Re: The Economics of Open Access Journal Publishing

From: Jan Velterop <>
Date: Mon, 3 Nov 2003 15:28:50 +0000

These reports were never meant to demonstrate that open access publishing
is viable economically. They just intend to warn (potential) investors
that there are forces out there that may have a strong influence on the
stock performance of the traditional STM publishers. The potential of
open access is such a force.

Quoting from the report: "The open-access model is in it's infancy. [...]
nevertheless, open-access has some attractive characteristics." On a
different page they say: "Our own view is that investors should be aware of
the risk of a change in the revenue model because we expect open-access
peer-reviewed journals to make further inroads."

The report is full of discussion about the risk open access may pose to the
sustainability of the high profit levels of the traditional STM industry.
This is the message: Open Access as a business model, almost universally
derided and dismissed only a few years ago, is now being taken seriously.
The seemingly unstoppable growth in the STM industry is now beginning to be
exposed as a bubble that may burst.

Jan Velterop

> -----Original Message-----
> From: Barry Mahon [mailto:barry.mahon_at_IOL.IE]
> Sent: 03 November 2003 13:35
> Subject: The Economics of OA
> In the most recent issue of SPARC Open Access Newsletter, issue #67
> November 2, 2003,
> Peter Suber concludes that the significance of a recent
> report on the STM journal
> market by Banque Nationale de Paris and a commentary on
> Elsevier by Citigroup
> Smith Barney "is that two major financial firms have looked
> at the business model for
> OA journals and concluded that it is viable"
> Peter is inhibited by copyright (and presumably restrictions
> on re-use which normally
> accompany such client reports by banks and brokers) to
> providing extracts from the
> report. I hope I am not compounding any potential felony bu
> quoting them again....
> One extract:
> " Under open-access, we believe the cost of publishing STM
> articles could
> be lowered for universities and research institutions. This belief is
> based on the critical assumption that submission costs per
> article would
> be less than the subscription revenues per article implied by
> the current
> model"
> and another:
> "We believe there is a 50% risk of a change in the model ten
> years from
> now"
> In my opinion, I don't think these remarks would necessarily
> indicate viability. As I said
> they are only extracts and perhaps BNP and Citigroup come
> down more emphatically
> in other parts of their reports. I think that the 'critical
> assumption' is indeed that, critical,
> and will require significant change in habits and policy in
> universities and research
> institutions.
> Whilst obviously not denying the potential quality of the
> work I did make the point
> already that these 'recommendations' are normally driven by short term
> considerations. I prefer the opinion of the recent report by
> the UK Wellcome Trust
> who, referring
> to recent purchases in
> the STM sector by venture capital funds says:
> "Why would private equity firms be interested in scientific
> publishing? The answers lie
> as much in the economic cycle as in the particular features
> of STM publishing. The
> scientific, technical and medical information publishing
> industry enjoys sustainable
> growth throughout the economic cycle. It is less prone to
> fluctuations than many other
> sectors. Publishing is currently a hot area for private
> equity firms as the industry is
> stable and still offers plenty of scope for pan-European
> consolidations. Private equity
> firms were attracted to the KAP (Kluwer Academic Publishers)
> deal because of the
> possibility for consolidation in the sector, currently
> dominated by Reed-Elsevier with a
> 30 per cent market share, but otherwise made up of small
> players. The size of Reed-
> Elsevier makes it difficult [for them] to get regulatory
> approval for further purchases in
> the sector"
> Barry Mahon
Received on Mon Nov 03 2003 - 15:28:50 GMT

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