Moral dimensions of Open, part 3: “legacy publishers make huge profits”
April 9, 2016
It’s widely recognised that the established scholarly publishers skim an awful lot of money off the top of research budgets. The Big Four (Elsevier, Springer, Wiley, Informa) all have profit margins in the range 32–42%. For Elsevier alone, a 38.9% profit on revenue of £2126M (page 17 of their own 2013 annual report) represents £826M diverted away from research each year – a figure more than sixteen times the £50M that the Finch Report estimated as the annual cost of transition to an all-open-access ecosystem.
Elsevier representatives will point out in their defence that some open-access publishers have even higher profit-margins: for example Hindawi’s founder claimed in a 2012 interview a net profit of $3.3M on revenue of $6.3M for the first half of 2012 – a profit margin of 52.4%. Even PLOS, an avowedly non-profit organisation, runs at an operating surplus of 27% in 2013 and 16% in 2014. (Expenses of $37M against revenue of $50.8M in 2013; expenses of $40.7 million against revenue of $48.5 million according to their 2014 report).
Can this be justified? I have three thoughts.
First, the emphasis on profit margins – that is, profit as a percentage of revenue – is misleading. Hindawi’s median APC is $600 (calculated from their listing). So a 52.4% profit on a typical paper represents $314 leaving academia and going into shareholders’ pockets; whereas 38.9% of a typical Elsevier paper, with an APC of $3000, is $1167. So when the Wellcome Trust funds publication in a hybrid OA Elsevier journal, it diverts nearly four times as much cash out of academia than when its authors use Hindawi.
Second, much depends on the destination of the profits. When Elsevier or Hindawi profit from publishing, that money is lost to academia. By contrast, PLOS’s operating surplus – $240 of the $1495 APC on a PLOS ONE paper – is ploughed back into their mission “to accelerate progress in science and medicine by leading a transformation in research communication”. The same obviously applies to society publishers such as the Royal Society.
Third, when it comes to Gold OA, what really matters is not how much profit a publisher makes, but simply how much they charge to publish. To funding agencies, the price of an APC is money that can’t be spent elsewhere, whether it goes to publisher profits or merely covers publisher costs. It’s better to pay a $400 APC of which $200 is profit than a $500 APC of which $100 is profit. APC funds can be more effectively used when the price of publishing goes down, and it really doesn’t matter much whether that is achieved by publishers cutting profits or cutting costs.
And this in the end is the conclusive argument against legacy publishers such as Elsevier: irrespective of what the profit margins are, the prices are simply too expensive. There is no legitimate need for the Wellcome Trust to continue spending an average of £1837 ($2595) on APCs, mostly with legacy publishers, when newer born-digital publishers such as PeerJ and Ubiquity Press can do an objectively better job for much less money.
So I am not really convinced that profit margins are a big issue, or even that they are very morally significant at all. In the end, Gold-OA publishing is a service provided in exchange for a fee. A company that can do that very efficiently at a given price is surely no more immoral than one that does the same job less efficiently at the same price, and so has lower profits.
[Next time, part 4: “on the shoulders of giants”]
This post is recycled, almost word-for-word, from one that I wrote for the Royal Society in May last year. I’ve updated some of the figures, and added a brief prologue and epilogue, but that’s all. My views have not changed.