## Will open-access publication fees grow out of control?

### July 31st, 2010

I recently had a conversation with someone (I’ll call him D) whose opinion I greatly respect, a staunch supporter of broadening access to the scholarly literature, who expressed a view I was quite surprised about. D is of the opinion that the publication fee business model for open access journals is economically flawed, so flawed that he thinks it is not worthy of support, for instance through university and funder commitment to underwrite publication fees as envisioned here and here and in nascent implementation.

D thinks that the only worthy alternative is what is sometimes called the “public access” business model, in which access is limited to subscribers but only for a short embargo period of, say, six months or a year. This model can effectively be mandated by having funders require public access for articles they fund.  The NIH policy is an example of a public access mandate, and the pending FRPAA legislation would broaden the mandate to essentially all US-government-funded research.

Certainly, I am a staunch supporter of public access mandates, and the shorter the embargo period the better. Harvard University is on record supporting the approach, as am I. But I also think that the publication fee model is viable, and indeed preferable in the long term.  Thinking about D’s argument has led me to write this post explaining my contrary view.

D’s argument against the publication-fee business model for OA journals (expanded and recast in my own words) is as follows:

Faculty must publish in order to maintain and advance their careers; this imperative is especially strong for junior faculty. If payment of a publication fee were a precondition to publish in the pertinent high-profile journal for a given faculty member, he or she would effectively be forced to pay it. Publishers would therefore be able to hyperinflate publication fees up to the marginal benefit to the faculty member of publishing the article. By way of example, Baser and Pema show that publication of a ten-page article in The American Economic Review corresponds to a 1.3% or 1.9% increase in salary (depending on how you measure). Such an increase might come to a couple of thousand dollars a year, equivalent to a net present value of tens of thousands of dollars. If AER were an open-access journal charging publication fees, what would prevent the publisher from charging those tens of thousands of dollars to the authors?

D expects publication fees to hyperinflate, with scholars unhappily having to acquiesce to a kind of extortion. This worry of runaway publication fees leads D to the conclusion that publication fees are an unsustainable business model for open access journals.[1]

The problem with the argument becomes transparent when one sees that it applies equally well to subscription journals.  Nothing prevents subscription journals from charging publication fees, and many do. Bill Hooker estimates the average at $1,250 per article for NIH-funded articles. By the argument above, these fees ought to have hyperinflated to capture the future salary benefit to the author of publishing in the journal. It’s no counterargument that the subscription journals already are receiving revenues from subscription fees; for profit-maximizing journals, there’s no such thing as “enough profit”. D’s argument thus doesn’t distinguish between closed-access and open-access journals. Similarly, open-access journals do not seem to be charging arbitrarily high fees. For OA journals that ISI provides an impact factor for and that charge a per article publication fee, the average such fee is less than$1,000. (If averaged over all OA journals, the number is, of course, much lower, as the vast majority of OA journals charge no publication fees whatsoeverI’ve provided the data in accompaniment with a previous post.) By contrast, the average revenue per article for scholarly journals in general is considerably more. Bill Hooker conservatively estimates the figure at $2,100-2,900 per article. Based on figures from the Report and Recommendations from the Scholarly Publishing Roundtable, the number is actually over$5,000. (They report (page 3) the total revenue for scholarly publishing at \$8 billion on 1.5 million articles.) So OA publication fees don’t seem egregiously high compared to subscription journal revenues.

Why does the argument fail? Simply because it doesn’t take competition into account. Consider the following analogous argument.

Faculty must eat in order to maintain their careers, indeed their lives. If payment of a fee for food were a precondition to a faculty member eating, he or she would effectively be forced to pay it. Farmers would therefore be able to hyperinflate food costs up to the marginal benefit of eating, which is, roughly speaking, infinite since the alternative is death.

But we don’t see infinite costs for food, for the simple reason that there is a competitive market for food, which competes away the surplus. Of course, if there were a single monopoly farmer, the argument would go through, and the farmer could charge arbitrary prices for food. Similarly, competition among journals can keep publication fees down so long as there is a competitive market. If one journal charges too much for publication fees, authors will consider submitting to other more cost-effective journals, journals that provide better value for the dollar. Authors will trade off cost for the quality of the publisher’s services, including especially the imprimatur of the journal. The fact that the main selling point of a journal is that imprimatur means that publication fees will correlate with journal quality, as I have shown empirically occurs.

There can be a competitive market for author-side publisher services because from the author’s point of view, publisher services are economic substitutes. You either publish an article in one journal or another. It’s not helpful to acquire services from two publishers; in fact, it’s typically not allowed! By contrast, from the reader’s point of view, access to multiple journals constitute complementary goods: access to one journal doesn’t diminish the value of access to another; in fact it enhances that value since one can then access the works in the one that are cited in the other. The complementarity of access, along with ownership of copyright in the articles, provides publishers with monopoly power in selling access, leading to the hyperinflation that is well attested. The Bergstroms make this point clearly:

Journal articles differ in that they are not substitutes for each other in the same way as cars are. Rather, they are complements. Scientists are not satisfied with seeing only the top articles in their field. They want access to articles of the second and third rank as well. Thus for a library, a second copy of a top academic journal is not a good substitute for a journal of the second rank. Because of this lack of substitutability, commercial publishers of established second-rank journals have substantial monopoly power and are able to sell their product at prices that are much higher than their average costs and several times higher than the price of higher quality, non-profit journals.

By contrast, the market for authors’ inputs appears to be much more competitive. If journals supported themselves by author fees, it is not likely that one Open Access journal could charge author fees several times higher than those charged by another of similar quality. An author, deciding where to publish, is likely to consider different journals of similar quality as close substitutes. Unlike a reader, who would much prefer access to two journals rather than to two copies of one, an author with two papers has no strong reason to prefer publishing once in each journal rather than twice in the cheaper one.

If the entire market were to switch from Reader Pays to Author Pays, competing journals would be closer substitutes in the view of authors than they are in the view of subscribers. As publishers shift from selling complements to selling substitutes, the greater competition would be likely to force commercial publishers to reduce their profit margins dramatically.

(Peter Suber has also pointed out the importance of competition in his reply to Richard Poynder’s post about hyperinflation of publication fees.)

There are two countervailing worries. First, OA journals still hold monopolistic control over their brand, their imprimatur, which is the primary good that the journal sells the author. So perhaps the situation with journals is not like the situation with food. Perhaps the monopoly a publisher has over the journal brand will allow uncontrolled inflation of publication fees.

But why does an author want their article associated with a journal brand? Not for its own sake but for the quality signal — the imprimatur — that the brand name provides.  Since you can only publish an article in one journal, if multiple journals have similar imprimatur, then the journals are substitutes. A publisher can’t have a monopoly on cachet, only on a journal name. Journals can charge higher publication fees if they have a good name, but other journals can develop their own brand and steal business by providing a similar quality signal at a lower fee, that is, by market competition.

Second, the costs of OA journals might end up hidden from the authors making the publishing decisions, vitiating the market mechanism. For instance, if universities and funders were willing to transparently pay arbitrary publication fees on behalf of affiliated authors, authors would be oblivious to the fees, and hyperinflation could well result. This is an example of a moral hazard, exactly the kind of moral hazard that has existed in the subscription-fee journal market, where libraries pay arbitrary subscription fees on behalf of an oblivious readership.

The solution is obvious: Design underwriting policies so that market mechanisms stay intact. As a negative example, university “memberships” (like this one) that replace per article fees for an open-access journal with a one-time annual payment have exactly the character of hiding the costs of publication from the authors making the publication venue decision. For this reason, I don’t support this kind of membership in general. The open-access-fund design in place at Harvard, Cornell, and other institutions avoids the moral hazard problem by capping the outlays per author per year. This allows free choice to authors in choosing publishing venue and institutional underwriting, while still establishing a scarce resource to trade off against journal quality. [Update: I’ve provided some further comments on OA publisher memberships.]

D needn’t worry that the publication fee business model is economically precarious. But what about his alternative, limited-embargo subscription journals?  We already know that the subscription-fee business model suffers from market problems: the good being sold, access, is monopolistically owned (via copyright transfer from author to publisher), and the market embeds a moral hazard (with libraries paying on behalf of cost-oblivious readers). Adding a public access requirement eases the access problem, but doesn’t eliminate it because of the embargo. If the need to access during the embargo period is strong enough, libraries will need to subscribe. If not, they can avoid subscription and rely on the embargoed access. The control of the effectiveness of the public access policy therefore depends crucially on the embargo length. But it is likely that the ideal embargo length will differ across different fields, and perhaps among different journals within a given field. And there is no distributed mechanism (like a market) to set these embargo lengths. Rather, the embargo length is determined by centralized control, a kind of command economy. What are the odds that governments will accurately pick the ideal embargo lengths — long enough to ensure viability of journals but short enough to provide reasonable public access? How do we know that a good tradeoff even exists? Given that there is an alternative business model that provides truly open access and that sets costs based on a functioning market mechanism, why do we want to prefer the public access route to the exclusion of the publication fee route?

I don’t know if I can convince D that the publication-fee business model is worthy of support in tandem with the public access approach. I hope it was worth the try.

[1]It’s interesting to note that D’s argument is inconsistent with — in essence the opposite of — the argument that publication-fee OA journals will operate as vanity presses. That argument presumes that good journals won’t be able to charge high enough publication fees to cover their costs, so will have to lower their standards to get more revenue. I’ve shown previously that the vanity-press worry is ill-founded.

### 5 Responses to “Will open-access publication fees grow out of control?”

Harnad, S. (2010) No-Fault Peer Review Charges: The Price of Selectivity Need Not Be Access Denied or Delayed. D-Lib Magazine 16 (7/8). http://eprints.ecs.soton.ac.uk/21348/

SUMMARY: Plans by universities and research funders to pay the costs of Open Access Publishing (“Gold OA”) are premature. Funds are short; 80% of journals (including virtually all the top journals) are still subscription-based, tying up the potential funds to pay for Gold OA; the asking price for Gold OA is still high; and there is concern that paying to publish may inflate acceptance rates and lower quality standards. What is needed now is for universities and funders to mandate OA self-archiving (of authors’ final peer-reviewed drafts, immediately upon acceptance for publication) (“Green OA”). That will provide immediate OA; and if and when universal Green OA should go on to make subscriptions unsustainable (because users are satisfied with just the Green OA versions) that will in turn induce journals to cut costs (print edition, online edition, access-provision, archiving), downsize to just providing the service of peer review, and convert to the Gold OA cost-recovery model; meanwhile, the subscription cancellations will have released the funds to pay these residual service costs. The natural way to charge for the service of peer review then will be on a “no-fault basis,” with the author’s institution or funder paying for each round of refereeing, regardless of outcome (acceptance, revision/re-refereeing, or rejection). This will minimize cost while protecting against inflated acceptance rates and decline in quality standards.

2. Will open-access publication fees grow o… « InfoDoc MicroVeille Says:

[…] Will open-access publication fees grow out of control? : http://blogs.law.harvard.edu/pamphlet/2010/07/31/will-open-access-publication-fees-grow-out-of-contr… […]

3. Joseph J. Esposito Says:

The disputant “D” is correct. I wrote about this several years ago: http://j.mp/aCVZ4s. Open Access has many virtues, but saving money is not among them.

Joe Esposito

4. Stuart Shieber Says:

There is the question of whether publication-fee OA journals are more economical than subscription-fee journals — maybe and maybe not — and then there is the question that Mr. Esposito raises in the cited article as to whether “OA will reduce costs to zero or some modest mark–up above zero”. The answer to the latter is of course “no, it won’t.” Does anyone really believe that straw man?

But my post wasn’t about whether OA will save money or not; it was about whether the publication fee model is “economically precarious”, and in particular whether publication fees are likely to hyperinflate. Mr. Esposito’s interesting article covers a number of speculative topics — I recommend it to readers of this blog — but I couldn’t find any argument in it in support of D’s worry about publication-fee hyperinflation. Nor, by the way, could I find much of an argument that the publication-fee business model can’t save money as compared to the subscription-fee model. Readers can judge for themselves.

5. Tom Dietterich Says:

Although there is a lot of talk about the value of the journal’s imprimatur, I think the imprimatur itself is quite precarious. If the editorial board of a journal becomes frustrated with the high price (as did the editorial board of Machine Learning when I was serving on it a decade ago), they can defect and start another journal (as many of us did). The cost of starting (and operating) a journal (especially in electronic form) is very low. So the barriers to entry are low. It is difficult to imagine maintaining a high-value imprimatur without the volunteer time of a high-quality editorial board.