Cutting Through the Mysteries of Journal and Article Pricing

I’m delighted to be able to offer a guest blog from Rebecca Kennison. Rebecca is the principal of K|N Consultants and has worked extensively in scholarly publishing. What follows is a remarkably acute analysis of Elsevier’s journal pricing practices that she recently contributed to the Open Scholarship Initiative listserv. (This version has been slightly edited to provide additional clarification.) Rebecca is responding to a post by an Elsevier representative, and yet what she has written struck me as speaking to all of us interested in how the major corporate publishers are handling the shift to open access.

Rebecca is addressing the pricing of the class of subscription journals for which authors can buy open access for their article with an “article processing charge” (APC) — which can range as high as $5,000 in the case of Elsevier — in what are commonly known as “hybrid journals” in which content paid for by subscriptions and by APCs appear in the same journal . Shouldn’t increases in author (or funder) sponsorship of open access articles in a journal lead to a corresponding drop in its subscription rates? Such is the question, posed by many librarians, that Rebecca manages to slice through very effectively.

Rebecca writes…

Thanks for the slide showing the decrease in pricing of these 26 [hybrid] journals based on increased open content — or, as the slide puts it, decreased subscription content. I’ve also reread the argument you at Elsevier make for why you do not double-dip. If I understand your pricing process correctly, no matter how many authors in any given journal pay an APC, that amount rarely has any bearing on the overall pricing of the journal because the OA content pricing and the subscription pricing models are completely disconnected in your calculations. I don’t think I had fully understood that before.

Elsevier’s APC price points are based on “journal impact factor; the journal’s editorial and technical processes; competitive considerations; market conditions; other revenue streams associated with the journal.” In other words, APCs are priced to reflect what the market will bear, which may or may not having anything to do with actual cost, since the “journal’s editorial and technical processes” are only one factor in the overall pricing. Subscription pricing is also not based primarily on cost, but rather on “article volume; journal impact factor; journal usage; editorial processes; competitive considerations; and other revenue streams such as commercial contributions from advertising, reprints and supplements.” APC prices can be raised (or lowered) independently of subscriptions. Subscription prices can be raised (or lowered) independently of APCs. Because Elsevier’s pricing is not based solely or perhaps even primarily on editorial and production costs, any argument that they are double-dipping becomes moot. Double-dipping can only occur when first-copy costs [i.e., the fixed costs of producing the first unit of a publication] are being paid for by both an APC and a subscription and the publisher is not offsetting or reducing subscription costs accordingly. If subscription pricing is not based on costs (first copy or otherwise), then there is nothing to offset by APCs.

That’s not what most of us think of when we think of hybrid journals. Instead, here’s how we think hybrid journals work. Let’s say we have Hybrid Journal A, which publishes 100 articles/year. Before it was a hybrid journal, it used to have a subscription price of $1000 and had 1000 subscribers, bringing in $1 million per year. This year, 25% of the articles in this newly “hybridized” journal were published via APCs to the tune of $2500 each. Since for this particular journal subscription pricing is coupled with APC payments — as we commonly think (or at least often hope) is the case for hybrid journals — that $62,500 in APC revenue now means for next year there will be a reduction to the subscription price of $62.50 per subscriber, reducing the journal subscription to $937.50. This sort of revenue balance via offsets only works for a while, though. To maintain that $1 million in annual revenue, the journal eventually needs either to increase its volume (to 400 articles per year at $2500/article) or increase the individual APC (to $10,000) or something more evenly balances the two.

The likelihood is that that $1M revenue cannot be maintained, but the hope (and, for some, the fervent dream) many OA advocates have is that the reduced costs of an all-OA world would result in reduced need for revenues at their current level. (In my example those cost reductions would need to be rather severe for the journal to be able to maintain a $2500 APC and stick with only publishing 100 articles per year. I’ll leave it to others to debate what and where cost cutting could happen to make up that $750,000 in lost revenue.) But this approach becomes moot when pricing is not based on costs but rather on journal reputation and other competitive considerations. (Let me be clear in saying I’m not arguing for pricing journals like we do widgets, but merely observing that pricing based on value is considerably more difficult to evaluate than is pricing based on costs.)

As I now understand it, the above scenario is not how Elsevier works (although it does sound like on occasion Elsevier does sometimes reduce its pricing for journals with considerable APC-funded content, although when that happens is unclear). So I must say I actually agree with [Elsevier’s representative]: Elsevier does not technically double-dip because it technically does not have hybrid journals. It has articles paid for by APCs and articles paid for by subscriptions. The concept of the hybrid journal is as an entity that has two revenue sources — one from APCs and one from subscriptions. In the Elsevier model, pricing for both types of content happens on the article level, one paid for upfront (and individually) and the other at the backend (albeit as part of a bundle, whether a journal or a package).

To rework my example above, it doesn’t matter to Elsevier how many articles in Journal A are paid for by APCs as far as subscription pricing is concerned. Although a quarter of the articles in the journal are being paid for via APCs and in each case he $2500 APC goes to cover the article for which it has been paid, the journal subscription can nevertheless remain at $1000 because even while the “subscription article volume” may have dropped by 25% the journal itself still has a high impact factor, strong journal usage (including usage from those OA articles), stringent editorial processes, and a robust reputation as the top journal in its field. The amount of OA content thus makes not a lick of difference in the pricing of the subscription — and if the journal is part of the Big Deal, it makes even less of a difference. As long as subscription revenues can be maintained, there is not likely to be any resulting decreases to those subscription at a large scale, no matter how much OA content may also be produced at the same time.

So what’s the takeaway? For me it’s what I’ve argued pretty vehemently for some time: If you’re going to pay an APC, then publish in a “pure” OA journal, not in a hybrid journal. If for whatever reason (journal reputation foremost of all) you choose to publish in a subscription journal with a hybrid model, don’t pay the APC. Instead, fight to keep your rights and then post the article anywhere you like. But the dream of flipping subscription journals to OA one APC at a time is probably just that — a dream — at least when it comes to Elsevier journals.

[N. B.: The Elsevier representative thanked Rebecca for this contribution to the listserv, adding, “You’ve got the complete de-coupling of the two models in our hybrid titles spot on.”]