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9. Economic Models of Digital-Only Journals
We are exploring economic aspects of digital-only journals using Ithink Analyst, a modelling software package. We have produced three models and have used simulations to test model sensitivities. We will first describe some background to the models. We will then describe the software tool and how we used it. We will then describe each model in turn and, finally, describe our plans to further develop models of digital journal production and delivery.
Much development of digital journals, especially digital parallels of print journals, has been conducted by commercial publishers. Their pricing models do nothing to address the serials crisis. More innovative pricing models have been developed by stakeholders from within the higher education (HE) community (e.g., Harnad and Hemus, 1997; Harnad, 1995b; Fishwick et al., 1998; Harnad, 1996). They seek an effective and affordable system for disseminating peer-reviewed scholarly articles. Their models often bypass commercial publishers; in other words, the journals are produced by the HE community. Proponents of these models claim that digital publishing can be significantly cheaper than print publication. They argue that as much as 70% of the total cost of journal production and distribution is incurred by printing and distributing print copy and that this is saved in a digital environment (Harnad, 1995; Duranceau, 1995; Harnad and Hemus, 1997; Harnad, 1996). This is contested by publishers who claim that the variable costs they claim, including print and distribution, account for only 20-30% of the total (Garson, 1996; Arjoon, 1999; Noll, 1993; Rowland et al., 1995; Fisher, 1997). Some of the difference between these positions is related to level of functionality that writers assume is necessary.
Proponents of alternative models argue that many publisher functions are unnecessary. Their models are often based on production of unsophisticated text articles produced at significantly lower cost. This approach can be criticised for two reasons. First, journal users expect additional functionality (Elsevier Science, 1996; SuperJournal, 1999a,b). They anticipate that digital journals will allow them to work more efficiently. Users consider core features to include the ability to browse, search and print, good system performance, critical mass and currency, and the facility for seamless discovery and access (SuperJournal, 1999a; McKnight, 1997; Electronic Publishing Services Ltd , EPS Ltd; Armstrong and Lonsdale, 1998; Butterworth, 1998; Jenkins, 1997; Rowland et al., 1997; Fletcher, 1999; Prior, 1997; Rusch-Feja and Siebeky, 1999; Petersen Bishop, 1998; SuperJournal, 1999b). User acceptance is essential if digital journals are to succeed.
The second criticism is that the elimination of some of the filtering and organisation that is traditionally done by publishers increases the work of librarians and end users. The net effect on the academic community may be increased cost. For these reasons, we did not study an end product consisting of unsophisticated text. Our models assume the core level of functionality that users demand. The development and inclusion of this enhanced functionality requires technical skill that is expensive. Publishers claim that the additional costs more than compensate for any savings from print and distribution. They argue that digital journals cost at least as much to produce and distribute as print journals.
It is difficult to compare the cost of digital and print journal production and distribution. Publishers are reluctant to disclose costs. Even if they did so, it would be difficult to compare journal costs across companies because different accounting practices are employed. The publishing industry does not employ activity-based costing. There has been academic work on activity-based costing of print journals, notably that of Carol Tenopir and Don King (see Chapter 8 and Tenopir and King 2000). The costs associated with digital publication are, as yet, unknown. The activities involved in digital publishing have yet to stabilise, making it difficult to determine costs.
We are building activity-based models so that we can develop a better understanding of the production and delivery of digital-only journals and of the different roles and costs involved in that process. These models also allow us to explore alternative cost-recovery and pricing mechanisms.
To date, we have built and tested three models of digital-only journal production and delivery. These models were based on a review of the literature supplemented by personal communication with practitioners. The models were built as part of a project which evaluated economic models of a number of aspects of the digital library within a four-month period. In 2000, Leah Halliday conducted interviews with several stakeholder groups and revised the models in line with the data that she collected. The results suggest that publication is most efficiently undertaken by professional publishers within an organisation that is dedicated to journal publishing (Halliday and Oppenheim, 2001a,b,2000b,a).
9.2 The models
We will now describe the three models that we have developed. Journal production and delivery is an international business, but these models were built from a UK perspective. Thus, for example, staff costs are based on UK figures and where value added tax is applicable in the UK it is applied at the rate of 17.5%. Where we quote figures, however, we have converted them to US$ at the exchange rate in February 2000.
We refer to the first model as "traditional". It models a process similar to that of print journals. This model is included for comparison with current practice but does not include production of print. In this traditional model, authors, referees and editors are unpaid. Editors receive from the publisher only a contribution towards editorial office costs. Production and delivery costs are recovered through sales of subscriptions and individual articles. The model differs from print production in that the entire editorial process is conducted electronically and the product is delivered to libraries in electronic form.
The second model is of a non-commercial journal that is available for use free of charge on the Internet. This model is based on the work of Stevan Harnad (Harnad and Hemus, 1997; Harnad, 1995b,1996). His model is based on the premise that academics submitting papers to journals for publication seek to disseminate their findings widely and would contribute to costs to facilitate widespread dissemination. In a print environment, it was necessary to accept access restrictions because print publication is expensive and publishers had to recoup their costs. In a digital environment, Harnad argued, costs can be reduced by as much as 70%, bringing them to a level that can be recovered from authors rather than subscribers. Harnad proposed that authors pay page charges and that journals be available to all users free of charge on the Internet. He suggested that the author fee should be around $400 for a 20-page article. Recovering costs from authors would actually contribute to cost reduction as subscription administration would be unnecessary.
The third model is a free-market model. It is based on a supporting study commissioned by the UK Electronic Libraries Programme (eLib) and conducted by Fishwick et al. (1998). Fishwick et al. compared a number of different models for pricing electronic scholarly journal articles. Their report suggested that the current academic information delivery chain is inefficient due to a number of distortions in the supply-demand chain. Among these are that: (1) authors represent a principal source of demand for publication but make no contribution to publication costs; (2) those consuming the information, i.e. the readers, seldom pay for it, preferring instead to obtain it from libraries; and (3) much of the journal publication work is undertaken by editors and referees without payment, or with minimal honoraria.
Fishwick et al. proposed an alternative model which introduced `normal' market feedback mechanisms into the academic information delivery chain with a view to developing an efficient market for scholarly articles. Publication would be funded by a combination of author submission fee and by sales of subscriptions and/or individual articles. Thus, both authors and users would contribute to costs, reflecting the fact that both contribute to demand. Editors and referees would be paid to encourage efficiency, and authors would receive royalties. Fishwick et al. argued that if authors paid to have their work published and received royalties based on the number of copies sold, they would submit for publication only their best work. Rather than publishing as many papers in `minimum publishable units' to maximise their perceived research output, they would concentrate their best work in fewer, high-quality papers. to encourage them to submit for publication only material of the highest quality. The system includes a mechanism to support authors who cannot afford to pay a submission fee. The editorial office would apply to charitable foundations to fund these papers. Papers would then be available individually or in customised bundles from the publisher database.
Fishwick et al. also suggested that the facility to print from digital journals be rationed even when the library obtains a journal or database of articles by site license and thus, has paid in advance for unlimited access by end users. They argued that this would force end users to identify and select only journal articles that they genuinely read rather than filtering after printing. This would generate usage data for librarians (and possibly publishers) that would reflect real need, argued Fishwick et al..
This recommendation suggests that end-users currently waste resources by gathering information that they do not need. Given that researchers' time is scarce, this seems unlikely. Rather than making the system more efficient, rationing might prejudice researchers' ability to do their jobs. This is a potential practical problem. There are also cultural barriers to the market model. It is important to some academics in their roles as authors, editors and referees, that scholarly publishing operate independently of market forces. They believe that direct financial remuneration introduces motives that have no place in the system (L. Halliday, unpublished data 2001).
All three of our models represent the full publication cycle from receipt of manuscripts by the editor to delivery to end users. The resources required to produce and deliver journals are similar in each model. Staff costs are most significant. All of the models include two half-time staff responsible for production and systems. In the market model, where editors and referees are paid, the total financial cost is substantially higher than in the other models. We included an overhead on staff costs which represents, for example, buildings and support such as personnel and training, i.e. resources that are not related directly to products such as journals. We pitched the overhead rate at 120%. This reflects true costs in a large organisation such as a university. As these alternative models are proposed as HE-based operations, we think it realistic that they be costed as if housed in universities. It is important to recognise that just because work is undertaken without charge does not mean that it is cost-free. In economic terms, production that distracts an academic from her/his core tasks, i.e. research and teaching, may be more expensive than production that is undertaken by someone with the required skills who is dedicated to journal production. Nevertheless, we recognise that it may be possible to produce journals in a leaner organisation so we applied the overhead at 60% and re-ran model simulations for comparison. We also varied the surplus applied from zero to 20% in two of the models. We assumed that some surplus would be required for development of the journal. The free-access model is a much leaner model and does not include a surplus. Development would have to be funded through grants or other sources of funding.
9.3 Modelling software and simulations
The software package we used is called Ithink Analyst. Four key element types are used to build Ithink models.
A stock represents an accumulation. The items accumulate by flowing into and/or out of the stock (see description of the `flow' below). The total content amounts to the inflow minus the outflow at each time period in a model simulation. In many of the stocks represented in our models the inflow and outflow are equal. For example, a journal editor receives a number of manuscripts every year. Of those, he or she rejects a very small percentage and the remainder are sent for peer review. The same number of manuscripts enter and leave the editorial office.
A flow either fills or drains a stock in the direction of the flow arrow. A cloud at either end of a flow indicates an infinite source of or destination of the material flowing to or from a stock. Basically this indicates that the source of material passing through the flow is beyond the scope of the model.
A converter informs other elements in the model. It may contain a constant value, e.g. tax at 17.5%; an incremental value, e.g. 1 in year 1 and rises by 1 in each subsequent year; a variable which can be manipulated by a model user; or an algebraic relationship between different elements in the model.
A connector is like a wire which transmits information between elements in a model, e.g. in Figure 9.1 the flow labelled `xfer to ref' represents the number of manuscripts that are sent to referees to be reviewed. The value of this flow is determined by the number of manuscripts received by the editor (MS received), and the number rejected immediately, e.g. because the subject is unsuitable. The value of the converters is conveyed to the flow by connectors.
Each of our models consists of four interconnected sectors: content origination, publication, information brokerage, and the library function. The models all simulate production of a small journal which publishes 120 10-page papers per annum. We used Ithink to represent graphically the interrelationships that characterise each system. We then defined numerically each element in the model. Some of these definitions are equations which describe the relationship between two or more elements in the model. The bases of the equations and the assumptions in each model element are described within the model in element `documents.' These can be viewed by a model user. The models are designed to be used rather than viewed. Although we deliberately kept them as simple as possible, the systems modelled are fairly complex. Pictures of whole models cannot be captured in a page.
Figure 9.2 is an example of the publisher section from the market model. It includes two stocks: "publication" and "publ budget". "Publication" is the accumulation of articles published in the journal. The flow from the "origination" sector into this stock is not shown. "Publ budget" is the publisher's budget. Costs ("publ spend") and profit ("publ profit") flow out of it and revenues flow in. The flows representing revenues from other sectors are not shown in Figure 9.2. Converters are used to calculate various values in the model. For example, total publishing costs are calculated with reference to publication costs, editorial costs and the overhead applied to those. The total publication costs informs the authors' contribution, i.e., the value of the author fee. Converters with rectangular buttons in them (e.g. "overhead" and "profit margin") represent those whose values are determined by the model user.
We varied the value of elements in each of the three models and ran a series of simulations to establish the costs and benefits for different stakeholders in manipulating elements in this way and also to identify model sensitivities. As is evident from Figure 9.2, which shows only one quarter of a model, each model has a large number of elements that could be varied. The time period of the project severely limited the number of simulations that we were able to run. We will now report the results of some of those simulations.
9.5 Traditional model
First, we ran a series of simulations to determine the subscription price of a traditional-model journal if the following elements were varied: the overhead rate, the profit margin, and the size of the subscription base. We display the results in Table 9.1.
|No. of subscribers||Subscription fee ($)|
It is clear from these figures that a journal making a modest profit and recovering full costs can be supplied to users for a modest fee as long as the subscription base consists of at least 500 subscribers. This gives an idea of how inexpensive journals can be without adopting an alternative cost-recovery model. We acknowledge, however, that the journal modelled is slightly smaller than the average scientific journal. Our modelled journal publishes 1,200 article pages per annum whereas an average journal publishes 1,434 article pages per annum (Tenopir and King, 2000, p.237). The effect of this is likely to be negligible.
9.6 Free-access model
We also ran simulations to determine the level of author fees that would be required to fund the free-access model. We present the results in Table 9.2. The fee varies depending on the overhead and profit margin. These fees were submission fees, i.e. they are based on the assumption that all authors whose papers are refereed contribute to costs. It has been argued that all authors should contribute to journal costs as some costs are related to administration and refereeing of papers regardless of whether they are accepted. It may be unrealistic, however to expect UK authors whose papers are rejected to contribute. Some journals in the USA charge submission fees which are not returnable but UK authors are less willing to pay fees for submission or publication (L. Halliday, unpublished data, 2001).
|Submission fee ($)||816||58||1005||112||1383||154|
|Per Page ($)||81||6||101||11||138||15|
Harnad suggested that fees of tens of dollars a page rather than hundreds of dollars a page would be acceptable and estimated that it would cost approximately $400 to produce a 20-page article. This gives a page charge of $20 which is insufficient to support our model. That is not surprising considering that ours is a model involving the employment of paid professionals to produce a journal with what we consider to include core functionality. Harnad suggested that professional publishing staff are unnecessary. His model and relied largely on unpaid contributions. Nevertheless, the fees generated by our model fall within a range that some authors consider acceptable. Acceptance of the free-access model requires authors to take a system-wide view of the costs and benefits of scholarly publishing as it affects the whole organisation including the library (see Tenopir and King 2000). The main barrier to implementation of this model is cultural: that is, getting authors to accept the principle of page charges. Few journals have tested this model. One example is the New Journal of Physics published by the Institute of Physics Publishing . Authors pay $500 per accepted paper. Submissions to this journal have been slow, but this is the case for any new journal. Authors' reluctance to publish in NJP may be related to concerns about digital publication per se rather than to the pricing model.
9.7 The market model
Clearly, the financial cost of producing a market-model journal is high because editors and referees are paid and authors receive royalties on their papers. Again, we will report on subscription fees and author fees. Fishwick et al. suggested that published papers be sold to users either by subscription to the publisher's whole list, by subscription to specific parts (e.g., within a specific subject area), by a two-part tariff which consists of a reduced subscription price combined with reduced transaction cost per individual article, or simply on a pay-per-use basis. We were unable to explore the likely proportion of subscriptions to sales of individual articles but we did consider the effect of sales of individual articles on author royalties. The author fee pays for editorial and refereeing work and contributes 10% of production costs. The author receives a royalty of 5% on subscriptions income and sales of articles. The administration of royalty fees adds to costs in this model as do additional tasks associated with unfunded papers — Fishwick et al. suggested that the editorial office should seek funding for these from appropriate charitable foundations. In the model, this administration is undertaken by a half-time secretary, who, we estimated, would be capable of processing 600 manuscripts per annum (a journal with an 80% rejection rate that publishes 120 papers per annum would process 600). Table 9.3 presents the submission if the overhead rate and rejection rate are varied.
|Submission fee ($)||651||562||703||579|
|Per Page ($)||65||56||70||58|
Obviously, the rejection rate has little impact on submission fees in this model because author fees contributed to only 10% of production costs. The fee is collected primarily to pay editors and referees who are unpaid in other models. The author pays for the peer-review function while subscribers pay for publication of journal articles.
In this model, we varied the value of the following elements to determine the effect on subscription price: rate of overhead, profit margin, and size of subscription base. The results, reported in Table 9.4, show that the subscription price of a market-model journal is generally 10-12% less than that for the traditional-model journal and the latter does not include a submission fee.
|No. of subscribers||Subcription fee ($)|
Royalty income is related to the sale of subscriptions and individual articles. The royalty is included in the market model as an incentive to publish only high-quality material. The royalty rate is related to journal income. Income is static as any increase in subscriber numbers is used to reduce the price of subscriptions and articles. Thus, author royalties increase only in relation to those of other authors published in the same journal, i.e. a relatively popular paper will generate more income for its author than one that is not frequently read.
Finally, we revised the traditional model to explore the figures generated if both authors and subscribers contributed to costs. This would effectively distribute costs across two groups both of which contribute to demand. The subscription fees generated by the traditional model are modest without author contributions. Author fees reduce them further. However, administration of both sets of fees would add to costs. It is often argued that authors and end users are drawn from the same group so the distinction is not necessary. This is not entirely true, however; many journal readers never write papers. Readers from industrial, professional and clinical settings often are not part of the academic research community. Thus, journals funded only by author fees would subsidise these users. The question to be asked is whether or not this matters as long as scholarly publication is as efficient as possible for the academic community.
These models are first drafts. They contain flaws and omissions, some of which we have discovered although some may remain to be discovered. One example is that we were unable to separate subscriptions administration and maintenance from other publisher costs. We would have liked to represent costs associated with subscriptions by calculating part of the overhead as a percentage of sales income. This would reflect the fact that costs vary with the number of subscriptions. However, calculating the overhead in that way would have required a circular connection between model elements which is prohibited by the software package. It is important that we isolate subscriptions-related costs because they are eliminated when costs are recovered from authors. A fair comparison between models that recover costs only from authors and those charging subscription fees is impossible unless we can do so.
During 2001, L. Halliday built two models based on data from interviews with established commercial and learned society publishers, and with alternative publishers who publish from within universities. Subscriptions administration costs are isolated in these models.
Another important factor is the staffing level required to produce a digital journal. The models documented here were criticised as overstaffed. Halliday's work work during 2001, however, suggested that the models described here are understaffed. All of the activities associated with publishing the journal including production, marketing, and development are undertaken by these staff. Interview data suggest that a journal publishing 120 papers per annum on this basis would require two full-time employees. As staff costs and the overheads on them are the most substantial costs, alteration to staff levels would impact significantly on total costs.
Despite their flaws, these models have been useful for developing our understanding of the digital-journal production and delivery process, and for eliciting feedback. The models allowed us to explore journal publishing and elicited feedback that informed the design of a project, conducted during 2000 and 2001, during which Halliday built models that break journal publishing costs into discrete functions. Incurred by libraries, the costs associated with providing end users with access to digital journals were not modelled, as none of the librarians interviewed had a clear idea of the activities involved let alone the costs of those activities. The model building and simulation was supplemented with qualitative exploration of digital journal publishing and use. Many of the barriers to implementing `alternative' models or to the success of digital-only journals are cultural in getting authors to accept new charging mechanisms. Full details of this work have yet to be published.
1. The report from this project is available at the following URL: http://www.ukoln.ac.uk/services/elib/papers/supporting/#ukoln.
3. Information about Ithink can be found at the following URL: http://www.iseesystems.com/Softwares/Business/ithinkSoftware.aspx .
4. They are also documented in the report of our project which is available at the following URL: http://www.ukoln.ac.uk/services/elib/papers/supporting/#ukoln.
5. Copies of the complete models are available to anyone who would like to manipulate them. They can be opened and simulations run using a free runtime version of the Ithink software which is available from the Ithink Web site.