Is Open Access Destroying Academic Publishers?

Oct 12, 2012

Article ImageThe digital age has given way to an open access renaissance - allowing for the free flow of information traditionally bound up in scholarly journals and academic publications. But when an influential analyst said that a European push toward open access could significantly hurt academic publisher Reed Elsevier's bottom line, many STM publishers took a second look at this model.

A peek behind the headlines shows that the analyst's report is merely one in a series of skirmishes in a years' long war. The journal publishing industry - while still immensely profitable - is facing increasing calls for open access to government funded research results and a reduction in journal prices.

The latest brouhaha began last summer when three United Kingdom-based education research councils announced that Britons will get easier access to the results of publicly funded research starting in 2014. "Removing pay walls that surround taxpayer funded research will have real economic and social benefits," said David Willetts, Universities and Science Minister, in a statement. "It will allow academics and businesses to develop and commercialize their research more easily and herald a new era of academic discovery. This development will provide exciting new opportunities and keep the UK at the forefront of global research to drive innovation and growth."

While the benefits for Britons are being weighed, the consequences for one of the biggest players in the academic publishing market don't sound quite as rosy, according to Claudio Aspesi, senior research analyst at Sanford Bernstein, a financial research firm. Elsevier's most profitable business is publishing peer-reviewed scientists' work and charging university libraries for the journals. A significant move toward open access could break that business model, Aspesi said in his analyst note.

Although it generated a lot of press, Aspesi's comments generated a large yawn on Wall Street, as Elsevier's stock (ticker: ENL) has been trading in a narrow range since his research note was published. (The stock is up 17% for the year.)

Other analysts, while sharing Aspesi's concern for Elsevier's profitability, are more sanguine about the industry's prospects. Morningstar's Michael Corty's analyst report on Elsevier barely mentions the open access threat, saying that Elsevier is the firm's most profitable unit, has a 25% market share and is three times larger than its closest competitor. His only mention of the open access threat is this side note in small type:

"Some scholarly journal users have been taking more of a stand against the prices charged by publishers for content. As a result, publishers like Reed Elsevier may have to take smaller price increases from academic libraries in future years."

Corty echoes the same note of caution in his report on John Wiley & Sons, another academic publisher, yet the thrust of the report states that its science, technology, medical and scholarly unit "benefits from high renewal rates, limited competition, and high profitability."

Universities are increasingly balking at the subscription prices that generate the high profitability that Corty mentioned. This spring, Harvard University's Faculty Advisory Council said in a memo that the increase in journal prices has created an "untenable situation" for the university's library. It continued, "Even though scholarly output continues to grow and publishing can be expensive, profit margins of 35% and more suggest that the prices we must pay do not solely result from an increasing supply of new articles."

The council offers faculty and students several suggestions to help combat the problem, including submitting papers to Digital Access to Scholarship at Harvard (DASH), the university's open access system, and to "consider submitting articles to open-access journals, or to ones that have reasonable, sustainable subscription costs."

Rebellions against the perceived inflated cost of journals have been gaining followers over the past decade or so. More than 12,000 researchers have signed the online petition, The Cost of Knowledge. The website names Elsevier as the publisher with the unfair business practices and asks researchers if the signees will refrain from engaging in publishing, refereeing, or editorial work with the company.

Perhaps the key to the controversy can be found in The Cost of Knowledge website's first sentence: "Academics have protested against Elsevier's business practices for years with little effect." The internet has disrupted many industries in the last 15 years, with many facets of publishing, like newspapers and magazines, markedly less profitable. New approaches, like the open-access journal publisher Public Library of Science, have been tried, but Elsevier continues to thrive.