8.4 To Understand Price One Must Understand Publishing Costs
While there have been literally hundreds of articles written about the price of scholarly journals in recent years, very little has been written about the cost of publishing journals. To understand why prices are what they are, one must know about the cost of publishing journals. One reason that costs are not often discussed in the literature is that publishers do not want their competitors to know their costs. Also, costs vary a great deal among journals, depending on the characteristics of journals such as manuscript rejection rates, number of articles, number of pages, number of issues, and circulation and the type of resources used such as location and experience of editors, technologies applied, and quality of paper. With that concern in mind, we decided to develop a cost model of journal publishing in order to analyze effects of circulation, changes in characteristics of journals over time, and how such factors might affect the price of journals. We formulated a cost model using data we collected for the 1978 journal systems analysis and more recent pieces of information gleaned from the literature. The model has been reviewed by staff from different types of journal publishers, who found it reasonable with the caveats mentioned above. We also compared our model data with other published data and found them a good source of validation. 
The cost model consists of five functions or groups of activities as follows:
Article processing including manuscript receipt processing, initial disposition decision-making, identifying reviewers or referees, review processing, subject editing, special graphic and other preparation, formatting, copy editing, processing author approval, indexing, coding, redaction, and preparation of master images.
Non-article processing including many of the same activities involving editorials, letters to the editor, brief communications, and book reviews. It also includes preparation of issue covers (for paper versions), tables of contents, and indices.
Reproduction involving printing, collating, binding of issues, and printing for reprints (all of which activities are not necessary for electronic versions).
Distribution of paper versions involving wrapping, labeling, sorting by zip code, and mailing; distribution of electronic versions including storage and access. Subscriptions maintenance is required of both versions.
Support activities including marketing and promotion, rights management and other legal activities, administration, financing, and other indirect activities.
In 2002 the average US science journal characteristics were estimated to be 10.8 issues, 154 articles, 213 manuscripts submitted, 1,910 article pages, 397 special graphics, 2,215 total pages, and 4,800 subscriptions.  The cost model estimates for these functions are $255,897 for article processing, $22,957 for non-article processing, $215,392 for reproduction and distribution, and $197,908 for support, for a total of $692,154. The article processing cost per article is $1,660 per article and the reproduction and distribution cost per subscription is about $45 per subscription (without allocation of support costs).
By holding all other journal characteristics and cost parameters constant, we can assess the effects of journal characteristics on the total and unit cost. For example, we find that the cost per hypothetical subscription varies substantially by number of subscribers (see Table 8.1).
|Subscribers||Cost per Subscription|
The price necessary to recover costs at 500 subscribers is at least $993 per subscriber, but it decreases sharply at the 2,500-5,000 subscription range, at which point the unit costs decrease slowly approaching an asymptote (which is the incremental reproduction and distribution costs). At 500,000 subscribers the cost is $2 above these costs. Of course, in reality the journal characteristics and cost parameters among journals vary. For example, large circulation journals tend to publish more issues, have expensive photos and graphics, reject more manuscripts, and use more expensive covers and paper. Spinella (this volume) makes this point in discussing publication of large circulation journals, such as Science. However, by holding non-circulation characteristics and cost parameters constant we get a good picture of the effect of size of circulation. Halliday and Oppenheim (this volume) present similar results as above, but expand by showing effects of varying overhead and profit levels (which we call support above).
Similarly, by varying the number of articles published from, say, 50 to 200, we find that cost per subscriber increases from $77 to $172 (at 4,800 subscribers). The direct article processing costs per article do not vary much—$1,747 per article with 50 articles and $1,651 per article with 200 articles in a journal—but the difference in cost per article is substantial when non-article processing, reproduction and distribution, and support functions are included ($7,375 vs. $4,130). Similarly, the cost per article received by subscribers decreases from $1.54 per article with a 50 article journal to $0.86 per article for a journal with 200 articles. That cost per article decreases as journal size increases may be the reason that publishers have steadily increased the size of journals over the years (from an estimated average of 85 articles per title in 1975 to 154 in 2002).