Citicorp report on Elsevier and open access On October 8, Citigroup Smith Barney issued a 56 page report, _Reed Elsevier: Science Friction_, analyzing the STM journal industry and the market position of Reed Elsevier. The authors are Rogan Angelini-Hurll, Marc Sugarman, Roberto Odierna, and Tom Singlehurst, in consultation with Vighnesh Padiachy. The report is not online, so I can't link to it. But here is my summary of its main conclusions, or at least the main conclusions of interest to proponents of open access. * During 2004, Reed Elsevier profits will grow more slowly than the STM publishing sector overall. Moreover, constrained library budgets and increased government scrutiny exert pricing pressure on the whole STM sector. Consequently Citicorp is downgrading its rating of Elsevier stock from Hold/Medium Risk to Sell/Medium Risk and lowering its price target from 500p to 450p. * Growth in the Reed Elsevier science division will slow down in the short term and require new investment. However, the rise of OA institutional repositories will create new risks for that investment. * Most libraries have finished switching over to electronic delivery, so Elsevier's premium for ejournals will no longer bring in much revenue. At the same time, more and more libraries want out of the big deal. * Open access is rising in popularity and will not go away. OA archives and OA journals are increasing in number and usage, and governments are considering policies that would mandate OA to taxpayer-funded research. * The market will move towards upfront-funded OA journals. However, several factors will slow the transition, which will therefore be evolutionary rather than revolutionary. For the short or medium term, but not the long term, the transition to upfront funding for journals will cost more than the present system. Governments may be reluctant to reduce research funding in order to pay for OA. To support their journals, society publishers might have to give up revenue now used for other purposes. OA journals will not have the benefit of funding from corporate users that conventional journals currently enjoy. * The STM journal market is peculiar. Journals don't pay authors. Readers don't pay journals; because libraries pay on behalf of readers, readers know the quality but rarely the cost of what they read. Journals don't compete directly with one another and have a monopoly on the distribution of their own articles. Unlike other consumers, libraries spend up to the limit of their budgets. * Publishers explain their price increases by citing increased costs, increased volume, increased usage, and increased investment in infrastructure for electronic publishing. However, when examined closely (details in the report), these explanations are misleading and unpersuasive. Citicorp believes that price increases are mainly due to a desire to maintain high profit margins. * If the price per article is falling, it is due to greater volume, clever bookkeeping, and bundling, and does not result in lower costs for subscribers. * Library budgets are maxed out. If publishers continue to raise prices, libraries will have to purchase smaller and smaller percentages of the published literature. * Universities are starting to understand that rising journal prices and journal use of copyright are reducing access to research. At the same time universities are starting to see the benefits of open access as an alternative to the current system. (At this point, the report offers a table based on my list of University Actions Against High Journal Prices, http://www.earlham.edu/~peters/fos/lists.htm#actions.) However, while universities protest high prices, and some endorse open access, most renew their Elsevier subscriptions. * OA advocates are correct to argue that OA removes access barriers, increases the visibility and impact of authors and their work, increases a funding agency's return on investment, relieves library budgets, brings access to non-academics, and provides a business model that scales with research funding rather than with library funding. * On the downside, the "author-pays" model may not be economically sustainable, may not transfer from biomedicine to other fields, may "penalize" high-output research institutions and countries (though this "penalty" may be "more than recouped" through OA efficiencies), and may not generate revenue needed for post-publication expenses such as long-term preservation and upgrading technology. * Government intervention is justified by the use of public money to fund research, to fund researcher salaries, and to fund the purchase of journal subscriptions. * Today the level of knowledge about open access among scientists is low, but this will change. Universities are starting to educate their faculty about OA and to recommend it (in part) as a solution to library budget problems. Large and conspicuous government-sponsored OA initiatives are imminent in the U.S. and U.K. Successful OA journals are rising in usage and repute. ___________________________________________________________ Win a castle for NYE with your mates and Yahoo! Messenger http://uk.messenger.yahoo.com