The academic publishing market is in crisis, with subscription prices rising at a rate unsustainable for most subscribers. Despite the difficulties periodicals at large have had transitioning to digital distribution, with many publishers shuttering their businesses, academic publishing has become more lucrative. In this post, I explore the causes of this “serials crisis” in academic publishing.
How large a problem is this?
Earlier this year, the University of California system left their contract with Elsevier, citing rising costs and restrictions the company wanted to place on UC faculty. UC is interested in transitioning their faculty out of publishing with journals that charge for access, and Elsevier, being in that business, chose a punitive pricing structure for access to their new articles. This is gigantic: the University of California’s library system has one of the largest collections in the world, and UC schools are very well-ranked as research institutions. Elsevier is a similarly substantial actor in academic publishing: this market is very concentrated, and Elsevier is among the 5 biggest publishers in the world. It is also ludicrously profitable. “In 2010, Elsevier’s scientific publishing arm reported profits of £724m on just over £2bn in revenue. It was a 36% margin – higher than Apple, Google, or Amazon posted that year.” Stephen Buranyi. “Is the staggeringly profitable business of scientific publishing bad for science?” The Guardian, June 27, 2017
Publishers in general are suffering with an inability to monetize readership. The easy portability of digital text has been encroaching on journalism everywhere, and it is unusual to hear about a publisher throwing around so much weight. How is it that Elsevier holds such a strong position? What makes academic publishing so different from traditional publishing?
The value of a scientific journal
Scientific journals provide three main services:
distribution/archiving
peer-review coordination
prestige/marketing
I explore each of these roles below. I’m looking for the aspect of the publishing business that might explain the extraordinary potential for incumbents to capture profits and discourage disruption by new competitors.
At first blush, journals’ primary job is to publish articles: they distribute research and archive it in a way that it can be reliably found when it needs to be looked up. Publication costs have plummeted to near-zero with the advent of the Internet This blog is (for the time being) hosted for free, and the proliferation of social networks has grandmothers everywhere publishing their own original content online, for free., and these negligable costs could easily be borne by most publishing academic’s institutions. Near-substitutes for traditional publication, like BioRxiv and Twitter, give diluted options of the articles themselves: this should be a serious threat to incumbent publishers. Just as in the rest of publishing, the marginal cost of a digital copy of a journal is zero, creating massive potential for piracy, if prepublication services do not suffice. Given all the substitutes and the near-zero barrier to entry to competing on this facet of publishing, this is a poor candidate to explain journals’ market power.
The second obvious service provided by journals is quality control. A hallmark of science is peer review, and the journal can provide a match-making service for researchers reviewing one-another’s papers prior to publication. The details of peer review arrangements vary across journals and disciplines, but to the naive outsider, it seems the actual administration of this process should be pretty straightforward. After an initial screening to filter out dubious papers, an editor has to find volunteers to read a paper. Ideal volunteers are already publishing in this field, and they get early access to promising research. They want to read the paper anyway, and don’t expect any payment. It seems to me that such people could organize themselves, and my impression is that they often do. Guest editors for a publication do not commonly receive payment, as I understand, for the service they render in this capacity, and neither do reviewers or authors https://www.quora.com/Do-Editors-of-academic-journals-get-paid-for-their-services. Because this work is donated for free by volunteers who don’t even receive recognition, it seems unlikely to be the source of journals’ market power.
The third service journals provide is almost certainly the main source of sticking power in modern academic publishing. Journals sit between two parties: authors and readers, and serving as matchmaker between them is immensely valuable. In his 2014 best-seller, Zero to One, Venture capitalist Peter Thiel enumerates defensible positions in markets that can afford an entrepreneur some defense from perfect competition and the lack of profits that result. Network effects like the relationship between readers and authors are one of these defensible positions Thiel’s four sources of monopoly power are proprietary technology, network effects, economies of scale and branding. In addition to the network effects of their two-sided market, journals cultivate brand recognition to maintain a toehold in an otherwise untenable market.. From this perspective, similar markets might be credit card providers (shoppers and stores), venture capital funds (entrepreneurs and customers) and colleges (students and their future employers).
Next post, I’ll take a closer look at journals’ stickiness and the changing market they are embedded in. I will predict where things are going, and explore the potential for disruption and improvement in the publishing space.