Economic disruption in mature markets (e.g. Western Europe, North America and Japan)

 Continued growth in the number of researchers worldwide and the associated growth in the research literature

 The continued popularity and success of the journal as a means to communicate and disseminate scholarly research and serve as a means of ‘scholarly reputation management’

 New technology

 Regulation and legislation from governments and their agencies

 The emergence of a small number of large publishers

 Funding agencies, such as NIH, Wellcome Trust and Max Planck Society, taking a more active role in scholarly communication

 The reader/user or their proxy pays for content (the traditional subscription model)

 The author or their proxy pays for publication services (author pays)

 Financial support or subsidy from a sponsor

 Aggregating and packaging audiences to sell advertising

Reader pays model

The reader pays model involves a subscriber paying a fee for an agreed period of time, usually one calendar year, to access content. In the past, the fee was usually paid in advance with the publisher delivering the printed issue at a determined frequency throughout the year. Nowadays, content is typically delivered incrementally online as each article is published with print as an optional extra, sometimes for an additional fee. The subscriber may be an individual but is typically an institutional library. In terms of cash flow, this model is beneficial to the publisher because subscription fees are paid in advance of the subscription period before many costs are incurred by the publisher.

Before the internet era, institutional libraries (for example, academic, government, corporate libraries) would typically subscribe to individual titles selected by an acquisitions or collection development librarian in consultation with a library committee composed of faculty. The primary mode of delivery was print. Since the development of online journals and with the emergence of a small number of very large publishers, content has been bundled into so-called ‘Big Deals’. The Big Deal was created partly in response to the so-called ‘serials crisis’. This can be described as a ratchet effect in the following way: there is a growing number of researchers in the world. These researchers conduct more research and publish more research articles. This has resulted in journals getting larger and more new journals being launched. Consequently, journal subscription rates rose faster than the cost of living and faster than library budgets. Consequently, libraries cancelled subscriptions to journals, limiting access to content. Annual subscription prices were ratcheted up another notch to take account of subscription attrition.

For some journals as well as there being an institutional subscription market, there is also a market for personal subscriptions to individuals. The best examples are Science and Nature which include magazine-style content blended with broad scientific coverage. Other examples are titles for a professional audience such as engineering and medicine. Learned societies often make their journals available to members as part of the membership package or at a low personal rate.

The individual market can be an important segment for some journals to widen readership, increase visibility and generate revenue. The dynamics between these two segments of the market needs to be fully understood to make effective pricing decisions. Publishers are tending to see individual subscriptions decline. This is partly as journals get larger and require more shelf space in the office, and also because institutional libraries and publishers have been successful in licensing content and making it easily and conveniently available online, removing the need for researchers to wait for the printed issue to arrive.

The dynamics between print and online editions, and institutional and individual sales, can be further complicated where journals have a significant revenue from classified or display advertising in the print edition. Media rates for selling online ads are much lower than selling ads in a printed issue and publishers are finding ‘yields’ from online advertising are much lower than for print. This situation is not likely to change in the near future, making publishers with significant print advertising revenue reluctant to cease the hard copy, with its associated costs.

In the print world, an institution often subscribed to multiple copies of the same journal (main library, department reading rooms, etc.). In the online world, these multiple subscriptions are being replaced gradually by a single campus-wide licence providing access to the online version, sometimes as part of multi-year deals. Part of this trend has also seen libraries discontinuing print subscriptions all together. The transition from print to online has been continuing since the mid 1990s and for some publishers the proportion of subscribers taking online only can be as high as 70 per cent. For the publisher, this requires decisions and policies on how to price legacy print subscriptions, terms and conditions for site-wide licenses and when to stop producing print issues all together.

As in any market, supply and demand are important economic factors. In scholarly journals, the demand curve continues to climb as more researchers fuel the growth of existing journals and spawn the development of new titles, for example in new or interdisciplinary research fields. Mabe (2003) has estimated that the number of journals has grown steadily over the last 200 years at around 3.5 per cent per year. On the supply side, the academic library (the primary paying customer for academic journals) is under continued financial pressure as a result of library budgets not keeping pace with inflation or even declining in absolute terms. The long recession starting in 2008 has seen renewed economic pressure in the three large mature markets of the USA, Western Europe and Japan. It seems likely that these financial constraints will continue and have a serious impact on all stakeholders in the journals enterprise. Consequently, publishers are eagerly establishing new markets, for example, in the so-called BRIC (Brazil, Russia, India and China) countries, and looking for innovative ways to add value, for example the use of semantic technology to enrich and tag content.

Publishers and librarians have also responded to the supply and demand pressures, publishers by bundling content and librarians by forming purchasing consortia or collectives.

 Content is licensed from the publisher for a multi-year term (often 3 years)

 The ‘base’ price paid by the consortia to the publisher is typically the total amount of the subscription value of previously subscribed content from each of the consortia members

 There is a premium or access fee that is negotiated between the publisher and consortium that enables members of the consortium to access previously unsubscribed journal content

 Annual price increases are usually subject to a price cap

 There is a method to add new content to the collection at an agreed price

Author pays model

Partly in response to the growing pressures on academic library budgets, there are an increasing number of publishers and journals that are adopting an ‘author pays’ model. This is known as Open Access (OA) publishing where authors publishing in the journal are required to pay a fee (often termed an ‘Article Processing Charge’, APC) and in return, articles are made freely available online to all at no charge. APCs range from a few hundred dollars to several thousand dollars with the average somewhere in the range $1500–2500 per article. The author pays model has also been termed the ‘gold route’ to OA. As far as cash flow is concerned, this model is less advantageous to the publisher than the subscription model as revenue flows (author payments) are more in phase with outgoing expenses.

It is relevant to note that charging authors is not new and goes back to publishers levying ‘page charges’ on authors. These charges were based on the understanding that authors benefit from publishing in a journal and should be asked to support part of the costs. Typically, such charges would cover so-called ‘pre-press’ or ‘first copy’ costs, i.e. the costs of preparing an article for publication which would typically include:

So called ‘run-on’ costs would be covered by the reader through subscription charges. Run-on costs would include manufacturing costs (printing, paper) and distribution. This page charge/subscription fee model is an example of a hybrid business model.

Some journals employ a tiered page charge scheme where charges are triggered once a page limit is exceeded. Page charges are sometimes voluntary and waiver schemes are also available for authors who are not in a position to pay. These variations are also used by some OA publishers.

In the late 20th century pages charges declined or charges were made voluntary rather than mandatory. This trend was driven largely by commercial publishers who in the 1960s and 1970s developed journals that were free to the author and relied exclusively on subscription charges.

Where society journals still have page charges then a possible way forward to a full OA model would be to increase author fees and reduce subscription prices, eventually removing subscription charges altogether.

Another option for author side payments is to charge authors a ‘submission fee’, whereby the author is charged a fee whether or not the article is published. This spreads the financial costs beyond solely published authors. Thus far, it appears that few journals are willing to adopt this variant as possibly they fear it might deter submissions.

The number of OA journals continues to grow and the take-up of OA can also be measured in terms of the growing number of OA publishers, ranging from not-for-profits – like the Public Library of Science – to commercial OA publishers – such as BioMedCentral (acquired by Springer in 2008), Hindawi (based in Egypt) and InTech (based in Croatia). The OA model clearly works for some publishers in some subject areas and it is now more of a question of how quickly the model will develop and move into other disciplines. Authors in some fields (predominantly biomedical) have been early adopters, chemistry has been less embracing, and it is likely that in other fields (e.g. mathematics) researchers with limited or no access to funds will be less attracted to the author pays model. The same applies to authors in developing countries where funds to pay OA fees would represent a significant cost, putting these researchers at a disadvantage (unless they were subsidised in some other way).

The trend to launch new journals under an OA model is partly driven by financial considerations. Starting up new subscription-based journals takes more upfront investment of money (with payback over 5–7 years), whereas OA journals are more ‘pay-as-you-go’. The new OA publishers have been able to ramp up a lot of journals very quickly.

How the OA business model impacts financially on institutions depends on a number of factors such as: total expenditure on OA articles against expenditure on subscription products and the rate of transition from one model to the other. A Research Information Network (http://www.rin.ac.uk/) study (‘Heading for the open road: costs and benefits of transitions in scholarly communications’) identifies five different routes for achieving a sustainable transition, and compares and evaluates the benefits as well as the costs and risks for the UK.

For any scheme requiring author payment, it is important that publishers adopt clear policies to ensure that an author’s ability to pay is separate from editorial acceptance, creating a ‘firewall’ between the editorial office and finances.

Subsidy

Subsidies can take different forms from real financial resource through to resource in kind, donations of time and non-financial resource such as space, computer equipment and expertise. Many small publishing ventures and start-ups are funded in this way until they develop a sustainable financial model for the longer term. It can be a somewhat precarious existence to be a beneficiary of someone’s largesse.

Perhaps the best recent example of subsidy funding a start-up is that of the Public Library of Science (PLoS). PLoS was founded in 2000, and received a grant of $9 million from the Gordon and Betty Moore Foundation to help support the creation and launch of a high-profile OA journal – PLoS Biology. Since then, PLoS has gone on to launch other high-profile journals, community-style journals and PLoSOne, all of them based on the OA model. PLoS is now financially self-sustaining and the rapid growth and success of PLoSOne has been one of the contributing factors.

As an aside, the PLoSOne model is different from most journals in a number of ways. As mentioned above it depends on a gold OA business model and employs a Creative Commons licensing scheme where authors retain copyright. The journal adopts the principle of peer review, but has implemented peer review in a different way from most journals. Rather than being asked to judge scientific quality or significance of an article – the scheme used by most traditional journals – referees are asked to judge on technical correctness, validity of the experimental method, whether conclusions flow from results, etc. Scientific quality and significance are then judged post-publication by readers using article-based metrics such as downloads and post-publication commentary.

The dramatic success of PLoSOne (it rapidly became the world’s largest scientific journal in terms of articles published) has led to the model being copied by a number of other publishers who have created their own versions of PLoSOne. These now have their own term: ‘mega-journals’.

Other countries also support scholarly journals through subsidy. For example, in Japan, many learned society journals are partially supported by a subsidy system called ‘kakenhi’. This is a system of grants-in-aid that provide financial support or subsidy for many Japanese learned society journals. The dependence on government agencies to support a national scholarly publishing system may remove some market pressures, until of course government decides that there are other national priorities and journals have to fund their own way.

Another example of subsidy is SciELO – Scientific Electronic Library Online. This is a model for cooperative electronic publishing of scientific journals on the Internet designed to meet the scientific communication needs of developing countries, particularly Latin American and Caribbean countries. SciELO is product of a partnership among regional, national and international institutions. In a similar way, BioOne is a collaborative venture of learned societies in the biological sciences where each founding organisation continues to make financial and/or in-kind contributions to BioOne’s development. BioOne provides a means for smaller societies to gain market impact and presence online and a means to provide libraries with a high-quality collection. ProjectMuse has similar objectives for learned society journals in the humanities and social sciences.

Advertising and sponsorship

There are a very small number of high-profile journals that generate significant revenue from advertising, both classified – i.e. principally career sections and advertisements for jobs – and display ads – i.e. for products and services. These are publications such as Nature and Science which are as much magazines as they are journals and have a much broader reach in terms of subject coverage. They also have very large readerships and circulations – institutional and individuals – which mean that advertisers can reach a large audience for their products and services. Advertising in most scholarly journals has generally a much more limited potential because of the smaller readership. There are exceptions of course, and these are typically in fields where the readership has a professional base such as medicine or engineering. The transition from print to online for these journals has been another challenge as advertising rates for online publications are typically a fraction of advertising rates in printed journals.

Sponsored sales of single issues

Sponsored sales of single issues can be a significant income stream for some journals. This involves a sponsor (often a corporate organisation) purchasing a particular journal issue in bulk because the contents of the issue are relevant to their business. Journals in the medical field (e.g. New England Journal of Medicine, The Lancet) can generate significant revenue from sponsorship of this kind where a pharmaceutical company might purchase 100 000 copies of a report on a successful clinical trial. For smaller clinical journals such sales can represent an important secondary income.

Sponsored sales whilst being a positive boost for sales and providing additional visibility for the journal brand, can be unpredictable from year to year. There are also possible ethical issues to steer clear of when selling content in this way and making sure there is a clear ‘firewall’ between editorial control and the sponsors’ interests. In the last couple of years such revenues have been declining, partly because of the current economic situation and perhaps partly because the pharmaceutical companies are looking at other ways of promoting their products.

Other revenue

Publishers can also earn additional revenue from their digital content, often in the form of royalties or license fees, by making their content available through other channels such as third-party aggregators. These aggregator databases are intended to access segments of the market that are difficult or costly for the publisher to access. To avoid the possibility of cannibalising revenue from current subscriptions, publishers have the option to embargo content in these databases so that access is only to prior years and not to current content.

Editorial office support

There are a number of activities that incur costs surrounding the editorial process. The journal needs an effective system to support the process of managing submission of articles, peer review and manuscript tracking. Almost all journals now use a software system to manage these processes either developed in house or leased under a license from a specialist service provider. Consequently, the publisher is faced with a ‘make or buy’ decision, where factors to take into account include:

Licensing software from a supplier of course means there are external costs and license fees rather than internal salaries and consultants fees involved. Peer review software companies charge on the basis of a fee for each manuscript submission that goes through the system.

In addition to software, managing a journal office includes costs for peer review management, manuscript checking, author support and administration. These costs can be as salaries for in-house staff or payments and stipends to support external editorial offices housed at the editor’s research institution. All of these costs usually scale as the size of the journal grows. A useful business ratio to keep track of here is cost per submitted manuscript and how this scales with volume of articles. Another useful metric is revenue per article – particularly if your journal is considering moving from a subscription to an author pays model.

Production costs

Production is another set of publishing activities that has changed significantly in recent years with associated cost implications.

Production includes typesetting (usually in the form of XML composition), copy editing and page make up – the so-called ‘pre-press’ activities. Many of these activities, particularly pre-press, were done in local markets by small to medium-size vendors close to home. Nowadays, much of this production activity is outsourced to large companies based off shore in places like India. Cost-effective management of production vendors has become an essential skill as well as the ability to negotiate service levels and prices and manage expectations. Travel budgets for production staff have risen accordingly. With this off-shoring and outsourcing has also come economies of scale that have driven down prices significantly. In such an environment it is unlikely that production departments will find it beneficial to enter multi-year agreements with vendors – better to have the ability to renegotiate with existing suppliers and/or negotiate with potential new suppliers as competition, technology changes and economies of scale drive prices down further. Finance Directors will be looking to see price per page metrics trending downwards.

As the transition continues away from print then other potential costs savings are available; for example, print-on-demand technology provides publishers with a cost-efficient method to manage print runs and warehousing costs. In an innovative move, some publishers have adopted a ‘rotate and condense’ print format that accommodates two pages on a single page with significant cost reductions.

Online delivery

While production costs have come down, the new activities associated with online production and delivery have added new costs. A publisher

now needs to build an online delivery platform or rent space with a journal hosting provider (another ‘make or buy’ decision). Technology costs scale in a marked contrast with how editorial or production costs scale. Technology costs typically have a large fixed cost component and small variable costs (as content is added to the platform) whereas production costs tend to scale proportionately according to the size of the journal. One can list many different requirements needed for successful online journal platforms, such as:

This list will only continue to evolve and grow with new developments in the market and emerging opportunities for the management of scientific data. The challenge is to assess how each of these activities and processes adds value compared with its impact on your cost base and ability to generate a return on investment.

Marketing and sales costs

As for many other parts of the journal publishing value chain, marketing and sales have not been spared from significant strategic and operational change.

With the move away from annual journal subscriptions based on simple price lists published in a catalog, to online information products bundled via a license negotiated with the customer, there are a great many new costs associated with these different practices: for example, legal costs of creating and managing licenses, and sales staff costs associated with face-to-face discussions with library customers to negotiate mutually beneficial deals, new requirements to mine customer data and drive sales success. There is also a need for software and systems to manage these data and the associated business transactions, such as:

With more and more marketing being managed via sophisticated software, the world of marketing (whether it is author marketing, usage marketing or content marketing) is becoming evidence based and analytically driven. Many of these systems are web based and provide valuable tools to staff in the office and on the road. New systems mean additional costs and the challenge is to show a positive return on investment. In addition to these new activities, there remain costs of other activities, such as exhibiting at conferences. Editors and societies demand it, but it is hard to determine whether it is cost effective.

Financial strategy and pricing

An important first step in any assessment of publishing finances is clarity on the organisation’s financial strategy and how this fits within its overall mission. A profit motive is clear in any commercial organisation whilst for a not-for-profit then financial aspects are just as important even if the goal is to break even financially as well as serve the mission.

Pricing of journals and information services is more an art than a science. Pricing partly depends on the objectives of the owner and the strategic and business goals the organisation sets out to achieve. Pricing is also about value and understanding the value your customers place on your product in a competitive market. An effective pricing strategy should also be part of the marketing mix and although costs are important to keep in mind when making pricing decisions, cost-based pricing is more likely to be appropriate for commodity-style products rather than a journal publishing a unique collection of content.

Value, of course, tends to be in the eye of the beholder and understanding the value proposition of your journal means having a deep understanding of your customers and the competitive market. A highly cited quarterly review journal is likely to represent a different value proposition from a large rapid communication journal, for example. Being closer to the customer is much easier in the online world particularly as usage defines a value metric and usage is now well calibrated through the COUNTER system (http://www.projectcounter.org). Ratios such as ‘cost per download’ (CPD) are now terms commonly in the vocabulary of publishers and librarians where librarians set CPD thresholds and if a journal exceeds a particular CPD value then this triggers a closer review or even cancellation of the title in question. For OA journals, setting appropriate article processing charges for authors requires a similar philosophy concerning value, the competitive market and financial objectives.

Revenue comes in many flavours, as indicated in the business models section above. For each business model, there needs to be an appropriate pricing scheme. As well as multiple journal bundles, pricing discounts and consortia licenses, some publishers have been successful with tiered pricing schemes. This is where each customer is assigned to a tier according to a metric or set of metrics that relate to the value a customer places on having access to the content. For example, a small two-year college might place a lower value on having access to research content than a large research intensive university and prices should vary accordingly. Other pricing schemes use full-time equivalent number of faculty or researchers as a measure, and the Carnegie Classification (http://classifications.carnegiefoundation.org/) has been used by publishers as a means to set prices according to the value a customer is likely to place on having access to content. Product tiering is another common pricing strategy, where the customer pays a premium for value-added features; this strategy is less common in journals publishing.

Given that most publishers are in business to maximise access and distribute their content widely, pricing models that are more restrictive and meter usage are less likely to support objectives and goals for the publisher and tend to be unpopular with librarians as well. A key message is to keep pricing schemes transparent and simple to communicate to all concerned.

The financial statements

Three financial statements are required to manage any business: the profit and loss statement, balance sheet and cash flow statement. There are many useful books available on finance for non-financial managers; for example, Financial Intelligence: A manager’s guide to knowing what the numbers really mean is a practical guide with informative sections on each of the three financial statements (Berman and Knight, 2006).

Other important financial statements

Financially intelligent managers should not only understand the P&L statement but also be aware of and get acquainted with two other important financial statements. These are briefly defined here and for further background the reader is referred to one of the many books on financial management for non-financial managers.

Launching new journals

Research continues to grow and publishers have responded to market needs by launching new journals in emerging fields and interdisciplinary topics. Launching new journals compared with managing an existing journal program requires a different mind-set, for example the approach to risk and investment. Launching new journals can be an effective way to grow the business and a number of factors need to be taken into account, such as:

A successful journal launch is always a team effort and it is strongly recommended that one of the team has a strong financial background if you don’t have a management accountant on hand. This will help create and develop the business plan before launch and help monitor risks and provide forecasts as the journal develops.

Berman, K., Knight, J. Financial Intelligence: A manager’s guide to knowing what the numbers really mean. Cambridge, MA: Harvard Business School Press; 2006.

Mabe, M. The growth and number of journals. Serials. 2003; 16(2):191–197.

Cox, J., Cox, L., Scholarly Publishing Practice: Academic journal publishers’ policies and practices in online publishing, 2008. [ALPSP Research Report, Third Survey].

Heading for the open road: costs and benefits of transitions in scholarly communications – a study commissioned by Research Information Network (RIN), JISC, Research libraries UK (RLUK), the Publishing Research Consortium (PRC) and the Wellcome Trust. April 2011.

King, D. W., Alvarado-Albertorio, F. M. Pricing and other means of charging for scholarly journals: a literature review and commentary. Learned Publishing. 2008; 21:248–272.

Nagle, T., Hogan, J., Zale, J. The Strategy and Tactics of Pricing, 5. New York: Prentice Hall; 2010.