Income models for Open Access Introduction

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1.1 Overview

Developing a sound business model is a critical concern of publishers considering open-access distribution. Selecting the model(s) appropriate to a particular journal will depend not only on the expense hurdle that must be cleared, but also on the publisher’s mission objectives, size, business management resources, risk tolerance, tax status, and institutional or corporate affiliation. This guide provides an overview of income models currently being used to support the open- access distribution of peer-reviewed scholarly and scientific journals. It is intended for any publisher that seeks to launch an open-access journal or to convert an existing journal to open-access distribution. Such publishers include independent, single-title operations, operated by a founding editor with volunteer support; society publishers of all sizes, including single- and multiple-title publishing programs; and conventional publishers, both commercial and nonprofit. It is important to remember this broad range of publisher types when reviewing the income models described here. Some of the models require management and marketing resources beyond those available to small or informal operations. Conversely, some models might prove incongruous or ineffective if applied by a large commercial publisher.

A publisher might explore open-access alternatives to a subscription model for a variety of reasons. These include:

  • to increase access to its published research by lowering or eliminating market barriers to the content;

  • to maximize market reach and support a new journal launch when the market will not support a traditional subscription model; or

  • to implement a supply-side model (discussed below) in response to funder-mandated content deposit policies.

A publisher may be motivated to adopt an open- access income model out of sympathy with arguments that Open Access increases the effectiveness of scientific, social scientific, and humanistic research; increases social and political equity between researchers in the two hemispheres; and better aligns with the gift culture of the academy. Or a publisher may simply be seeking the most effective business model to respond to rapidly evolving market expectations.

This guide describes income models capable of sustaining Open Access as typically defined; that is, as free and immediate online access to peer-reviewed journal literature. Therefore, we have not discussed content embargoes and other techniques which might increase access, but that do not provide full Open Access.

1.2 Frame of Reference

Two principal criticisms are leveled at the alternative income models used to support open-access journals. One criticism (often voiced by journal publishers currently using a subscription model) is that a given model lacks universal applicability to all journals regardless of type or discipline. Another (often voiced by Open Access proponents) is that a particular model maintains a publication’s current cost basis, without restructuring the underlying economics of publishing.

While each of these criticisms may be true of a given model—and may be relevant from the perspective of those advancing them—their frame of reference is the transformation of the entire economic system of scholarly publishing. As such, they will typicallytable be irrelevant, in practice, to an individual journal publisher seeking an income model capable of sustaining a particular open-access journal.

1.2.1 Scalability

For a small publisher, the appeal of a universal solution can be explained by the publisher’s lack of resources to design, implement, and maintain a new business model. Where subscription agents and aggregators serve a journal’s well-established subscription base, maintaining the current subscription model often requires little active effort on the part of a publisher. In such cases, a change of business model might require a small publisher to deploy resources that it does not possess or to incur risks it is unable to assess fully.

Figure 1



However understandable this concern, an income model does not need to reform the entire system of scholarly publication to be worthwhile to a specific journal. In the absence of a comprehensive, systemic change in the manner in which peer-reviewed journals are funded, publishers will continue to apply a variety of income models to support open-access distribution. In this context, an income model should be judged on its effectiveness to support any given journal—or to support a specific class of journals—rather than on its universal applicability to support journals across all disciplines and markets. Where necessary, society publishers will need to apply other solutions, including collective action, to address their resource issues.

1.2.2 Reforming the Economic Basis of Scholarly Publishing

Some may criticize an income model because it does not directly lower journal publishing costs. In this view, online distribution should reduce the overall cost of publication, and publishers should not be able to capture excessive profits under the guise of Open Access. While a compelling and legitimate case can be made for restructuring the economics of scholarly publishing—a case advocated forcefully by SPARC, the sponsor of this guide—such a reformation frames the change in terms of philosophical principles and political imperatives. Income models, however, are indifferent business mechanisms. Their market implications are driven by the financial and mission motivations of the individual publishers that implement them, not by the intrinsic nature of the model itself.

Although the library market reaction to escalating serials prices was a significant impetus to the open-access movement, it is useful to separate the philosophical and social arguments for Open Access from arguments based on immediate, local economic relief for libraries. The most compelling argument for Open Access is that improves the efficiency, effectiveness, and equity of the research process, delivering greater social and economic benefits as a result. Greater social utility, however, does not necessarily translate into reduced costs from a local library procurement perspective.

That an income model does not necessarily restructure the underlying cost of the publication it supports should not disqualify it for supporting an open-access journal. A commercial publisher’s article processing fee for a discretionary open-access option may be several times higher than the fees for comparable society journals, but that does not delegitimize the article processing fee model itself. Further, some income models introduce market dynamics that can, on a system level, have a moderating effect on prices. For example, as economists Mark McCabe and Christopher Snyder have demonstrated, over time, authors will assess the relative value of article processing fees offered by competing journals, giving a competitive advantage to a journal with a lower processing fee over a journal of equal impact with a higher fee.

Innovative business models continue to emerge, and a model may evolve that elegantly reconciles the social promise of Open Access with the practical need for financial sustainability on an individual journal level. As no single model has yet emerged to support open-access distribution universally, the need for experimentation and testing remains. In this exploratory environment, libraries can actively accelerate the adoption of successful open-access income models by remaining flexible and pragmatic in their evaluation of new models.

1.3 Costs

Publishing expenses vary widely from one journal to the next. Journal publishers—both nonprofit and commercial—range from single-title, founder-editor operations to multinational organizations publishing hundreds of journals. Some publishers have in-house professional staffs to provide editorial, production, sales, marketing, and administrative support. Others outsource some, or all, of these functions to volunteers, part-time staff, independent contractors, or publishing service providers. While there are some economies of scale in journal publishing, larger organizations tend to bear greater overhead costs than smaller organizations. Obviously, a high cost structure imposes a steeper hurdle for a business model to clear, while a low cost structure allows the publisher greater flexibility in selecting a model.

1.4 New & Converting Journals

Whether an existing journal is being converted to Open Access or a new journal is being launched as Open Access may also affect the suitability of a given business model.

A new journal—Open Access or otherwise—confronts an interrelated set of market entry barriers that includes the journal’s need to demonstrate quality and reputation, audience reach, and the ability to attract author submissions. On the positive side, a new journal may be able to operate on a lower cost basis than an existing publishing operation. Lower costs reduce the financial yield required from the journal’s business model, giving a publisher more latitude in selecting income streams. An existing journal, while perhaps operating under a higher cost structure, will have already demonstrated its value to authors, readers, and institutional markets. This makes it possible to test the feasibility of various alternative income models based on historical data. This established value may also provide a publisher with leverage in implementing a new business model, allowing the publisher to make a journal’s conversion to Open Access contingent on demonstrating the viability of the new model.

1.5 About Business Models

A business model describes the economic logic that sustains an enterprise. For the publisher of a peer-reviewed journal, it describes the journal’s audiences, the unique value that the journal delivers to each of those audiences, the activities and resources required to create and deliver that value, and the market mechanisms by which the journal translates the value it delivers into income to sustain itself. (See Figure 1.)

Although business models may have many components, the critical elements for a peer-reviewed journal include a publication’s:

Audience or client segments—the various audiences that derive value from the journal.

To develop an effective business model, a publisher needs to identify a journal’s distinct client segments, each with its specific characteristics and value requirements. For a peer-reviewed journal, client segments will typically include authors, readers, libraries, and advertisers or sponsors. Each of these segments needs to be evaluated in terms of the value perceived, its ability to pay, and the communications and marketing channels that will be used to reach it.

Value proposition—the collection of content and services that serves the needs of each client segment.

A journal’s value proposition represents that part of its offering for which a specific client segment is willing to pay. In the context of peer-reviewed journals, this payment is not confined to a cash fee for access to the journal. It also comprises an author’s choosing to publish in the journal and a researcher’s attention in reading the journal.

Thus the business model for an open-access journal addresses a three-sided market in which readers pay with their attention, funders (whether donors, user proxies, or advertisers/sponsors) pay for access to the target audience’s attention, and authors pay (with their content and, sometimes, with article fees) for the audience reach, research impact, and professional prestige that the journal delivers. The business model translates the author’s content and the reader’s attention into revenue to support the journal. A business model may comprise one or more value propositions for each of its target client segments. The relative strength of this value proposition—its power to generate income, capture researcher attention, and/or attract content submissions—depends on the extent to which it is unique; that is, the extent to which it delivers something of value—including content quality, content quantity, research impact, professional reputation, or audience reach—that no other journal delivers.

The financial potential and stability of any funding model, whether based on generating earned revenue or securing subsidies, are functions of how tightly the value delivered is aligned with the markets that benefit from it. While intuitively obvious, this point is sometimes ignored—especially when publishers seek subsidies for a journal—resulting in weak, poorly targeted funding models.

Core activities and resources—the set of activities that a publisher undertakes to produce the journal, and to support the income model itself, as well as the resources required for the activities.

The resources required to sustain a journal constitute its cost structure and represent the income hurdle that the journal’s funding model needs to clear. These include traditional resources, such as editorial staff and publishing costs, as well as intangible assets, such as the journal’s reputation or brand equity.

As far as possible, these activities, and the cost of the resources to support them, need to be aligned with the value proposition and income stream for each client segment. This alignment helps ensure that a publisher focuses on the most critical activities and allocates resources efficiently across the journal’s activities.

Distribution channels—the channels through which the journal reaches its audiences and delivers its value.

These channels may include print and online distribution channels (including subscription agents, journal aggregators, society memberships, etc.) and other channels. Distribution channels can also affect a publisher’s cost structure for a service (for example, commissions to sales agents and aggregators). They may also influence which revenue models might work: for example, a journal that includes online advertising will require a distribution channel capable of supporting it.

Distribution channels also entail communication and marketing. The value that an open-access journal delivers must be communicated clearly and explicitly to the client segment expected to pay for it. This is true for grants and other subsidies, as well as for earned revenue models, and it is especially true of funding models that shift responsibility to beneficiaries (such as authors) that may have been shielded from direct payment in the past.

Income streams—the channels through which the journal actually generates income—including, potentially, both earned revenue and subsidies—from the client segments to which the journal delivers value.

For open-access journals, income streams can assume the form of article processing fees, voluntary use fees, subsidies, grants and donations, advertising, sponsorships, secondary licensing fees, endowment interest, and other approaches described in this guide. A journal may require multiple income streams to sustain itself. These together comprise its business model.

1.6 Demand-& Supply-Side Models

The manner in which a given publisher selects, implements, and combines various income components will reflect its organizational, philosophical, cultural, technical, and disciplinary context. There may be no logical limit to the combinations and permutations of income models possible, although in practice some components are more complementary than others.

Income models are dynamic, and new models, variations on existing models, and hybrid combinations of models occur frequently. Although a best effort has been made to be thorough, the overview provided below makes no claims to being either comprehensive or definitive.

The income model typology summarized in Table 1 characterizes open-access income models as either:

  • demand-side models, funded primarily by consumers of the content or by proxies that pay on their behalf; or

  • supply-side models, funded primarily by producers of the content or by proxies that pay on their behalf.

In many cases, supply- and demand-side income models can be combined to maximize the income sources available to support a journal.

Each type of model has its own advantages and limitations when applied in support of open-access distribution. Demand-side open-access models are susceptible to free ridership—where beneficiaries of an open-access journal do not shoulder a share of the cost of providing it—and demand-side models need to be designed and implemented to overcome this tendency (see below).

A supply-side model that relies exclusively on subsidies risks insulating the journal from constructive market forces. Such insulation could result in a journal producing content of a type or quantity out of line with reader demand. Publishers can take steps to mitigate this risk. For example, publishers can empanel advisory boards, including members from libraries and the research community, to serve as proxies for market demand.

Table 1: Demand- & Supply-side Models

Demand-Side Models Supply-Side Models
Versioning Input Fees
Offline media editions Article processing fees
Convenience-format licenses Discretionary Open Access
Value-added Services Affinity Relationships
Voluntary Fees Advertising
Use-triggered licenses Sponsorships
Donations & Fundraising Internal Subsidies
  Society dues surcharge
  Institutional Grants & Subsidies
  Government Funding
In-Kind Support

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