Periodicals Price Survey 2002:
Doing the Digital Flip

Both scholars and librarians were unconvinced of their reliability, so paper continued to rule. It took a decade, but e-journals have claimed their place. And there is evidence that many librarians are ready to give up paper for good.

The suddenness of the turnaround has taken many publishers by surprise. Up until now, most evidence pointed to the continuing dominance of print as the format of choice, even in the fast-paced world of scientific, technical, and medical (STM) publishing. Online added value but was not an archival certainty. Even negotiations that involved expanded access to electronic text usually began with print subscriptions as the bedrock of the deal.

Last year, however, a number of consortia demanded that print and online be negotiated separately. They wanted online access at the core of pricing negotiations because their users clearly preferred online. They wanted an online-plus-print model, rather than print-plus-online. It is called 'flip pricing.' As a model, flip pricing is not new. Academic Press introduced the concept with its first e-journal package. Few publishers adopted that model, however, and most libraries have continued to receive print and online more or less as a package deal.

Publishers and agents always expected paper versions of most STM titles to go away, but common wisdom suggested that would not happen until archiving issues were resolved. Flip pricing suggests that libraries are ready to make the switch to online with or without an archiving solution, and the ramifications for the market are huge.

Cost history for the study was pulled from EBSCO's database of 308,000 serials title listings. For practical purposes, the data are limited to prepriced titles (as opposed to standing-order and bill-later titles) that can be ordered through a vendor. The data are current as of February 19, 2002.

It is hard to believe the speed with which e-journals have become the standard in scholarly publishing. In 1994, there were fewer than 75 peer-reviewed electronic journals. As recently as 1997, some of the largest STM publishers still had no journals online. In 1998, about 30% of the titles in Science Citation Index (SCI) were available online. Four years later, the percentage of online journals in SCI is approaching 75%; the journals in Social Sciences Citation Index are about 63% online; and 34% of the journals indexed in Arts & Humanities Citation Index now have electronic versions. Most of the large scientific publishers have their primary scholarly titles online for 2002.

Online journals were introduced in a decade best remembered for double-digit journal price inflation and massive print cancellations. It is no wonder that periodical prices became tentative and changeable when digital was added to the mix. Out of the tension came the chaotic string of deals and pricing models that have characterized the market since 1997. Most publishers have changed strategies more than once since then.

In 2000, 75% of publishers offered online free with print, with the rest charging extra for online. But every year, publishers reverse themselves on this one issue, and last year the pendulum seemed to be swinging back in favor of charging extra for online with a print subscription. Of the 7,623 e-journals with set prices in EBSCO's order file, 61% were offered free with a print subscription for this year.

The majority of major publishers still offer online 'free' with print as a rule. The list includes Cambridge University Press, Elsevier, Emerald, Oxford, Routledge, Sage, Springer Verlag, and Taylor & Francis. Blackwell Science charges extra, but the other Blackwell imprints do not. University presses are split. Duke, Indiana, Johns Hopkins, and Penn State, all participants in Project MUSE, charge; MIT, Chicago, and California do not. Society presses are also split, but the majority appear to charge for online with print. The list of STM publishers that charge extra includes such heavyweights as Academic, Wiley, Kluwer, Dekker, Nature, Plenum, and S. Karger.

The reversals have been so confusing that the Association of Subscription Agents (ASA) has begun a campaign to get publishers to announce their pricing schemes earlier in the year so that agents have time to alert their customers and amend their orders. The turmoil over pricing models can only grow with the advent of flip pricing.

The flip pricing issue broke into the open last year when OhioLINK negotiated a deal for online content with major publishers of e-journals. The deal included DDP options, or rights to purchase print at deeply discounted prices. Library consortia in California and Canada quickly followed suit. Discounts on print ranged from 60% to 90%, which meant that publishers agreed to supply print with online for an added charge of 10% to 40% of the list price of each title. Some of the same publishers already offered online free with print. Print, however, is not free with online in these deals.

It is hard to say how deeply the practice of flip pricing has penetrated the market, but publishers seem braced for this model to become dominant. The ASA reports that all of the Big Five STM publishers--Academic, Elsevier, Kluwer, Springer, and Wiley--offer deep discount prices for print. Also on the ASA list are other major publishers like the American Chemical Society, Blackwell Publishers, Institute of Physics, and Johns Hopkins. As more publishers separate their print and electronic fulfillment systems, they will be better positioned to support this model.

Agents still handle virtually all orders for print subscriptions. Flip pricing dramatically lowers the cost of the print, which dramatically lowers the vendor's income from publisher discounts. The vendor's obligation to service subscriptions, meanwhile, remains the same. Some publishers have recognized this effect and adjusted their discounts to compensate fully; others have not, further eroding the relationship between vendors and publishers.

The bigger question is whether publishers still need agents to intermediate online orders. That question will remain in flux as publishers experiment with direct service models. In the meantime, the combined effect of deep discounts and direct order requirements will mean less consolidation of subscription orders and higher service fees for libraries that use agents.

The rate of price increases seems to be moderating somewhat, particularly in the sciences and for non-U.S. titles. The continuing overall strength of the U.S. dollar may have something to do with the moderation, but another likely reason is that publishers hope to slow the rate of cancellations. On the other hand, sales in the social sciences remain strong, and there are fewer cancellations. Perhaps as a consequence, rate increases for titles in the social sciences have run higher than those of STM titles for the last several years.

Elsevier's acquisition of Harcourt General, Inc. last summer introduces some added uncertainty for 2003 prices because they often go up dramatically when a high-end publisher acquires new publications. The Harcourt deal brought Academic Press, Mosby, W.B. Saunders, and Churchill Livingstone under the Elsevier banner. Elsevier plans to bring the Academic database into Science Direct and will renegotiate Academic IDEAL licenses in 2003.

For years, this article has tracked the effect of currency exchange on the price of subscriptions in the United States. That effect has become almost impossible to quantify, as publishers increasingly price in dollars and practice sophisticated strategies to hedge against revenue loss from currency exchange. For this reason, we have eliminated the chart that tracks currencies and journal prices. Suffice it to say that when the dollar is strong in relation to the Euro and the pound, U.S. libraries may get a price break from non-U.S. publishers. Conversely, when the dollar weakens, history tells us that prices charged U.S. libraries will go up.

As Table 5 indicates, price increases for U.S. libraries have been in the 7% to 9% range during the last five years. Publishers are not yet speculating on 2003 prices, but it is reasonable to assume that 2003 prices will follow the recent trend. At this writing, the dollar has been stable against the Euro and the British pound. On the whole, we forecast overall increases just under 9% for 2003. Table 6 details projections for the three broad subjects based on foreign and domestic groupings. Wild card factors that could drive these numbers up or down include changes in U.S. and European currencies and the effects of publisher mergers.