivery services or on interlibrary loan fromother libraries or from document delivery servicesmay become redundant.

Online supply is clearly the way of the future. Readersuse online search engines, abstracting and indexing ser-vices, and customized alerting to identify articles of in-terest. Because searching is so rigorous, users will iden-tify and request more articles via these methods. Suchrequests will often be in titles not held on subscription.Online delivery delivers directly to the reader’s desktop;it can bypass the library premises and cut out some li-brary processes, with possible cost savings. The institu-tion gains, the reader receives immediate delivery, andthe publisher “captures” the transaction.

Such an approach is in no way compromised by pub-lishers seeking to develop pay-per-view and other similarmethods of reaching the individual reader directly andbecoming less dependent on academic and research librar-ies as the source of all their revenues. By selling journal ar-ticles “by the drink” and by licensing content to aggre-gators and republishers who can sell into markets thatwould never buy a subscription to the primary journal,publishers both extend their readership and keep institu-tional subscription prices and licensing fees under control.

Putting the Solution Inside the Machine

Innovation and experimentation in pricing and deliverymodels is accompanied by an administrative burden thatis usually wholly disproportionate to the value of thetransactions involved in contracting for even very largepackages of online journal information. As there has

been little time to establish custom and practice in thepricing, usage terms, performance, standards, and otherbusiness issues inherent in online publishing, it has beennecessary to negotiate terms and incorporate them in for-mal licenses. The problem is that each license is different.

It is possible that this burden will be lifted by technol-ogy itself. New systems are emerging that go under therubric of “digital rights management,” or DRM. At theheart of this technology is a method of encryption that al-lows the publisher to control in great detail specificallyhow users can access the content. DRM provides perma-nent protection of content; even after it has been distrib-uted, access to the content can still be controlled. It canprovide different access rules for different types of cus-tomer, and enables a publisher to distribute online con-tent to a defined readership or closed user group or tooffer value-added membership services, secure in theknowledge that only the member has access.

Early DRM systems were large scale, complicated, andexpensive products inappropriate to small-and medium-sized publishers. Newer products are really end-to-endpublishing services, such as Sealed Media in the UnitedKingdom, and Aries, a German system adopted byKarger. One U.K.-based company, Webgenerics, has spe-cifically targeted scholarly publishers with a Web-baseddigital publishing system called dotEncrypt. The benefitsinclude:

• the ability to apply different prices or rules to view-ing, downloading, or printing for different catego-ries of user;

• processing and collection of payments;• provision of a fully integrated reporting function;• the ability to offer added value to subscribers and

other closed-user groups;• great flexibility in packaging and pricing informa-

tion by applying multiple access rules for each pieceof content;

• the ability to adapt pricing after the content hasbeen released; and

• the facility for customers to preview—to “try be-fore they buy.”

Used well, these new systems make it possible to im-plement different usage rights for different prices and todistinguish readily between different types of users—members, individuals, libraries, and library consortia.The publisher sets the rules in the system, and the ma-chine does the rest. Detailed written agreements on usageterms become redundant. Unfortunately, DRM has beenportrayed wholly in restrictive terms: protection not ac-cess, prohibition not flexibility. A new term is needed toemphasize that it is also an enabling technology.

A Pointer to the Future

There are many rewards from positive cooperationbetween librarians and publishers, such as the work ondeveloping archives for e-content, creating standards formetadata, and trying new business models. Unfortu-nately, in the United States, cooperation at the individual

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publisher and institutional level has been developed,while the respective library and publisher trade associa-tions have indulged in rhetoric—much of it hostile—rather than dialogue. The Public Library of Science andCreate Change programs have not noticeably damagedcommercial publishers but have diverted a great deal ofenergy from more productive dialog. In the United King-dom, library and publisher associations have long beenaccustomed to working together to discuss and resolveissues affecting both communities. Examples include thePublishers/JISC (Joint Information Systems Committee)model license and the PALS (Publisher and Libraries So-lutions Committee) initiative on the joint development ofusage data standards.

The creation, testing, and evaluation of new businessmodels is important in order to exploit the full potentialof network technology. Publishers want to see theircontent reach all potential readers. The implication isthat there may be a variety of pricing and access models

to meet the usage needs and affordability criteria of dif-ferent user communities. Libraries will, for the foreseeablefuture, be the principal conduit to the reader for scholarlyliterature. Publishers and libraries are partners in the schol-arly enterprise, and have a responsibility to the researchcommunities they both serve to work together rather thanconduct conversations through the megaphone.

Notes

1. Carol Tenopir and Donald W. King, “Trends in Scholarly JournalPublishing in the United States,”

Journal of Scholarly Publishing

28(April 1997): 135–70.

2. Thomas J. Sanville, “A Method Out of the Madness: OhioLINK’sCollaborative Response to the Serials Crisis,”

Serials

14, no. 2 (2001):163–77.

3. Carol Tenopir and Donald W. King,

Towards Electronic Journals

(Washington, DC: Special Libraries Association, 2000).