The document discusses the history and economics of scholarly publishing and subscription models. It explains that in the 17th century, subscription models emerged as a way to fund publication of important works when patronage systems were inadequate. Over time, subscription models proved successful at allowing recovery of publication costs through assurance contracts that guaranteed funds if a threshold of subscribers was met. Economists now recognize subscription models provided a "club good" to members like authors, publishers, libraries, and societies - disseminating knowledge in an unprecedented way. However, debates now question this model as knowledge is considered by some to be a public good that should be universally available.

1. A significant component of BioOne’s mission has been and remains to explore new
business models for sustainable scholarly publishing, and to that end we are
constantly tes=ng models for expanding our open‐access publishing program. We
currently convert and host 12 OA journals—at no cost to the nonprofit organiza=ons
that publish the journals—which means our par=cipa=ng libraries and nonprofit
publishers underwrite the costs of BioOne’s OA ac=vi=es; libraries through
subscrip=on fees and publishers through reduced royal=es.
This is a sustainable level of open‐access ac=vity, but it is not scalable to any
meaningful degree. And so we have had to become very serious about the economics
of open‐access publishing, which is to say the economics of the provision of public
goods.
For the next few minutes, I would like to share with you what we have learned.
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2. A good deal of the discussion surrounding open‐access publishing is the idea that
knowledge is or ought to be a public good. That is, like literacy or access to clean
water, it ought to be universally available.
The compliment to that line of thinking is that the prevalent subscrip=on‐based
access model is flawed, at a minimum, perhaps even wrong in an ideological or moral
sense. “Informa=on wants to be free,” we oNen hear.
Let’s take a moment to review how we got where we are; that is, how—and why—
subscrip=ons are the dominant access model in scholarly communica=ons.
We are all so familiar with the subscrip=on model one almost thinks of it as a part of
nature, like minerals or polar bears. But of course it is not. It is a human inven=on, a
business model with a history, its origins in 17th century England.
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3. Historically, books were very expensive luxury goods, and their produc=on was
typically underwriSen by wealthy patrons. As were the libraries that housed them;
think of the Library of Celsus in Ephesus, or the Library of Alexandria under the
patronage of the Ptolemies. But in 17th century England, the patronage system was
inadequate to the need of book produc=on; authors and publishers without
independent means needed a way to assure their costs would be covered before
incurring them.
This was par=cularly true for expensive publica=ons, such as atlases, geographies,
dic=onaries, and illustrated books.
So a new model emerged whereby subscribers were solicited for advance payment or
guarantee of payment, oNen based on tes=monials from authorita=ve sources. If
enough subscrip=ons were purchased, the book would be produced, and if not, not.
If the book were produced, a subscriber list would oNen be printed in the book—
itself an incen=ve for par=cipa=on.
Like most everything, the new model developed in fits and starts, with a number of
varia=ons, some more successful than others. But on the whole, the model managed
to extend the support system beyond the old patron class, beyond courtly or
scholarly groups. This allowed the publica=on of many great scholarly and literary
works that would likely not have been produced otherwise.
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4. The first known work published by subscrip=on was John Minsheu’s Ἡγεμὼν εἰς τὰς
γλῶσσας, id est, Ductor in linguas, The Guide into Tongues, an eleven‐language
dic=onary published in 1617, whose =tle page is pictured here. Minsheu managed to
secure nearly 400 subscribers, some from among the usual patron class, but others of
lower rank, including one “ci=zen and grocer,” and he published their names in The
Guide. This became common prac=ce for subscribed books.
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5. Here is a subscriber list from Fanny Burney’s Camilla, published in 1796; the total list
runs to 38 pages.
Like book publishers, among the challenges scholarly socie=es faced in the 17th
century (and there were many) was how to recover the costs of publica=on. Henry
Oldenburg, the first secretary of the Royal Society, was an ac=ve leSer writer, and his
correspondence is full of this vexing topic. It was a chronic problem in the early days
of scholarly publishing.
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6. David Kronick, in an oNen‐cited ar=cle on the topic, notes that
“[P]ublishing journals of scien=fic or technical informa=on was oNen, in
general, a risky and costly undertaking [in the 17th and 18th centuries].”
Looking to the success of subscrip=ons as a way to fund the publica=on of important
books, academic journal publishers began to adopt this model in the 17th century, as
indicated by published subscrip=on lists in journals of that period. Over =me, the
subscrip=on model proved to be the most successful.
Why? What was at work here?
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7. Though they did not know it, the challenge facing the Royal Society and other
scholarly publishers was what economists examine in the context of public good
provision, a challenge turning on the problem of free ridership. Simply put, individuals
ac=ng in their own ra=onal self interest have no incen=ve for voluntarily contribu=ng
to the provision of a common resource if that resource can be consumed at no cost.
Scholarly publishing does not escape this problem, and the problem is exacerbated in
=mes of economic stress.
In a post to liblicense just last month, Rick Anderson summed up the free rider
problem in the context of open access perfectly. Note especially the por=on I’ve
highlighted here:
“But to the degree that stuff gets made available for free, and to the degree
that budgets con=nue to contract or remain stagnant, it's hard to see how any
system based on voluntary payments can survive in the long run.”
This is precisely the free‐rider problem open access faces.
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8. Over =me, economists and poli=cal scien=sts have iden=fied a number of
mechanisms that can overcome the free‐rider problem, under certain circumstances.
One of them is the use of assurance contracts. This is an interes=ng mechanism and
worth exploring a bit.
Assurance contracts work like this:
• Members of a group pledge to contribute to a collec=ve good if a total
contribu=on level is reached.
• If the threshold is met (perhaps by a certain expira=on date), the ac=on is
taken and the good provided;
• Otherwise, the par=es are not bound to carry through with the ac=on, and
any monetary contribu=ons are refunded.
Sounds a lot like our subscrip=on publishing model, doesn’t it?
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9. And in fact, it is. In hindsight, we now know that the subscrip=on publishing model
developed in the 17th century was nothing other than an assurance contract used to
support the provision of a common good: scholarly and cultural publica=ons.
But what kind of good was being provided, and for whom? Not a public good—only
subscribers got a copy of the book or journal. Rather, it is what economists refer to as
a “club good,” some=mes considered a subtype of public goods.
And who or what provides club goods? Clubs. It may seem an unfortunate choice of
terms, as it sounds frivolous. But the economic theory of clubs has wide reach. The
defini=on of club, from the New Palgrave Dic=onary of Economics, is:
“A small group of people sharing an ac=vity, o<en in a context where they care
about each other's characteris@cs.”
I think we might recognize ourselves in that defini=on.
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10. Who were the members of the club suppor=ng and benefi=ng from this club good of
subscrip=on‐based scholarly communica=ons? You can think about it in a number of
ways, but as things have developed over the past 350 years, I would propose the
following list—in no par=cular order:
[gloss slide]
This Club is a product of the Enlightenment. I think that tends to get lost in the
current discussions about open‐access publishing. And I fear that it is all too easy to
forget the significance of the good this Club has provided. For over three centuries,
this Old Club—to include all of us here—has supported the greatest expansion of
knowledge in human history, and has disseminated this knowledge around the globe.
It has been a truly remarkable achievement.
This, I would argue, is why the the subscrip=on model is so dominant, even today. It
has produced a nearly unimaginable good. No one would have predicted such an
extraordinary outcome from Minsheu’s innova=on.
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11. I men=oned at the outset that the discussion and debate surrounding open‐access
publishing has developed an ideological or moral component. Knowledge ought to be
a public good, ought to be universally available. Sugges=ons to the contrary are
wrong.
And we hear the counter argument made, that the current subscrip=on‐based system
is adequate to the need, that it efficiently distributes scholarly informa=on to those
who have use for it, and sugges=ons to the contrary are naive (or worse).
In short, the Old Club is fraying. Some=mes it almost seems as if its members are at
each others throats.
What in the world is going on? Why is the Club that has operated so effec=vely for
350 years coming apart?
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12. I think a number of factors are at work. The first is certainly technological innova=on.
The subscrip=on model was very well suited for the cluster of technologies that made
print publica=on and distribu=on possible. But with the emergence and maturing of
digital publishing technologies, much wider—but by no means universal—distribu=on
is now technically possible in a way that it never was in the era of prin=ng.
So disrup@ve innova@on, a term of art coined by Clayton Christensen, is a significant
factor. We don’t have =me to consider this concept in detail now; suffice it to say that
we would not be having a conversa=on about open access without the disrup=ve
technological innova=on we’ve experienced over the last 15 years.
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13. But other factors are in play as well. A second, I would argue, is more posi=ve, a sign
of the success of the Enlightenment Project of which we are all a part. Simply put,
scholarship has been on a steady growth path since the 17th century, and has
exploded following World War II.
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14. Here is a graphic char=ng the growth of scholarly socie=es over =me, a reasonable
proxy for the expansion of scholarly ac=vity. The data comes from the University of
Waterloo Library’s “Scholarly Socie=es Project.” Note the blue bars, represen=ng
periods in which 200 or more scholarly socie=es were founded. I find it interes=ng
that the bursts of ac=vity correlate with the two World Wars.
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15. A third factor is the emergence of sophis=cated commercial interests in scholarly
communica=ons. To be sure, commercial interests have been involved in scholarly
publishing since the 17th century. The Journal des Sçavans, a commercial journal, was
first published in January of 1665, three months before the first noncommercial
journal, the Philosophical Transac@ons of the Royal Society of London.
These commercial efforts were preSy low‐margin opera=ons in the early centuries—if
not nega=ve margin, as Kronick points out. But at some point in the 20th century, a
few commercial publishers developed a sophis=cated understanding of the nature of
the scholarly communica=ons market, and the value of their products.
Unlike normal consumer products, journals are not subs@tutes for one another, but
complements. As Ted and Carl Bergstrom pointed out in a 2006 ar=cle on the
economics of ecology journals,
“If one television manufacturer charged five =mes as much as its rivals for a
product of equal or lesser quality, no one would buy it.... A library cannot
[similarly] subs=tute a second copy of a cheap journal for a first copy of an
expensive journal in the same field.”
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16. I suggested that the subscrip=on model developed in the 17th century was an
assurance contract in fact, a mechanism to overcome free‐ridership to provide a club
good.
It is also true that the modern subscrip=on model as prac=ced by the vast majority of
nonprofit publishers—on a risk‐mi@ga@on and cost‐recovery basis—con=nues to
func@on as an assurance contract, in the service of providing a significant club good—
to an expanding club.
The somewhat more complicated truth is that the same word, subscrip@on, when
applied to commercial publishers, denotes a dis=nct business prac=ce, both in intent
and economic func=on: a value‐op=mized pricing strategy rather than product‐cost
model. This is not a difference in degree, but in kind.
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17. Ted and Carl Bergstrom, again, have published a good deal on the difference between
commercial and nonprofit pricing prac=ces. (I recommend everything they’ve wriSen
on the subject). This excerpt is just one example.
So the third factor contribu=ng to the disrup=on of the Club might be properly called
the pernicious pricing prac@ces of profit‐maximizing publishers, nearly all commercial,
but to include some nonprofit publishers adop=ng commercial business strategies.
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18. A LISU study of journal pricing trends from 2000 to 2006 demonstrates the effect of a
profit‐maximizing strategy. CPI in that period was 10%. Pricing trends range from four‐
to ten‐=mes CPI. We’re all familiar with this.
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19. A fourth factor has to do with the trend in funding of research libraries. We oNen
hear talk of declining library budgets. In fact, library budgets were steadily increasing
—at twice the rate of CPI—from 1986 through 2008, according to ARL sta=s=cs.
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20. Here’s a chart from ARL that I’m sure you’re all familiar with. As you can see in the
green line on this graph, library budgets did not begin to decline un=l 2009, following
the banking crisis of 2008. The nega=ve trend that actually has been at work over
that period of =me must be named for what it is: a sustained process of ins@tu@onal
defunding of research libraries, as indicated by total library expenditures as a
percentage of total university expenditures (the gold line on the graph).
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21. Let’s sum things up: The blue box I have added represents the context of disrup=ve
technological innova=on, which I have shown as beginning in 1995. (Give or take a
couple of years, I think this is about right). The blue line, showing serial expenditures
by ARL libraries, indicates the cumula=ve effect of factors 2 and 3: the explosive
growth of scholarship, and the pricing prac=ces of commercial publishers (and their
imitators). The gold line tracks factor 4, a trend of ins=tu=onal defunding of research
libraries.
With these four factors ac=ng in combina=on, it is preSy clear that the Old Club is
facing something of a perfect storm.
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22. In the context of open access, we move beyond club goods to public goods, and
beyond clubs to value networks. Peter Suber published a clear and though{ul piece
on the ques=on of knowledge as a public good in the November 2009 issue of the
SPARC Open Access NewslePer. He opened his post as follows: “One of the most
durable arguments for OA is that knowledge is and ought to be a public good.” Quite
right.
The ques=on I would like to ask is, Who or what will underwrite the provision of this
public good, the provision of scholarly communica=ons on an open‐access basis?
More precisely, what en==es comprise the emerging value network that may replace
the Old Club?
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23. The three most successful OA scholarly publishing ini=a=ves at present are BioMed
Central, Hindawi Publishing Corpora=on (both commercial enterprises), and PLoS (a
nonprofit enterprise).
I am sure you are all aware of the extraordinary success of PLoS One. It received its ISI
ranking in 2009—4.351 in Biology—now up to 4.411 in 2010. That is very respectable
for any new journal, but even more so for a journal that was originally conceived to
challenge tradi=onal peer review.
More important is the explosive growth of PLoS One, which is not linear, but
geometric.
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24. In just four years, PLoS One has grown from publishing 138 ar=cles to 6,749. It is now
the largest journal in the world and has generated a stampede of imitators. I believe
PLoS One may well be a game changer, at least in the experimental and observa=onal
sciences.
So, as the most successful OA publishing ini=a=ve in existence, what en==es currently
comprise the value network that drives PLoS One, and how does it compare with the
Old Club?
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25. Let’s review my list of Old Club members. In the new value network employed by
PLoS One, universi=es remain a fundamental node, and to an even greater extent, as
some are underwri=ng OA author fees for their facul=es through the Compact for OA
Publishing Equity (COPE).
Obviously, researchers, students, and educators are important nodes in the value
network, as are funding bodies. Just as with universi=es, funding bodies requiring and
underwri=ng OA publica=on are an increasingly important part of the mix.
PLoS One is, of course, cri=cal, in its role as a publisher, now taking on the addi=onal
responsibility of valida=ng research results, a role previously played by academic
socie=es, as well as cura=on and distribu=on, roles previously play by libraries.
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26. The two members of the Old Club currently unnecessary in the PLoS One model are
academic socie=es and libraries. PLoS One does not intersect with academic socie=es
at all.
As for libraries, beyond par=cipa=on by some libraries (as dis=nct from universi=es) in
PLoS’s Ins=tu=onal Member program and PLoS’s provision of COUNTER 3 reports,
PLoS One does not meaningfully intersect with research libraries, and what
interac=on there is, I would argue, is marginal and immaterial to PLoS One’s
con=nued growth and success.
Can anyone tell me what the “L” in “PLoS” stands for?
Now, this is simply my interpreta=on of the current OA value network for the most
successful OA ini=a=ve to date. It could be flawed; it is certainly debatable.
But even if generally accurate, there is nothing to say that it is the only value network
suppor=ng OA publishing models, or that the value‐network nodes I have iden=fied in
the PLoS One model are the only grouping possible. Academic socie=es, for instance,
play an important role in both BioMed Central and Hindawi.
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27. I strongly believe that research libraries can become a significant node in the
emerging OA value network, and it is my strong hope that you do.
Whether or not that happens, of course, depends on
• the seriousness with which you approach the economics of public good
provision and libraries’ poten=al role in that economic structure;
• choices you make in the OA ac=vi=es you pursue; and
• decisions you make about either staying on the sideline as free riders, or
ac=vely contribu=ng to suppor=ng the provision of this good—the costs—as
you have done for centuries as members of the Old Club.
I have my own ideas about how research libraries could con=nue to play a cri=cal role
in the enterprise of scholarly communica=ons, now in an open‐access context. But
rather than giving you a list of my prescrip=ons, I think it might be beSer to open
things up for discussion in the few minutes we have leN.
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28. Thank you very much for le~ng me share my thoughts with you.
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