NETTING IT OUT

The networked world of digitized information is reaching adolescence. We can now discern the patterns of the new business models and the usage patterns that will shortly become commonplace. It’s often easiest to spot patterns and trends in industries that are adapting to the new realities because they have no other choice. That’s the case with the scientific, technical and medical journal publishing community.

While many traditional publishers have put a figurative toe into the Internet, technical journal publishers have plunged in wholeheartedly. In this Report, we’ll look at the best practices that these e-pioneers have promulgated. In subsequent reports, we will look at one of the technologies that these journal publishers have been adopting--Digital Object Identifiers (DOIs) and at how these publishers are using the network effect to expand markets.

The key take-away from this Report is: Prepare to offer and pay for your digital assets using several business models in parallel: enterprise licenses, subscriptions, memberships, pay-per-use, and free.

For companies selling information, software, or any other type of digital assets that are distributed, accesses, marketed, and/or consumed via the Internet, these new business models can serve as predictors of the future.

WEAVING A WEB OF SHARED KNOWLEDGE

In Teilhard de Chardin’s “Phenomenon of Man,” (1) the Jesuit philosopher posited the notion of a “Noosphere”--a layer of knowledge and consciousness that surrounds the earth. I remember with great clarity how that concept moved me when I first read and heard about it at the age of 18. I didn’t picture a mystical blanket of white light and love being draped around the earth by a deity. Instead, I foresaw a weaving-together of human consciousness--ideas and knowledge building upon one another around the world. Somehow I knew then (back in 1969), as I know now, that the soon-to-be-deployed Internet would play a crucial role in the evolution of de Chardin’s Noosphere. So, it’s always exciting to me when I find tangible examples of how humankind is, in fact, weaving this fabric of shared knowledge in the ether.

Revenue Models for Digital Assets?

If your company sells information, software, or any other type of digital assets that are distributed, accessed, marketed, and/or consumed via the Internet, there are a set of issues you should be thinking about now. There’s already been a fair amount of dialogue on the subject of copyright protection, fair use, and protection of intellectual property, mostly popularized by the “Napsterization” of the music business, as I discussed in my book, “The Customer Revolution.” But there are many other issues to understand and to master. What are the most sustainable models for generating revenues from digital assets? How do those revenue models interoperate? What’s the best way to identify and to track digital assets as they wander about the network? What kinds of services--Web Services and other kinds of business services--will be able to consume and/or leverage your digital assets? What’s the best way for your digital assets to market themselves in a networked world? These are some of the issues that technical journal publishers have confronted and mastered. If you want to predict the future of your business, here are some glimpses of what you should expect.

Technical Journals Lead the Way

In December, 2002, I attended an “STM Innovations Seminar” sponsored by the International Association of Scientific, Medical, and Technical publishers. What struck me most about the initiatives I heard described at that conference were the patterns and practices that seemed to be emerging as these publishers’ electronic journal publishing efforts matured. Let’s take a look at how this specialist industry is coping with the digitization of its intellectual property. Then, we’ll step back and look at what these patterns might mean for other industries that are confronting digitization.

Confronting the Realities of Publishing in a Digital, Networked World

The scientific, technical, and medical journal publishing community is an esoteric and somewhat insular field. The publishing of scholarly journals has never been considered a hotbed of innovation. Journal publishing is a conservative and quite traditional industry which caters to academic researchers. Although seminal research and thought leadership is highly respected, academic institutions are well-known for their fiefdoms and for their organizational inertia.

Therefore, you may be as surprised to learn, as I was, that this niche industry is creating quite a few of the best practices, the business models, and the digital infrastructure to solve many of the world’s seemingly intractable issues around the sharing, licensing, and re-use of intellectual property in a digital, networked world.

There are at least three categories of best practices that technical journal publishers have pioneered:

1. CREATING SUSTAINABLE BUSINESS MODELS FOR MANAGING ACCESS. Scholarly publishers have been confronted by rising costs and buyers’ shrinking budgets. As a result, they and their customers have pioneered an interesting set of business models that look as if they’ll stand the test of time. These business models may shed some light on what to expect in other industries that are grappling with the business model changes stemming from the migration to digital media.

2. IDENTIFYING & TAGGING DIGITAL ASSETS. Scholarly journal publishers are aggressively adopting the use of Digital Object Identifiers (DOIs) to tag their journal articles. They are also evolving a set of standard metadata elements and cooperating on a set of shared services that can take advantage of this meta-tagging. We will be discussing this area in the upcoming weeks.

3. USING THE NETWORK EFFECT TO EXPAND MARKETS. Technical journal publishers are faced with small, niche markets for each of their publications. Yet, over the past five years, these publishers’ revenues have grown and their readership has expanded, due to cross-industry cooperation on cross-linking and search services. We will explore the network effect in an upcoming Report.

CONTEXT: THE ROLE OF THE PEER-REVIEWED JOURNAL

In the cut-throat world of scientific competition and academic advancement, journals play a pivotal role. Ideas, scientific breakthroughs, and inventions are announced in journals. The peer review required for a manuscript to be accepted for publication in a prestigious journal plays a pivotal role in ensuring rigor in the scientific discovery process. Career advancement is often dependent on a researcher’s ability to get his or her work accepted by his peers and published in a high-caliber journal. The greater the reputation of the journal in the field, the more respect and accompanying benefits the author receives. So, journals are critical to the scientific process and to the advancement of the careers of professionals in many fields.

For years, I’ve been interested in this esoteric corner of the publishing industry and, in particular, in its most expensive segment--the scientific, technical, and medical journal publishing industry which accounts for approximately $10 billion/year (2).

Journal-Publishing: A Business under Siege?

There are currently 10,000 core scientific, medical, and technical journals being produced by a few dozen publishers. These publishers include large for-profit publishers like John Wiley & Son, Blackwell Publishing, Elsevier Science, and Kluwer Academic Publishers. They also include member societies and not-for-profits, like the Institute of Electrical and Electronics Engineers (IEEE), the American Medical Association, and the American Psychological Association. They include other learned societies like the Royal Society of Chemistry, the Institute of Physics, and the Japan Society for Cell Biology. They include university presses, such as Oxford University Press and Harvard, and semi-government organizations, such as the International Monetary Fund, the World Health Organization, and the National Library of Medicine.

The revenues for scholarly journals traditionally came from two sources: subscriptions (primarily from large libraries) and page-charges to authors.

Despite the critical role that journals play in academic and scientific communities, the business case for scholarly journal publishing is a difficult one. The average number of subscribers per journal is 500 (3). (The number of readers is larger, since many of these subscribers are libraries--read on.) Over the past decade, many of the larger commercial publishers have been steadily raising their subscription prices by an average of 10 percent per year in order to cover their increasing costs. Yet, the library budgets at the institutions that purchase these journals on behalf of their researchers have only been growing at an average of 5 percent per year. The result of this mismatch: many cancelled subscriptions with fewer subscribers carrying the ever-increasing costs of the publications. In short: a recipe for disaster!

Technical Journals Are Expensive to Produce

Scientific, medical, and technical journals are expensive to produce--particularly those involving esoteric character sets, such as mathematical, chemical, molecular, biological, and other discipline-specific notations. These journals require complex composition and pagination, as well as rigorous classification, cross-referencing, and careful proof-reading by discipline-specific subject matter experts.

The expense involved in producing technical journals has not declined; in fact, it has increased. It costs, on average, between $150 to $300 to produce the first copy of each page of a technical journal, according to Tim Ingoldsby, VP of Business Development for the American Institute of Physics. “Our costs have risen due to the dramatic increase in the amount of material we now publish and the competition for authors. Learned societies used to be able to defray some of their publishing costs by charging authors by the page--usually about $75 per page. But commercial journal publishers typically don’t charge the authors, so if we want to compete for authors, it’s difficult to charge them production costs, except for our most prestigious journals, like Applied Physics Letters. The scholarly publishing model has led to price increases for subscriptions that outstrip inflation and the budgets of the institutions that buy them.”

Producing E-Journals Has Increased, Not Reduced, Costs

Of course, now journals must be produced both in print and online. And new value-added services are expected and required by researchers, authors, and librarians.

A study of 16 scientific, technical, and medical publishers conducted in June, 2002, by our colleagues at Seybold Consulting/Publications (4) confirmed the reality of the rising costs required to support both print and online publications. The study showed that “in the past five years, the size of publication-focused IT groups grew much faster than those handling more general business systems, a trend experienced by publishers of all sizes in the survey. The increases were due in large part to technical staff working on electronic publishing activities, especially Web products and services.” (See Illustration 1.)

Five-Year Growth: Business IT Staff vs. Publication IT Staff
Please download PDF to see the illustration.
Illustration 1. Note that the numbers reported here are the medians for each group. Source: “IT Spending Patterns in STM Publishing,” June, 2002 (5).

*****ENDNOTES*****
1. Pierre Teilhard de Chardin, The Phenomenon of Man, first written in 1938; first published in 1955 (17 years after his death).

2. These estimates are courtesy of Lex Lefebvre, the Director of the International Association of Scientific, Technical, and Medical Publishers (STM).

3. Source: Lex Lefebvre, ibid.

4. Seybold Seminars, Seybold Publications, and its consulting arm, Seybold Consulting--is the company that my father founded and that my brother sold. It is currently owned by Key3Media. There is no formal business relationship between our two companies, but lots of informal ties.

5. Reprinted with Permission from Seybold Consulting/Publications, a division of Key3Media. The full report, IT Spending Patterns in STM Publishing--A Seybold Consulting Study of Information Technology Budgets, Staffing and Activities at Professional and Scholarly Publishers, is available from Seybold Publications at: http://www.seyboldreports.com/store/ITSpendingResearch.html.
*****ENDNOTES*****