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From the 2020 update report

Appendix: Scholarly Journals

The scholarly journals business is still on a path to raising its profitability, but pricing pressures will intensify and we see substantial stagnation of subscription revenues.

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The most detailed information on scholarly journals revenue trends comes from Wiley. In early March, the company presented its Q3 2020 (for the three and nine months ending on January 31st, 2020). In its 8K form, the company stated that its 3% constant currency revenue growth for the quarter was “primarily driven by growth in open access.” In previous quarters, the research business grew in the range of 3% to 4%, and – in the quarters when management offered commentary – volume growth in open access publishing was identified invariably as the driver of revenue growth.

We do not have such granular commentary for the other leading publishers. Interviews with the management of other publishers suggest that the pressure to keep subscription pricing growth close to null or to offer additional inducements (for example, by offering to bundle other digital content with the core journal subscriptions, when possible) is mounting.

Is growth through open access volume sufficient to support the scholarly publishing industry? Historically, publishers raised their revenues by inserting annual price increases into their subscription contracts. To justify their price increases, the publishers pointed to the growth in the volume of articles they published. Hence, the evolution of costs and revenues should not fundamentally differ just because the articles are published in open access.

We continue to believe that raising revenues in line with the growth in the number of articles will raise the profitability of publishers over time. First of all, not all the costs incurred by publishers are variable with the number of articles published; in addition, a well-managed company should strive to increase its productivity somewhere in the region of 1% to 3% every year. If management are unable to do so, it is a shortcoming that should not be rewarded; if they are able to do so, the decision to not share the benefits with their customers is legitimate, although the publishers should not be surprised if this makes the customers unhappy.

Transformative agreements have been an increasingly significant topic of discussion in the past year, and we’ve begun to see a small, but growing, number of these deals signed. Can these deals change these dynamics in any way? We are skeptical for several reasons:

  • First, the publishers are going to ask for substantial price increases to agree to transformative agreements (both “read and publish” and “publish and read”) that really advance open access. This is perfectly rational: Elsevier reports that 15% of its journal revenues derive from corporate and individual subscriptions; these revenues can be expected to evaporate completely. It is rational for publishers to attempt to recoup these revenues, and this requires them to raise their charges to the academic sector by 20% on average.

    In addition, transformative agreements are not being negotiated between one publisher and one institution, but over time and across a very large number of institutions. While “transformative” agreements are being negotiated with large numbers of institutions, many more are likely to remain outside such arrangements. Those “read” institutions will expect their subscription fees to decrease to reflect the open content, requiring that more be captured from “publish”-intensive institutions. While this may be equitable, it remains to be seen whether “publish” institutions will be able and willing to accept the radical reallocation of costs logically implied by transformative agreements. Every deal signed lowers the value of “read” subscriptions at all other institutions (because more of the content is available OA)– but the perception of that value is different for every institution. Hence, publishers need to protect themselves by offsetting that lost value via the institutions that sign ‘publish” deals.

    It is no surprise that the Elsevier deal with Couperin, the French consortium of universities and research organizations, which was touted as leading to a decrease of subscription fees, has disappointed. The deal is not Plan S compliant; it is not even a real OA deal. Articles authored by researchers unwilling to pay APCs (even at the discounted rate offered by Elsevier) will remain under embargo for one year.

  • Moreover, these deals are not homogenous, and – until standards emerge – they will continue to require lengthy negotiations, limiting the capacity of most publishers and institutions to roll them out fast enough. In the meantime, they disadvantage smaller publishers – including many society publishers – and further entrench large commercial publishers.

  • Finally, these contracts are complicated and based on a number of assumptions which are driven by scarcely understood forecasts. In the words of the CEO of an important publisher, “I don’t know whether we will make money or lose money.” Of course, this is just as true for the counterparts on the other side of the table, and negotiating teams have no easy way of knowing whether libraries will be better or worse off as a result of these deals.

In summary, the scholarly journals business is still on a path to raising its profitability, but pricing pressures will intensify. The possibility that the White House will mandate immediate access to articles resulting from research funded by the federal government creates further uncertainty around future revenues. We will discuss later how the larger publishers may attempt to change the composition of their revenue mix by broadening Big Deals into a series of Mega Deals, with the attending risks for the academic community.

About the authors

Portrait of Claudio Aspesi

Claudio Aspesi

A respected market analyst with over a decade of experience covering the academic publishing market, and leadership roles at Sanford C. Bernstein, and McKinsey.

Scholarly Publishing and Academic Resources Coalition

SPARC is a coalition of academic and research libraries that work to enable the open sharing of research outputs and educational materials in order to democratize access to knowledge, accelerate discovery, and increase the return on our investment in research and education.