As discussed in Chapter Four, the trend of academic libraries towards online-only journal subscriptions continues to accelerate, and individual society members are also growing increasingly comfortable with online-only access. As a result, a society’s pricing for a journal—in terms of its member publication benefit and institutional pricing—needs to anticipate the potential for significant institutional print cancellations and a shift in preference to online-only availability.

If a society incurs additional costs from publishing its journal online, it may elect to cover some or all of the cost difference by increasing member dues and/or institutional prices; lowering its print fulfillment costs by converting subscribers and/or members to online-only access; or through some combination of the two. Even if a society outsources the marketing and sales of its online journal to a publishing partner, which will often have its own preferences for structuring print and online pricing, a society should understand its options. To provide such perspective, we discuss below some of the member and institutional subscriber pricing options available to societies, along with their implications.

While it seems clear that the demand for print by institutional libraries will continue to decline, the prognosis for personal print subscriptions is less evident. Although multiple studies indicate that researchers prefer online journals for many research activities, and local printing of articles effectively moots the online reading issue, few studies have addressed the specific issue of preference for personal print subscriptions. In disciplines that rely heavily on visual images, the demand for print will depend in particular on the quality of image delivery in the digital environment. As it is impossible to determine when, or even if, the demand for a print edition will disappear entirely, a society will want to price its online and print editions to help manage the potential transition, whether gradual or precipitous, from print to online.

The viability of increasing member dues or modifying the member publication benefit will depend on the particular financial and (often) political situation within the society. If a society’s dues level is perceived as high relative to similar societies, if it has a history of recent dues increases, or if it represents a secondary affiliation for many of its members, it may be constrained in increasing its individual dues levels or modifying the publication benefit.

A 2002 Stanford University survey examined the behavior of faculty users of electronic journals who had joined societies and who ordered or cancelled personal subscriptions in the previous year.1 The study indicates that the most frequent reason for faculty cancelling a journal subscription was an abrupt price increase rather than free access to the journal via an online library subscription.2

In practice, societies seem more likely to modify their member publication benefit than to increase member dues outright. The options a society will have for modifying its member publication benefit will depend on a variety of factors, including member tolerance for change and the nature of the society’s print publication program and benefits. Societies that publish multiple journals often offer cafeteria plans that allow a member to receive one or more journal subscriptions with their membership, and/or discounts on subscriptions to additional journals. Depending on a society’s publication program, it may have a variety of options for incorporating online access in its member benefit. These include:

The table below illustrates the net revenue effects per unit that might be achieved, based on the various member publication benefit options outlined above.4

Example: Net Revenue Effects of Various Dues Options, on a Unit Basis

Figure 1

Neither the list on pages tk-tk nor the examples in the table above exhaust all the possible member publication benefit pricing approaches available to a society. However, the table provides a model that a society could modify—applying its own data and assumptions—to assess the potential revenue effect of various common approaches.

While the leadership of a society often has a good intuitive sense of whether it can increase its member dues, predicting member preferences for various publication benefit options—especially when the options have many variables—will often prove more difficult.5 In such instances, a survey of member preferences for various publication benefit offerings would typically be useful.

Societies also have several options for structuring how they price a journal’s online and print editions for institutional subscribers,6 although this pricing typically has fewer variables than is the case with member dues.

Early pricing models for online journals were conservative and did not give libraries the option of cancelling print. To help maintain their existing revenue streams, publishers offered print-only and print-plus-online options. With the increasing demand for online editions, pricing models have evolved, and more publishers now offer an online-only option along with print-only and bundled dual-media options.7 Indeed, for some publishers, the pricing model has flipped completely, with print sold as an add-on to the online edition.

According to a 2008 scholarly publisher survey, the most common pricing options were print and online for one price (over 50% of small publishers), with a discounted price for online-only access (about 25% of small publishers).8 The table below summarizes common institutional pricing options for journals available in both print and online:

Common Institutional Journal Price Format Options

Relatively few publishers offer an online version exclusively.9 Exceptions include journals that have discontinued print while converting to an open-access model, or the approximately 3,300 open-access journals that have never published a print edition in the first place.10

If a journal’s print subscriber base were to decline substantially, the journal’s variable cost structure would change—possibly affecting a journal’s pricing—as overall printing costs decline while per-unit costs increase. At the same time, the advent of high-quality print-on-demand technologies makes it possible for publishers—even for image-intensive journals requiring high production values—to continue offering print editions even as the number of print subscribers approaches zero.

As noted in Chapter Four, a lack of discipline-specific data will make it difficult for most societies to estimate institutional subscriber preferences by delivery medium with any precision. To mitigate the risk caused by this uncertainty, a society can design a journal’s pricing to yield approximately the same revenue contribution irrespective of format, thus minimizing the net revenue effect of the market’s uptake of one purchase option over another. This approach renders the society indifferent, from a financial perspective, to the delivery format an institutional subscriber selects. In this way, the society can manage the migration of journal revenue from print to online and project revenue with confidence, regardless of the pace of change in market preference for one format over another.

The same approach described for member dues options can be applied to institutional pricing. First, the society needs to determine its revenue objective—for example, whether to maintain current net income levels or to increase revenue slightly to offset the incremental costs of online publication. The society can then use its existing print price, along with its variable cost of goods sold for delivering print, to establish pricing that render it more or less indifferent to institutional subscription uptake by medium.

The table below illustrates how a society could price its print and online options to remain more or less revenue-neutral. (Given the complexity of uptake assumptions for each of the format options, we simply show revenue contribution on an individual subscription basis.)11

Example: Net Revenue Effects of Various Subscription Options, on a Unit Basis

Figure 2

As the table indicates, the online-only and dual media options will yield higher returns (roughly equivalent to the variable print cost of goods sold) than will the print-only option.

How much latitude a society will have to adjust its pricing—for example, to cover new costs associated with online distribution—will depend in part on the journal’s current price. As a society considers its online pricing options, it should also evaluate how the journal’s current print price compares with other journals in the same or related fields. There are some specialized pricing studies available, although these tend to be one-time studies that age quickly.12 One of the more useful recurring analyses is that published each April in Library Journal.13 The Library Journal price index provides four-year pricing information for journals, including breakdowns by the following Library of Congress subject areas:

Maintaining a history of a journal’s pricing over time allows a society to compare the rate of the journal’s price increases against comparable journals in the same field. The table below illustrates a price comparison for a hypothetical art history journal. In the example, the journal’s price has been increasing at a slightly faster rate than the average for all history journals, and has an institutional subscription price 20% higher than average. In this case, the society might forgo a price increase, recognizing that pricing the online-only format option on par with print can increase net revenue resulting from institutional libraries’ growing preference for online-only access.

Sample Art History Journal Price Comparison

Figure 3

In some instances, it will also be useful to compare a journal’s pricing against that for the most directly comparable titles (in terms of editorial scope, audience, reputation, and publication frequency).

Another useful resource for determining a journal’s price and value relative to comparable journals is the “Journal Cost-Effectiveness” database developed by Ted Bergstrom and Preston McAfee, economists at the University of California at Santa Barbara and Caltech, respectively.14 The database uses cost-per-article and cost-per-citation data to indicate a journal’s value relative to others in its field.

As a general rule, institutional libraries prefer routine, predictable increases over large, discontinuous price jumps. A society that has increased its pricing erratically—for example, years of no increases punctuated by single-year increases of 20% or more—may want to increase its journal prices in modes, annual increments rather than in larger periodic adjustments.

The pricing by distribution format (print, online, both), described above, assumes that all institution types pay the same subscription rate. However, society publishers also have the option of employing differential pricing. Institutional libraries have long acquiesced in differential pricing of subscriptions, recognizing that journals housed in libraries receive more intensive use than individual subscriptions. Indeed, differential pricing of print subscriptions may be considered the historical precedent to online site licenses.

There are two basic approaches to journal pricing: cost-plus and value-based. Cost-plus pricing bases a journal’s price on a society’s costs of producing it, plus a margin sufficient to sustain the journal’s operation. Societies often apply this approach to print journals. Value-based pricing tries to determine the price that institutions would be willing and able to pay. Establishing a price for an online edition in this way can allow a society to tap the value created by the online version and increase the revenue available to sustain the service going forward.

Such value-based pricing for online journal services often takes the form of tiered price schedules. Tiered pricing can allow a publisher to generate more revenue while keeping journal prices moderate and equitable. When demand is inelastic, as is the case for scholarly and scientific journals, the amount of unappropriated revenue—the revenue forgone from institutions that perceive either greater or lesser value in the journal relative to its price—is comparatively large. Tiered pricing allows a journal to capture some of the unappropriated surplus from larger institutions that realize more value in the journal, and some of the deadweight loss from smaller institutions that could not otherwise afford the journal. Capturing this value is possible with an online service, as the marginal cost of delivering the service to each additional subscriber is near zero.

Academic libraries typically tolerate differential pricing based on institution size and intensity of use. Pricing based on such buyer characteristics allows publishers to offer online information services at price points that help maximize both service reach (in terms of revenue) and end-user access. In North America, the U.K. and Western Europe, online information services, including online journals, are often offered via banded pricing schemes based on the type of institution,15 on the number of full-time equivalent students (FTE) at an institution, the number of sites included in the license, the number of concurrent users able to access the service, or some combination of these measures.16 Although such tiered pricing models are more prevalent among commercial publishers, nonprofit publishers also use them, with approximately 25% of nonprofits basing the price on the number of sites, 17% on FTEs, 17% on institution type, and 4% on simultaneous users.17

A society publishing a journal with a broad readership could develop tiered pricing, offering a journal at a higher price for MA/PhD-granting institutions than for baccalaureate institutions. However, for highly specialized journals, size-based price bands will not typically work well with North American institutions. Since the intensity of use of a specialized journal will not be a simple function of an institution’s size, many large institutions without programs in the specific area might not find size-based pricing compelling. Conversely, lowering the price for smaller institutions might simply reduce the society’s revenue from the journal without significantly increasing the journal’s market size.

The cost of marketing and administering a tiered pricing model—even where suitable—might reduce the net incremental revenue benefit to the society. Unless a society outsources sales and fulfillment of its journal to a publishing services provider, it may find that pricing by distribution medium serves the society’s needs without the added administrative cost of a tiered pricing model.

Online distribution makes sales of individual journal articles technically and economically viable. According to one survey of scholarly publishers, over 75% of nonprofit publishers, irrespective of size, offered pay-per-view (PpV) access, although less than 20% of small- and medium-sized nonprofit publishers that offer PpV consider it a significant source of revenue.18 PpV distribution requires that the journal has ecommerce functionality, either through its online publishing system or via an online fulfillment service (e.g., Ingenta or JSTOR).

Although pay-per-view pricing has the potential to cannibalize some marginal institutional subscriptions, the risk appears to be relatively low.19 For a journal with an institutional subscription price of $250, and a relatively low price of $15 per article,20 institutions anticipating more than seventeen downloads per year would be better served by a subscription.

At this point, most academic librarians do not consider pay-per-view an attractive alternative to electronic site licenses, due to the unpredictability of cost and the burden imposed on end users. Also, libraries tend to reject models that might involve them policing usage or restricting access.21 A joint library-publisher study is currently evaluating potential usage-based pricing models that would allow a library to convert from PpV to a subscription model once it reaches a specified usage threshold. Under such a model, a publisher might set the price for such a converted subscription at a premium over the standard subscription price.22

The business approaches described in this guide allow a society to operate a subscription-based publishing program efficiently, thus allowing it to remain (or become) financially self-sustaining. At the same time, alternatives to traditional subscription models exist, and an overview of online journal pricing needs to include a discussion of “open access” distribution.

Although definitions of open access differ in relatively minor ways, an early definition promulgated by the Budapest Open Access Initiative (BOAI) remains prevalent.23 The BOAI defines open access to scientific and scholarly literature to be:

... its free availability on the public Internet, permitting any users to read, download, copy, distribute, print, search, or link to the full texts of (peer reviewed or pre-print) articles, crawl them for indexing, pass them as data to software, or use them for any other lawful purpose, without financial, legal, or technical barriers other than those inseparable from gaining access to the Internet itself. The only constraint on reproduction and distribution, and the only role for copyright in this domain, should be to give authors control over the integrity of their work and the right to be properly acknowledged and cited….24

It should be emphasized that open access is an access principle, not a business model. While the subscription pricing models described above are based on fees paid by readers—or their proxies, such as academic libraries—open-access publishing uses alternative funding models to make research content available free to the end user. The challenges of implementing a business model capable of supporting open-access distribution are exaggerated by some and minimized by others. In reality, implementing such business models is neither easy nor impossible.

In any event, issues relating to open access are becoming increasingly prevalent in the market environment for scholarly and scientific journals,25 and these changes can affect a society in a variety of ways. These include:

A full discussion of the opportunities and challenges of open access lie beyond the scope of this guide,27 and guides to planning and implementing open-access business models are available.28 However, we will briefly review the issues above as they may affect any society publisher.

Consortia sales, and participation in bundled collections and aggregations, raise a variety of issues pertaining to pricing, market coverage, primary subscription retention, and royalty or revenue allocations. The overview below should provide a society with perspective on the types of issues it is likely to confront. Other issues germane to participating in an online aggregation are described in Chapter Six.